Public Policies Affecting Consolidation & Structural Changes

Statement of Leland Swenson
President of the National Farmers Union

 

PUBLIC POLICY ACTIONS RECOMMENDED TO ADDRESS CONCENTRATION

 

The loss of family farms and other independently owned businesses is not inevitable. The accelerated march toward a totally vertically integrated production system can be turned around with action to strengthen the regulatory system and revitalize independently owned businesses.

  1. Enact Moratorium - Congress should enact a moratorium on agricultural mergers, to provide time enough to review what is happening with mergers and take appropriate action if needed. Last fall the Senate rejected an amendment calling for an 18-month moratorium on large agricultural mergers, i.e., mergers involving companies with assets of $100 million acquiring companies with assets of $10 million or more. On April 12, Sen. Daschle, D-S.D., and Sen. Leahy, D-Vt., introduced legislation to strengthen antitrust enforcement.
  2. Prohibit Packer Ownership of Livestock - Congress should prohibit packer-ownership of livestock. Ownership allows the packer to control supply in a way that results in the packers manipulating the market so that farmers and ranchers receive less for livestock. Legislation is pending that would limit packer ownership to 14 days prior to slaughter. This is a step in the right direction.
  3. Strengthen Mandatory Price Reporting - Congress should continue to strengthen mandatory price reporting legislation. A good start was made in the fiscal appropriation for Agriculture for 2000. USDA is currently promulgating regulations that are expected to be in place by late summer this year.
  4. Report Concentration Data - Congress should require USDA to collect concentration information. Currently, the University of Missouri collects information to show the top 4 firms in many different commodity areas. However, the problem is that some of the information is not readily available to the university. USDA is in position to have the best access to the information.
  5. Disclose Joint Ventures - The Justice Department (DOJ) and the Federal Trade Commission (FTC) should require firms to submit information on joint ventures and alliances that are between firms above a certain size. In many cases, firms that are participating in joint venture arrangement behave just like firms that have merged. Yet, joint ventures and alliances have not been subject to any scrutiny.
  6. Establish Permissible Level - Congress should consider enacting a level of concentration that triggers an automatic antitrust violation to make it easier for the Justice Department and the Federal Trade Commission to prevent high levels of concentration.
  7. Disclose Merger Reasons - Congress should require the Justice Department and the Federal Trade Commission to detail why mergers that are subject to antitrust review are okay, if the decision is made not to oppose the merger. This would improve accountability.
  8. Repeal Illinois Brick - Congress should pass legislation that would allow farmers and ranchers to hold retailers responsible for price gouging. Under current case law, farmers and ranchers cannot sue retailers due to legal precedent set by Illinois Brick, a case where the court held that farmers and ranchers have no legal standing for recourse against retailers since they do not deal directly with retailers. As the retailers gain more and more power within the marketplace, it is vital that they should at least be liable for damage they cause due to market manipulation. Illinois Brick has been repealed in 16 states.
  9. Require Economic Impact - Congress should require an economic impact statement detailing the expected impact a deal will have on farmers and ranchers prior to allowing an agricultural merger.
  10. Label for Country of Origin - Congress should enact country of origin labeling to allow consumers to know where their food supply is being produced. Country of origin legislation has been introduced in the House and Senate.
  11. Focus Research to Benefit Family Farms - Congress should ensure that publicly-funded research is benefiting family-sized agricultural businesses and surrounding communities.
  12. Target Development Grants - Congress should prohibit the use of rural development grants for the creation of factory farms.
  13. Expand GIPSA Authority - The Senate should enact legislation to bring poultry under the jurisdiction of USDA’s Grain Inspection, Packers and Stockyards Administration (GIPSA). Legislation has already been introduced in the House by Rep. Marcy Kaptur.
  14. Authorize Producer Bargaining - The Senate should enact legislation to authorize contract producers to form collective bargaining units to negotiate with integrators. Again, legislation has been introduced in the House by Rep. Kaptur.
  15. Fund Local Market Development - Congress should consider prioritizing research on local and regional markets as well as research on small business structure as part of the National Research Initiative (NRI). By offering information, training, and financial assistance in the forms of grants and loans, communities could foster the formation of food cooperatives and other key small businesses.
  16. Prohibit Slotting Fees - Congress should prohibit slotting fees, i.e., the large fees charged to suppliers to put their product on the store shelf. Slotting fees provide windfall profits to retailers and create an expensive barrier for new firms and new products.
  17. Authorize Interstate Shipment – Allow interstate shipment of state-inspected meat. Legislation has been introduced by Senators Daschle and Hatch.

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