Family farmers ultimately derive their income from the agricultural marketplace. Family farmers have always been in a position of weakness in selling their product to large processors and in buying their inputs from large suppliers. Today, the position of the family farmer has become far weaker as consolidation in agribusiness has reached all time highs. Farmers have fewer buyers and suppliers than ever before. The result is an increasing loss of family farms and the smallest farm share of the consumer dollar in history.

One hundred years ago, this nation reacted appropriately to citizen concerns about large, powerful companies by establishing rules constraining such businesses when they achieved a level of market power that harmed, or risked harming, the public interest, trade and commerce. The United State Congress enacted the first competition laws in the world to make commerce more free and fair. These competition laws include the Sherman Act, Clayton Act, Federal Trade Commission Act and Packers & Stockyards Act. Since that time, many countries in the world have followed this U.S. example to constrain undue market power in their domestic economies.

Unfortunately, competition policy has been severely weakened in this country, especially in agriculture, due to federal caselaw, underfunded enforcement, and unfounded reliance on efficiency claims. The result has been a significant degradation of the domestic agricultural market infrastructure. The current situation reflects a tremendous misallocation of resources across the food chain. Congress must strengthen competition policy within the farm sector to reclaim a properly operating marketplace.

We urge Congress to strengthen competition policy by enacting legislation that considers family farmers in its enforcement, by funding enforcement agencies more fully, and by supporting the creation of new farmer-owned businesses to add competitors to the marketplace. We urge Congress to create a Competition Policy title in the farm bill.

A. Antitrust Regulation and Enforcement in Agriculture

The antitrust laws should be altered to focus on supplier harm in addition to consumer harm.

New legislation should prohibit mergers or acquisitions that allow a firm to gain more than a fifteen percent market share nationally in any agricultural business including the retail supermarket trade.

Congress should craft competition rules specific to agriculture within the new farm bill.

Jurisdiction over enforcement of antitrust laws should reside with the Department of Justice in a newly created Office of Agricultural Competition.

Congress should amend the Clayton Antitrust Act to make it clear that a person who suffers indirect as well as direct harm can recover damages resulting from anticompetitive conduct.

Congress should enact legislation easing the ability of farmers to achieve class status in litigation involving anticompetitive practices by agricultural businesses, including the retail supermarket trade.

Congress should significantly increase funding for enforcement of antitrust laws.

B. Competition in the Livestock Sector

As to all meat and poultry processors who posses five percent or greater of market share, we urge that Congress:

Enact a two year suspension on mergers and acquisitions between firms in the red meat and poultry processing sectors.

Transfer jurisdiction over competition issues in the livestock sector from the United States Department of Agriculture to a newly created Office of Agricultural Competition in the Department of Justice.

Prohibit red meat processors from owning livestock or livestock production operations.

Require all contracts between processors of red meat and poultry to include a fixed base

price negotiated at the time of the agreement and the bidding and/or offering of such contracts are conducted in an open, public manner.

Prohibit non-price benefits between processors and producers of livestock as anticompetitive or discriminatory practices unless such benefits are offered in an open, public manner. Such non-price benefits include, but are not limited to, delivery terms, processor financing, processor leasing/ownership of facilities or land, etc.

Improve price reporting by processors as to live animals and the meat trade. The USDA should not eliminate information from public reports under the guise of "proprietary information" unless such information is proven by a processor to be economically valuable, not readily ascertainable in other nonpublic ways, and that disclosure would cause provable economic harm.

C. Fairness in Contracting

To the extent that contracting is allowed between agricultural producers and processors, we urge that Congress enact the following fairness requirements:

Require contracts to be in plain language and to disclose material risks.

Provide contract producers with a three-day right to review contracts.

Prohibit confidentiality clauses in contracts.

Provide producers with a first-priority lien for payments due under a contract.

Protect producers from having contracts terminated capriciously or as a form of retribution.

Prohibit processors from retaliating or discriminating against producers who exercise rights including the right to join producer organizations.

D. Creating New Competition

The establishment of new competitors in the agriculture sector is key to diffusing the power of the dominant firms and providing profitable opportunities for family farmers. Federal and state governments provide tremendous amounts of money to dominant firms in the form of grants, loans, tax breaks, research and development subsidies. We urge the Congress to redirect much of these funds to spur the development of new start-ups that will provide new opportunities for family farmers to market their products.

All food and agriculture related grant and loan programs should target small to mid-sized farms and farmer-owned businesses. This should not be limited to entities structured as cooperatives.

Research performed within USDA or funded by USDA should focus on small to mid-sized farms and farmer-owned businesses.

The federal Food Stamp program and Women, Infants and Children program should allow food purchases directly from farmers. Technology constraints with electronic funds transfer cards should be overcome.

Government procurement for food should give a 10% preference to bids from farmer-owned operations. More numerous, but smaller volume, contracts and/or requests for proposal for food procurement as opposed to the large volumes currently included in such contracts. Further, a study should be done to identify barriers to buying from farm-based or farmer-owned food suppliers in an effort to find and implement solutions to such barriers.

Current USDA efforts in the areas of direct marketing should be continued and strengthened.

 

The Organization for Competitive Markets is a multidisciplinary nonprofit group made up of farmers, ranchers, academics, attorneys, political leaders and business people. OCM provides research, information and advocacy towards a goal of increasing competition in the agricultural marketplace and protecting those markets from abuses of corporate power. They are on the web at http://www.competitivemarkets.com.