[corp-focus] Justice on the Range

[Robert Weissman]

Justice on the Range
By Russell Mokhiber and Robert Weissman

The cowboy and rancher once stood as symbols of American individualism.

Those days are long gone. Today, most U.S. cattlemen and women operate
at the mercy of huge meatpacking conglomerates.

Small meatpackers are, for the most part, a thing of the past, acquired
or driven out of business by a handful of giant corporations.

Where small-scale ranchers once sold cattle on the open market to
small-scale packers, most cattle producers now sell, often under
long-term contractual arrangements, to just four companies -- Tyson/IBP,
Cargill/Excel, Swift/ConAgra, and Farmland National Beef -- which
together control roughly 80 percent of the U.S. market.

The cattle producers have vastly diminished control of how they raise
cattle, and they can't negotiate a fair price.

Over the last decade, especially as the federal government has refused
to intervene to promote market competition, many cattle producers have
given up hope of maintaining their independence, making a decent profit
or staying in business.

But not all. Some refused to concede even in the face of overwhelming
economic power.

Working with a group of lawyers, some cattlemen found a way to fight back.

They filed suit against the meat packers for violating the terms of the
Packers and Stockyard Act, a venerable statute which protects
competition in the cattle market.

Last month, they won a landmark decision.

A jury found Tyson/IBP (Tyson purchased IBP after the litigation began)
to have engaged in anti-competitive practices over the last decade, and
awarded $1.3 billion to a class of 30,000 cattlemen and women. Suits
against the other leading packers are pending.

"In the cattle market, cash on the spot market is the traditional way of
buying and selling," explains Michael Stumo, general counsel for the
Organization of Competitive Markets, and an attorney who assisted the
law firm that handled the cattle producers' case. "The custom and
practice is for packers to bid and get delivery within seven days. That
stops packers from storing cattle and dropping the prices" they bid.

Relying on their market power, IBP and the other leading meat packers
have largely abandoned this traditional way of doing business, instead
relying on "captive supplies" of cattle. The giant firms "use
contracting strategies to lock up cattle months beforehand" at
pre-established prices, Stumo explains, so that they can reduce
aggressive bidding on the open market, or stop bidding on the open
market altogether.

As a result, independent cattle producers trying to sell on the open
market find that prices are artificially low. Sometimes they have
trouble finding buyers altogether.

"In the event Plaintiffs and others similarly situated reject IBP's
unfairly low price," the cattle producers contended in the complaint
filed in the lawsuit, "IBP then slaughters the cattle from its captive
supply leaving Plaintiffs and their class members without a fair price
for their cattle. Plaintiffs must accept IBP's unfairly low price
because they have no other viable market except the market controlled by IB=
P."

In short, Stumo says, what has happened is that the packers have
leveraged their market power on the demand side into control of the
market on the supply side.

The jury agreed with these claims. It concluded that Tyson/IBP's
manipulation of the market drove down prices by 3-4 percent, a huge
reduction in the very low-margin cattle-selling business.

Immediately after the verdict, Tyson/IBP announced it would appeal.

"Our company can=92t demand that cattlemen sell to us," Tyson/IBP said in
a statement issued after ruling. "Anyone who raises or feeds cattle can
sell to whomever they want. So we compete with other packers for
available market-ready cattle. A majority of the cattle we buy are
purchased on a daily cash market basis. Others are bought through
various marketing arrangements that were initiated by cattle producers
who came to us seeking a more efficient way of selling their livestock."

Tyson/IBP argued that it had valid business reasons for the contract
arrangements that give it a captive supply, but Stumo says that evidence
at the trial showed each of the company's alleged business
justifications was phony. Tyson/IBP is able to obtain a consistent
supply on the open market, product on the open market is actually of
higher quality than that from Tyson/IBP's captive supply, and the
transaction costs from buying on the open market are minimal.

What's really at stake is the packers' ability to control markets. The
industry is actually considerably more consolidated now than it was in
1921, when the Packers and Stockyard Act was passed to head off what was
viewed as dangerously high levels of centralization. At that time, the
five biggest packers controlled 65 percent of the national market.
Today, Tyson alone has an approximately 40 percent market share.

Unfortunately, concentration in the agribusiness sector is typical in
the economy (think ExxonMobil, ChevronTexaco, Citigroup,
GlaxoSmithKline, Microsoft, Daimler Chrysler, AOL Time Warner) rather
than exceptional.

What the cattle producers have shown is that, with persistence and
creativity, it is possible to fight back against the corporate behemoths
who maintain an ever tighter chokehold on the political economy.


Russell Mokhiber is editor of the Washington, D.C.-based Corporate Crime
Reporter, http://www.corporatecrimereporter.com. Robert Weissman is
editor of the Washington, D.C.-based Multinational Monitor,
http://www.multinationalmonitor.org. They are co-authors of Corporate
Predators: The Hunt for MegaProfits and the Attack on Democracy (Monroe,
Maine: Common Courage Press; http://www.corporatepredators.org).

(c) Russell Mokhiber and Robert Weissman

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