A PYMNTS Company

When Beefing Up Competition Bleeds at Consumers’ Misfortune

 |  January 28, 2022

By: Aurelien Portuese (Schumpeter Project on Competition Policy)

President Biden announced a billion-dollar plan to beef up competition in the meat processing industry this week to reduce price increases for meat. Inflation affects all sectors of the economy. But the Biden administration is seeking to divert attention from government-created causes for inflation (i.e., loose monetary and fiscal policy) by blaming large companies. Now it is the meat industry that is under attack. Global food prices have increased because the Covid pandemic disrupted the labor market supply chain. And yet, the alleged solution is antitrust, although antitrust is neither the cause nor the answer to inflation. 

President Biden blames high beef prices on monopoly without evidence. The price of a beef round in the United States is $11.92, thereby placing the country at the 25th position in terms of the price of beef rounds. Switzerland ($52.68) and Norway ($29.71) top the ranking with their small and uncompetitive domestic markets. Countries such as France ($18.74), Australia ($13.28), and Canada ($12.03) have higher meat prices than the United States. The large domestic U.S. market enables scale economies and low prices, but most importantly, this positive consolidation also helped technological improvements for the benefit of consumers.

Moreover, while it notes that profits have increased since 2019, it fails to provide data for earlier years. Perhaps profits in 2019 were low compared to normal. Without more data, something the administration has not provided, it’s hard to know whether the current structure of the meat industry is problematic. Also, if monopoly is a problem, why did meat processors not raise prices in 2019 or earlier?

Indeed, as Jen Skerritt notes, “There’s a reason meat is so cheap in America compared with the rest of the world. A big part of that is the rapid consolidation that’s allowed meatpackers to operate on huge economies of scale and run lines at lightning speeds that continue to increase.” In other words, consolidation, rather than being evidence of the lack of competition in the meat industry, as Biden explicitly suggests, enables fierce price competition and innovation for the benefit of consumers. Innovation and scale generate corporate profits because low meat prices drive demand. Historically, United States meat prices have remained low.