Biden Takes Antitrust Steps in Meatpacking Industry

President Biden announced on Monday (Jan. 3) an action plan to create a more competitive and resilient meat and poultry supply chain.

The plan aims to reduce high prices for meat, which in November were up 20.9% from a year earlier, to improve the working conditions of workers in these industries and to increase independent processors capacity.

According to the White House, four meatpacking companies control 85% of the beef market. In poultry, four processing firms control 54% of the market and in pork, four companies control 70% of the market.

“When dominant middlemen control so much of the supply chain, they can increase their own profits at the expense of both farmers — who make less — and consumers — who pay more. Most farmers now have little or no choice of buyer for their product and little leverage to negotiate, causing their share of every dollar spent on food to decline,” the White House press release said.

In view of this concentration, Biden announced a joint initiative between USDA and DOJ to report violation of competition laws.

This is not to say that DOJ will conduct antitrust investigations against the meat-processing industry. However, the administration encourages whistleblowers to come forward and report any suspicion of wrongdoing. If DOJ finds evidence of a cartel or a restriction of trade, it could prosecute the companies and its executives, impose fines and, as a result, prices could be set at a more competitive level. Such measures alone may not break up the market concentration.

The second part of Biden’s plan is to increase capacity for independent processors. The plan includes financial support for small- and medium-sized enterprises, up to $1 billion in guaranteed loans, which will help these firms to train workers, improve their working conditions and to promote innovation.

The White House also plans to reduce overtime inspections costs and to allow processing facilities to reach more customers by becoming federally inspected through the Meat and Poultry Inspection Readiness Grant Program.

The effect of these measures on the final prices remains to be seen. On the one hand, an increase in supply by independent processors may help reduce the prices in the market. On the other hand, if these independent processors need to pay higher wages and are not compensated with a greater cost reduction from innovation and the removal of red tape, the effect on prices may not be as expected.

The last measure included in Biden’s plan aimed at changing the “Product of USA” labeling rules. “Under current labeling rules, meat can be labeled “Product of USA” if it is only processed here, including when meat is raised overseas and then merely processed into cuts of meat here. We believe this could make it hard for American consumers to know what they are getting,” the press release said.

While there isn’t a clear indication of what changes will occur in labeling rules, they may have an impact on meat imports, affecting to a greater extent the big meat processing firms and protecting smaller, independent processors.

This action plan comes days after former Secretary of the Treasury Larry Summers, in a series of tweets, criticized the Biden administration for resorting to antitrust tools to fight inflation and suggesting that the problems of the meat industry may be related to capacity and labor constraints.

“If the Admin wants to push some prices down, perhaps it can stop advising the already overeager antitrust authorities to pursue cases like meatpacking where they have little chance to win and instead consider scaling back “buy America” in favor of buying cheap, reduce restrictions on entry into energy productions, scale back tariffs and anti-dumping actions and reduce regulatory delays that preclude capacity increases,” Summers said.

If the Admin wants to push some prices down, perhaps it can stop advising the already overeager antitrust authorities to pursue cases like meatpacking where they have little chance to win…

— Lawrence H. Summers (@LHSummers) December 26, 2021

See also: Antitrust Won’t Help to Fight Inflation, Says Former Treasury Sec Larry Summers

With this action plan, Biden’s administration has sent a strong signal to the markets. The White House, and possibly some federal agencies like the Federal Trade Commission, will monitor prices across industries to identify possible competitive and supply chain concerns, and they are ready to act, if needed.