We are told time and again by multinational companies proposing mergers that consumers will benefit from better prices. But we've seen how well that concept works in the real world, as anyone who has flown lately, or purchased prescription medication, or felt the sting of "Too Big to Fail" banking, or dealt with a cable company can attest. Fewer choices don't translate into happy customers because bigger isn't necessarily better.
And according to a recent article by the Wall Street Journal, the business of monopolization is booming. This year alone, $2 trillion in global mergers have been announced, which is up 53 percent since last year and represents the most consolidation since 2007.
Now, fewer choices could be hitting your dinner plate. The Department of Justice (DOJ) is currently considering a massive marriage between the largest meat company in the nation, Tyson Foods and the 11th largest meat company, Hillshire Brands Co. While some Americans can avoid flying, purchasing prescription drugs or watching cable television, all of us eat. And if the DOJ approves this merger, it will defy common sense and send a clear signal that the federal government is turning its back on the little guy, who in this case is not only the American consumer, but beef and pork producers across the nation, as well.
The scale and scope of this merger will substantially reduce competition in the meat sector, which is already very concentrated. In fact, just four companies slaughter and process nearly 81 percent of the cattle nationally, and in the pork sector, the top four firms control 65 percent of hog sales.
For grocery shoppers, the proposed Tyson-Hillshire merger means Big Meat will now have even more control over prices. For America's family farmers and ranchers it means fewer buyers for their livestock. And because farmers are price takers, not price makers, they can expect their already tight margins to get squeezed even more, so that the large multinationals can maximize stock returns.
Think of the buying power the new company will have over the nation's hog farmers, who have over the years seen the number of buyers slowly dwindle. Tyson is already the second largest hog packer in the country, and Hillshire operates the second largest sow packing plant in the country as well as 10 meat-processing plants. And they built this dominance through deals just like this. Tyson, for example, has been part of numerous other deals since 2001 and has plucked the likes IBP, Inc., Garrett poultry, Washington Creamery, Franz Foods, Prospect Farms, Krispy Kitchens, Ocoma Foods, Cassady Broiler, Vantress Pedigree, Wilson Foods, Honeybear Foods, Mexican Original, and Heritage Valley to name a few.
Rural America is justifiably alarmed, with 82 leaders from agriculture, consumer and faith-based communities raising serious questions about the proposed merger. "The food and agribusiness sector is already excessively consolidated from seed to supermarket. This proposed merger comes after a year of intense acquisition activity in the food and agriculture sector, amounting to a growing wave of substantial mergers that threaten to accelerate the food industry's tight control of this extremely concentrated sector of the economy," they noted in a recent letter to the DOJ.
The fear of a handful of companies -- in this case, the Meat Barons -- having too much sway over the marketplace, and thus consumers and farmers, isn't something new. In fact, Section 7 of the Clayton Act, which was passed over 100 years ago, was signed into law to prevent a merger that would "substantially lessen competition, or tend to create a monopoly." In other words, the Tyson-Hillshire deal.
Interestingly, the same rash of monopolistic power grabs that led to this law a century ago, also led to the founding of the National Farmers Union. And we've been busy ever since fighting the uphill battle against dangerous consolidation in everything from equipment and seed to basic rural infrastructure service.
Over the decades, we've heard the same tired propaganda: That consolidation helps everyone. But a century of broken promises and a little common-sense tells us differently. Mergers help the big get bigger and leave the small guys helpless to their whims. The DOJ needs to say no to this latest power grab.
Roger Johnson is president of the National Farmers Union.