Antitrust Enforcement: Too Little Too Late?

Competition workshops were political victories for Obama

"We're from the government and we're here to help."

That was one of the take away messages from this week's fifth and final workshop on competition in agriculture, co-sponsored by the U.S. Department of Justice and USDA and held in Washington , D.C., this week.

Forgive me if this sounds callous, but I'm a bit dubious when politicians and citizens gather together. Promises will be made. Voters will be persuaded.

"We're from the government, and…"

It is amazing how quickly politicians can grab hold of a good old fashioned populist issue and spin it for good effect, as attorney general Eric Holder and secretary of agriculture Tom Vilsack did this week.

In presiding over the final DOJ/USDA workshop, Holder and Vilsack used all the right buzzwords to make the case that, yes, the government is here to help you. Farmers need more transparent markets. Big corporations are bad. Farmers deserve a level playing field. Farmers are hard working people.

It played well to the crowd of 500 who came to listen and tell stories of abuse at the hands of nefarious processors and contractors.

Why now?

We can all agree with Holder and Vilsack's opening statements - that the federal government should have started investigating concentration in Ag a long time ago. Admittedly, it was impressive that both cabinet officers attended all five workshops, which began in Iowa in March and covered seed, dairy, poultry and livestock in selected regions over the past several months.

The workshops produced thousands of words, comments, and speeches. Many trees and digital gigabytes gave their lives to the cause. Farmers bravely stood and even cried as they told tales of abuse and shabby treatment from contractors and packers.

Still we wondered: what good will come of it? Vilsack got downright grumpy when a cynical reporter asked if the whole effort was nothing more than "hand-holding for small farmers."

"It's really unfair to the people who have been working hard over the past six months to suggest this is merely a hand-holding exercise," he retorted.

No need to get indignant, Mr. Secretary. As indelicate as it may be, it was a legitimate question. If it's so important to the government now, why hasn't it been on your radar all along? Where was DOJ ten years ago? Where were they when intellectual property rights were legally applied to living things like seed? Who allowed Dean Foods to become the sole buyer of milk in eastern Wisconsin ? These problems are not new.

Secretary of agriculture Tom Vilsack (l to r) with U.S. attorney general Eric Holder and U.S. assistant attorney general Christine Varney at the final DOJ/USDA competition in agriculture workshop held in Washinngton, D.C. Dec. 8, 2010.

The workshops raised expectations, and USDA and DOJ know it. There is no doubt regulators are taking a closer look at the farm landscape, particularly concentration in processing, buyer power and vertical integration.

To DOJ and USDA's credit, some changes have already happened. In January 2010, USDA put in a rule to establish basic fairness for poultry contracts, to ensure producers no longer have their contracts arbitrarily cancelled without notice. GIPSA reforms have been proposed (and strongly rebuked by the meatpacking industry; no surprise there). Antitrust officials blocked a small acquisition earlier this year by Dean Foods, the country's largest milk producer. DOJ now has a place on their website where you can report unfair practices.

The old days?

Still, it was strange to hear all the reminiscing about how things used to be in agriculture. The days of pitchforks and purty red barns are over. We're not going back. Change is difficult. Maybe you did have four places to sell your hogs or milk or grain twenty years ago. Farming is more challenging with fewer choices today, but there are also opportunities for those who have the skills to take advantage of them.

Competition concerns are real. But some consolidation is unavoidable. It seems disingenuous for farmers to complain about having fewer choices when the same attributes you strive for – greater efficiency, better management – is what enabled the strongest of those (grain, hog, cattle, milk) buyers to acquire their competitors and shrink the playing field. Why is it okay for farmers to expand and acquire neighboring assets in order to become more efficient, but not the folks further up the food chain?

Politically, this was a home run for the Obama administration. The workshops gave the impression DOJ and USDA were champions for small farm ers and the lack of transparency and choice in the marketplace. They served as a high profile place to vent about perceived injustices and bad business practices. All told about 4,000 showed up at the five workshops.

Agriculture will keep a close eye on the federal government to see what more will come from all this effort.

If nothing else, it was a great demonstration of how the government can make you feel better about the problems it should have taken care of 20 years ago.

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