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Monopolies march on

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Stephanie Paige Ogburn | Jan 31, 2012 06:00 AM

Pity the antitrust regulator. As the Obama administration pacifies its way toward the 2012 elections, those bureaucrats charged with protecting small businessmen from monopolies are dropping like flies.

Take J. Dudley Butler, the head of the soporific-sounding Grain Inspection, Packers and Stockyards Administration. Butler, a lawyer who built a career fighting powerful, giant poultry companies who unjustly squeezed money from the farmers they contracted with, jogged into his position fists up, vowing to enforce the Packers and Stockyards Act. The  underenforced law is a potentially potent piece of 1921 legislation passed on the heels of the Sherman and Clayton Acts and aimed at protecting smaller cattle producers, feedlot owners, and poultry growers from the market manipulations that occur when just a few buyers control the marketplace. (This is called a monopsony; a situation when many sellers only have one buyer and thus can be forced to take the one buyer's offered price, as opposed to a monopoly, when there is only one seller and the buyers are forced to take the seller's price.  As reported in Harpers magazine, Walmart has power similar to a monopsony, too.)

J Dudley ButlerButler resigned last week after his efforts to enforce the Packers and Stockyards Act were drop-kicked into the "politically inexpedient" ether. (The National Public Radio headline about the resignation ran: "Antitrust official gets stampeded by Big Beef.")

Butler's departure was punctuated by that of Sharis Pozen, who was heading up the Department of Justice's antitrust division. Pozen was acting chief for just six months, filling the role vacated by former antitrust head Christine Varney, who, like Pozen, left to return to private practice.
Although the New York Times' Dealbook blog post on Pozen's resignation cites legal insiders saying DOJ's antitrust activities are still going strong, the "reinvigorated enforcement of antitrust laws" referenced in that coverage seems to be a fickle pursuit, limited to telephone companies and internet titans rather than beef monopolies and giant seed corporations.

After the loss of Varney last summer, a wave of dismay passed through those concerned about monopoly and monopsony power in agriculture. In 2010, the Department of Justice and the Department of Agriculture had held a series of five hearings on the topic of agriculture and competition (or lack thereof), each addressing a different sector: dairy, poultry, beef, seeds and retail. Varney, whom a source once told me reminded him of "Teddy Roosevelt in heels and a skirt," had been a prominent presence at the meetings, standing up for beleaguered chicken farmers and listening to dairymen's tales of woe.

But now Varney's gone, and the push to undo over 30 years of agricultural consolidation may have disappeared with her.  A 2007 report (PDF) by Bill Heffernan, a rural sociologist and professor emeritus at the University of Missouri, who has been tracking consolidation in agriculture for many years, lists the following levels of concentration in U.S. agriculture industry:

Concentration in agriculture table

Obviously, the degree to which consolidation of market power lessens competition and stifles innovation differs considerably from industry to industry. But when farmers see seed prices rise 30 percent in a year, as they did in 2010, and have no one else to buy from, or when just a few companies control more than a third of the market, the ability of a small group of corporations to set the terms of the marketplace is strong, and the ability of small producers and individuals to fight it is weak. Capitalism is built upon a system of many buyers and sellers coming to agreement in an open marketplace. When the numbers on either side become skewed, the potential for market failure becomes high.

To be fair, Obama's Department of Justice has made far more of its antitrust authority than any of the four administrations before it. But it's also had its fair share of setbacks; to date, almost nothing has come of the competition workshops where farmers poured out their hearts and souls to the few people with power to change the system. And it's unclear which direction DOJ is heading in terms of enforcing antitrust violations against the powerful companies whose grip on agriculture remains strong. In 2010, the department had been reported to be examining antitrust issues in the seed industry; that investigation has disappeared from the news, although in early 2011 a few observers registered their fear that their investigation would fail to result in any change. In the meantime, the agribusiness industry's march toward greater consolidation continues.

Stephanie Paige Ogburn is the online editor at High Country News.

Image of J. Dudley Butler courtesy USDA.

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