While federal antitrust efforts have been primarily focused on big tech platforms, a recent piece of legislation expands this focus to include large agriculture firms, colloquially known as big ag. Unfortunately, the same mistakes that plague proposed big tech legislation are being replicated in the new agriculture bill. Instead of codifying ‘big is bad’—whether in the tech or ag sector—antitrust law needs to focus on consumer harm, an area where existing agencies already have authority to address anticompetitive behavior.
The Food and Agribusiness Merger Moratorium and Antitrust Review Act (FAMMAR), introduced by Senator Cory Booker (D-NJ), is the latest effort to expand the scope of antitrust law. If passed, FAMMAR would place a moratorium on vertical mergers for agriculture firms with over $160 million in annual net sales or total assets.
By placing a moratorium on mergers for firms over a specific size, FAMMAR assumes that large firms are automatically anticompetitive and harmful to consumers. This belief also underpins current anti-big tech legislation, notably Prohibiting Anticompetitive Mergers Act (PAMA) introduced by Rep. Mondaire Jones (D-NY), which would automatically ban mergers deemed too big, and in Senator Amy Klobuchar’s (D-MN) Platform Choice and Opportunity Act (PCOA), which would prohibit mergers and acquisitions equal to or greater than $50 million for large tech firms.
By assuming that big is bad, these bills ignore the consumer benefits of mergers and acquisitions.
Mergers and acquisitions in the food and ag industry hold the potential to satisfy consumer demands. According to a recent Food Industry Association and NielsenIQ report, consumer demand for a transparent food supply chain is high. The report suggests that 64 percent of shoppers would switch product brands for one that offered increased transparency. Additionally, 80 percent of the survey participants said they value information on certifications, allergens, and value-based information such as fair trade and labor practices.
One way to meet this demand for more transparent supply chains and address food safety concerns is to create integrated and coordinated supply chains. In other words, the less integrated a supply chain is, the more hands an item passes through, and the more difficult it is to track and ensure quality. A less integrated system of food production would lower transparency and make it more difficult for consumers to know where their food comes from.
Consolidation not only allows for increased transparency but can also lower prices. According to a paper published in the American Journal of Agricultural Economics, consolidation in the beef packing industry led to a reduction in processing costs of over 35 percent. According to the Kansas City Federal Reserve Bank, consolidation of certain levels of the agriculture industry—specifically food marketing—has benefited consumers and allowed food costs to be a small and typically stable share of household budgets.
The belief that Congress must grant antitrust enforcers greater power to prevent anticompetitive mergers ignores the reality that they already possess significant latitude to protect market competition. In fact, federal regulators have been heavily involved in preventing anticompetitive mergers.
In 2008 a proposed merger involving National Beef and JBS was dropped following a complaint from the Department of Justice’s Antitrust Division. According to the Department of Justice, “the combination of JBS and National will likely lead to grocers, food service companies and ultimately American consumers paying higher beef prices,” Thomas O. Barnett, head of the Antitrust Division at that time, argued that the proposed merger “will also lessen the competition among packers in the purchase of cattle that has been critical to ensuring competitive prices to the nation’s thousands of producers, ranchers and feedlots.”
Additionally, the Antitrust Division intervened in George’s Foods’ proposed acquisition of a Tyson Foods chicken processing plant. While the acquisition ultimately went through, this was only after the DoJ and George’s Foods reached an agreement requiring the company to make certain plant improvements to increase processing capacity.
These examples show that antitrust enforcers have the authority to address illegal behavior without enacting further legislation. Recent efforts in tech and now in the agricultural sector show that weaponizing antitrust and codifying ‘big is bad’ are not passing trends but have become central pillars of contemporary political discourse. Rather than another attempt to expand the realm of antitrust and target large firms, lawmakers and regulators should refocus their efforts on competition and illegal behavior instead of relying on an outdated and rigid belief that big is bad. Focusing on competition, decision-makers will protect the market process that benefits producers and consumers.