[Federal Register Volume 65, Number 58 (Friday, March 24, 2000)]
[Notices]
[Pages 15982-16033]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-4591]
[[Page 15981]]
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Part III
Department of Justice
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Antitrust Division
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United States v. Cargill, Incorporated; Public Comment and Plaintiff's
Response; Notice
Federal Register / Vol. 65, No. 58 / Friday, March 24, 2000 /
Notices
[[Page 15982]]
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DEPARTMENT OF JUSTICE
Antitrust Division
[Civil No. 98-CV-1875 (GK)]
United States v. Cargill, Incorporated; Public Comment and
Plaintiff's Response
Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C.
16(b)-(h), the United States of America hereby publishes below the
comments received on the proposed Final Judgment in United States v.
Cargill, Incorporated and Continental Grain Company, Civil No. 98-CV-
1875 (GK), filed in the United States District Court for the District
of Columbia, together with the Untied States' response to the comments.
Copies of the comments and response are available for inspection in
Room 215 of the U.S. Department of Justice, Antitrust Division, 325
Seventh Street, NW, Washington, DC 20530 (telephone: 202/514-2481) and
at the office of the Clerk of the United States District Court for the
District of Columbia, 333 Constitution Avenue, NW, Washington, DC
20001. Copies of these materials may be obtained upon request and
payment of a copying fee.
Constance K. Robinson,
Director of Operations, Antitrust Division.
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
In the matter of: United States of America, Plaintiff, v.
Cargill, Incorporated, and Continental Grain Company, Defendants,
Civil Action No. 99-1875 (GK).
UNITED STATES RESPONSE TO PUBLIC COMMENTS
Communications with respect to this document should be addressed
to: Roger W. Fones, Chief; Donna N. Kooperstein, Assistant Chief;
Robert L. McGeorge, Michael P. Harmonis, Attorneys; Transportation,
Energy & Agriculture Section, Antitrust Division, U.S. Department of
Justice, 325 Seventh Street, NW, Washington, DC 20530, (202) 307-
6361.
February 11, 2000.
Table of Contents
I. Factual Background
A. The Parties To The Transaction
B. The Proposed Acquisition
C. The Complaint
D. The Proposed Settlement
E. Compliance With Antitrust Procedures And Penalties Act
II. Legal Standard Governing The Court's Public Interest
Determination
III. Summary Of Public Comments
IV. The Department's Analysis Of The Transaction
A. The Relevant Merger Law
B. Framework For The Department's Competitive Analysis
1. Monopoly Analysis
2. Monopsony Analysis
C. Overview Of The Department's Analysis Of Competitive Issues
In This Transaction
1. Background
2. Analysis Of Cargill As A Seller Of Standard-Grade Grain
Products
3. Analysis Of Cargill As A Seller Of Specialty Products
4. Analysis Of Cargill As A Buyer Of Grain
5. Analysis Of Cargill As An Operator Of River Elevators
Designated By CBOT For Settlement Of Futures Contracts
6. Summary Of The Department's Competitive Analysis
V. The Department's Responses To Specific Comments
A. Remedy
B. Market Definition
C. Cargill's Power Over Price
D. Futures Markets
E. Specialty Markets
F. Nebraska Grain Markets
G. Concentration In Other Agriculture Markets
H. Ban On All Agribusiness Mergers
I. Vertical Integration
J. Non-Economic Concerns
K. Administration And Legislative Actions
L. The OCM Comments
M. A Hearing Is Unnecessary In This Case
N. The 60-Day Comment Period Should Not Be Extended
Conclusion
United States Response to Public Comments
Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C.
16(b) (``AAPA''), plaintiff, the UNITED STATES OF AMERICA, acting under
the direction of the Attorney General, hereby files comments received
from members of the public concerning the proposed Final Judgment in
this civil antitrust suit and the Response of the United States to
those comments.
I. Factual Background
A. The Parties to the Transaction
Cargill, Incorporated (``Cargill'') and Continental Grain Company
(``Continental'') are grain traders. They employ grain distribution
networks--primarily composed of country elevators, rail terminals,
river elevators, and port elevators--to buy grain from farmers and
other suppliers, store it, and move it to their domestic and foreign
customers. In addition, both firms are engaged in related businesses
such as grain processing and cattle feeding.
B. The Proposed Acquisition
On October 9, 1998, Cargill entered into an agreement with
Continental to acquire its gain trading business (conducted by
Continental's Commodity Marketing Group). Cargill is not acquiring
Continental's processing or finance divisions, which Continental will
continue to operate as independent businesses after Cargill's
acquisition of its grain trading business.
C. The Complaint
On July 8, 1999, the United States Department of Justice (the
Department) filed a Complaint with this Court alleging that Cargill's
acquisition of Continental's Commodity Marketing Group would
substantially lessen competition for grain purchasing services in nine
relevant markets, in violation of Section 7 of the Clayton Act (15
U.S.C. 18). In those markets, Cargill would have gained the power to
artificially depress the prices paid to U.S. farmers and other
suppliers for their grain and oilseed crops--including corn, soybeans,
and wheat (collectively referred to as ``grain'').
The Complaint also alleged that the transaction would have resulted
in Cargill and one other grain company controlling approximately eighty
percent of capacity at the Chicago and Illinois River elevators that
are authorized by Chicago Board of Trade (CBOT) to accept delivery for
the settlement of corn and soybeans futures contracts.\1\ That
concentration would have increased the risk of manipulation of futures
prices.
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\1\ For corn futures contracts, CBOT-authorized delivery points
are located in Chicago and on the Illinois River as far south as
Peoria; for soybean contracts, these facilities are in Chicago and
along the entire length of the Illinois River.
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Finally, the Complaint alleged that a non-compete provision of the
Cargill/Continental agreement was a division of markets in violation of
Section 1 of the Sherman Act, 15 U.S.C. 1. Because the Cargill/
Continental acquisition agreement prohibited Continental from re-
entering the grain distribution business for five years, the Complaint
charged that it gave Cargill more time than would be reasonably
necessary to gain the loyalty of former Continental suppliers and
customers, and therefore, the agreement constituted an unlawful
division of markets.
D. The Proposed Settlement
The Department, Cargill, and Continental filed a joint stipulation
for entry of a proposed Final Judgment settling this action on July 8,
1999. In each of the nine markets where the Department has determined
that the consolidation of competing Cargill and Continental grain
elevators would give grain companies the power to artificially depress
the price of grain that they pay farmers and other suppliers, the Final
Judgment requires the divesture of either the Cargill grain elevator or
the Continental grain elevator serving that
[[Page 15983]]
market. The Final Judgment also requires divestitures of elevators on
the Illinois River to ensure that concentration among firms controlling
CBOT-authorized delivery points does not provide opportunities for
manipulation of CBOT corn and soybean futures contracts.
Continental's divestitures to preserve competition for the purchase
of grain from farmers and other suppliers include:
Its river elevator at Lockport, Illinois;
Its river elevator at Caruthersville (Cottonwood
Point), Missouri;
Its rail elevator at Salina, Kansas;
Its rail elevator at Troy, Ohio;
Its port elevator at Stockton, California; and
Its port elevator at Beaumont, Texas.
Prior to entering into the proposed Final Judgment, Continental
also terminated its minority interest in a river elevator at Birds
Point, Missouri. Accordingly, no divestitures were required to protect
competition in this market.
In order to protect against manipulation of CBOT futures markets,
Continental was required to divest its Chicago port elevator.\2\
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\2\ Continental's divestiture of its Lockport river elevator is
a remedy for concentration among authorized CBOT delivery stations,
as well as remedy for concentration among grain buyers in that area.
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Cargill's divestitures to preserve competition for the purchase of
grain from farmers and other suppliers were:
Its river elevator at East Dubuque, Iowa;
Its river elevator at Morris, Illinois; and
Its port elevator at Seattle, Washington (with the
option to retain its port elevator at Seattle if it does not acquire
the Continental port elevator at Tacoma).
In addition, the Final Judgment requires Cargill to enter into a
throughput agreement making one-third of the daily loading capacity at
its Havana, Illinois River elevator available to an independent grain
company to avoid undue concentration among firms controlling CBOT
delivery points.\3\
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\3\ Cargill's divestiture of its Morris facility serves to
protect against CBOT concentration problems, as well as
concentration among buyers of grain in that market.
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The proposed Final Judgment also prohibits Cargill from acquiring
any interest in the facilities to be divested by Continental pursuant
to the proposed Final Judgment or the river elevator at Birds Point,
Missouri in which Continental formerly held a minority interest.
Finally, the proposed Final Judgment prohibits the non-compete
provision of the Cargill/Continental agreement from remaining in force
for more than three years.
E. Compliance With Antitrust Procedures and Penalties Act
To date, the parties have compiled with the provisions of the
Antitrust Procedures and Penalties Act as follows:
(1) The Complaint and proposed Final Judgment were filed on July 8,
1999;
(2) Defendants filed settlement pursuant to 15 U.S.C. 16(g) on July
19, 1999.
(3) The Competitive Impact Statement (``CIS'') was filed on July
23, 1999;
(4) The proposed Final Judgment and CIS were published in the
Federal Register on August 12, 1999, 64 F.R. 44,046 (1999);
(5) A summary of the terms of the proposed Final Judgment and CIS
was published in the Washington Post, a newspaper of general
circulation in the District of Columbia, for seven days during the
period August 10, 1999 through August 16, 1999;
(6) The sixty-day period specified in 15 U.S.C. 16(b) commenced on
August 12, 1999 and terminated on October 12, 1999;
(7) The United States hereby files the comments of members of the
public and the Nebraska Attorney General's amicus brief (bound
separately as Appendix A) together with the Response of the United
States to the comments and brief, pursuant to 15 U.S.C. 16(b); and
(8) The United States will move this Court for entry of the Final
Judgment after the comments and the Response are published in the
Federal Register. The Final Judgment cannot be entered before the
publication. 15 U.S.C. Sec. 16(d).
II. Legal, Standard Governing the Court's Public Interest
Determination
Upon the publication of the public comments and this Response, the
United States will have fully compiled with the APPA. After receiving
the United States' motion for entry of the proposed Final Judgment, the
Court must determine whether it ``is in the public interest.'' 15
U.S.C. 16(e). In doing so, the Court must apply a deferential standard
and should withhold its approval only under very limited conditions. As
Judge Greene observed in the AT&T case:
If courts acting under the Tunney Act disapproved proposed
consent decrees merely because they did not contain the exact relief
which the court would have imposed after a finding of liability,
defendants would have no incentive to consent to judgment and this
element of compromise would be destroyed. The consent decree would
thus as a practical matter be eliminated as an antitrust enforcement
tool, despite Congress' directive that it be preserved.
United States v. American Tel. & Tel. Co., 552 F. Supp. 131, 151
(D.D.C. 1982), aff'd mem. sub nom. Maryland v. United States, 460 U.S.
1001 (1983).
The United States Court of Appeals for the District of Columbia has
noted that ``constitutional questions * * * would be raised if courts
were to subject the government's exercise of its prosecutorial
discretion to non-deferential review.'' Massachusetts Sch. of Law at
Andover, Inc. v. United States, 118 F.3d 776, 783 (D.C. Cir. 1997)
(citing United States v. Microsoft Corp., 56 F.3d 1448, 1457-59 (D.C.
Cir. 1995). Rather, the district court should review the proposed Final
Judgment ``in light of the violations charged in the complaint and * *
* withhold approval only [a] if any of the terms appear ambiguous, [b]
if the enforcement mechanism is inadequate, [c] if third parties will
be positively injured, or [d] if the decree otherwise makes `a mockery
of judicial power.' '' Id. at 783 (quoting Microsoft at 1462).
With this standard in mind, the Court should review the comments of
members of the public concerning the proposed Final Judgment and the
United States' Response to those comments. As this Response makes
clear, entry of the proposed Final Judgment is in the public interest.
III. Summary of Public Comments
Sixty-seven individuals, eight public officials, and nineteen
organizations expressed their views on the proposed Final Judgment.
These comments and questions are summarized below.
Sixty-five individual farmers filed comments. Some are disappointed
because they believe the transaction does nothing to raise the prices
they receive when they sell their grain. Others are concerned that the
markets in which they sell their grain have become so concentrated that
the grain companies will be able to depress prices paid to farmers for
their grain. Still others are concerned that Cargill will be able to
monopolize ``specialty or niche'' markets or lessen competition in
grain futures markets. Finally, some of the commenting farmers believe
there should be a complete ban on mergers and acquisitions in the
agribusiness sector.
Congresswoman Jo Ann Emerson, Missouri Attorney General Jeremiah
Nixon, and several farm organizations, including the Missouri Farm
Bureau Federation, Missouri Soybean Association, and Permiscot County
Farm Bureau, addressed their comments to Section IV(D) of the proposed
Final Judgment, which directs Continental to divest its river elevator
at Cottonwood Point, Missouri, near Caruthersville. After noting that
Bunge Corp. is one of
[[Page 15984]]
the major grain purchasers in the vicinity of Cottonwood Point, these
commentators urge the Department of Justice not to permit divestiture
of the Cottonwood Point facility to Bunge.
New Mexico Attorney General Patricia Madrid has no opposition to
the proposed Final Judgment, although she is concerned about there
being one less significant competitor in the national grain trading
market after the transaction. Attorney General Madrid, therefore, urges
the Department to actively advocate administrative and legislative
actions that will invigorate competition in the agricultural sector of
our economy.
Minnesota Attorney General Mike Hatch believes the proposed Final
Judgment does not go quite far enough to ameliorate antitrust concerns
raised by the transaction. He is concerned that grain markets are
already too highly concentrated and that agriculture industries, in
general, are experiencing high rates of vertical consolidation. Under
the circumstances, Attorney General Hatch recommends that the proposed
Final Judgment be modified to prohibit Cargill from acquiring any other
of its competitors in grain export, transport, and storage markets.
Nebraska and South Dakota Attorneys General Don Stenberg and Mike
Barnett the issue with the relevant geographic markets as defined in
the Complaint. They believe the Department of Justice should not have
focused on overlapping draw areas for country, rail, river or port
areas, but rather suggest the relevant market should be enlarged to
include the entire United States or even the rest of the world. Given
that Cargill and Continental are two of our nation's largest grain
trading companies, these--Attorneys General are of the view that the
two firms should not be permitted to merge under any circumstances. In
addition, Attorney General Stenberg's comments in his amicus brief
mirror many of the concerns expressed by the Organization for
Competitive Markets, discussed infra.
North Dakota Attorney General Heidi Heitkamp filed a comment
expressing her appreciation for the ways in which this law suit has
preserved competition for farmers at the local level in North Dakota.
She, nevertheless, remains concerned about powerful concentrations of
agribusiness firms that North Dakota farmers must face. Based on that
concern, she suggests that the Department should reconsider the
adequacy of divestitures required by the proposed Final Judgment and
instead, seek to enjoin the transaction in its entirety. In particular,
Attorney General Heitkamp thinks the time has come to rethink antitrust
analysis in the farm sector to give greater consideration to non-
economic concerns.
John W. Helmutch, an agricultural economist, filed a comment that
set forth his suggested analytical framework for the Department's use
in analyzing the transaction. In his view, it is essential for the
Department to assess market concentration, the extent of information
available to grain traders and farmers in the market, and the potential
adverse competitive effects on grain futures markets and other
agribusinesses beyond grain trading, such as livestock markets. Mr.
Helmuth asks if we have made these assessments.
A.V. Krebs believes the Department's analysis is deficient because
it fails to consider whether the transaction will permit Cargill to
force its own standards, practices, marketing arrangements, and prices
on farmers, processors, and merchandisers in grain markets throughout
the United States.
Professor C. Robert Taylor of Auburn University is concerned that
the Department did not adequately consider the extent of vertical
integraiton in the agricultural sector. Minnesota and Nebraska
Attorneys General Mike Hatch and Don Stenberg and Catholic Charities of
Sioux Cit, Iowa voice the same concernin their comments.
Jon Lauck, writing on behalf of the Organization for Competitive
Markets (``OCM''), filed a comment that was critical of the
Department's analysis in several respects. OCM states that the
Department's analysis failed to consider: (1) The impact of
concentration in agriculture markets other than grain buying; (2) the
continuing potential for anticompetitve behavior in the post-merger
market; (3) whether the divested facilities will continue to be
competitive forces in the hands of new owners, particularly if the new
owners do not have a ``network'' of elevators that buy grain; (4) the
impact on potential entry into grain buying markets; (5) the
ramifications of competition in overseas grain markets; (6) the
implications of economic disorganization of farmers which can be
exploited by powerful buyers; (7) information disparities in
agriculture markets; (8) the lack of benefits of the merger; (9) a
range of statutes that Congress intended courts to consider when making
decisions about agriculture markets; and (10) that the consent decree
risks leaving farmers without an effective outlet for legal redress.
OCM's conclusion is that the proposal Final Judgment is not an adequate
remedy and that the transaction should be prohibited in its entirety.
Several farm, rural-life, and religious groups voice concerns about
general levels or market concentration in agriculture industries. These
groups include the American Agriculture Movement, Animal Welfare
Institute, Clean Water Action Alliance, Farmland Co-op Inc., Institute
for Agriculture and Trade Policy (``IATP''), Kansas Cattlemen's
Association, Minnesota Catholic Conference, National Catholic Rural
Life Conference, and the Office of Hispanic Ministry. In the main, they
believe the Department's analysis does not adequately consider
concentration in agriculture markets beyond grain buying. In their
view, these non-grain markets are already too concentrated, and so
Cargill ought not be permitted to acquire Continental under any
circumstances.
The Kansas chapter of the National Farmers Organization (NFO)
expressed concern about declining grain ``basis levels.'' Thus, they
are concerned that Kansas farmers will receive lower prices for their
grain after the transaction. The Kansas NFO did not address the
adequacy of the proposed Final Judgment.
National Farmers Union (``NFU'') filed comments opposing the
transaction because the transaction does not increase competition in
grain markets. NFU also believes the proposed Final Judgment is
deficient because it does not ensure that divested facilities will
remain competitive. NFU also believes the proposed Final Judgment fails
to address the roles played by Cargill and Continental in export
markets.
Rural Life Office of Dorchester, Iowa expressed concern that the
transaction may facilitate Cargill's exercise of market power in
``organic and specialty'' markets.
Women Involved in Farm Economics (``WIFE'') is concerned that the
transaction as proposed, by unifying the second and third largest grain
traders in Nebraska, might depress grain prices to Nebraska farmers and
permit Cargill to control their export market. WIFE did not object to
the proposed Final Judgment.
IV. The Department's Analysis of the Transaction
We begin our response to public comments with an overview of the
legal standards for analyzing mergers and acquisitions, our
investigation of Cargill's proposed acquisition of Continental's
commodity marketing business, and our analysis of the relevant
competitive issues in this case. Thereafter, we respond to specific
points raised by commentators.
[[Page 15985]]
A. The Relevant Merger Law
Section 7 of the Clayton Act, 15 U.S.C. 18, prohibits mergers and
acquisitions whose effect may be substantially to lessen competition
``in any line of commerce * * * in any section of the country.'' The
purpose of Section 7 is to prevent acquisitions or mergers before they
create harm. `` `The intent here * * * [is] to cope with monopolistic
tendencies in their incipiency and well before they have attained such
effects as would justify a Sherman Act proceeding.' '' Brown Shoe Co.
v. United States, 370 U.S. 294, 318 n. 32 (1962) (quoting S. Rep. No.
81-1775 at 4-5).
The antitrust laws apply to the exercise of market power over
sellers (monopsony power), just as they do to the exercise of market
power over buyers (monopoly power).\4\ See Mandeville Island Farms v.
American Crystal Sugar Co. 334 U.S. 219, 235-44 (1948) (a case arising
under Sections 1 and 2 of the Sherman Act). Section 7, in particular,
applies to monopsony power gained via acquisitions or mergers. See
United States v. Rice Growers Ass'n of California, 1986 WL 12562 (E.D.
Cal. 1986) (acquisition by one miller of another found to lessen
competition in purchase of California paddy rice); United States v.
Pennzoil Company, 252 F. Supp. 962, 981-985 (W.D. Pa. 1965), (merger
found to lessen competition in purchase of Penn Grade crude oil).
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\4\ As noted in the U.S. Department of Justice/Federal Trade
Commission's Horizontal Merger Guidelines Sec. 0.1 (issued 1992,
revised 1997): ``The unifying theme of the Guidelines is that
mergers should not be permitted to create or enhance market power or
to facilitate its exercise. Market power to a seller is the ability
profitably to maintain prices above competitive levels for a
significant period of time * * * Market power also encompasses the
ability of a single buyer (a `monopsonist'), a coordinating group of
buyers, or a single buyer, not a monopsonist, to depress the price
paid for a product to a level that is below the competitive price *
* *''
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To predict whether an acquisition may substantially lessen
competition or tend to create a monopoly, the reviewing court must
determine: (a) The ``line of commerce'' or product market in which to
assess the transaction, (b) the ``section of the country'' or
geographic market in which to assess the transaction, and (c) the
acquisition's probable effect on competition in the product and
geographic markets. The probable effect often can be assessed by
determining the level of concentration based on the market shares of
the parties to the proposed transaction and their competitors in the
product and geographic markets. See United States v. Philadelphia
National Bank, 374 U.S. 321, 362-63 (1963).
B. Framework for the Department's Competitive Analysis
As the case law suggests, the core issue in competition analysis is
whether the proposed transaction likely would create or enhance market
power or facilitate its exercise. This investigation focused on both
monopoly and monopsony issues (that is, whether Cargill would likely
gain market power through its acquisition of Continental's grain
trading business in its roles as a seller or as a buyer of grain).
1. Monopoly Analysis
The Horizontal Merger Guidelines, which outlines the Department's
enforcement policy for horizontal acquisitions and mergers subject to
Section 7 of the Clayton Act, define market power in monopoly
situations as the ability of a seller profitably to maintain prices
above competitive levels (or to reduce quality or service below
competitive levels) for a significant period of time. Horizontal Merger
Guidelines at Sec. 0.1. An acquisition can facilitate the exercise of
market power by increasing the likelihood of coordinated interaction
among competing firms or by creating a market structure in which firms
find it profitable to unilaterally raise prices or reduce output. See
id. at Sec. 2.
To determine whether the proposed acquisition would create, enhance
or facilitate the exercise of market power, Department staff first had
to define the markets within Cargill and Continental compete. Under the
Horizontal Merger Guidelines, a market is defined as a set of products
or services within a geographic area such that a hypothetical
monopolist could profitably impose a ``small but significant and
nontransitory'' price increase or decrease. Id. at Sec. 1.0.
If the evidence shows that a hypothetical monopolist of any given
product or service profitably could impose such a price increase, that
product or service is defined as the relevant product market. Id. at
1.11. If, on the other hand, the evidence shows that a sufficient
number of customers would substitute other products or services to make
such a price increase unprofitable, those products or services are also
included in the product market. Id. This process continues until a
group of products or services is identified for which a small but
significant and nontransitory price increase would be profitable. Id.
Similarly, if the evidence shows that a hypothetical monopolist of
the relevant product or service could impose such a price increase in
any given region, that region is defined as the relevant geographic
market. Id. at 1.21. If, on the other hand, the evidence shows that a
sufficient number of customers would switch to products or services
provided at locations outside the region to make such a price increase
unprofitable, those locations are also included in the geographic
market. Id. This process continues until a group of locations is
identified for which a small but significant and nontransitory price
increase would be profitable. Id.
Once the relevant product and geographic markets are defined,
Department staff must evaluate the competitive impact of the proposed
acquisition. A merger is likely to be problematic if the merged firms
are two of a relatively small number of sellers in the market. Under
these circumstances, the merged firm may gain unilateral power to raise
prices, or the existence of only a few other firms in the market may
facilitate tacit collusion.
2. Monopsony Analysis
As a general proposition, the analysis of competitive issues in
monopsony cases is the mirror image of the more common analysis of
competitive issues in monopoly cases.\5\ For example, instead of
determining whether the merging firms are two of a small number of
sellers in the relevant product and geographic market, and whether the
merged firm would gain sufficient market power to raise prices to
consumers, monopsony analysis focuses on whether the merging firms are
two of a small number of buyers in the relevant product and geographic
market, and whether the merged firm would gain sufficient market power
to depress prices paid to its suppliers. Likewise, instead of
determining whether the buyers could defeat an attempt by a monopolist
to increase prices by a small but significant and non-transitory amount
by switching to alternative products or alternative suppliers, the
issue in a monopsony investigation is whether the sellers could defeat
an attempt by a monopsonist to depress prices by producing other
products or by selling their products to more distant buyers.
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\5\ As noted in Section 0.1 of the Horizontal Guidelines: ``The
exercise of market power by buyers (`power') has adverse effects
comparable to those associated with the exercise of market power by
sellers. In order to assess potential monopsony concerns, the Agency
will apply an analytical framework analogous to the framework of
these Guidelines.''
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[[Page 15986]]
C. Overview of the Department's Analysis of Competitive Issues in This
Transaction
1. Background
Cargill and Continental are international grain traders, and so the
Department's investigation encompassed grain markets throughout the
world. In the course of this investigation, conducted by a team of
approximately twenty lawyers, paralegals, and economists, the
Department's staff: reviewed over 400 boxes of documents furnished by
Cargill and Continental pursuant to our second request discovery
procedures; deposed Cargill and Continental executives; reviewed
relevant legal and economic literature; consulted with officials of the
Department of Agriculture, the Commodity Futures Trading Commission,
and state attorney general offices; and interviewed over one hundred
farmers, farm organization officials, agricultural economists, grain
company executives, and other individuals with knowledge of the
industry and competitive conditions.
The Department's staff found that grain typically moves from farms
to country elevators, from which it moves to river elevators and rail
terminals, and then to domestic purchasers or to port elevators for
export to the rest of the world. We found that Cargill and Continental
often compete with each other at various stages of their grain
distribution networks as they buy, store, distribute, and sell
agricultural commodities. Accordingly, the investigation encompassed
all aspects of their worldwide grain businesses in order to identify
any portions of their respective grain distribution networks where they
compete with each other.
In our investigation, we focused on the use of these grain
distribution networks to facilitate four different aspects of the grain
business:
1. Selling standard grades of grain (Primarily, corn, wheat and
soybeans);
2. Selling less widely-traded grain products (super commodities,
special commodities, and other niche products);
3. Buying grain; and
4. Providing elevator services at delivery facilities that are
designated by the CBOT for the settlement of corn and soybean futures
contracts.
As to the first two categories, the investigation indicated that
the transaction would not create market power in the sale of these
products; and very few of the public comments dealt with these aspects
of the grain business. Most of the comments concerned the Department's
conclusions on the third and fourth aspects of the Cargill and
Continental grain businesses.
2. Analysis of Cargill as a Seller of Standard-Grade Grain Products
Cargill and Continental compete in a national (or international)
market in their roles as sellers of standard agricultural commodities.
Although they are big grain companies in absolute terms, they have
relatively small shares of the output markets in which they compete.
One way to assess concentration among grain traders is grain storage
capacity.\6\ By this measure of concentration, collectively they had
less than eight percent of total U.S. off-farm grain storage capacity--
before the divestitures required by the Final Judgment.\7\
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\6\ Market share data is difficult to obtain and not entirely
reliable in this industry. One limitation of this measure of
concentration is the ``double counting'' problem that occurs when a
firm handles the same bushel of grain several times--for example,
when it buys wheat at a country elevator, transfers it to its rail
terminal and subsequently its flour mill, and sells it to a baker.
\7\ See section V(B) of this Response.
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Food processors, cattle feeders, and other buyers of agricultural
commodities rely upon competition among a fairly large number of big
grain companies with nationwide grain distribution networks and nearby
regional grain companies to ensure competitive prices. Commodity prices
tend to be fairly consistent in grain companies' output markets
throughout the country when adjusted for transportation costs. With
these competitive conditions, it was not surprising that the officials
from cereal companies, bakers, and other buyers of wheat, corn, and
soybeans whom we interviewed consistently indicated that they thought
the transaction would not give Cargill the power to raise prices for
standard commodities.
In summary, our investigation determined that the relevant
geographic market for grain companies' sale of grain is at least as
broad as the national market. With a combined Cargill/Continental share
of less than eight percent of that market, it is highly unlikely that
this transaction could create or enhance market power for sellers of
these commodities to any appreciable degree.
3. Analysis of Cargill as a Seller of Speciality Products
Although we concluded that this transaction would not give Cargill
or other grain companies market power as a seller of standard grade
grain products, we considered the possibility that Cargill and
Continental might be two of a relatively small number of sellers of
less widely-traded commodities and that the consolidation of these
business might give Cargill market power as a seller of these products.
Niche grain products include super commodities (crops with specific
characteristics, such as high oil content corn), special commodities
(crops that are not widely traded, such as white corn), and organic
crops.
Our investigation determined, however, that there are no niche
product market sin which Cargill and Continental are two of a
relatively small number of competitors. Consequently, we concluded that
the transaction will not create opportunities for Cargill to gain
sufficient market power to raise the prices on any of the niche
products that it sells.
4. Analysis of Cargill as a Buyer of Grain
Although Cargill and Continental compete for the sale of grain in
national and international markets, our investigation revealed that
they compete for the purchase of grain in relatively small local or
regional markets. Shipping grain by truck is relatively costly and
time-consuming. Farmers, therefore, tend to truck their grain within
limited geographic areas surrounding their farms--usually to buyers who
operate nearby country elevators or to buyers who operate river, rail
or port elevators if their farms are fairly close to those facilities.
Operators of river elevators and rail terminals may transport grain
farther distances to buyers who operate port elevators and domestic
processing plants--reflecting the relatively low cost of transporting
bulk commodities long distances by rail or barge as compared with truck
transportation. The draw area of one grain company's country, river,
rail or port elevator overlaps the ``draw area'' of a competing
elevator if their facilities are close enough to each other so that the
costs of shipping grain to the two elevators are not significantly
different.
During the course of our investigation, the Department reviewed
every local or regional market in which Continental competed with
Cargill for the purchase of grain before the transaction. Department
staff began this process by identifying every geographic market in
which Cargill and Continental operate facilities with overlapping draw
areas.\8\ We then determined how many grain companies other than
Cargill and
[[Page 15987]]
Continental operated grain elevators in each of those markets and
conducted detailed and specific analyses of all of the approximately
three dozen local or regional markets that are served by less than
twelve grain company elevators. The analysis for each of these
geographic markets included interviews of farmers, officials of farm
organizations, independent elevator operators, and other people with
knowledge of these local and regional markets, determinations of local
or regional grain transportation costs, and other relevant information
about competitive conditions in these markets. We concluded that
sufficient numbers of competitive grain buyers would remain after the
consolidation of the Cargill and Continental elevators in most of those
local or regional markets to make it highly unlikely that grain
companies could gain the power to depress the prices they pay for
grain.
---------------------------------------------------------------------------
\8\ At this stage of the process, we eliminated only the
Continental elevators that are located so far away from the nearest
Cargill elevator that it is inconceivable that the Continental
elevator and nearest Cargill elevator might be drawing an
appreciable amount of grain from the same farmers.
---------------------------------------------------------------------------
In nine local or regional markets, however, farmers located within
the overlapping Cargill/Continental draw areas depend on competition
among Cargill, Continental, and only a few other grain companies to
obtain a competitive price for their grain. Cargill's acquisition of
Continental's elevators in these markets, therefore, could create
sufficient market power to enable the few grain companies competing in
those markets to depress grain prices.
Sections VI and VII of the Complaint refer to these overlapping
Cargill/Continental draw areas as ``captive draw areas.'' This term
identifies highly concentrated markets in which Cargill and Continental
are two of a relatively small number of grain buyers and in which the
transaction is likely to create or enhance monopsony market power for:
operators of port elevators in the Pacific Northwest port range;
operators of port elevators in the central California port range;
operators of port elevators in the Texas Gulf port range; operators of
river elevators along the Illinois and Mississippi rivers; and
operators of rail terminals in the vicinities of Salina, Kansas and
Troy, Ohio.
In order to prevent the loss of competition for the purchase of
grain that would result from Continental's exit from these markets, the
Department insisted that Cargill divest either its elevator or
Continental's elevator in the markets to a new entrant who would
operate the facility as a grain elevator and compete for the purchase
of grain from farmers in the facility's draw area. Cargill and
Continental have divested, or are in the process of divesting, the
following facilities:
Continental Facilities Acquirer
Lockport, IL river elevator............... Louis Dreyfus Corporation.
Caruthersville, MO river elevator......... Louis Dreyfus Corporation.
Salina, KN rail elevator.................. Declined to renew its lease.
Troy, OH rail elevator.................... Mennel Milling Company
Beaumont, TX port elevator............... Louis Dreyfus Corporation.
Stockton, CA port elevator................ Penny Newman Grain Co.
Birds Point, MO river elevator 9......... Terminated minority
interest.
Cargill Facilities Acquirer
East Dubuque, IL river elevator........... Consolidated Grain & Barge.
Morris, IL river elevator................. Louis Dreyfus Corporation.
Seattle, WA port elevator................. Louis Dreyfus Corporation.
\9\ The proposed Final judgment does not require a divestiture of the
Birds Points facility since Continental terminated its minority
interest in that facility before the execution of that settlement
agreement.
5. Analysis of Cargill as an Operator of River Elevators Designated by
CBOT for Settlement of Futures Contracts
Our investigation indicated that the acquisition would give Cargill
and one other firm approximately 80% of the authorized delivery
capacity for settlement of CBOT corn and soybeans futures contracts. In
the light of these market shares and other market information, we
determined that Cargill's acquisition of Continental would make it
easier for Cargill unilaterally, or in coordination with the few
remaining firms in the corn and soybean futures markets, to manipulate
corn and soybean futures contracts in violation of section 7 of the
Clayton Act.
The divestitures of Continental's Lockport river elevator and
Cargill's Morris river elevator are needed to prevent the loss of
competitors that otherwise would have occurred as a result of
consolidation among operators of delivery facilities authorized for the
settlement of CBOT corn and soybean futures contracts. Further
divestitures required by the Final Judgment to remedy these concerns
include Continental's Chicago port elevator and one-third of the
capacity of Cargill's river elevator at Havana, Illinois.
6. Summary of the Department's Competitive Analysis
In summary, the Department found that Cargill's acquisition of
Continental's Commodity Grain Marketing Group, as originally
structured, would violate the antitrust laws. Cargill's acquisition of
grain elevators in nine local or regional markets in which there are
relatively small numbers of elevators operated by other grain companies
would have created or enhanced the ability of grain companies to
exercise monopsony powers in those geographic markets. Cargill's
acquisition of Continental's CBOT-authorized delivery points would have
resulted in undue concentration of these facilities and increased
opportunities for manipulations of CBOT futures markets. And, the non-
compete provision of the Cargill/Continental agreement would have
harmed competition by unduly restricting Continental's right to re-
enter the grain trading business in the future.
The Department has concluded that the restructuring of the
transaction as required by the proposed Final Judgment resolves these
competitive concerns. The divestitures required by the Final Judgment
should preserve the competitive conditions that existed before the
acquisition and ensure that farmers in the affected markets will
continue to have effective alternatives to Cargill when selling their
crops. The entry of new operators of CBOT-authorized delivery stations
should prevent manipulation of CBOT corn and soybean futures markets.
And, the requirement that the non-compete provision of the Cargill/
Continental agreement remain in force for no more than three years
should ensure that Cargill does not preclude continental's re-entry
into the grain distribution business for longer than is required to
give Cargill a fair opportunity to gain the loyalty of former
Continental suppliers and customers.
V. The Department's Responses to Specific Comments
We now turn to the comments that raise questions about our analysis
or that suggest relief different or supplemental to that contained in
the proposed Final Judgment. Copies of this Response without appendix
are being mailed to all who filed comments.
A. Remedy
Several commentators questioned whether the acquirers of the
divested facilities would be competitive.\10\ The proposed Final
Judgment sets forth procedures designed to ensure that the firms that
acquire the divested facilities will vigorously compete to buy grain
from farmers in their geographic markets.
---------------------------------------------------------------------------
\10\ Minnesota Attorney General Mike Hatch, South Dakota
Attorney General Mark Barnett, National Farmers Union, and Western
Organization of Resource Councils.
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Pursuant to the proposed Final Judgment, Cargill and Continental
provided widespread notice of the availability of the facilities that
they were required to divest in newspapers
[[Page 15988]]
of general circulation, provided appropriate information concerning
these facilities to prospective acquirers, and submitted reports to the
Department concerning these inquiries and subsequent negotiations. They
received over one hundred written expressions of interest in the
facilities to be divested,\11\ and now have entered into definitive
agreements to divest all of the facilities that they were required to
transfer to new entrants under the terms of the Final Judgment.
---------------------------------------------------------------------------
\11\ As a further indication of widespread interest in the
divested facilities, the number of potential acquirers who obtained
detailed information pursuant to confidentiality agreements ranged
from thirteen (for the Seattle port elevator) to twenty-one (for the
Morris and Caruthersville river elevators).
---------------------------------------------------------------------------
To ensure that the new entrants have the capability to compete with
Cargill and other incumbent grain companies in their markets, the
United States reviewed the proposed divestiture agreements, obtained
further information from the proposed acquirers, and conducted an
independent investigation into the background and capabilities of the
proposed acquirers. Under the Final Judgment, the United States has the
sole right to disapprove any prospective acquirer if it concludes that
the proposed acquirer might not operate the divested facility as part
of a viable, ongoing business. The Department's investigation indicated
that each of the proposed acquirers has the financial capability,
expertise, and incentive to become a vigorous, independent competitor
in the relevant market. Louis Dreyfus and Consolidated Grain & Barge
are major grain companies who will use these acquisitions to expand
into markets that they do not presently serve. Mennel and Penny Newman
are smaller, but they are experienced grain traders who presented sound
business plans for assimilating the Troy rail elevator and Stockton
port elevator in their respective grain distribution businesses.
In summary, the divested facilities will be controlled by new
entrants with the background, expertise, and incentive to compete
effectively for the purchase of grain produced in these markets. With
these divestitures, therefore, it is not likely that this transaction
will create or enhance the exercise of market power by Cargill or other
grain companies enabling them to depress prices paid to farmers for
their crops in any market.\12\
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\12\ Antitrust relief should `` `cure the ill effects of the
illegal conduct, * * * assure the public freedom from its
continuance,' * * * and it necessarily must `fit the exigencies of
the particular case.' '' See Ford Motor Company v. United States,
405 U.S. 562, 575 (1972) (quoting United States v. United States
Gypsum, 340 U.S. 76, 88 (1950)) and International Salt Co. v. United
States, 332 U.S. 392, 401 (1947)). The proposed Final Judgment meets
these criteria by preserving competition in domestic grain markets,
as it existed prior to the transaction. In the absence of any
evidence to indicate that the transaction raises antitrust concerns
elsewhere, there is no basis for prohibiting Cargill ``from
acquiring any other direct competitors in grain export, transport,
and storage markets,'' as suggested by Minnesota Attorney General
Mike Hatch. If Cargill were to attempt to acquire competitors in
additional markets, the Department will have the opportunity to
investigate those acquisitions and to seek remedies for any
transactions that violate the antitrust laws.
---------------------------------------------------------------------------
For the divestitures required to forestall undue concentration
among firms who control river elevators designated for the settlement
of CBOT corn and futures contracts, the Department insisted on
additional criteria. We required that the proposed acquires (Louis
Dreyfus at Morris and Lockport, NIDERA at Chicago, and Prairie Central
at Havana) demonstrate that they satisfy all requirements for obtaining
CBOT designation as an authorized delivery point (including CBOT's
financial standards) in addition to the criteria established for the
other divestitures.
Turning to one specific local market, Congresswoman Jo Ann Emerson,
several farm groups, and one individual farmer in southeastern Missouri
cautioned against allowing Bunge Corp, to acquire the Continental river
elevator at Caruthersville (Cottonwood Point), Missouri because Bunge
is already one of the major grain buyers in that local market.\13\ The
United States agrees with their analysis. Bunge will not acquire that
facility; instead it will be acquired by Louis Dreyfus.
---------------------------------------------------------------------------
\13\ Missouri Farm Bureau Federation, Missouri Soybean
Association, Pemiscot County Farm Bureau, and Clyde Southern.
---------------------------------------------------------------------------
B. Market Definition
Several commentators argue that the United States failed to
recognize that Cargill and Continental operate on a national scale and
to realize that this transaction would concentrate the national grain
market for the purchase and sale of grain.\14\ We believe that we used
the correct market definitions in our competitive analysis.
---------------------------------------------------------------------------
\14\ Nebraska Attorney General Don Stenberg, South Dakota
Attorney General Mark Barnett, National Farmers Union, WIFE, and
Reena Kazmann.
---------------------------------------------------------------------------
Under standard antitrust analysis (as applied to monopsony cases),
we determine the boundaries of relevant geographic markets by
determining whether it would be profitable for the only buyer of grain
in the geographic market to depress the price that farmers receive for
their grain by a small, but significant, and non-transitory amount. In
this case, the farmer's alternatives when he looks for buyers of his
crops include the closest grain buyer and other buyers located
relatively near the closest buyer.\15\ In most markets, we found that
the additional trucking costs would preclude farmers from shipping
their crops more than about twenty to thirty miles beyond the nearest
grain elevator to get a small, but significant, increase in the price
paid for his grain.
---------------------------------------------------------------------------
\15\ The cost of shipping grain from farm to grain elevator is
more relevant than the distance from farm to grain elevator, but
cost and distance are roughly proportionate to each other in most
cases.
---------------------------------------------------------------------------
In this case, therefore, it was appropriate to focus our monopsony
analysis on local or regional markets consisting of areas in which: (a)
Cargill and Continental had elevators that were close enough to each
other to compete for the purchase of grain originating in their
overlapping draw areas; and (b) there were a relatively small number of
competitors near enough to the Cargill and Continental facilities to be
reasonable outlets for farmers located in the overlapping Cargill/
Continental draw areas. These are the markets in which the transaction
could create market power if too few competitors remained after Cargill
acquired nearby Continental grain elevators.
Our investigation began with an examination of all local or
regional markets in which Cargill and Continental operated grain
elevators that were close enough together to compete for the purchase
of grain from the same farmers. After eliminating the local or regional
markets served by relatively large numbers of other grain company
elevators, we found that Cargill and Continental were two of a
relatively small number of grain companies who competed for the
purchases of grain in nine local or regional markets and concluded that
the transaction would have created monopsony market power in those
markets.
Not one of the comments that we received indicated that we
overlooked a specific local or regional market in which the transaction
was likely to create competitive problems. Instead, the commentators
who said that we overlooked a relevant geographic market directed our
attention to national, international or export markets.
If the relevant geographic market were nationwide, we would have
been forced to conclude that the transaction is not likely to lessen
competition among grain buyers. Using total U.S. off-farm grain
elevator capacity as a measure of market share in the grain
distribution industry, Cargill had about a 5.7% share of the market and
Continental about 1.2%
[[Page 15989]]
before the transaction (and before the combined capacity was reduced by
the divestitures required under the Final Judgment).\16\ The combined
share of less than eight percent of the market is far below any
appropriate threshold for suggesting that this transaction is likely to
significantly lessen competition among grain buyers. Thus, the combined
Cargill/Continental share of the national grain market masks the
anticompetitive effects of this transaction, as originally structured,
at the local or regional level.
---------------------------------------------------------------------------
\16\ The 1999 Grain & Milling Annual estimates total U.S. off-
farm grain storage capacity to be 7,938,190,000 bushels. Id. at 7.
Cargill had total capacity of 452,399,560 bushels; Continental
169,346,000 bushels. Id. at 21, 22. The combined Cargill/Continental
capacity is 7.83% of total U.S. off-farm grain storage capacity.
---------------------------------------------------------------------------
Other commentators suggest that the U.S. grain export market may be
a relevant market.\17\ Cargill and Continental are two of the United
States' largest agricultural exporters (with combined export market
shares of about 40% for corn, 30% for soybeans, and 25% for wheat);
but, U.S. export market shares are not meaningful indications of
concentration in any relevant grain output market.The customers for
Cargill and Continental U.S. grain exports (i.e., grain buyers in
foreign countries) rely on competition among relatively large numbers
of U.S. and foreign grain sellers. These sellers include Cargill,
Continental, other big international grain traders, such as Bunge,
Louis Dreyfus, Peavey (a division of ConAgra), and ADM, smaller
regional grain traders, and (in most cases) their own domestic
producers. With such large numbers of competing sellers in these
markets, it is not likely that this transaction will create or enhance
monopoly market power.
---------------------------------------------------------------------------
\17\ Nebraska Attorney General Don Stenberg, South Dakota
Attorney General Mark Barnett, National Farmers Union, and WIFE.
---------------------------------------------------------------------------
Cargill and Continental port elevators were a major focus of our
investigation, but not because of their impact on buyers in foreign
markets. We devoted substantial efforts to the investigation of this
level of the Cargill and Continental grain distribution networks
because: (a) In several port ranges, they compete with each other for
the purchase of grain from farmers and other suppliers in their port
elevators' overlapping draw areas; and (b) there are relatively small
numbers of other grain companies in some of those port ranges. In fact,
we found competitive problems requiring the divestiture of four of
Continental's six port elevators.
C. Cargill's Power Over Price
Many of those who file documents are concerned that Cargill may
have the power to depress grain prices paid to farmers after it
acquires Continental.\18\ We too had that concern, and as explained in
section IV of this memorandum, we concluded that the acquisition as
originally proposed would have adversely affected farmers in local or
regional markets who had no reasonable choice but to sell their grain
to Cargill, Continental, and only a few other grain companies. As
explained in section V(A) of this memorandum, the divestitures required
by the proposed Final Judgment protect those farmers. Only if the Court
were not to require the divestitures set forth in the proposed Final
Judgment would grain companies gain the power to depress prices paid to
farmers and other suppliers in these markets.\19\
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\18\ Nebraska Attorney General Don Stenberg, South Dakota
Attorney General Mark Barnett, Animal Welfare Institute, National
Catholic Rural Life Conference, and Office of Hispanic Ministry,
Greta Anderson, Vivian Anderson, Kay Barnes, Isabelle Barth, Mary
Beckrich, Amanda Bray, Loris von Brethorst, Marilyn Borchardt, Mike
Callicrate, G.M. Carlson, Mary Casserand, Laurie Chancellor, Donald
B. Clark, Roger and Shari Cummings, Peggy B. Daugherty, Lyman and
Darline Denzer, Steve Dewell, C.K. Dresae, Llewellyn and Karen
Engelhart, Dan and Judy Gotto, Bob Gregory, Mary Hargrafen,
Minnesota AG Mike Hatch, Veron E. Heim, John W. Helmuth, Barbara
Hook, Jeff Horejsi, Robin Kleven, Riley Lewis, Todd Lewis, Lawrence
Marvin, Margot Ford McMillen, Darlene Milbradt, Winton Nelson,
Jennifer Poole, Rae Powell, Lois Shank, Lyle D. Spencer, Ellen
Stebbins, Elenor Steburg, Daniel J. Swartz, and Professor C. Robert
Taylor.
\19\ A.V. Krebs posed the question whether farmer and others who
deal with Cargill will be forced to conform to Cargill's standards
for marketing grain after the acquisition. The answer is no. The
proposed Final Judgment ensures that the transaction will not create
or enhance the ability of Cargill to exercise market power in
domestic grain markets. Absent market power, Cargill cannot impose
its will on the firms with whom it does business.
Several individual farmers and the National Farmers Union oppose
the acquisition because it will not have the effect of increasing
prices or competition in grain markets. The goal of antitrust is to
prevent transactions that would reduce existing competition. The
antitrust laws provide no legal basis for using the power to
challenge proposed mergers to increase competition in any market.
---------------------------------------------------------------------------
D. Futures Markets
Several comments stated that the United States failed to consider
the impact of the transaction on futures markets.\20\ In fact, we
devoted considerable attention to that issue. Our analysis of the
futures issue included reviews of all agricultural futures markets and
economic literature on the subject, interviews of farmers, farm
organization officials, grain company executives, and other people who
rely on futures markets, and extensive consultations with officials
from the Commodity Futures Trading Commission (CFTC).
---------------------------------------------------------------------------
\20\ Minnesota Attorney General Mike Hatch, John W. Helmuth, and
Keith Mudd.
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We concluded that the transaction, as originally structured, would
have given Cargill and Archer Daniels Midland Co. (ADM) approximately
eighty percent of the delivery capacity for the settlement of CBOT corn
and soybean futures contracts, thereby increasing opportunities for
manipulation of those futures markets. Under the transaction, as
originally structured, Cargill would have acquired eight Continental
elevators that were authorized to accept deliveries for the settlement
of CBOT corn and soybean futures contracts. The proposed Final Judgment
requires the divestiture of three CBOT-authorized delivery stations on
the northern portion of the Illinois river--Continental's port elevator
at Chicago, Continental's river elevator at Lockport, and Cargill's
river elevator at Morris. In addition, Cargill is required to make one-
third of its loading capacity at a fourth facility--its Havana river
elevator--available to an independent grain company under a throughput
agreement in order to gain an additional facility on the southern
portion of the Illinois River for the settlement of soybean futures
contracts.
During our review of the divestitures proposed by Cargill and
Continental, we reviewed the prospective acquirers' backgrounds to
ensure that they had the requisite financial and operational
capabilities and incentives to become vigorous independent competitors.
In cooperation with officials from the CFTC, we also obtained credible
assurances that the acquirers could obtain CBOT authorization to accept
deliveries in settlement of corn and soybean futures contracts. The
Department concluded that the divestitures will leave sufficient CBOT-
authorized delivery capacity in the control of firms other than Cargill
and ADM to protect against manipulation of CBOT corn and soybean
futures markets.
E. Specialty Markets
Several commentators indicated that the United States failed to
consider whether the transaction would enable Cargill to monopolize
speciality or niche commodity markets.\21\ As noted in section IV(B)(3)
of this Response, we did study this issue, but our investigation
[[Page 15990]]
produced information showing that the transaction would not create or
enhance market power in any markets for the purchase or sale of niche
products (including super commodities, special commodities, and organic
grain products).
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\21\ Minnesota Attorney General Mike Hatch, Rural Life Office,
Office of Hispanic Ministry, and Roger and Shari Cummings.
---------------------------------------------------------------------------
In summary, our investigation uncovered no niche product market in
which Cargill and Continental were two of a relatively small number of
buyers or sellers. Our investigation, which encompassed all niche
products handled by either Cargill or continental, revealed that
either: (a) They did not compete with each other before the transaction
or (b) there were sufficient numbers of other grain companies in the
market to deny Cargill the opportunity to gain monopoly or monopsony
market power.
F. Nebraska Grain Markets
Several members of the WIFE organization in Nebraska expressed
concern about the ability of Cargill to depress prices paid to Nebraska
farmers. As mentioned previously, the main focus of our competitive
analysis was to determine whether the transaction was likely to create
sufficient market power for Cargill to depress prices paid to farmers
in any local or regional market. Since our preliminary investigation
identified several markets in Nebraska in which Cargill and Continental
compete for the purchase of grain, we devoted considerable attention to
local markets within he state. After conducting numerous interviews
with farmers and farm organizations in those areas, calculating local
grain transportation costs, and considering other relevant competitive
data, however, we concluded that there were no local markets in
Nebraska in which Cargill and Continental were two of a relatively
small number of competitors for the purchase of grain. In each Nebraska
market where Cargill and Continental compete with each other for the
purchase of grain, we found that there were sufficient numbers of
alternative nearby buyers remaining after the Cargill/Continental
consolidation to defeat any attempt by grain companies to depress
prices paid to farmers in those areas. Accordingly, we did not seek
divestitures of any grain elevators in Nebraska.
G. Concentration in Other Agriculture Markets
Some comments express concern over concentration in markets other
than grain--for example, markets pertaining to beef and pork packing,
cattle feedlots, broiler and turkey production, animal feed plants,
flour and corn milling, soybean crushing, and ethanol production.\22\
The comments suggest that the Department's analysis of the Cargill
transaction may be deficient because it fails to give due consideration
to these and other agriculture markets.
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\22\ Nebraska Attorney General Don Stenberg, AAM Inc., Clean
Water Action Alliance, IATP, Kansas Cattlemen's Association, and
Minnesota Catholic Conference, Marilyn Borchardt, John W. Helmuth,
and Richard and Margene Eiguren.
---------------------------------------------------------------------------
The Department disagrees. No facts have arisen that lead us to
believe that Cargill's acquisition of Continental will harm competition
in markets other than those identified in the Complaint.
The Department filed the Complaint and entered into the proposed
Final Judgment after an extensive investigation. During this
investigation, we examined competition and the likely effects of the
transaction in every market where both Cargill and Continental provide
competing products or services. We focused on the grain and grain
futures markets alleged in the Complaint because these are the markets
in which Cargill and Continental compete with each other and the
markets in which competition could diminish after this transaction.
We are aware of other agribusiness industries in which one or both
firms operate--including beef and pork packing, broiler and turkey
production, flour and corn milling, soybean crushing, cattle feedlots,
animal feed plants, and ethanol--but none of these industries is
affected by the transaction since Continental is not selling its
processing division to Cargill. Having carefully reviewed the facts,
the Department has found no reason to believe that the transaction
would have an adverse impact on competition in markets other than the
grain markets alleged in the Complaint.
H. Ban on All Agribusiness Mergers
Some commentators suggest that current concentration levels in
agriculture markets justify an absolute ban on mergers and acquisitions
in the agriculture sector.\23\ The antitrust laws provide no legal
basis for such a ban, and the Department has no power to prevent the
consummation of any transaction except to prevent or cure specific
violations of the antitrust laws. Section 7 of the Clayton Act is the
principal federal statutory provision dealing with mergers and
acquisitions and, as explained above, it prohibits transactions that
may harm competition in specific markets. Concentration levels are an
important part of the analysis, but the ultimate test under Section 7
is whether the acquisition may tend to substantially lessen competition
and that is the showing we must be prepared to prove in court, based on
the facts in any given case.
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\23\ May Beckrich, Dick Lundebreck, David Olson, and Professor
C. Robert Taylor.
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I. Vertical Integration
Several commentators express concern about a trend toward vertical
integration in agricultural industries, and they ask if the Department
gave due consideration to that trend.\24\ The Department is aware that
some agricultural sectors are experiencing an increase in vertical
integration. While a trend toward integration can be anticompetitive in
certain circumstances, we did not find that such concerns are presented
by the Cargill-Continental transaction.
---------------------------------------------------------------------------
\24\ South Dakota Attorney General Mark Barnett, AAM Inc.,
Animal Welfare Institute, Catholic Charities, Clean Water Action
Alliance, Jan Lundebrek, David Olson, and Professor C. Robert
Taylor.
---------------------------------------------------------------------------
Vertical integration occurs when several stages of production,
processing, distribution, and marketing are brought together in one
firm. In broilers, for example, many of the big firms are involved in
breeding, hatching, growing, processing, and packaging activities.
Vertical integration also appears to be increasing in other
agricultural sectors.
In many circumstances, vertical integration is actually
procompetitive, allowing firms to reduce their costs. See Herbert
Hovenkamp, Federal Antitrust Policy, The Law of Competition and Its
Practice, 332-36 (1994). However, there may be circumstances in which
vertical mergers raise antitrust concerns, usually by either increasing
barriers to entry, facilitating collusion or circumventing regulation.
Id. at 346-48.
Since the Cargill-Continental transaction is a horizontal, rather
than vertical, acquisition, it does not raise significant vertical
issues. The Department did not uncover evidence suggesting that the
transaction, as restructured, would have anticompetitive effects at any
level in the production chain or result in an increase in vertical
integration that would be competitively problematic. In short, the
Department was aware of, and did consider, trends toward vertical
integration in various agricultural sectors, but concluded that such
trends did not provide a basis for seeking broader relief with respect
to this transaction.
J. Non-economic Concerns
North Dakota Attorney General Heitkamp urges the Department to go
beyond antitrust analysis and give greater consideration to unspecified
[[Page 15991]]
``non-economic concerns.'' While she does not say so directly, Attorney
General Heitkamp may be suggesting that the antitrust laws be used to
preserve family farms.
Our prosecution of this matter protects the interests of all
farmers, large and small. The proposed Final Judgment is designed to
eliminate the risk that Cargill's acquisition of Continental will
lessen competition anywhere in the United States. Department staff
first identified all markets in which Cargill and Continental are
competitors, and then, in every one of these markets, assessed the
extent to which the acquisition raises concerns about a loss of
competition that would cause competitive problems. Ultimately, we
identified nine relevant markets in which farmers were likely to be
adversely affected by the creation of monopsony market power that would
enable Cargill and other grain companies to depress grain prices.
Through divestitures, the proposed Final Judgment resolves those
concerns. In addition, the Final Judgment protects against the exercise
of market power to manipulate corn and soybean futures prices and
limits a non-compete clause that otherwise would have prevented
Continental from re-entering the grain distribution business.
As far as our investigation was able to determine, there are no
other potential adverse competitive effects likely to arise from the
acquisition. The proposed Final Judgment therefore protects sellers of
grain throughout the United States from the price depressing effects
that otherwise could have been caused by the acquisition. This outcome
is beneficial to farmers of every size, including small family farmers.
K. Administrative and Legislative Actions
New Mexico Attorney General Madrid has no opposition to the
proposed Final Judgment. Rather, her comment urges the Department to
advocate administrative and legislative actions that will invigorate
competition in agriculture markets.
The Antitrust Division of the Department of Justice testifies
before Congress on antitrust matters and prepares written reports
stating the views of the Department on pending or proposed legislation
pertaining to antitrust. Division attorneys also participate in
administrative proceedings that require consideration of the antitrust
laws or competition policies. In these situations, the Division often
is the government's principal advocate of competition. Therefore,
Attorney General Madrid can be sure that whenever the opportunities
present themselves--in legislation, administrative proceedings or
elsewhere--the Department will continue to promote competition in
agriculture markets.
L. The OCM Comments
OCS's comments indicate that it is dissatisfied with the action
taken by the Department of Justice. Apparently, OCM thinks the
complaint and proposed Final Judgment are too modest to deal with
Cargill's dominance, as perceived by OCM, in numerous agriculture
markets throughout the world. OCM's comments thus ``reach beyond the
complaint, to evaluate claims that the government did not make and to
inquire as to why they were not made.'' See United States v. Microsoft
Corp., 56 F.3d at 1459. By doing so, OCM invites the court improperly
to intrude on the government's prosecutorial role. See id.
On the merits, many of OCM's comments in opposition to the
Department's analysis are answered by the CIS itself, the rationale of
which OCM has not addressed. Rather than repeat the CIS here, we
briefly deal with OCM's principal objections with appropriate
references to relevant explanations in the CIS or elsewhere in this
Response.\25\
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\25\ In a separate filing, Nebraska Attorney General Don
Stenburg shares OCM's concerns as they are set out in points 4, 5,
6, 8, and 9 of this section.
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1. DOJ Failed To Consider the Wider Concentration in Agricultural
Markets Beyond Grain Buying
In addition to its grain trading operations, Cargill has
significant presence in beef packing, cattle feedlots, pork packing,
broiler and turkey production, animal feed plants, flour and corn
milling, soybean crushing, and ethanol production. OCM believes that
Cargill transfers resources between these markets according to
prevailing economic conditions.\26\ In OCM's view, these transfers are
bound to increase after the transaction and, in some manner, enhance
Cargill's power regardless of its economic performance.
---------------------------------------------------------------------------
\26\ OCM refers to these transfers of resources between markets
as ``cross-subsidization,'' and claims that they make diversified
firms ``even more capable of * * * anti-competitive behavior.`` OCM
at 2-3.
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The appropriate question for antitrust purposes, however, is
whether, by transferring its own assets across industry lines as it
sees fit in response to changing economic conditions, Cargill's ability
artificially to depress prices will increase. OCM does not explain how
such transfers could actually injure competition, and the Department is
not aware of any plausible theories.
2. DOJ Failed To Consider the Continuing Potential for Anticompetitive
Behavior in the Post-Merger Market
OCM is concerned that the proposed Final Judgment may not preserve
competition in the relevant markets. We address this concern in the CIS
at pages 9-17 and in section V(A) of this memorandum.
3. DOJ Failed To Show That the Divested Remnants of Continental Will Be
a Competitive Force Absent a Large Network of Elevators That Buy Grain
OCM questions whether the divested grain elevators will be operated
by effective competitors if the acquirers do not operate a large-scale
network of facilities. This comment also goes to the issue of relief,
which we address in section V(A) of this memorandum.
In addition to the points discussed in that section, we note that
operators of river elevators and rail terminals who do not have
extensive distribution networks in their facilities' draw areas do not
have to buy their grain from Cargill or other national grain
companies--they can buy from farmers and local or regional operators of
country elevators in those markets. Likewise, operators of port
elevators who do not have extensive inland distribution networks can
buy grain from independent operators of river elevators and grain
terminals in their facilities' draw areas. On the basis of these facts
and other information that we learned about the acquirers and
competitive conditions in the markets where the divested facilities are
located, we concluded that all of the acquirers of the divested
facilities are likely to be viable and effective competitors as a
result of the elevators that they are acquiring.
4. DOJ Failed To Consider the Impact on Potential Entry Into Grain
Buying Markets
OCM suggests that Continental should be held together because it is
one of the few firms that has the potential to challenge Cargill in
markets that Cargill now dominates, citing United States v. Penn-Olin
Chemical Co., 378 U.S. 158 (1964), for that proposition. The teachings
of Penn-Olin do not apply to the facts in this case.
In Penn-Olin, the Supreme Court considered the legality of a joint
venture between two chemical companies to build a sodium chlorate
plant. Although the joint venture would have added a
[[Page 15992]]
sodium chlorate producer to the market, the Court remanded the case
with instructions that the district court consider ``the reasonable
probability that either one of the corporations would have entered the
market by building a plant, while the other would have remained a
significant potential competitor.'' Id. at 175-76. The Court's
rationale was that ``[t]he existence of an aggressive, well equipped,
and well financed corporation engaged in the same or related lines of
commerce waiting anxiously to enter an oligopolistic market would be a
substantial incentive to competition which cannot be underestimated.''
Id. at 174.
Penn Olin thus concerns the protection of the present competitive
force of a likely potential entrant--a firm perceived as a likely
entrant by those in the market. That is not our concern in this case
because Continental is presently in the market. We are concerned with
the protection of actual competition in grain markets throughout the
United States. As explained at pages 9-17 of the CIS and in section
V(A) of this memorandum, the proposed Final Judgment fully addresses
this concern by divesting Continental's assets to new, independent
competitors in the markets, who can ensure that farmers receive a
competitive price for their grain after the transaction.
5. DOJ Failed To Consider the Nature of Grain Selling Markets
It is true, as OCM suggests, that a lessening of competition in
world grain markets could have an adverse effect on competition within
the United States. Therefore, contrary to OCM's assertion, we did
assess Cargill's acquisition of Continental in the light of market
conditions throughout the world.
Our investigation revealed that numerous firms sell to buyers in
foreign countries--including big international grain traders (such as
Cargill, Bunge, ADM, Peavey, and Louis Dreyfus), smaller regional grain
traders, and domestic producers in most foreign countries. These
numbers suggest that overseas markets will remain unconcentrated, even
after Cargill acquires Continental. Acquisitions in unconcentrated
markets rarely have adverse competitive effects, and OCM provides no
evidence to the contrary.\27\
---------------------------------------------------------------------------
\27\ As noted in section IV(B)(4) of this Response, our
investigation did indicate competitive problems at U.S. export
facilities because Cargill and Continental were two of a relatively
small number of grain buyers in the relevant port ranges, not
because Cargill and Continental were two of a relatively small
number of grain sellers in any overseas market.
---------------------------------------------------------------------------
6. DOJ Failed To Consider the Economic Disorganization of Farmers Which
Can Be Exploited by Powerful Buyers
Many thousands of farmers produce corn, wheat, and soybeans in the
United States. As grain leaves their farms, however, the number of
firms that buy grain from the farmers becomes much smaller. OCM says
this disparity ``creates a rationale for scrutinizing the power of
buyers relative to sellers.'' We agree with OCM on this point; its
assertion that we ignored buyer power in our analysis is simply
incorrect.
If there is one theme that unifies our analysis, it is that
Cargill's acquisition of Continental should not be permitted to create
or enhance market power or to facilitate its exercise. CIS at 4-9; see
also section IV(B) of this memorandum. Market power in this case means
the ability of Cargill, as a buyer, to depress the price it pays for
grain. See section IV(B)(4) of this memorandum. During the course of
our investigation, we located every grain market in the United States
in which it appeared likely that Cargill could depress prices as a
result of the acquisition--and we obtained appropriate relief to
address that concern. See id. at section V(A).\28\
---------------------------------------------------------------------------
\28\ As noted in section V(B) of this Response, no commentator
suggested that we failed to require divestitures in any specific
local or regional market in which Cargill and Continental are two of
a relatively small number of grain buyers.
---------------------------------------------------------------------------
In short, the Department has not ignored the ``power of buyers''
that concerns OCM. Rather, we now recommend entry of the proposed Final
Judgment, which will ensure that this transaction does not give Cargill
the opportunity to exercise monopsony power over farmers anywhere in
the United States.
7. DOJ Failed To Consider Informational Disparities in Agricultural
Markets
OCM does not explain how Cargill's acquisition of Continental will
exacerbate informational disparities that may exist in agriculture
markets. To the extent that Cargill or other grain merchants have the
benefit of information that may be in some sense superior, there is no
evidence that such information will improve after the transaction so as
to lessen competition. Assuming information disparities could be the
predicate for a Section 7 violation, they are not exacerbated by the
transaction.
8. DOJ Failed To Explain the Benefits of the Merger
OCM's argument that we should explain the efficiencies in order to
justify our ``approval of the merger,'' OCM comment at 8, suggests that
it misunderstands the role of the Department of Justice in reviewing
mergers subject to the antitrust laws. The Department does not approve
mergers. Rather, the Department reviews the particular facts and
circumstances of each proposed merger in order to determine whether the
merger is likely to substantially lessen competition. If the Department
determines that a proposed merger is likely to lessen competition in
violation of the antitrust laws, we seek an injunction from the court
to prohibit the transaction.
As the Complaint and CIS make clear, the Department challenged this
merger in its original form as being in violation of Section 7 of the
Clayton Act. The Department did not rely upon any asserted
``efficiencies'' as a defense to allow Cargill to acquire Continental
facilities in any relevant market in which we concluded that the
transaction would otherwise tend substantially to lessen competition.
The Department agreed to settle only after Cargill and Continental
agreed to be bound by the terms of the proposed Final Judgment, which
has the effect of substantially altering the terms of the merger to
ensure that the transaction will not give grain companies market power
to depress grain prices in any relevant market in the United States.
9. DOJ Failed To Consider a Range of Statutes That Congress Intended
Courts To Consider When Making Decisions About Agriculture Markets
OCM refers at some length to the Packers and Stockyards Act, the
Capper-Volstead Act, and the Agricultural Fair Practices Act. OCM then
concludes that ``mergers or other activities that enhance the power of
buyers'' require careful review under the antitrust laws, especially
when farmers are involved. See OCM comment at 12. The United States
carefully investigates all mergers that may create substantial
competitive harm affecting any group, including farmers. As the CIS and
this Response make clear, the Department's concern for Cargill's power
as a buyer of grain from farmers has been central to our analysis,
prosecution, and proposed remedy in this case.
10. DOJ Failed To Consider That the Consent Decree Risks Leaving
Farmers Without an Effective Outlet for Legal Redress
OCM believes that the court of Appeals for the District of Columbia
Circuit has ``severely restricted'' the ability of the district court
to determine whether the proposed Final Judgment is in the public
interest as required by the
[[Page 15993]]
APPA. See OCM comment at 13. For that reason, OCM is concerned that the
interests of midwestern farmers may not be fully considered in this
federal circuit.
There is no reason to believe that the District Court for the
District of Columbia cannot make the public interest determination that
is required by law in this case.
M. A Hearing Is Unnecessary in This Case
Nebraska Attorney General Stenberg urges the Court to appoint a
special master ``to hear evidence and to make a recommendation to the
court as to the efficacy'' of the proposed Final Judgment prior to its
entry. See Brief of the Attorney General of Nebraska as Amicus Curiae
at 13-14. The APPA provides that the Court must make a determination
that entry of the proposed consent judgment is in the public interest
before entering that judgment. The statute provides that in making such
a public interest determination, the Court ``may'', inter alia, appoint
a special master, conduct proceedings involving the taking of testimony
and documentary evidence, and ``take such other action in the public
interest as the court may deem appropriate.'' 15 U.S.C. 16(f)(5). The
statute does not require the Court to hold hearings, but directs the
court to take such action as it deems appropriate.
As noted in section II of this memorandum, Congress, in passing the
APPA, intended that consent decrees remain a viable antitrust
enforcement option. They could not remain viable if it were necessary
for a reviewing court to conduct a trial for a de novo determination of
factual issues relevant to the adequacy of a proposed decree. The
legislative history is clear that the court need not conduct the
equivalent of a trial on the merits, or even conduct a hearing or take
evidence, S.Rep. No. 298-93 at 6 (1973):
The Committee recognizes that the court must have broad
discretion to accommodate a balancing of interests. On the one hand,
the court must obtain the necessary information to make its
determination that the proposed consent decree is in the public
interest. On the other hand, it must preserve the consent decree as
a viable settlement option. It is not the intent of the Committee to
compel a hearing or trial on the public interest issue. It is
anticipated that the trial judge will adduce the necessary
information through the least complicated and least time-consuming
means possible. Where the public interest can be meaningfully
evaluated simply on the basis of briefs and oral arguments, this is
the approach that should be utilized. Only where it is imperative
that the court should resort to calling witnesses for the purpose of
eliciting additional facts should it do so.\29\
---------------------------------------------------------------------------
\29\ This passage is quoted in United States v. Associated Milk
Producers, Inc., 394 F. Supp. 29, 45 (W.D. Mo. 1975), aff'd, 534
F.2d 113 (8th Cir. 1976), cert. denied sub non. National Farmers
Org., Inc. v. United States, 429 U.S. 940 (1976) (hereafter
``AMPI'').
The expeditious procedures to determine the public interest that
Congress envisioned are not possible without reliance upon the
Department's good faith execution of its prosecutorial discretion.
Evidentiary hearings, therefore, should be used only in extreme cases.
See United States v G. Heileman Brewing Co., 563 F. Supp. 642, 652 (D.
Del. 1983) (``This preference for the comment procedure over more
burdensome forms of third-party participation * * * is clearly shown by
the legislative history of the APPA.'').
In the instant case, an evidentiary hearing would be inordinately
time consuming and would not in any way further the Court's
understanding of facts relevant to the determination it must make.
There has been no claim of bad faith or malfeasance on the part of the
United States in settling this case. See AMPI, 394 F. Supp. at 41, and
cases cited. Nor has Attorney General Stenberg explained why he has not
been able to fully apprise the Court of his concerns in the comments he
has already filed with respect to the proposed Final Judgment. See
Heileman Brewing Co., 563 F. Supp. at 653.
The Court need only consider the proposed Final Judgment as
explained by the CIS, the comments thereon, and this Response thereto.
Such consideration will amply demonstrate that the proposed Final
Judgment satisfies the public interest standard of the APPA as
interpreted by the courts.
N. The 60-Day Comment Period Should Not Be Extended
Several commentators request that the time period for filing public
comments be extended.\30\ There is no need for such extension.
---------------------------------------------------------------------------
\30\ Animal Welfare Institute, NFO Kansas, OCM, Insabelle Barth,
Mary Casserand, Steve Dewell, Grant and Mabel Dobbs, Barbara Hook,
Jay Godley, Todd Lewis, Glenn Oshiro, N. Ramsey, Ellen Stebbins,
Giles Stockton, Dr. Frankie M. Summers, Dennis and Janice Urie.
---------------------------------------------------------------------------
The 60-day public comment period specified in 15 U.S.C. 16(b)
commenced on August 12, 1999 and terminated on October 12, 1999; but we
have considered and responded to every comment that we received before
or after the deadline. Those who request more time for the filing of
comments do not suggest the existence of relevant facts that the
Department has failed to consider in negotiating and consenting to the
proposed Final Judgment. Nor do they explain why more time would be
desirable to assist the Court in making the public interest
determination that is required by the APPA. Under the circumstances, an
extension of the 60-day public comment period is unnecessary and
inappropriate in this action.
Conclusion
The Competitive Impact Statement and this Response to comments
demonstrate that the proposed Final Judgment serves the public
interest. Accordingly, after publication of this Response in the
Federal Register pursuant to 15 U.S.C. 16(b), the United States will
move this Court to enter the Final Judgment.
Dated this 11th day February, 2000.
Respectfully submitted,
Robert L. McGeorge,
D.C. Bar No. 91900.
Michael P. Harmonis,
U.S. Department of Justice, Antitrust Division, 325 7th Street, NW,
Suite 500, Washington, D.C. 20530, (202) 307-6361.
Certificate of Service
I hereby certify that I am an attorney for the United States in
this action, and have caused true and correct copies of the foregoing
UNITED STATES RESPONSE TO PUBLIC COMMENTS to be served by first-class
mail or by more expeditious means on counsel for the defendants, Marc
G. Schildkraut, Esq., Howrey & Simon, 1299 Pennsylvania Ave., NW,
Washington DC, Paul T. Dennis, Esq., Swidler Berlin Shereff Friedman,
LLP, 3000 K Street, NW, Suite 300 Washington, DC and Jack Quinn, Esq.,
Arnold & Porter, 555 12th Street, NW, Washington, DC, on this 11th day
of February, 2000.
Michael P. Harmonis.
United States Response to Public Comments--Appendix
Communications with respect to this document should be addressed
to:
Roger W. Fones, Chief, Donna N. Kooperstein, Assistant Chief; Robert
L. McGeorge, Michael P. Harmonis, Attorneys; Transportation, Energy
& Agriculture Section, Antitrust Division, U.S. Department of
Justice, 325 Seventh Street, NW, Washington, DC 20530, (202) 307-
6361.
Public Comments
The comments from members of the public that follow in this
Appendix were filed during the sixty-day period specified in 15 U.S.C.
16(b),
[[Page 15994]]
commencing on August 12, 1999 and terminating on October 12, 1999.
Congresswoman Jo Ann Emerson--Tab 1
State Attorneys General (alphabetical by State)--Tab 2
Organizations (in alphabetical order)--Tab 3
Individuals (in alphabetical order)--Tab 4
Tab 1
Congress of the United States,
House of Representatives,
Washington, DC 20515-2508, August 11, 1999.
Mr. Roger Fones,
Chief, Transportation, Energy, and Agriculture Section, Antitrust
Division, U.S. Department Of Justice, 325 7th Street, NW, Suite 500,
Washington, DC 20530.
Dear Mr. Fones: Thank you for the attention of your Department
to the plans by Cargill, Inc. to acquire the grain handling
interests of Continental Grain. In all of agriculture, from
transportation to processing, to inputs, there is a troubling trend
toward larger and fewer companies. It is vitally important that your
office work to prevent the kind of consolidation in agriculture
markets that hurts producers. In the case of Cargill, I believe that
your investigation and the ensuing stipulations were well warranted.
However, I hope that you will consider an issue that has been raised
by producers in my District regarding the consent agreement that the
DOJ has entered into with Cargill (civil action number 991875).
Specifically, I have been contacted by producers in Southeast
Missouri concerned that Continental's Cottonwood Point facility may
be sold to an entity already possessing a significant share of the
local grain market. As you know, the consent agreement requires
Cargill to divest itself of the Cottonwood Point facility in order
to satisfy competitive concerns. Local producers fear that Bunge
would gain a near monopoly share of the local market if it were
allowed to purchase the facility. I urge you to exercise strict
oversight authority over the divestiture of the Cottonwood Point
facility in order to prevent an unintended, anticompetitive
situation.
Thank you for your attention to this matter and I look forward
to hearing from you.
Sincerely,
Jo Ann Emerson, Member of Congress.
Tab 2
Richard Blumenthal, Attorney General,
State of Connecticut
Hartford June 23, 1999.
The Honorable Joel I. Klein,
Assistant Attorney General, Antitrust Division, Department of
Justice, 950 Pennsylvania Avenue, N.W., Room 3109, Washington, D.C.
20530.
Re: Mergers in the Agricultural Industry.
Dear Joel: I am sure you are aware of Minnesota Attorney General
Mike Hatch's recent letter to you--which he has suggested I support
in my capacity as Chair of the Antitrust Committee of the National
Association of Attorneys General--expressing his concern about the
proposed merger of the grain operations of Cargill, Inc. and
Continental Grain Company. In addition, I understand that North
Dakota Attorney General Heidi Heitkamp, Missouri Attorney General
Jay Nixon, and South Dakota Attorney General Mark Barnett have each
written to express their similar concerns about this proposed
merger.
As the Chair of the Antitrust Committee, I join in asking you to
consider carefully the possible damage to our nation's agricultural
industry caused by undue concentration in numerous grain markets.
In exercising our parens patriae authority, Attorneys General
are often called upon to evaluate and gauge the competitive harm
that may result in their own states from a proposed merger.
Moreover, we are all well informed of the benefits of competitive
markets in lower prices and better quality for consumers. Given the
importance of the food supply to our national, as well as local,
interests, and the needs of consumers and farmers for fair pricing,
it is crucial that we not allow monopolies or oligopolies to form--
or if already formed, from abusing their market power--at any level
of the agricultural industry. I urge you to be wary of and oppose
any merger that may tend to lessen competition in this all-important
industry in the interests of farmers and consumers alike.
Very truly yours.
Richard Blumenthal.
Mike Hatch, Attorney General
State of Minnesota
Office of the Attorney General,
St. Paul, MN, October 12, 1999.
Roger W. Fones,
Chief, Transportation, Energy and Agriculture Section, Antitrust
Division, United States Department of Justice, 325 Seventh Street,
NW, Suite 500, Washington, DC 20530.
Re: Comment--Proposed Consent Decree Approving the Proposed
Merger of Cargill, Inc. and Continental Grain Co.
Dear Mr. Fones: I submit these comments about the proposed
Cargill-Continental merger pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16 (1998). Our concerns were explained in
detail in a letter submitted to the Department of Justice in May,
attached for your information as Exhibit 1. While we appreciate the
Department of Justice's (DOJ) efforts in its lengthy investigation
of the proposed merger and while the proposed consent decree strives
to alleviate many concerns that have been raised regarding this
merger, we remain concerned about the impact of this merger upon
farmers and rural communities in Minnesota. This merger is taking
place in the context of a nationwide, even a global trend toward
consolidation of agricultural industries which, we fear, will only
harm the interests of farmers, consumers, and local communities.
As noted in our earlier letter, the grain industries,
particularly grain exports, are already highly concentrated,
increasing the likelihood that further concentration will lead to
oligopsony and even monopsony markets for grain farmers and other
sellers of grain. Further, agricultural industries are experiencing
a high rate of vertical consolidation as well, with Cargill being
one of the key players in this vertical consolidation given its ties
to agricultural biotechnology, grain production, animal feed, meat
packing, food processing, etc. Particularly disturbing are recent
comments of the chairman of Cargill who has publicly proclaimed the
company's intention to continue to expand its market reach
throughout agricultural industries, both on a horizontal and
vertical level. ``Cargill Chairman Micek Says Acquisitions Could
Fuel Growth,'' Star Tribune, September 11, 1999 (Exhibit 2). These
comments illustrate Cargill's intention to further reduce
competition in agricultural markets a time when its most recent and
controversial acquisition has not even been finalized.Thus, we
believe it would be prudent for the consent decree to prohibit
Cargill from acquiring any other direct competitors in grain export,
transport, and storage markets.
Also, it should be noted that Cargill continues to come under
scrutiny for its business conduct. In the most recent example, a
little over one month ago, the Commodities Futures Trading
Commission charged Cargill with improper selling of a commodity
option for future delivery of grain, because of its use of certain
contracts. Barshay, Jill, ``Cargill Charged With Illegally Selling
Option Contracts,'' Star Tribune, August 27, 1999 (Exhibit 3). This
type of alleged conduct is directly relevant to the proposed merger,
and should be considered by the Court in its evaluation of the
proposed merger and consent decree.
Finally, should the Court approve the proposed consent decree
and allow the merger to take place, we urge the Department of
Justice to strictly scrutinize Cargill's and Continental's
compliance with the proposed final order, and to exercise its
discretion in approving acquirers of the proposed divestitures in a
careful and exacting way. As the Department of Justice will have
sole discretion to approve or disapprove any proposed acquirers, we
ask that it exercise this discretion vigilantly to minimize to the
greatest degree possible any potential harm to competition and
public welfare that may result from this merger.
Very truly yours,
Mike Hatch,
Attorney General, State of Minnesota.
Exhibit 1 to the comment filed by Minnesota Attorney General Mike
Hatch is available for inspection in room 215 of the U.S. Department of
Justice, Antitrust Division, 325 Seventh Street, NW, Washington, DC
20530 (telephone: 202-514-2481) and at the Office of the Clerk of the
United States District Court for the District of Columbia, 333
Constitution Avenue, NW, Washington, DC 20001. Copies of these
materials may be obtained upon request and payment of a copying fee.
Jeremiah W. (Jay) Nixon, Attorney General,
Attorney General of Missouri,
[[Page 15995]]
Jefferson City, MO, September 16, 1999.
Mr. Roger W. Fones, Esq.,
Chief, Transportation, Energy and Agriculture Section, Antitrust
Division, United States Department of Justice, 325 Seventh Street,
NW, Suite 500, Washington, DC 20530.
Re: Comments on Proposed Consent Decree and Divestiture Settlement,
Cargill, Inc.'s Acquisition of Continental Grain Company.
Dear Mr. Fones: As Missouri Attorney General, I wrote directly
to Joel Klein, Assistant Attorney General in charge of the Antitrust
Division, in mid-May, 1999, regarding the above-referenced
acquisition. I had also instructed my assistant, Trey Hanna, to
assist your office in assessing the anticompetitive impact this
merger would have on grain farmers in southeast Missouri. As
expressed on earlier occasions, I am concerned about this
acquisition.
I was quite glad to see that the Department of Justice secured
(1) Cargill's agreement that it would not seek to acquire any
ownership interest in the river elevator at Birds' Point, Missouri,
which Continental had previously held, and (2) Continental's
agreement to first divest its river terminal at Cottonwood Point,
Missouri, (near Caruthersville) before conveying most of its other
grain assets to Cargill. Allow me to again express our thanks.
But we are still concerned; it remains to be seen whether the
new owner of that Cottonwood Point facility will be acceptable.
We have analyzed competitive conditions in southeast Missouri's
grain business and farmers' ability to secure a fair price for their
product. We have analyzed the ``Competitive Impact Statement''
(C.I.S.) filed by the Department of Justice on July 23, 1999 and
subsequently published in the Federal Register. Pursuant to the
Antitrust Procedures and Penalties Act, 15 U.S.C. Sec. 16 (b)-(h), I
now wish to formally comment on the proposed consent decree which,
if approved by the court, will become a final judgment and will set
competitive conditions in southeast Missouri for many years to come.
As the Department of Justice explained in that C.I.S., the core
purpose of requiring Continental to first divest the Cottonwood
Point facility is to ``preserve existing competition'' and
``maintain the level of competition [in southeast Missouri] that
existed pre-acquisition.'' (C.I.S., at p. 9). As also recited
therein, the Department of Justice has the sole discretion to
approve or disapprove the manner in which the defendants propose to
implement the divestiture of this facility (C.I.S., at p. 12), and
whom they propose to divest it to (C.I.S., at p. 11).
Farmers in southeast Missouri hear rumors that Continental may
propose to divest the Cottonwood Point facility to Bunge, the second
largest competing purchaser of grain in the area (after Cargill).
That would reduce the number of competing buyers of grain from four
to three, being nearly as bad for competition in southeast Missouri
as a sale to Cargill, which you sued to prevent. Likewise, a
divestiture to Consolidated Grain and Barge (C.G.B.), another
competitor in the market, would also be far from optimal.
Before Cargill and Continental announced this global
transaction, farmers in southeast Missouri had four competing buyers
to sell their product to. We urge the Department of Justice to
exercise its discretion, when approving proffered buyers, to make
sure they have four separate and distinct buyers after this
divestiture, as well.
While my analysis has focused exclusively on the Missouri
facilities, I also have concerns about the impact of this merger on
the market generally. I share the concern of many Missouri farmers
that the current anti-trust laws and resources may not adequately
protect them from attempts to manipulate the market place. I urge
the Justice Department to scrutinize this acquisition closely in
light of the growing consolidation in agriculture.
Thank you for giving these comments due consideration. If we can
answer any questions or provide other assistance, don't hesitate to
contact us through my assistant, Trey Hanna, at (816) 889-5000.
Sincerely,
Jeremiah W. (Jay) Nixon.
Don Stenberg, Attorney General,
State of Nebraska,
Office of the Attorney General,
Lincoln, Nebraska 68509-8920, September 7, 1999.
Mr. Roger W. Fones,
Chief, Transportation, Energy and Agriculture Section, Antitrust
Division, United States Department of Justice, 325 Seventh Street,
N.W., Suite 500, Washington, DC 20530.
Re: United States of America v. Cargill, Inc and Continental Grain
Company.
Dear Mr. Fones: Pursuant to the Antitrust Procedures and
Penalties Act, I am writing in my official position as the Attorney
General of the State of Nebraska to object to the proposed final
judgment in this case. In my opinion, the approval of the consent
decree is not in the public interest and is not consistent with the
public policy underlying federal antitrust statutes.
The proposed consent decree requires the divestiture of certain
grain elevators in specified locations, but otherwise approves the
merger of two of our nation's largest grain trading companies.
The increasing concentration in agricultural marketing and
processing will mean lower prices for farmers and higher prices for
consumers. Indeed, it was farmers' protests against the formation of
large agricultural marketing and processing trusts in the late
1800's that led to the creation of our antitrust laws.
We are now seeing the same types of concentrations of economic
power in the agricultural processing and marketing industries that
existed over 100 years ago until they were broken up by the passage
and enforcement of federal antitrust laws. At a minimum, a line must
now be drawn to prevent further anti-competitive economic
concentration in agriculture.
The fundamental flaw in the U.S. Justice Department's analysis
that it fails to recognize that grain handling and grain
merchandising is a nationwide and worldwide business. The proposed
merger needs to be viewed not simply on a region by region basis,
but upon overall national grain marketing implications.
The fundamental evils of excessive economic concentration are
well known and have been well known for more than 100 years. In a
highly concentrated industry, it is easy to keep track of the prices
a handful of competitors are paying to acquire grain and to sell it.
It is in the interest of the handful of competitors to uniformly
offer low prices to buy and high prices to sell to consumers. This
is true whether or not there is an explicit contract or conspiracy
in restraint of trade. Moreover, it is easier and more tempting to
form contracts or conspiracies to restraint of trade in a highly
concentrated industry.
In a May 7, 1999 letter concerning the Cargill/Continental
merger to the U.S. Department of Justice, Minnesota Attorney General
Mike Hatch noted some basic market share information that is of
great importance. He pointed out that Cargill and Continental are
the two largest grain exporters in the United States. Cargill is the
nation's largest grain exporter and Continental is the second
largest. General Hatch goes on the explain that in fiscal year 1998,
the market shares for the four largest national grain exporters
(including Cargill and Continental) range from 46.6% for wheat to
64.9% for soybeans and 80.9% for corn. Cargill itself estimates that
it and Continental together control about 35% of the U.S. grain
exports.
Continental and Cargill are both already such large enterprises
that it is very doubtful that this merger will produce any economies
of scale that would increase profits. Rather, increased profits will
come from the increased market power to pay producers less and
charge consumers more by virtue of vastly increased economic power.
The purpose of the anti-trust statutes is to preserve the free
markets so that our free enterprise system can produce the fairest
prices for both producers and consumers. The anti-trust statutes
should be brought to bear in this case for that very reason.
As General Hatch correctly noted in his May 7 letter, these
issues are national in scope and adequate resolution cannot come
from the state or local level. If the U.S. Department of Justice
cannot be persuaded to vigorously oppose a merger of this magnitude,
it is difficult to imagine any merger in the area of agri-business
which would be opposed by the Department.
Those of us from agricultural states under-stand the negative
impact of excessive economic concentrations in agriculture on our
farmers and ranchers. Persons from non-agricultural states should
carefully consider the substantial increases in consumer food prices
that loom on the horizon if further economic concentration occurs in
our agricultural sector.
Yours truly,
Don Stenber.
In the matter of The United States District Court for the
District of Columbia; United States of America, Plaintiff, vs.
Cargill, Incorporated, and Continental Grain Company, Defendants;
Case No. 1:99CV01875 (GK) Judge; Gladys Kessler.
[[Page 15996]]
Filed October 22, 1999.
Motion by the Attorney General of Nebraska To File Brief as Amicus
Curiae
Comes Now Don Stenberg, the Attorney General of the State of
Nebraska, and moves this Court for leave to file the brief attached
hereto as Exhibit A as amicus curiae in the above-referenced action.
The Attorney General of Nebraska has a special interest in the subject
matter of this lawsuit because of his duties and responsibilities to
enforce the antitrust laws, and because the merger proposed herein will
have a significant impact upon the State of Nebraska.
Don Stenberg, #14023,
Attorney General of Nebraska.
Dale A. Comer, #15365,
Assistant Attorney General, 2115 State Capitol, Lincoln, NE 68509-8920,
Tel: (402) 471-2682.
Certificate of Service
The undersigned hereby certifies that a copy of the foregoing
Motion By The Attorney General Of Nebraska To File Brief As Amicus
Curiae with attachments has been served upon the parties herein by
mailing each of those parties a true and correct copy of the same, via
first-class United States Mail, postage prepaid, addressed to the
parties' counsel of record as follows:
Robert L. McGeorge, Esq.
Attorney, U.S. Department of Justice, 325 Seventh Street, NW, Suite
500, Washington, DC 20530.
Marc G. Schildkraut, Esq.,
Howrey & Simon, 1299 Pennsylvania Avenue, NW, Washington, DC 20004.
Paul T. Denis, Esq.,
Swidler, Berlin Shereff Friedman, LLP, 3000 K Street, NW, Suite 300,
Washington, DC 20007-5116.
Jack Quinn, Esq.,
Arnold & Porter, 555 Twelfth Street, NW, Washington, DC 20004.
On this 21st day of October, 1999.
Dale A. Comer,
Assistant Attorney General.
Memorandum of Points and Authorities in Support of Motion by the
Attorney General of Nebraska To File Brief as Amicus Curiae
Don Stenberg, #14023,
Attorney General of Nebraska.
Dale A. Comer, #15365,
Assistant Attorney General, 2115 State Capitol, Lincoln, NE 68509-8920,
Tel: (402) 471-2682.
Introduction
This case involves an action under the Tunney Act, and in
particular 15 U.S.C. 16(e), in which the parties seek this court's
approval of a proposed final consent judgment involving a corporate
merger between Cargill, Inc. and Continental Grain Company. The
Attorney General of the State of Nebraska has now filed a Motion For
Leave To File A Brief As Amicus Curiae in this proceeding. This
Memorandum of Points and Authorities is submitted to the court in
support of that Motion.
Argument
I
The decision as to whether to allow participation by amicus curiae in
this case is left to the discretion of this court.
In general, the decision as to whether to allow a non-party to
participate in a case as amicus curiae is solely within the broad
discretion of the court. Ellsworth Associates, Inc. v. United States,
917 F.Supp. 841 (D.D.C. 1996). Such discretion also applies within the
specific context of the Tunney Act. United States v. Associated Milk
Producers, 394 F.Supp. 29 (W.D.Mo. 1975). The aid of amicus curiae is
appropriate at the trial level where they can provide helpful analysis
of the law. Waste Management of Pennsylvania v. City of York, 162
F.R.D. 34 (M.D.Pa. 1995). Amicus curiae are also appropriate when they
have a special interest in the subject matter of the suit. Strasser v.
Doorley, 432 F.2d 567 (1st Cir. 1970). As a result, the decision as to
whether to allow participation by amicus curiae in this case is left to
the discretion of this court, and such participation is warranted if
the amicus participants can provide a helpful analysis of the law or if
they have a special interest in the subject matter of this suit.
II
The court should exercise its discretion so as to allow the Attorney
General of Nebraska to file a brief in this case as amicus curiae.
The amicus curiae brief which the Attorney General of Nebraska
proposes to submit to this court contains a detailed discussion and
analysis of the proposed Final Judgment in this case under the
applicable antitrust laws, and therefore, will hopefully provide this
court with a helpful analysis of the law. More importantly, the
Attorney General of Nebraska has a special interest in the subject
matter of this lawsuit, in two respects.
First, the Attorney General of Nebraska is the primary state
official in Nebraska charged with the duty of enforcing the state's
antitrust laws. See, e.g., Neb. Rev. Stat. Secs. 59-1601 through 59-
1623 (1998) (the Nebraska Consumer Protection Act which, among other
things, authorizes the Attorney General to bring an action seeking to
enjoin a corporate acquisition which would ``substantially lessen
competition or tend to create a monopoly in any line of commerce); Neb.
Rev. Stat. Secs. 59-801 through 59-831) (1998) (authorizing criminal
sanctions for antitrust violations in Nebraska); and Neb. Rev. Stat.
Secs. 84-212 (1994) (authorizing the Attorney General to sue a parens
patriae on behalf of citizens of the state to recover damages sustained
by those citizens as a result of violations of the state or federal
antitrust laws). The Nebraska Attorney General also has specific
enforcement authority under the federal antitrust laws. See, e.g.,
Section 4 of the Clayton Act, 15 U.S.C. 15 (1998) (authorizing states
to sue for proprietary damages inflicted upon them); Title III of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, 15 U.S.C. 15c
(1998) (authorizing state attorneys general to sue for damages as
parens patriae on behalf of natural persons); Section 16 of the Clayton
Act, 15 U.S.C. Sec. 26 (1998); California v. American Stores Co., 495
U.S. 271 (1990) (upholding state's right pursuant
[[Page 15997]]
to Section 16 of the Clayton Act to obtain injunctive relief, including
divestiture, against illegal mergers); Hawaii v. Standard Oil, 405 U.S.
251, 257-60 (1972) (acknowledging state's authority to seek injunctive
relief on behalf of general economy of the state). As a result, the
Attorney General of Nebraska has a strong interest in antitrust
enforcement and in promoting free and fair competition. The Attorney
General of Nebraska also has a strong interest in protecting the
citizens of Nebraska from unreasonable restraints of trade, both in
their capacities as consumers and their capacities as competitors.
Second, agriculture is an important and major industry in the State
of Nebraska. In 1997, more than 96 per-cent of the state's land,
involving 47 million acres, was farm and ranchland. Clerk of the
Nebraska Legislature, Nebraska Blue Book 1998-99 (Michael R. Lewis ed.,
1998) p. 40. In that same year, gross cash receipts from farm marketing
in Nebraska totaled $10.1 billion, and Nebraska had 55,000 farms that
produced food for consumers in the United States and abroad. Id.
Consequently, any anticompetitive activities which affect agricultural
markets and farmers in the State of Nebraska in general are of concern
to the Attorney General of Nebraska.
It is also clear that agricultural interests and farmers in
Nebraska are affected specifically by the details of the proposed final
consent judgment in this case. As noted in the government's Competitive
Impact Statement herein, the overlapping draw area for the Pacific
Northwest includes portions of Nebraska. Competitive Impact Statement
at 4. In addition, the overlapping draw area for the Texas Gulf also
includes portions of Nebraska. Competitive Impact Statement at 4.
Therefore, the final consent judgment proposed in this case affects the
agricultural industry in Nebraska, and the Attorney General of Nebraska
has a direct responsibility to deal with anticompetitive practices
affecting those markets. On that basis, the Attorney General also has a
special interest in the subject matter of this lawsuit.
Conclusion
An amicus brief by the Attorney General of Nebraska in this case
would provide this court with a helpful analysis of the law. Moreover,
for the reasons stated above, the Attorney General of Nebraska has a
special interest in the subject matter of this lawsuit. As a result,
the Attorney General of Nebraska respectfully requests that this court
exercise its discretion and grant him leave to participate in this
action by filing a brief as amicus curiae.
Dated this 21st day of October, 1999.
(By: Don Stenberg, #14023, Attorney General)
Don Stenberg,
Attorney General of Nebraska.
Dale A. Comer, #15365,
Assistant Attorney General, 2115 State Capitol, Lincoln, NE 68509-8920,
Tel: (402) 471-2682.
Certificate of Service
The undersigned hereby certifies that a copy of the foregoing
Memorandum Of Points And Authorities in Support Of Motion By The
Attorney General Of Nebraska To File Brief As Amicus Curiae has been
served upon the parties herein by mailing each of those parties a true
and correct copy of the same, via first-class United States Mail,
postage prepaid, addressed to the parties' counsel of record as
follows:
Robert L. McGeorge, Esq.,
Attorney, U.S. Department of Justice, 325 Seventh Street, NW, Suite
500, Washington, DC 20530.
Marc G. Schildkraut, Esq.,
Howrey & Simon, 1299 Pennsylvania, NW, Washington, DC 20004.
Paul T. Denis, Esq.,
Swidler, Berlin Shereff Friedman, LLP, 3000 K Street, NW, Suite 300,
Washington, DC 20007-5116.
Jack Quinn, Esq.,
Arnold & Porter, 555 Twelfth Street, NW, Washington, DC 20004.
On this 21st day of October, 1999.
Dale A. Comer,
Assistant Attorney General.
Brief of the Attorney General of Nebraska as Amicus Curiae
Don Stenberg, #14023,
Attorney General of Nebraska.
Dale A. Comer, #15365,
Assistant Attorney General, 2115 State Capitol, Lincoln, NE 68509-8920,
Tel: (402) 471-2682.
Exhibit A
Interest of Amicus Curiae
The Attorney General of Nebraska is the primary state official in
Nebraska charged with the duty of enforcing the state's antitrust laws.
See, e.g., Neb. Rev. Stat. Secs. 59-1601 through 59-1623 (1998) (the
Nebraska Consumer Protection Act which, among other things, authorizes
the Attorney General to being an action seeking to enjoin a corporate
acquisition which would ``substantially lessen competition or tend to
create a monopoly in any line of commerce); Neb. Rev. Stat. Secs. 59-
801 through 59-831 (1998) (authorizing criminal sanctions for antitrust
violations in Nebraska); and Neb. Rev. Stat. Sec. 84-212 (1994)
(authorizing the Attorney General to sue as parens patriae on behalf of
citizens of the state to recover damages sustained by those citizens as
a result of violations of the state or federal antitrust laws). The
Nebraska Attorney General also has specific enforcement authority under
the federal antitrust laws. See, e.g., Section 4 of the Clayton Act, 15
U.S.C. 15 (1998) (authorizing states to sue for proprietary damages
inflicted upon them); Title III of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, 15 U.S.C. Sec. 15c (1998) (authorizing state
attorneys general to sue for damages as parens patriae on behalf of
natural persons); section 16 of the Clayton Act, 15 U.S.C. 26 (1998);
California v. American Stores Co., 495 U.S. 271 (1990) (upholding
state's right pursuant to Section 16 of the Clayton Act to obtain
injunctive relief, including divestiture, against illegal mergers);
Hawaii v. Standard Oil, 405 U.S. 251, 257-60 (1972) (acknowledging
state's authority to seek injunctive relief on behalf of general
economy of the state). As a result, the Attorney General of Nebraska
has a strong interest in antitrust enforcement and in promoting free
and fair competition. The Attorney General of Nebraska also has a
strong interest in protecting the citizens of Nebraska from
unreasonable restraints of trade, both in their capacities as consumers
and in their capacities as competitors.
Agriculture is an important and major industry in the State of
Nebraska. In 1997, more than 96 per cent of the state's land, involving
47 million acres, was farm and ranch land. Clerk of the Nebraska
Legislature, Nebraska Blue Book 1998-99 (Michael R. Lewis ed., 1998) p.
40. In that same year, gross cash receipts from farm marketing in
Nebraska totaled $10.1 billion, and Nebraska had 55,000 farms that
produced food for consumers in the United States and abroad. Id. As a
result, any anticompetitive activities which affect agricultural
markets and farmers in the State of Nebraska in general are of concern
to the Attorney General of Nebraska.
It is also clear that agricultural interests and farmers in
Nebraska are affected specifically by the details of the proposed final
consent judgment in this case. As noted in the government's Competitive
Impact Statement herein, the overlapping draw area for the Pacific
Northwest includes portions of Nebraska. Competitive Impact Statement
at 4. In addition, the
[[Page 15998]]
overlapping draw area for the Texas Gulf also includes portions of
Nebraska. Competitive Impact Statement at 4. As a result, the final
consent judgment proposed in this case will affect the agricultural
industry in Nebraska, and the Attorney General of Nebraska has a direct
responsibility to deal with anticompetitive practices in those markets.
Argument
The Final Consent Judgment Proposed by the Parties in This
Proceeding is Not in the Public Interest, and Should Not be
Approved by This Court
Under the Tunney Act, and in particular 15 U.S.C. 16(e), this court
may approve the final consent judgment proposed by the parties in this
case only if the court determines that the entry of such judgment is
``in the public interest.'' For the reasons discussed at length below,
the Attorney General of Nebraska contends that the consent judgment
with Cargill and Continental Grain Company (hereafter ``Continental'')
proposed by the United States is deficient and not in the public
interest. Consequently, this court should refuse to approve that final
consent judgment.
I
In a proceeding under the Tunney Act, this court is not a ``rubber
stamp'' for the Department of Justice, but acts as an independent check
on the terms of the proposed final consent judgment.
A number of federal cases have set out the applicable standards
with respect to a review of a proposed final consent judgment proposed
by the government under the Tunney Act. First of all, it is clear that
the court is not to act simply as a ``rubber stamp'' for the proposal
submitted by the Department of Justice. United States v. BNS Inc., 858
F.2d 456 (9th Cir. 1988); United States v. Western Electric Company,
767 F.Supp. 308 (D.D.C. 1991). Instead, the court ``is required to act
as an independent check on the terms of such decrees.'' United States
v. Western Electric Company, 767 F.Supp. 308, 328 (D.D.C. 1991). In
addition, Congress did not intend the court's review of a proposed
final consent judgment under the Tunney Act to be merely pro forma or
limited to what appears on the surface. United States v. Gillette
Company, 406 F.Supp. 713 (D. Mass. 1975). The court must make an
independent determination as to whether or not entry of a proposed
consent decree is in the public interest. United States v. Microsoft,
56 F.3d 1448 (D.C. Cir. 1995).
What constitutes the ``public interest'' in the context of this
type of proceeding was discussed at length in United States v. American
Telephone and Telegraph Company, 552 F.Supp. 131 (D.D.C. 1982). In that
case, this court indicated that purpose of the antitrust laws was to
``preserv[e] free and unfettered competition as the rule of trade.''Id.
at 149 (quoting from Northern Pacific Railway Co. v. United States, 356
U.S. 1 (1958)). Within that purpose, an antitrust remedy, including a
consent decree, must ``leave the defendant without the ability to
resume the actions which constituted the antitrust violation in the
first place'' or ``effectively foreclose the possibility that antitrust
violations will occur or recur.'' Id. at 150. In addition, ``antitrust
violations should be remedied with as little injury as possible to the
interest of the general public' and to relevant private interests.''
Id. at 150 (quoting from United States v. American Tobacco Co., 221
U.S. 106 (1911)).
II
The final judgment proposed by the parties in this action is deficient
in a number of respects, and is not in the public interest.
The Attorney General of Nebraska believes that the final consent
judgment proposed by the parties in this case is deficient in the first
instance because it does not take into account the wider context of
vertical consolidation in the nation's agribusiness system, and instead
focuses solely on the grain buying activities of Cargill and
Continental. Consolidation across vertically-related markets is
increasingly leading to the creation of all-inclusive food supply
chains in the United States where one company or interrelated group of
companies can control certain agricultural commodities from their
creation at the genetic level to their ultimate purchase by the
consumer. This sort of vertical consolidation will harm competition by
making entry into the affected markets more difficult, by making the
extent of actual competition more difficult to estimate, and by forcing
independent farmers and producers out of business. Allowing the merger
of Cargill and Continental will make further agribusiness consolidation
more likely. For one thing, acquisition of Continental's seventy grain
elevators will enhance Cargill's economic power generally, and allow
deployment of that economic power across a wide range of other
agricultural sectors including beef packing, cattle feedlots, pork
packing, broiler production, turkey production, flour milling, soybean
crushing and ethanol production. That enhanced economic power will also
allow Cargill to transfer resources across markets without regard to
competitive conditions. As a result, the government should have
considered more than the grain buying operations of Cargill in
evaluating this merger.
The proposed final consent judgment also fails to recognize that
grain handling and grain merchandising is a nationwide and worldwide
business. In that regard, as noted in the competitive impact statement
filed herein, Cargill is the second largest grain trader in North
America and the largest U.S. grain exporter. Continental is the third
largest grain trader in North America and the third largest U.S. grain
exporter. Merger of those market shares cannot help but increase the
concentration in the national and global grain trading and grain
exporting markets to questionable levels with damaging effects upon
farmers and consumers in Nebraska and other agricultural states. Yet,
the government's proposed final consent judgment focuses only on grain
trading activities in a small number of regional markets.
The Attorney General of Nebraska is aware of the decision in United
States v. Microsoft, 56 F.3d 1448 (D.C. Cir. 1995). Consequently, the
remainder of this amicus curia brief will focus on specific
deficiencies with respect to the matters alleged in the government's
Complaint in this case and the proposed final consent judgment
presented to the court.
A. The final consent judgment fails to take into account the size and
organization of the sellers in the markets affected by the proposed
merger.
In a number of merger cases, courts have given credence to the
notion that a merger resulting in a larger, more powerful firm may be
permissible if the companies the merged firm sells to also possess
market power. United States v. Baker Hughes, Inc., 908 F.2d 981, 984
(D.C. Cir 1990); F.T.C. v. Elders Grain, Inc., 868 F.2d 901, 905 (7th
Cir. 1989). For example, in United States v. Country Lake Foods, Inc.,
754 F.Supp. 669 (D.Minn. 1990), the district court recognized the
ability of large food corporations which were milk purchasers to act as
a check to the market power of milk processors in a merger involving
the fluid milk processing industry because the food corporations could
respond aggressively to price increases and had the capital resources
necessary to vertically integrate fluid milk processing. That reasoning
forms the basis for the ``power buyer'' defense to merger enforcement.
[[Page 15999]]
If the presence of ``power buyers'' in a particular market helps to
make a proposed merger more acceptable, it necessarily follows that the
lack of such ``power buyers'' makes a merger less acceptable, because
powerful sellers in a given market can use their market power to
exploit small and disorganized buyers. For example, in United States v.
Tote, Inc., 768 F.Supp. 1064 (D. Del. 1991), the court rejected the
power buyer defense because there were a large number of small buyers
in the market at issue. For that reason, among others, the court held
the merger in question to be anticompetitive. See also F.T.C. v.
Cardinal Health, Inc., 12 F.Supp.2d 34 (D.D.C. 1998).
The reasoning underlying the power buyer defense should also be
applied equally in evaluating the competitive effects of a merger in an
oligopsony situation. In other words, the anticompetitive effects of a
merger involving a small number of possible buyers should be evaluated,
in part, by measuring the number and power of the sellers for those
buyers. If the sellers are numerous, disorganized and small, then they
will be unable to respond to the anticompetitive exercise of market
power by small group of powerful buyers. That is precisely the
situation in the present case where a small group of buyers in the
grain buying and marketing industry are able to exert anticompetitive
power over numerous, disorganized and small farmers selling grain. That
situation will be exacerbated by the merger proposed under the final
consent judgment in this case, and for that reason, the final judgment
is not in the public interest.
B. The proposed final consent judgment does not take into account the
potential for continuing anticompetitive behavior in the post-merger
market.
In its Complaint, the government argues that very few firms buy
grain within particular draw areas. Government Complaint, p.4. The
government then contends that in those ``captive draw areas, [a merged]
Cargill would be in a position unilaterally, or in coordinated
interaction with the few remaining competitors, to depress prices paid
to producers and other suppliers because transportation costs would
preclude them from selling to purchasers outside the captive draw areas
in sufficient quantities to prevent the price decrease.'' Government
Complaint, p.4. To remedy this problem in the context of the proposed
merger, the government simply proposes divestitures in a few of the
captive draw areas. However, even with the divestitures proposed by the
Department of Justice, grain buying in the post-merger markets in the
captive draw areas at issue will still remain heavily concentrated and
susceptive to collusive and cooperative activity among the remaining
grain buyers. As a result, the proposed final consent judgment will not
effectively foreclose the possibility that antitrust violations will
occur in the future in the captive draw areas. For that reason, it is
deficient.
C. The proposed final consent judgment fails to take into account the
impact of global sales or grain buying in the United States.
A great deal of the grain purchased by Continental and Cargill is
sold overseas where purchases are based upon factors such as geographic
area, historic preference or long-term contracts. Those factors often
reduce the need for competition in buying American grain. However, the
proposed final consent judgment fails to take those global market
factors into account in determining what is necessary to maintain
competitive grain buying in the United States.
D. Under the proposed final consent judgment, there is no assurance
that the portions of Continental's operations which are divested can or
will remain a competitive force in the markets in question.
The government notes, in its Complaint, that ``[g]rain traders such
as Cargill and Continental operate extensive grain distribution
networks, which facilitate the movement of grain from farms to domestic
consumers of these commodities and to foreign markets.'' Government
Complaint at 3. Given this need for ``extensive grain distribution
networks.'' it is unclear as to how the remnants of Continental
divested as a result of the final consent judgment will compete
effectively in the markets where they are located, since they may not
be part of such a distribution network with its competitive flexibility
and access to information about grain flows. In addition, the
acknowledged need for ``extensive grain distribution networks'' in
these markets will make it highly unlikely that new firms will enter
these markets and provide additional competition. Indeed, the
Department of Justice concedes in its Complaint that new entry into the
grain buying business is unlikely. Government Complaint at 6.
E. The proposed final consent judgment fails to take into account the
effects of removal of Continental as potential competitor to Cargill.
In United States v. Penn-Olin Chemical Co., 378 U.S. 158, 173-4
(1964), the United States Supreme Court stated:
[t]he existence of an aggressive, well equipped and well
financed corporation engaged in the same or related lines of
commerce waiting anxiously to enter into an oligopolistic market
would be a substantial incentive to competition which cannot be
underestimated.
In the present case, Continental currently possesses the grain
distribution network and other resources to potentially challenge
Cargill in the grain buying business. With Continental taken out of
that business as a result of the merger proposed herein, Cargill will
face much less pressure to pay competitive prices and compete in grain
buying markets. This is particularly true given the difficulty of entry
into the market by new firms.
F. The final consent judgment fails to take into account other statutes
which Congress intended should be considered in making determinations
regarding agricultural markets.
A primary rule of statutory construction is that when a court
interprets multiple statutes dealing with a related object or subject,
those statutes are in pari materia and should be construed together.
Common Cause v. Federal Election Commission, 842 F.2d 436 (D.C. Cir.
1988); Linquist v. Bowen, 813 F.2d 884 (8th Cir. 1987). Essentially, if
a number of separate statutes relate to the same thing, they are in
pari materia, and all ought to be taken into consideration in
construing any one of them. United States v. Freeman, 44 U.S. 556
(1845). In the area of agricultural markets, Congress has passed a
number of statutes in addition to the provisions of the Sherman Act and
the Clayton Act which are in pari materia with those antitrust statutes
because they reflect congressional concerns about economic
concentration and the disproportionate bargaining power of farmers. All
of those statutes should have been considered in fashioning the
proposed final consent judgment in this case. Because they were not,
that final consent judgment is deficient.
First of all, the Department of Justice failed to consider the
implications of the Packers and Stockyards Act of 1921, 7 U.S.C. 181 et
seq. (the ``PSA''), in developing the final consent judgment. The PSA
was passed after the Sherman, Clayton and Federal Trade Commission
[[Page 16000]]
Acts, and was designed to go beyond the broad language of those
statutes. Wilson & Co. v. Benson, 286 F.2d 891 (7th Cir. 1961). Among
other things, the PSA was directed at the lack of competition between
agricultural buyers and the attendant possible depression of producers'
prices. Swift & Co. v. United States, 393 F. 2d 247 (7th Cir. 1968). In
the present case, one of the government's concerns with the proposed
merger is that prices paid to farmers could be depressed in a post-
merger market. Government Complaint at 6. The PSA supports the notion
that particular attention should be directed to mergers which implicate
marketing for farmers.
Another statute with implications for the merger under
consideration which was not considered by the government is the Capper-
Volstead Act, 7 U.S.C. 291-2. That statute specifically exempted
agricultural cooperatives from the antitrust laws because Congress
intended to treat farmer cooperatives differently from typical
corporations and to give farmers the opportunity to build their
bargaining power relative to corporate buyers. Fairdale Farms, Inc. v.
Yankee Milk, Inc., 635 F.2d 1037 (2nd Cir. 1980). This was done
deliberately to enable farmers to organize and work together so as to
obtain and exercise marketing power. Kinnet Dairies, Inc. v. Dairymen,
Inc., 512 F.Supp. 608 (M.D. GA. 1981). Any merger which works against
those principles to increase the power of buyers at the expense of
farmers should therefore be subject to special, heightened scrutiny.
Finally, the proposed final consent judgment fails to consider the
implications of the Agricultural Fair Practices Act of 1967, 7 U.S.C.
2301-2306 (the ``AFPA''). That Act was intended to prevent corporations
from interfering in the formation of collective marketing organizations
involving farmers. The overriding purpose of the legislation was the
protection of farmers' rights to organize cooperatively. Butz v. Lawson
Milk Co., 386 F.Supp. 227 (N.D. OH. 1974). Again, AFPA's recognition of
the potential for abusive practices by agricultural processors shows
congressional concern with the potential market power of agricultural
buyers which should have been reflected to a greater degree in the
final consent judgment which is now before this court.
G. The final consent judgment fails to set out any benefits or
efficiencies of the proposed merger.
The Department of Justice obviously has concerns about the
anticompetitive effects of the merger in this case as witnessed by the
divestitures required in the proposed final consent judgment and the
other allegations in the Complaint. Yet, the papers prepared by the
government do not set out any reasons for approving the proposed merger
after the divestitures such as post-merger efficiencies which will
result from the action. Absent any economic benefits resulting from the
merger in this case, it is difficult to understand how this merger can
be in the public interest in light of the other potential
anticompetitive problems set out above.
III
If necessary, this court should appoint a special master to assist in
determining if the proposed final consent judgment in this case is in
the public interest
For all the various reasons set out above, the Attorney General of
Nebraska contends that the proposed final consent judgment in this case
is not in the public interest as required by 15 U.S.C. 16(e). However,
should this court not determine that such a finding is appropriate at
the present time, the Attorney General of Nebraska urges the court to
appoint a special master in this case as contemplated by 15 U.S.C.
16(f) to hear evidence and to make a recommendation to the court as to
the efficacy of the proposed final consent judgment. The appointment of
a special master in this case is based upon the complex nature of the
agricultural markets at issue and the various statutes discussed above
which interact upon the application of the antitrust laws in this
context.
Conclusion
For the reasons discussed above, the Attorney General of Nebraska,
as amicus curiae, urges the court to reject the proposed final consent
judgment in this case as not in the public interest. Alternatively, the
Attorney General of Nebraska urges the court to appoint a special
master in this case who can assist the court in analyzing the
particular agricultural markets at issue.
Dated this 21st day of October, 1999.
Don Stenberg, #14023
Attorney General of Nebraska.
Dale A. Comer, #15365
Assistant Attorney General, 2115 State Capitol, Lincoln, NE 68509-8920,
Tel: (402) 471-2682.
Certificate of Service
The undersigned hereby certifies that a copy of the foregoing Brief
Of The Attorney General Of Nebraska As Amicus Curiae has been served
upon the parties herein by mailing each of those parties a true and
correct copy of the same, via first-class United States Mail, postage
prepaid, addressed to the parties' counsel of record as follows:
Robert L. McGeorge, Esq.,
Attorney, U.S. Department of Justice, 325 Seventh Street, NW, Suite
500, Washington, DC 20530.
Marc G. Schildkraut, Esq.,
Howrey & Simon, 1299 Pennsylvania Avenue, NW, Washington, DC 20004.
Paul T. Denis, Esq.,
Swidler, Berlin Shereff Friedman, LLP, 3000 K Street, NW, Suite 300,
Washington, DC 20007-5116.
Jack Quinn, Esq.,
Arnold & Porter, 555 Twelfth Street, NW, Washington, DC 20004.
On this 21st day of October, 1999.
Dale A. Comer,
Assistant Attorney General.
Attorney General of New Mexico
6301 Indian School Rd., NE., Suite 400, Albuquerque, New Mexico
87110; (505) 841-8098, FAX: (505) 841-8095
October 12, 1999.
FACSIMILE NUMBER (202) 307-2784
Roger W. Fones,
Chief, Transportation, Energy & Agriculture Section, Antitrust
Division, United States Department of Justice, 325 Seventh Street,
NW., Suite 500, Washington, DC 20530.
Re: United States v. Cargill, Incorporated and Continental Grain
Company, Case Number 1:99CV0187 (GK)
Dear Mr. Fones: I want to take this opportunity to express my
concerns for small farmers and ranchers and the serious threats I
believe they face from the ever-increasing rate of consolidation in
agricultural industries, of which the pending Cargill-Continental
Grain Company transaction is but one example.
Not only is consolidation occurring on a horizontal level--that
is between direct competitors--but large, economically powerful
companies are becoming more vertically integrated. Increasingly,
these vertically integrated companies are able to exercise
significant power over the food chain, all the way from production
to the packaged product. This can have serious adverse effects on
our economy and the important role performed by small farmers and
ranchers throughout our nation. As Minnesota Attorney General Hatch
pointed out in his May 7, 1999 letter concerning this matter to
United States Assistant Attorney General Klein, and consistent with
the comments submitted to you by Attorney General Don Stenberg of
Nebraska dated September 7, 1999, reliable studies indicate that the
gap between rising food retail prices and falling prices to farmers
and ranchers has been growing for some time. This widening gap is
the result, at least in part, of growing economic power of
vertically integrated agribusinesses and increasingly concentrated
markets and suggests that these markets may
[[Page 16001]]
already be dysfunctional in some important ways.
Given the state of the law interpreting Section 7 of the Clayton
Act, I do not challenge the consent judgment proposed by the
Department of Justice in this matter as being legally or factually
unsupported. Certainly the divestitures and other provisions
required by the proposed consent judgment ought to ameliorate the
anticompetitive effects of the acquisition to some extent. However,
even with the required divestitures, this transaction will likely
decrease the number of significant competitors in the national grain
trading market in the United States. It will also bolster Cargill's
already significant market presence both in markets in which Cargill
and Continental currently are direct competitors and in markets such
as those in the areas of animal feed, feeding cattle and processing
cattle, in which Continental is not currently a significant
competitor.
Thus, I would urge that these difficult issues be dealt with as
comprehensively as possible and that to the extent possible the
Department of Justice actively advocate administrative and
legislative responses that will enhance and invigorate competition
in the agricultural sector of our economy. In addition, the
antitrust laws in this sector of the economy should be effectively
and timely enforced, especially to protect the valuable interests of
small farmers and ranchers. I hope that any additional moves toward
further concentration in agricultural markets will be carefully and
thoroughly scrutinized.
Sincerely yours,
Patricia A. Madrid,
Attorney General.
cc: Attorney General Michael Hatch
Attorney General Don Stenberg
State of North Dakota, Office of Attorney General
State Capitol, 600 E Boulevard Ave, Bismarck, ND 58505-0040; (701)
328-2210; Fax (701) 328-2226.
October 11, 1999.
Mr. Roger Fones,
Chief, Transportation, Energy, and Agriculture Section, Antitrust
Division, US Department of Justice, 325 7th St. NW, Rm 500,
Washington, DC 20530.
Dear Mr. Fones: The following comments are submitted concerning
the proposed merger of Cargill, Incorporated, and Continental Grain
Company. Because there is little competition between Cargill and
Continental on the local level in North Dakota, my principal concern
has been with this merger's potential impact on the grain export
market. It is encouraging that the Antitrust Division responded to
these concerns by requiring divestiture by Cargill of its Seattle
port elevator and by placing limitations on any future throughout
agreement with the subsequent acquirer of that facility.
Nevertheless, I continue to have serious concerns about the
increasing consolidation among the agribusiness firms who purchase
the output of North Dakota's farmers. I am disappointed with the
apparent inability of present day antitrust law to prevent this
consolidation and the resultant injury to our farmers, the producers
of the agricultural bounty our country enjoys.
Over the past decade, we have witnessed ever-larger mergers
among ever-more-concentrated competitors. And all that the antitrust
enforcement agencies, my own included, seem capable of doing in
response is to tinker around the edges. At a minimal cost of a few
divestitures and some relatively insignificant restrictions on post-
merger conduct, agribusiness companies in the livestock, meatpacking
industries, and now the grain industry continue to grow larger, more
concentrated and more powerful. As a result, our farmers now
confront the most powerful concentrations of global economic
interests the world has ever known.
The economic history of North Dakota agriculture is largely the
story of the unequal balance of power between our farmers and the
large agribusiness and transportation interests with which they must
deal. While producer cooperatives have played a significant role in
counter-balancing these economic forces and hold substantial promise
for the future, economic disorganization is the natural result of
having a large number of farmers, geographically dispersed and
producing a wide variety of commodities. The original antitrust laws
were enacted over one hundred years ago in significant measure in
response to calls to protect farmers from the ravages of raw
economic power and to moderate its negative effects on society.
Unfortunately, these laws and the modern trends in their
enforcement are proving inadequate to the task. Modern antitrust
policy has lost sight of its agrarian roots. The farm sector is
hemorrhaging and that bedrock institution, the family farm, is in
mortal danger as a result of low commodity prices brought on, in
part, by the imbalance of economic forces the antitrust laws were
supposed to prevent.
I believe that the time has come to rethink antitrust analysis,
particularly in the farmer-agribusiness context. It is time to
forthrightly address the failures of economic analysis in this areas
as well to give greater consideration to the importance of non-
economic concerns in antitrust enforcement. I intend to work with my
fellow state attorneys general to initiate this process. I hope that
we will be able to count on the Antitrust Division for assistance as
we proceed.
In light of the above comments, I would ask that the Antitrust
Division reconsider its approval of this merger.
Thank you for your consideration of these comments.
Sincerely,
Heidi Heitkamp,
Attorney General.
State of South Dakota Office of Attorney General, 500 East Capitol
Avenue, Pierre, South Dakota 57501-5070; Phone (605) 773-3215, FAX
(605) 773-4106
October 5, 1999.
Roger W. Fones,
Chief, Transportation, Energy, and Agricultural Section, Antitrust
Division, United States Department of Justice, 325 7th Street, NW,
Room 500, Washington, DC 20530.
Re: United States of America v. Cargill Incorporated and Continental
Grain Company.
Dear Mr. Fones: In my capacity as Attorney General of the State
of South Dakota I am filing these written comments in opposition to
the proposed consent decree in the above referenced action pursuant
to the Antitrust Procedures and Penalties Act, 15 U.S.C. Sec. 16.
As you are aware, prior to the Department of Justice's proposed
consent decree, I joined the Minnesota Attorney General's letter
expressing opposition to Cargill Inc.'s proposal to acquire the
worldwide commodity marketing business of Continental Grain Company
and urged the Department of Justice to oppose the proposed merger.
It was, and still is my opinion, that the proposed merger may well
reduce competition. The resulting consequences on South Dakota's
agricultural industry could be serious. While the proposed consent
decree would require Continental to divest itself of a couple of
port, river and rail elevators and would prohibit Cargill from
acquiring certain interests and require entry into a throughput
agreement, these measures are simply inadequate to fully address the
long term consequences of this merger of two global grain industry
giants.
The Department of Justice, in its Complaint and Competitive
Impact Statement, distinctly explained that if the acquisition of
Continental's worldwide commodity marketing business is permitted to
proceed, there will be a substantial lessening of competition for
grain purchasing services to farms and other suppliers. As the
Department of Justice further explained, this will likely result in
many American farmers and other suppliers receiving lower prices for
their grain and oil seed crops. The proposed consent decree simply
does not go far enough to prevent the occurrence of the events
contained in these legal documents.
The Cargill/Continental merger is not adequately addressed by
simply dealing with market implications of the merger on a region by
region basis. The geographic market for grain is nationwide with
worldwide implications.
Further, it does not appear that Department of Justice has
adequately considered whether the divested remnants of Continental
will be a competitive force given the nature of the grain market. It
also appears that the Department of Justice did not adequately
consider the economic disparities that currently exist in the grain
market power over this nation's farmers who are many in number and
wield very limited power. The merger only increases this disparity.
The federal antitrust laws were enacted over a hundred years ago
in part to address the large agricultural trusts that existed in the
late 1800's. As a result these large trusts were broken up. Now,
despite the antitrust laws, we are experiencing increasing
concentration in all areas and aspects of the agricultural industry.
The concentration is both vertical and horizontal in nature. Such
concentration and resulting market power is the problem
[[Page 16002]]
that the antitrust laws were intended to rectify. If a merger of the
magnitude of that proposed between Cargill and Continental is
allowed to go forward as currently proposed in the consent decree,
the purpose behind antitrust laws will be defeated. This would be a
very big step backwards.
South Dakota has the smallest attorney general's office in the
nation. I simply do not have the resources to take on this merger
and neither do the offices for the surrounding states. No matter how
much myself and the Attorneys General of the surrounding states are
opposed to the merger we are not in a position to go to war with
Cargill and Continental. Only the Department of Justice is
sufficiently staffed and financed to contest a merger of this size.
As the Attorney General from an agricultural state, I have
witnessed first hand the devastating impact upon ranchers and
farmers that can result from market concentration by commodity
purchasers. The proposed merger will only make the situation worse.
The grain and livestock products produced by this nation's farmers
and ranchers are the lifeblood to this great country. The Department
of Justice should do whatever is necessary to preserve the ability
of our farmers and ranchers to conduct business in a competitive,
free and open market place. Only the prevention of the proposed
merger is an adequate remedy. The proposed consent decree is simply
inadequate and as such I object to its entry.
Yours truly,
Mark Barnett,
Attorney General, State of South Dakota.
Tab 3
American Agriculture Movement
AAM Inc., 2898 Audrain Road, #114, Sturgeon, MO 65284
October 10, 1999.
Chief, Transportation, Energy, & Agriculture Section, Antitrust
Division, U.S. Department of Justice, 325 Seventh St., N.W., Suite
500, Washington, DC 20530.
Dear Roger W. Fones: Please place these comments in the Federal
Register.
AAM wants to state its opposition to:
Cargill's announced purchase of Continental Grain's merchandising
business;
Smithfield Foods purchase of Murphy Family Farms and Tyson Food's
Pork Group.
Oligopoly is just a fancy word for monopoly. The Clayton &
Sherman Antitrust Laws were enacted after the release of THE JUNGLE
by Sinclair Lewis concerning excesses in the slaughter industry.
Today's excesses are more extreme but hurt farmers and ranchers more
directly and pose a threat to the consumer. The U.S. cheap food
policy will fail with the continued disregard of these laws.
With the present trend to consolidation in the livestock
industry, 3 or 4 vertically integrated companies not only
disproportionately control several livestock sectors but food
production, distribution and sales. This removes all pretense of
fair and open competitive markets.
The Packers And Stockyard Act must also be rigidly enforced to
protect small and medium livestock producers.
Sincerely,
Edward M. Fashing,
Missouri Vice President Communications.
Animal Welfare Institute
P.O. Box 3650, Washington, D.C. 20007-0150; Telephone: (202) 337-
2332, Fax (202) 338-9478
October 11, 1999.
Hon. Gladys Kessler,
Fax: 202-354-3442.
Dear Judge Kessler: I am writing to respectfully request that
the deadline for comment on the Cargill/Continental acquisition be
extended by the Department of Justice for another sixty days to
December 12, 1999.
It is my understanding that the Department of Justice states,
``The court's role in protecting the public interest is one of
ensuring that the government has not breached its duty to the public
in consenting to the decree.''
I address this letter to you because of the Department's failure
to act in the blatant current case affecting millions of animals
suffering in hog factories: the acquisition by Smithfield Foods,
first of Murphy Farms and not of Tysons hog component. All of these
huge corporations employ the same cruel methods of hog production
and, by their ``vertical integration,'' are destroying family farms
at a terrifying pace.
Because of the studies of the Animal Welfare Institute and its
long-term efforts to protect family farmers who raise pigs humanely,
I am responsible, as President of the Animal Welfare Institute, for
a detailed grasp of this huge problem, of which animal feed is a
major component. The Cargill/Continental acquisition impinges
heavily upon this feed and is harmful to the family farmers whose
ability to compete in a system increasingly monopolized by
agribusiness is being zeroed out.
The general public, likewise, is being cheated because the anti-
trust laws are not protecting the public, as they are intended to
do, by proper enforcement.
Respectfully yours,
Christine Stevens,
President.
P.S. You may be amused by the quotation from Art Buchwald which
was recently brought to my attention through ``The Agribusiness
Examiner,'' issued by A.V. Krebs, Editor and Publisher. I attach a
copy of page 14.
ANIMAL WELFARE INSTITUTE
``THANK GOD FOR THE FREE ENTERPRISE SYSTEM''
In his book of essays Down the Seine and Up the Potomac (G. P.
Putnam's Sons: 1977) political humorist Art Buchwald imagines a
scenario where two corporations--Samson Securities and Delilah
Company--asked the head of the Justice Department's Anti-Trust
Division if the two companies could merge. At the time Samson
Securities owned everything east of the Mississippi River, while
Delilah Company owned everything west of the river. Initially, the
head of the Anti-Trust Division indicated that he might have
reservations about the merger of the only two companies left in the
United States.
``Our department,'' he said, ``will take a close look at this
proposed merger. It is our job to further competition in private
business and industry, and if we allow Samson and Delilah to merge
we may be doing the consumer a disservice.''
The chairman of Samson protested vigorously that merging with
Delilah would not stifle competition, but would help it. ``The
public will be the true beneficiary of this merger,'' he said. ``The
larger we are, the most services we can perform, and the lower
prices we can charge.''
The president of Delilah backed him up. ``In the Communist
system the people don't have a choice. They must buy from the state.
In our capitalist society the people can buy from either the Samson
or the Delilah Company.''
``But if you merge,'' someone pointed out, ``there will be only
one company left in the United States.''
``Exactly,'' said the president of Delilah. ``Thank God for the
free enterprise system.''
The Anti-Trust Division of the Justice Department studied the
merger for months. Finally the Attorney General made this ruling.
``While we find drawbacks to only one company being left in the
United States, we feel the advantages to the public far outweigh the
disadvantages.''
``Therefore, we're making an exception in this case and allowing
Samson and Delilah to merge.''
``I would like to announce that the Samson and Delilah Company
is now negotiating at the White House with the President to buy the
United States. The Justice Department will naturally study this
merger to see if it violates any of our strong anti-trust laws.''
Catholic Charities, Diocese of Sioux City
October 6, 1999.
Roger W. Fones,
Chief, Transportation, Energy and Agriculture Section, Antitrust
Division, United States Department of Justice, 325 Seventh Street,
NW, Suite 500, Washington, D.C. 20530.
Dear Sir: We are writing in regard to the Department of
Justice's ``Final Judgement'' relative to Cargill's purchase of
Continental Grain's grain merchandising division.
It is our understanding that the Department filed a formal
``Complaint'' with the U.S. District Court charging that Cargill's
purchase would ``substantially lessen competition for the purchase
of corn, soybeans and wheat in each of the relevant geographic
markets, enabling it unilaterally to depress prices paid to farmers.
The proposed transaction will also make it more likely that the few
remaining grain trading companies that purchase corn, soybeans and
wheat in these markets will engage in anticompetitive coordination
to depress farm prices.''
We also understand that on the same day this ``Complaint'' was
filed, the Department filed a consented ``Final Judgement'' agreed
to by all parties.
[[Page 16003]]
This makes no sense to those of us who agree with the
Department's own finding in its ``Complaint''.
This purchase, if approved in its present form, will further
accelerate the vertical integration of the agricultural sector with
dire consequences for family farm agriculture, rural America and the
consumers of our food supply.
We urge the Department of Justice to withdraw its ``Final
Judgement''; reaffirm the adverse impact of the Cargill purchase
upon the economic and social structure of rural America and to stand
by its original ``Complaint''.
Very truly yours,
Marilyn Murphy,
Social Concerns Facilitator/Rural Life Contact.
Clean Water Action Alliance
Mr. Roger W. Fones,
Chief, Transportation, Energy & Agriculture Section, Antitrust
Division, United States Department of Justice, 325 Seventh Street,
N.W., Suite 500, Washington, D.C. 20530.
Re: United States of America v. Cargill, Inc. and Continental Grain
Company
Dear Mr. Fones: I am writing on behalf of our organization to
object to the proposed final judgment in this case. The approval of
the consent decree is not in the public interest and is not
consistent with the public policy underlying federal antitrust laws.
Our organization has over 40,000 members state-wide. We are
concerned with the growing concentration in agriculture and the
resulting economic impact on family farmers and environmental
degradation of our rural communities. Antitrust laws have long
recognized that concentration in agricultural industries is harmful
to farmers. These protections have not been enforced to prevent
extensive concentration in the meatpacking and other agricultural
industries which are now being controlled by a small number of
agribusiness giants.
Both the DOJ/FTC and NAAG Guidelines raise serious questions and
grave concerns regarding the economic effect of the proposed
Cargill-Continental merger. The grain industry is already heavily
concentrated, leaving farmers who sell their grain to exporters
vulnerable and with very limited options. Both Cargill and
Continental are among the top four corn and soybean exporters
nationwide. Cargill estimates that together they will control 35% of
U.S. grain exports. This type of extensive control in the market
share by Cargill and Continental extends beyond grain processing to
animal feed and meat-packing. If the economic power of these mega-
firms is not controlled, a few large corporations will control the
marketplace and our food supply which is harmful to both farmers and
consumers.
The federal antitrust laws are important to allow every business
entity--no matter how small--the freedom to compete. The rapid rate
of concentration in the agricultural sector is threatening the
ability of the small farmer to compete effectively in the
marketplace. Not only are farmers suffering because of the lack of
access to markets and unfair prices paid to them, but rural
communities are experiencing negative economic impacts as corporate
agribusiness giants continue to consolidate and control more and
more of our food system. Many small towns in the state depend on
farming income to support their local infrastructures--schools,
banks, churches and small businesses. The trend toward vertical and
horizontal integration is threatening the economic viability of
these communities.
Cargill has utterly failed to addressed the above-mentioned
concerns generated by excessive vertical and horizontal integration
in the industry. We urge you to reject the proposed consent decree.
Sincerely,
Suzanne R. McIntosh, Esq.,
Program Director.
Farmland Co-Op Inc., A Pro Farmers Choice
P.O. Box 276, Brush, Colorado 80723; Telephone 1-970-842-5059, Fax
1-970-842-5667
October 8, 1999.
Roger W. Fones,
Chief, Transportation, Energy & Agriculture Section, Antitrust
Division, United States Department of Justice, 325 Seventh Street,
N.W., Suite 500, Washington, DC 20530.
Dear Mr. Fones: It is my belief that the merger of Cargill and
Continental Grain has to be stopped. Our farmers have realized for a
long time that without market competition, they suffer from pricing
that is below what can be achieved through active competition. This
lack of competition threatens the future of our agricultural system.
It may be all right for the large corporations and regional
entities, but I have to look out for my individual farmers. I do not
think you take consolidation seriously. When you look a
consolidation I believe you have to look at all their activities
including strategic alliances, and joint ventures. A full-blown
combination of assets is not telling the whole story. Concentration
of large companies is one of the reasons for lower prices even
though it may be only one of many. I do not see how you can say that
some of these merging companies preserve competition. If you truly
believe this I would like to be able to explain that to my farmers.
You as a representative our political system need to step up to the
plate and address this growing concern of rapid consolidation. We
need to be more pro active in our communities and in our state by
even court actions to curtail market concentration.
I represent a local cooperative association of approximately
1000 producers. In conversations with the top 165 growers, I can say
that they know the results and have been impacted from no
competition to placed competition in the grain market in our
community. In 1997 we had only one local entity purchasing grain. In
1998 after a partnership with us that opened a competitive elevator,
the price offered to our growners increased $0.5 a bushel and the
competitor was forced to pay for protein. Without this action, how
many dollars do you think would have gone on in the hands of a large
corporation? What benefit does increased concentration have on our
American agriculture?
I don't know just exactly how long these mergers will take to
impact our local farmers. I do not that when Farmland Industries and
Cenex Harvest States consolidated their petroleum operations into
Country Energy L.L.C. that we took an enormous hit on product
pricing and had to go to the outside. I hated to do that, but our
farmers need competition in the market place. What impact did this
joint venture for most cooperatives that had not sought out other
supplies? They were forced to pay a higher price for this
consolidation. I'm am against these mergers if they do not benefit
our producers. I just believe that we need to protect our farmers by
making sure that competition continues to be strong. Just thought I
would share my opinion with you.
Thank you,
Glenn A. Babcock,
General Manager.
Institute for Agriculture and Trade Policy
2105 First Avenue South, Minneapolis, MN 55404-2505
October 7, 1999.
Mr. Roger W. Fones,
Chief, Transportation, Energy & Agriculture Section, Antitrust
Division, United States Department of Justice, 325 Seventh Street
N.W., Suite 500, Washington, D.C. 20530.
Re: United States of America v. Cargill, Inc. and Continental Grain
Company
Dear Mr. Fones: I am writing to express IATP's opposition to
Cargill's proposed acquisition of Continental Grain Company, an
acquisition which would unify the second and third largest grain
traders in North America, which export 40 percent of American
agricultural commodities.
Competition in agricultural markets is rapidly declining in the
face of mergers and acquisitions and a plethora of new corporate
relationships including joint ventures, strategic alliances or
partnerships, interlocking directorates and partial ownership. In
its analysis, the Department of Justice failed to recognize the
wider concentration in agriculture markets beyond grain buying to
include handling, processing and merchandising both domestically and
globally.
The principle result of this concentration would be a
significant increase in the imbalance of power favoring agribusiness
at the expense of the farmer. This growing imbalance would
exacerbate the trend toward lower prices for farmers and likely
result in higher prices for consumers.
While the proposed consent decree requires divestiture of some
grain elevators in certain locations, it does not, in our opinion,
meet the spirit and the letter of federal anti-trust law. We must
use our anti-trust laws to preserve our free market system and
ensure competition that produces fair prices for both producers and
consumers.
Thank you for your attention in this matter.
[[Page 16004]]
Sincerely,
Niel Ritchie,
Policy Analyst.
Dated: November 10, 1999.
Judge Gladys Kessler,
U.S. District Court, for the District of Columbia, 333 Constitution
Ave. N.W., Washington, D.C. 20001.
Re: United States of America v. Cargill, Inc. and Continental Grain
Company
Dear Judge Kessler: Presently before you awaiting your approval
is a ``Final Judgment'' filed by the U.S. Department of Justice
relative to the purchase of the grain merchandising division of
Continental Grain Co. by the Cargill Corp.
Legal precedent, according to the Department of Justice,
requires that ``[t]he balancing of competing social and political
interests affected by a proposed antitrust consent decree must be
left, in the first instance, to the discretion of the Attorney
General.--The court's role in protecting the public interest is one
of insuring that the government has not breached its duty to the
public in consenting to the decree. The court is required to
determine not whether a particular decree is the one that will best
serve society, but whether the settlement is within the reaches of
the public interest.''
In its July 8, 1999 ``Final Judgment'' I believe in fact that
the Department of Justice has ``breached its duty to the public in
consenting to the decree'' and that its ``Final Judgment'' is not
``within the reaches of the public interest.''
Clearly, as the Department of Justice's own ``Complaint'' states
the Cargill purchase would ``substantially lessen competition for
purchases of corn, soybeans, and wheat in each of the relevant
geographic markets, enabling it unilaterally to depress the prices
paid to farmers. The proposed transaction will also make it more
likely that the few remaining grain trading companies that purchase
corn, soybeans, and wheat in these markets will engage in
anticompetitive coordination to depress farm prices.''
Using the Department of Justice's own figures and criteria we
see in its ``Complaint'' that even before this announced purchase
the U.S. grain trade was already dominated, if not monopolized, by
Cargill and nothing in the Department of Justice's ``Final
Judgment'' addresses itself to that important issue.
Likewise, the Department of Justice must consider more that the
grain buying operations of Cargill. The acquisition of Continental's
seventy elevators will enhance the economic power of Cargill as a
general matter. such a result concerns farmers because Cargill's
assets and economic power can be deployed across a range of
agricultural sectors.
For example, Cargill stands out as a top-four firm in beef
packing, cattle feedlots (where Continental is the largest), pork
packing, broiler production, turkey production, animal feed plants,
grain elevator capacity, flour milling, dry corn milling, wet corn
milling, soybean crushing, and ethanol production. Such a dominant
position across many agricultural markets will allow Cargill to
transfer resources between sectors according to the economic
conditions that are prevailing at a given time.
The ability to transfer assets will allow Cargill to maintain
its dominant status in all of these markets irrespective of its
competitive prowess, Unlike farmers, who are forced into bankruptcy
after a few bad seasons, Cargill will maintain its dominant status
over time regardless of economic performance over the short-term.
With Continental's assets. Cargill will become an even more powerful
and ``sophisticated'' firm, even more capable of strategic,
cooperative, and anti-competitive behavior.
As the Kansas Cattlemen's Association Chairman I, Michael L.
Schultz am acting on behalf of our members to state that we are
opposed in the continual mergers and acquisitions that are becoming
common place in our society. These mergers do have detrimental
effects on our communities by taking the wealth out of the community
and destroying competition and family life, which is what built this
country.
We have seen the effects of the consolidation in the cattle
industry and its negative effects on our industry and communities.
It is mentally conditioning that has taken over, along with great
amounts of money from the corporations to pressure the political and
legal systems to allow these mergers to continue. We are not sure
where it will end, possibly when we have 1 company in the U.S.A.,
Russia and China then will we have enough consolidation in our
society.
We ask that you enforce the anti-trust laws to ensure
competition in the market, once competition is reduced the
corporations will not pass the savings or profits back to the
producers or consumers of which they claim. A great example for
doing the reverse is the breakup of Ma-Bell. It produced more
competition in the telecommunication industry and now we have
competition, great phone rates, cellular service, etc. This is what
drives creativity and healthy communities. In Kansas a population of
less than 3300 serves over 80% of the communities. We do need your
support to end the death of our communities, competition will ensure
that small communities survive.
In the name of economic and social justice and the preservation
of the family farm system of agriculture in the United States I urge
you to recommend that the Department of Justice withdraw its ``Final
Judgment,'' study in far greater detail this ill-advised sale and
carefully consider the grave anti-trust issues that it presents and
the dire consequences to both producers and consumers of our food
supply.
Michael L. Schultz,
Chairman, Kansas Cattlemen's Association.
Minnesota Catholic Conference
475 University Avenue W., St. Paul, Minnesota 55103-1996) Phone
(651) 227-8777, Fax (651) 227-2675
September 23, 1999.
Mr. Roger W. Fones,
Chief, Transportation, Energy & Agriculture Section, Antitrust
Division, 325 Seventh Street N.W., Suite 500, Washington, D.C.
20530.
Re: United States of America v. Cargill, Inc. and Continental Grain
Company
Dear Mr. Fones: Pursuant to the Antitrust Procedures and
Penalties Act, I am writing to object to the proposed final judgment
in this case. The approval of the consent decree is not in the
public interest and is not consistent with the public policy
underlying federal antitrust statutes.
The proposed consent decree requires divestiture of certain
grain elevators in specified locations, but otherwise approves the
merger of the second and third largest grain traders in North
America, which export 40 percent of American agricultural
commodities. This continued concentration of commodity exporters
violates the spirit and the letter of the federal antitrust laws.
The increasing concentration in agricultural marketing and
processing will mean continued low prices for farmers and higher
prices for consumers. It was this very type of concentration, which
lead to the creation and passage of the first federal antitrust
laws.
The primary flaw in the U.S. Justice Department's analysis is
that it failed to recognize the wider concentration in agriculture
markets beyond grain buying to include grain handling and
merchandizing both a nationwide and worldwide business.
The proposed merger between Cargill and Continental fails to
explain what benefits will be produced. The economies of scale of
these two corporations merging will not lead to increased profits.
Rather, the increased profits will come on the backs of the farmers
receiving a lower price for their grain and consumers paying higher
prices for their products, the very consequence antitrust statutes
seek to prevent.
Catholic Social Teaching states a firm belief in the principle
that the economy exists for the people, not the people for the
economy; In this merger there is a threat to that principle and
therefore I urge you to reject the proposed consent decree.
Sincerely,
Thomas (Toby) Pearson,
Director of Social Concerns, Minnesota Catholic Conference.
Missouri Farm Bureau Federation
P.O. Box 658, 701 South Country Club Drive, Jefferson City, MO
65102 / (573) 893-1400
July 13, 1999.
Mr. Roger Fones,
Chief, Transportation, Energy and Agriculture Section, Antitrust
Division, US Department of Justice, 327 7th Street, NW, Suite 500,
Washington, DC 20530.
Dear Mr. Fones: We appreciate the Justice Department's scrutiny
of the proposed sale of Continental Grain Company's Commodity
Marketing Group to Cargill, Incorporated and believe the
stipulations included in the consent decree are warranted. The
preservation of competition at the local level is of the utmost
importance; agricultural producers can ill afford consolidation that
further depresses commodity prices. While the Justice Department
complaint states the proposed Cargill/Continental sale would have
adversely affected competition in some
[[Page 16005]]
areas, we urge the Justice Department to conduct a similar review of
purchase offers made for the facilities is which divestiture is
required.
Specifically, we have been contacted by producers in southeast
Missouri who are concerned that Continental's Cottonwood Point
facility may be sold to an entity that would also have an excessive
influence on the local grain market. Specifically, there are rumors
circulating that Bunge may be interested in this facility. We cannot
stress enough the importance of preserving competition for
agricultural products, regardless of who the principal parties are.
We urge the Justice Department to scrutinize every offer to
purchase facilities that are offered for sale as a result of the
Cargill divestiture and prevent any further erosion of marketing
options available to agricultural producers.
Sincerely,
Charles E. Kruse,
President.
Missouri Soybean Association
P.O. Box 104778, 520 Ellis Blvd., Suite N, Jefferson City, MO
65101; Phone: (573) 635-3819, Fax: (573) 635-5122
August 24, 1999
Mr. Roger Fones,
U.S. Department of Justice, Washington, DC 20530.
RE: Civil Action #991875 Filed 7-8-99
Dear Mr. Fones: The Missouri Soybean Association represents
nearly 2,000 soybean farmers across the state of Missouri. We have
been very vocal expressing our concern about the consolidation
within our agricultural industry. We want to thank you for keeping a
protective eye out for too much consolidation resulting in lack of
competition and unfair prices to our farmers.
We understand Bunge Grain Company is interested in purchasing
the Continental Grain Cottonwood Point elevator located in Southeast
Missouri. We fear that purchase would eliminate competition in that
area since this acquisition would give them a total of seven
elevators within a fifty-mile radius.
We would encourage you to carefully look at all the options
available for purchasing the Cottonwood Point elevator to determine
which of the large grain-trading firms, including Cargill, would
offer the best long-term fair prices for Southeast Missouri grain
producers.
Please let me know if you have any questions on this matter.
Thank you for your attention to this important agriculture issue.
Sincerely,
Dale R. Lugwig,
Executive Director/CEO.
National Catholic Rural Life Conference
4625 Beaver Avenue, Des Moines, Iowa 50310-2199; (515) 270-2634
October 8, 1999.
Judge Gladys Kessler,
U.S. District Court for the District of Columbia, 333 Constitution
Avenue, NW, Washington, DC 20001.
Re: United States of America v. Cargill and Continental Grain
Dear Judge Kessler: Presently before you and awaiting your
approval is a ``Final Judgment'' filed by the U.S. Department of
Justice regarding the purchase by Cargill Corp. of the grain
merchandising division of Continental Grain Co.
According to the Department of Justice, legal precedent requires
that the ``balancing of competing social and political interests
affected by a proposed antitrust consent decree must be left, in the
first instance, to the discretion of the Attorney General. The
court's role in protecting the public interest is one of insuring
that the government has not breached its duty to the public in
consenting to the decree. The court is required to determine not
whether a particular decree is the one that will best serve society,
but whether the settlement is within the reaches of the public
interest.''
In its July 8th ``Final Judgment'', the Department of Justice
appears to have breached its duty to the public in consenting to the
decree, and we believe that its ``Final Judgment'' is not ``within
the reaches of the public interest.''
The Department of Justice's own ``Complaint'' states the Cargill
purchase would ``substantially lessen competition for purchases of
corn, soybeans and wheat in each of the relevant geographic markets,
enabling it unilaterally to depress the prices paid to farmers. The
proposed transaction will also make it more likely that the few
remaining grain trading companies that purchase corn, soybeans and
wheat in these markets will engage in anticompetitive coordination
to depress farm pieces.''
The Department of Justice needs to take into full consideration
the existing dominant position of Cargill in our nation's grain
trade. The acquisition of Continental Grain's elevators (numbering
70) will enhance the economic power of Cargill. Such a result
concerns farmers because Cargill's assets and economic power can be
deployed across a nearly complete range of agricultural sectors:
Cargill has a dominant position in beef packing, cattle feedlots,
pork packing, poultry production, animal feed plants, grain elevator
capacity, flour milling, corn milling, soybean crushing and ethanol
production. Such a dominant position across many agricultural
markets allows Cargill to transfer resources between sectors
according to the economic conditions that are prevailing at a given
time.
The ability to transfer assets also allows Cargill to maintain
its dominant status in all of these markets irrespective of its
competitive prowess. With the additional assets of Continental
Grain, Cargill will become an even more powerful firm and ever more
capable of strategic anti-competitive behavior.
The National Catholic Rural Life Conference has stood with small
farmers and rural communities since our inception in 1923. Besides
the farm crisis of the 1980s, we have used our voice to defend the
family farm system throughout the 20th century as corporate and
industrial interests have eroded our nation's rural communities.
Once again we raise our voice in solidarity with the vulnerable
individuals and families who are often overlooked when large mergers
or acquisitions take place in our food and agriculture system.
In the name of economic and social justice and the preservation
of an independent and locally-controlled family farm system of
agriculture in the United States, we urge you to recommend that the
Department of Justice withdraw its ``Final Judgment''. We ask that
this ill-advised acquisition by Cargill undergo far greater study in
respect to antitrust issues and the dire consequences to both
producers and consumers of our food supply.
Respectfully,
Brother David Andrews, CSC,
Executive Director.
NFO Kansas
1783 Barn Road, Solomon, KS 67480, 785-479-2183
Roger W. Fones,
Chief, Transportation, Energy & Agriculture Section, Antitrust
Division, United States Department of Justice, 325 Seventh Street,
NW, Suite 500, Washington, DC 20530.
Mr. Fones: I am writing on behalf of our many grain farmer
members in Kansas to ask that the proposed merger between
Continental and Cargill grain be revisited. We strongly,
passionately feel that this violates the intentions of pro-
competitive marketplace acts such as the Clayton Act provides.
Our organization is a bargaining group. Anytime two major buyers
like these companies join together, it lessons the strength of farm
bargaining.
Please extend the comment period for another 60 days and revisit
this issue.
Thanks.
Sincerely,
Ray Kohman,
Kansas NFO President.
Roger W. Fones,
Chief, Transportation, Energy & Agriculture Section, Antitrust
Division, United States Department of Justice, 325 Seventh Street,
NW, Suite 500, Washington, DC 20530.
Mr. Fones: On behalf of our members in Kansas National Farmers,
we would like at request that the merger between Cargill and
Continental be NOT allowed. Our organization passed a resolution at
our state annual meeting in August which opposed this ``Giant of
Mergers.``
We are very concerned about the lack of enforcement on anti-
trust issues today. Our very livelihoods are at stake due to
increasing market channel monopolization. We feel that our ability
to get competitive bids will be reduced and we feel that grain
``basis levels'' will decline due to ``Price Leadership''
strategies.
Please conduct a more thorough investigation into the Cargill/
Continental Grain sale before submitting a Final Judgment on the
matter. Also, please extend the public comment period for another
sixty days.
[[Page 16006]]
Thank You!
Greg Stephens,
Kansas NFO National Director, 842 S. 10th, Salina, KS 67401.
National Farmers Union
400 Virginia Avenue, S.W., Suite 710, Washington, D.C. 20024, Phone
(202) 554-1600
October 7, 1999.
Mr. Roger W. Fones,
Chief, Transportation, Energy & Agriculture Section, Antitrust
Division, U.S. Department of Justice, 325 Seventh Street, N.W.,
Suite 500, Washington, D.C. 20530.
Re: United States of America v. Cargill, Inc. and Continental Grain
Company
Dear Mr. Fones: On behalf of the 300,000 farm and ranch families
of the National Farmers Union, I write to express our strong
opposition to the acquisition of Continental Grain company by
Cargill, Inc.
We agree with the allegation in the complaint that alleges the
merger would substantially lessen competition for grain purchasing
service to farmers and other suppliers in many areas in the United
States. We also agree that the merger would increase concentration
in the delivery point for settlement of Chicago Board of Trade
contracts. And, we agree that the covenant not to compete is an
unreasonable violation of trade.
The proposed stipulation attempts to address these concerns by
requiring a number of divestitures. Yet, even these divestitures are
insufficient to avoid the harm that will inevitably occur to market
competition if there is a merger between Cargill--the second largest
grain trader in North America and the largest grain exporter, and
Continental--until recently the third largest grain trader and the
third largest grain exporter.
If the two firms were less dominant, the proposed divestitures
may have been sufficient to insure post-merger competition within
the grain market. However, when the tops firms are allowed to merge,
there is no way to recoup the loss to market competitiveness.
In the countryside, Continental is known for being an aggressive
grain buyer. Elevator operators report Continental will usually beat
any other offer by $.02 per bushel, if given the chance. And while
$.02 is inconsequential, it turns into millions of dollars when
multiplied by the volume of grain that farmers and ranchers sold to
Continental last year.
Cargill's extensive submission of information in public
documents reveals that Cargill is already operating in the areas
where Continental operates. The clear reason for this merger is the
elimination of competition. There is nothing about this merger that
will increase competition to either farmers or ranchers or other
members of the general public. Therefore, both the Department of
Justice and the Court should find that the proposed stipulation that
allows the merger is not and cannot be in the public interest.
In addition to failing the public interest test, we believe the
proposed enforcement mechanisms are not enforceable and are
therefore, insufficient. The stipulation requires a number of
divestitures in order to maintain competition. Yet, what happens if
another buyer cannot be found. And, if a buyer is found, what buyer
will be able to effectively compete with the newly enlarged Cargill?
Once Continental Grain has been swallowed by Cargill, the damage is
done. We cannot come back at a later date and have any assurance of
being able to replace the loss of this competitor.
The proposed stipulation also completely fails to address the
roles Cargill and Continental play as the largest and third largest
grain exporters. Lack of competition in the export market has a
direct impact on U.S. grain producers for two reasons: 1) exports
make up an important part of our market and, 2) the domestic market
is influenced by the world price. While the complaint alleges the
merger will lessen competition, and estimates that collectively
Cargill and Continental control approximately 40 percent of all U.S.
grain exports, the stipulation does nothing to address that problem.
In addition, the only alternative to the proposed final
judgment, discussed in the consent decree, is that of going to trial
and obtaining a court decision similar to the proposed stipulation.
The consent decree fails to consider the alternative of disallowing
the acquisition.
While we appreciate that the Justice Department required a
number of concessions from the merging parties, the bottom line is
that there is just no way to allow this merger without causing
irreversible damage to market competition. Therefore, we
respectfully request that the proposed consent decree be rejected.
Sincerely,
Leland Swenson,
President.
Office of Hispanic Ministry, St. Joseph Catholic Church
320 Mulberry, Waterloo, IA 50703, 319-234-6744
September 30, 1999.
Judge Gladys Kessler,
U.S. District Court for the District of Columbia, 333 Constitution
Ave. N.W., Washington, D.C. 20001.
Dear Judge Kessler: The Department of Justice's investigation
and subsequent formal ``Complaint'' revealed that the nation's
largest private corporation, Cargill, is attempting to
overwhelmingly control the U.S. grain trade. Legal documents show
that Cargill's purchase would ``substantially lessen competition for
purchases of corn, soybeans, and wheat in each of the relevant
geographic markets, enabling it unilaterally to depress the prices
paid to farmers. The proposed transaction will also make it more
likely that the few remaining grain trading companies that purchase
corn. soybeans and wheat in these markets will engage in anti-
competitive coordination to depress farm prices.''
According to the Department of Justice, the court is required to
determine, not whether this judgment to allow the Cargill/
Continental sale best serves society, but whether it falls within
the range of acceptability or is ``within the reaches of public
interest.''
The Cargill purchase of Continental Grain facilities will
increase Cargill's buying power and price control; it will decrease
the markets available to farmers and cause farmers to have to
transport grain farther, especially if some terminals are closed to
increase corporate profits; it will position Cargill to dominate
specialty or ``niche'' markets because of the acquisition of
continental's storage facilities (markets that farmers are currently
using to try to find profitability in already heavily Cargill-
dominated markets).
I believe that every person has a right to the gifts of
creations, especially to the necessities of life. Respect for the
dignity of the human person also requires that each person has the
right to free enterprise, the right to undertake the work that is
their calling and the right to fair compensation for that work. This
right is compromised when too much control is concentrated to
increase the power and wealth of a few. Food, as well as the
facilities for production and distribution, should not be
concentrated to the benefit of a few.
Therefore I urge that you not allow the sale of Continental to
Cargill. Thank you very much.
Sincerely,
Sister Kathleen Grace,
Pastoral Minister.
O.C.M.--Organization for Competitive Markets
301 South 13th Street, Suite 401, Lincoln, Nebraska 68508, (402)
434-2938
October 1, 1999.
Bob McGeorge,
U.S. Department of Justice, Antitrust Division, 3257th St. NW, Room
506, Washington, D.C. 20530.
Dear Bob: This letter seeks confirmation that your office has
received our objections to the Cargill-Continental consent decree.
Please advise.
Given the great interest in this merger, OCM has also requested
that the Department of Justice seek an extension of the comment
period, as allowed in the Tunney Act. Since many groups and
individuals will need to be advised of a potential extension, OCM is
interested in knowing whether DOJ will seek such an extension.
Thank you for your help in this matter.
Sincerely,
Jon K. Lauck
O.C.M.--Organization for Competitive Markets
301 South 13th Street, Suite 401, Lincoln, Nebraska 68508, (402)
434-2938
September 20, 1999.
Mr. Roger W. Fones,
Chief, Transportation, Energy & Agriculture Section, Antitrust
Division, United States
[[Page 16007]]
Department of Justice, 325 Seventh Street NW, Suite 500, Washington,
DC 20530.
Re: United States of America v. Cargill, Inc. and Continental Grain
Company
Dear Mr. Fones: I am writing to you to explain OCM's opposition
to Cargill's acquisition of Continental Grain Company, an
acquisition which would unify the second and third largest grain
traders in North America, which export 40 percent of American
agricultural commodities. Specifically, OCM objects to the analysis
used by the Department of Justice (``DOJ'') when reviewing the
acquisition. DOB's analysis: (1) failed to consider the wider
concentration in agricultural markets beyond grain buying; (2)
failed to consider the continuing potential for anticompetitive
behavior in the post-merger market; (3) failed to show that the
divested remnants of Continental will be a competitive force absent
a large network of elevators which buy grain; (4) DOJ failed to
consider the impact on potential entry into grain buying markets;
(5) failed to consider the nature of the grain selling market; (6)
failed to consider the economic disorganization of farmers which can
be exploited by powerful buyers; (7) failed to consider information
disparities in agricultural markets; (8) failed to explain the
benefits of the merger; (9) failed to consider a range of statutes
that Congress intended courts to consider when making decisions
about agricultural markets; (10) and failed to consider that the
consent decree risks leaving farmers without an effective outlet for
legal redress. By failing to consider the aforementioned factors,
the DOJ failed to recognize how the Cargill-Continental merger posed
``a significant threat of injury from an impending violation of the
antitrust laws.'' \1\
---------------------------------------------------------------------------
\1\ Zenith Radio Corp. v. Hazeltime Research Inc., 395 U.S. 100,
130 (1969). Section 16 of the Clayton Act allows individuals to sue
for injunctive relief ``against threatened loss or damage by a
violation of the antitrust laws.'' 15 U.S.C. Sec. 26 (1988).
---------------------------------------------------------------------------
(1) DOJ failed to consider the wider concentration in
agricultural markets beyond grain buying.
In recent years, agricultural processing markets have become
highly concentrated. From a top-five concentration ratio of 24
percent in the early 1980s, for example, the beef-packing sector's
five-firm concentration ratio has grown to 85 percent. Similar
statistics apply to several other sectors of the agricultural
processing economy. I have enclosed a copy of a report authorized by
Professor William Heffernan of the University of Missouri that
explains the extent of the concentration problem.
The DOJ's analysis did not consider the wider context of
consolidation in the agricultural system and instead focused on the
grain buying activities of Cargill and Continental. Growing
concentration in agricultural markets should have been considered by
the DOJ given the continuing consolidation of agribusiness firms. In
United States v. Philadelphia National Bank, for example, in which
enforcement officials stopped the merger of the second- and third-
largest banks in Philadelphia, the court noted the particular
importance of stopping the merger given the growing concentration in
the banking market.\2\ It was the growing power of agribusiness
firms that triggered concerns among farmers and inspired the passage
of the Sherman Act. And it was continuing concentration in
agricultural markets, particularly through merger, that prompted
passage of additional antitrust statutes such as the Clayton Act.
The importance of the antitrust laws to farmers is explained by the
difficulties inherent in farmers bargaining with large and powerful
agribusiness buyers. Legislators and courts have fully recognized
these concerns in statutes and in cases, respectively, but the DOJ's
merger analysis failed to weigh these considerations. I have
explained this background in a law reviews article entitled ``Toward
an Agrarian Antitrust,'' 75 North Dakota Law Review (August/
September 1999) which I have included for your review.
---------------------------------------------------------------------------
\2\ United States v. Philadelphia National Bank, 374 U.S. 321,
367 (1963).
---------------------------------------------------------------------------
The DOJ must consider more that the grain buying operations of
Cargill. The acquisition of Continental's seventy elevators will
enhance the economic power of Cargill as a general matter. Such a
result concerns farmers because Cargill's assets and economic power
can be deployed across a range of agricultural sectors. For example,
Cargill stands out as a top-four firm in beef packing, cattle
feedlots (where Continental is the largest and where it plans to
invest the one-half billion dollars paid by Cargill for its elevator
chain), port packing, broiler production, turkey production, animal
feed plants, grain elevator capacity, flour milling, dry corn
milling, wet corn milling, soybean crushing, and ethanol production.
Such a dominant position across many agricultural markets will allow
Cargill to transfer resources between sectors according to the
economic conditions that are prevailing at a given time. This cross-
subsidization will allow Cargill to maintain its dominant status in
all of these markets irrespective of its competitive prowess. Unlike
farmers, who are forced into bankruptcy after a few bad seasons,
Cargill will maintain its dominant status over time regardless of
economic performance over the short-term. With Continental's assets,
Cargill will become an even more powerful and ``sophisticated''
firm, even more capable of strategic, cooperative, and anti-
competitive behavior.\3\
---------------------------------------------------------------------------
\3\ For judicial recognition of the power of sophisticated firms
see Michael S. Jacobs, The New Sophistication in Antitrust, 79,
Minn. L. Rev. 1 (1994).
---------------------------------------------------------------------------
Allowing the merger of Cargill and Continental makes further
agribusiness consolidation likely. Allowing such a large-scale
merger abets the recently-announced merger of Smithfield Foods, the
nation's largest pork packers, with Murphy Farms, the nation's
largest pork producer. The Smithfield-Murphy Farms merger sets the
stage for another Cargill-Continental merger, this time involving
Cargill's large-scale pork packing operation and Continental's pork
producing operation, further continuing the cycle of agribusiness
consolidation.
(2) DOJ failed to consider the continuing potential for
anticompetitive behavior in the post-merger market:
The DOJ argues in its complaint that within particular draw
areas very few firms buy grain. It argues that if Continental's
operations were absorbed ``Cargill would be in a position
unilaterally, or in coordinated interaction with the few remaining
competitors, to depress prices paid to producers and other suppliers
because transportation costs would preclude them from selling to
purchasers outside the captive draw areas in sufficient quantities
to prevent the price decrease.'' \4\ Divestitures in a few of these
markets as proposed by the DOJ does not address this problem. Even
with the divestitures, grain buying would remain heavily
concentrated and susceptible to collusive and cooperative activity.
---------------------------------------------------------------------------
\4\ Complaint, U.S. v. Cargill, Inc. and Continental Grain
Company, July 8, 1999, at 4 (italic added).
---------------------------------------------------------------------------
(3) DOJ failed to show that the divested remnants of Continental
will be a competitive force absent a large network of elevators
which buy grain:
Furthermore, it is unclear how the divested components of
Continental will remain an effective competitor with Cargill absent
the former entity's large-scale elevator capacity. The few
facilities that will not be acquired by Cargill hardly constitute a
legitimate competitive threat. As the DOJ emphasized in its
complaint, grain buying involves a large-scale network of
facilities.\5\ The few remaining Continental facilities, stripped of
their internal networks which provide them with competitive
flexibility and information about grain flows, will be powerless in
comparison with Cargill, with its $51 billion in annual revenues and
81,000 employees in 60 different countries. Continental's decision
to sell off its grain buying operation may also indicate that it no
longer considers grain buying a priority. In short, there is no
assurance that the remaining facilities will even compete in the
markets that concerned the DOJ. Given the need for a network of
elevators to compete in the grain buying business, it is also highly
unlikely that any new firms will enter the market to challenge
Cargill. The DOJ openly concedes in its complaint that it is
``unlikely that Cargill's exercise of market power will be prevented
by new entry, by farmers and other suppliers transporting their
products to more distant markets, or by any other countervailing
competitive force.'' \6\
---------------------------------------------------------------------------
\5\ Id. at 3 (noting that ``Grain traders such as Cargill and
Continental operate extensive grain distribution networks, which
facilitate the movement of grain from farms to domestic consumers of
these commodities and to foreign markets'').
\6\ Id. at 6.
---------------------------------------------------------------------------
(4) DOJ failed to consider the impact on potential entry into
grain buying markets:
Stripping Continental Grain of its internal network of elevators
poses additional threats to competition. Given the difficulty of
entry into the grain buying business, as conceded by DOJ, it is
additionally important to hold together a firm that could
potentially challenge Cargill in the many markets in which it holds
a dominant position. As the Supreme Court has noted, ``[t]he
existence of an aggressive, well equipped and well financed
corporation engaged in the same or
[[Page 16008]]
related lines of commerce waiting anxiously to enter an
oligopolistic market would be a substantial incentive to competition
which cannot be underestimated.'' \7\ Important factors in
determining whether a firm may enter the concentrated grain buying
market include its ``resourcefulness'' and the ``nearness of the
absorbed company'' to the market, characteristics that could be
attributed to a large-scale firm such as Continental Grain.\8\
Without the existence of Continental's grain buying operations,
Cargill will face considerably less pressure to pay farmers a
competitive price for their product.
---------------------------------------------------------------------------
\7\ U.S. v. Penn-Olin Chemical Co., 378 U.S. 158, 173-4 (1964).
\8\ U.S. v. El Paso Natural Gas Co., 376 U.S. 651, 660 (1964).
See generally U.S. v. Falstaff Brewing Corp., 410 U.S. 526 (1973)
(preventing Falstaff's acquisition of a New England brewery because
it would eliminate Falstaff's de novo entry into the New England
market); Mark D. Whitener, Potential Competition Theory--Forgotten
But Not Gone, 5 Antitrust 17 (1991).
---------------------------------------------------------------------------
(5) DOJ failed to consider the nature of grain selling markets:
The DOJ also fails to assess the nature of grain selling
markets. Much of the grain bought by Cargill and Continental is sold
on world markets. But this selling is sometimes based on geographic
area, historic preference, or long-term contracting. Without a
guaranty of vigorous competition among grain traders for overseas
customers, it is not necessary to compete vigorously for the
purchase of the grain of American farmers and therefore there is no
incentive to bid up the prices paid to farmers. If Cargill has a
long-term arrangement with an overseas grain buyer, for example,
Cargill will buy grain from American farmers when it needs to
fulfill its obligation. In this process, no competitive bidding with
another grain buying firm will be necessary. Without an assessment
of the workings of world grain selling practices, DOJ's assumption
that competitive bidding will maintain a competitive price for
American farm products is unfounded.\9\ And even if evidence of
competition for export markets can be found, that does not
necessarily mean that there is competition for the grain sold by
American farmers. Firms can choose to collude in upstream markets
and compete in downstream markets.
---------------------------------------------------------------------------
\9\ For examples of grain company manipulations of world
markets, see DAN MORGAN, THE MERCHANTS OF GRAIN (1979).
---------------------------------------------------------------------------
(6) DOJ failed to consider the economic disorganization of
farmers which can be exploited by powerful buyers:
The DOJ also fails to consider the economic organization of
farmers who sell to the large grain buyers. Courts have often noted
that a key consideration when determining the potential for
horizontal collusion is the relative organization of firms in the
adjacent sectors. Judicial recognition has come in the form of a
defense to challenged mergers.\10\ Courts have entertained the
argument that a larger, more powerful firm resulting from a merger
may be acceptable if the firms it sells to also possess market
power.\11\ In U.S. v. Country Lake Foods, Inc., a case involving the
merger of two firms in the fluid milk processing industry, a court
recognized the ability of large food corporations who bought milk to
check the power of milk processors.\12\ The court noted the
``extremely concentrated'' nature of the food processing industry in
the relevant market, where the top-three concentration ratio was
over 90 percent.\13\ The size of the food firms and the volume of
their purchases allowed them to monitor milk prices, making them
``very sophisticated buyers.'' \14\ The court noted their ability to
switch to other milk processors and to enter the processing market
themselves.\15\ The market entry of the large food processors would
be aided by their capital resources, which would allow them to
purchase an existing plant, and by their existing customer base.\16\
The court found the power-buyer defense the ``most persuasive
argument'' advanced by the defendants.\17\
---------------------------------------------------------------------------
\10\ Mary Lou Steptoe, The New Merger Guidelines: Have They
Changed the Rules of the Game? 61 Antitrust L.J. 493, 493-4 (1993)
(explaining that ``[a]lthough the power-buyer defense may appear to
be a judicial creation that has only emerged within the last two
years, it actually reflects an underlying trend in merger law,
present since General Dynamics [1974], toward a more searching
examination of the economic conditions that affect a seller's
ability to exercise market power'').
\11\ U.S. v. Baker Hughes, Inc., 908 F.2d 981, 984 (D.C. Cir.
1990) (now-Justice Thomas endorsing the consideration of a ``variety
of factors'' in merger cases, including buyer power, and rejecting
the ``fixation'' on singular factors such as market entry); F.T.C.
v. Elders Grain, Inc., 868 F.2d 901, 905 (7th Cir. 1989) (Judge
Posner recognizing that the industrial dry corn industry was
unlikely to be cartelized given the nature of their buyers, ``a
handful of large and sophisticated manufacturers of food
products'').
\12\ 754 F. Supp. 669 (D. Minn. 1990).
\13\ Id., at 674.
\14\ Id.
\15\ Id.
\16\ Id., at 680.
\17\ Id., at 679.
---------------------------------------------------------------------------
Commentators have elaborated on the potential power of certain
buyers. For example, buyers are particularly adept at checking the
power of concentrated sellers when the price of the item in question
is widely known.\18\ In Country Lake Foods, the milk buyers could
estimate the cost of processed milk based on the price paid for raw
milk (since prices are publicly reported) and switch to a different
seller if prices were deemed to be oligopolistically-priced.\19\ In
addition to switching to a new seller, buyers could induce the
market entry of additional sellers by extending long-term contracts
or providing the financing for the start-up of new sellers.\20\
Large buyers could support the merger of two smaller sellers who,
when their assets are combined, could more effectively compete
against larger sellers in the market.\21\ Large buyers could also
enter or threaten to enter the upstream market themselves.\22\
---------------------------------------------------------------------------
\18\ Steptoe, at 496.
\19\ Steptoe, at 496.
\20\ Steptoe, at 501.
\21\ Safeway and Kroger, major buyers of ready-to-eat cereals,
supported the merger of Kraft, which owns Post, and the cereal
division of Nabisco because ``it makes Post a stronger competitor to
Kellogg and General Mills,'' which sell 60 percent of ready-to-eat
cereals. State v. Kraft General Foods, 926 F. Supp. 321, 325, 351
(S.D.N.Y. 1995).
\22\ Steptoe, at 499-500.
---------------------------------------------------------------------------
Implicit in the recognition of the power-buyer defense is the
assumption that powerful firms in a market can exploit small and
disorganized firms in a vertically adjacent market. In other words,
the power-buyer argument provides a rationale for halting the growth
of powerful agribusiness processors at the expense of the thousands
of farmers who sell to them. In U.S. v. United Tote, Inc., the court
rejected the power-buyer defense because it recognized the relative
disorganization of the buyers of the totalisator.\23\ Because so
many buyers were present in the market and the buyers possessed
different levels of sophistication, they could not constitute a
legitimate check on the power of the sellers.\24\ In the recent case
FTC v. Cardinal Health, Inc., the DC Court of Appeals considered the
potential power of firms who bought drugs from the four largest
wholesale distributors of drugs in the nation.\25\ While the court
noted the power of certain buyers in the market, it also considered
the numerous independent pharmacies that lacked the power to
effectively bargain with the large wholesalers.\26\ The existence of
a large number of buyers and the presence of many small independents
created a ``fragmented'' buying sector unable to counter the power
of the wholesalers.\27\ The buyer-power defense creates a rational
for scrutinizing the power of buyers relative to sellers. Thousands
of farmers, for example, are hard-pressed to muster the market power
necessary to check the powerful food companies who buy their
products. Farmer marketing is characteristically disorganized and
``fragmented,'' similar to the descriptions of the totalisator and
wholesale drug buyers described in United Tote and Cardinal Health.
---------------------------------------------------------------------------
\23\ 768 F. Supp. 1064 (D. Del. 1991). The totalisator system
manages betting at horse tracks. Id., at 1065.
\24\ Tote, at 1085 (explaining that ``the totalisator market
does not consist of a few, very large consumers. In stark contrast,
the totalisator market consists of over two hundred fifty-five pari-
mutuel [the most common form of wagering on horses] facilities, only
thirty-nine of which have average daily handles in excess of 1
million dollars. Even if the Court were to accept United Tote's
argument that the owners of these large, sophisticated facilities
would be able to protect themselves from any anti-competitive price
increase, this would still leave at least one hundred nine
facilities unprotected in the small market segment along'').
\25\ 12 F. Supp. 2d 34 (D.C. Cir. 1998).
\26\ Cardinal Health, at 60 (noting that ``[i]ncreasingly, the
27,000 independent pharmacies in the United States today are joining
buying cooperatives which, in turn, are consolidating to try to
develop greater buyer power,'' but concluding that ``independent
pharmacies have little leverage, as evidenced by the considerably
higher upcharges they have to pay in comparison to the retail chains
and institutional GPOs'').
\27\ Cardinal Health, at 61 (holding that the ``existence of the
independent pharmacies and the smaller hospitals makes the wholesale
market considerably fragmented and remarkably similar to the market
described in United Tote'').
---------------------------------------------------------------------------
An example of buyer power in agricultural markets was recently
exposed in South Dakota. During the summer of 1999, a federal court
in South Dakota ruled on the constitutionality of a South Dakota
livestock
[[Page 16009]]
price reporting law, passed during the 1999 legislative session in
response to concerns about price manipulations by large packers.\28\
While not an antitrust ruling, the court did note the large amount
of buying power possessed by packers. The court explained the
absence of bargaining power on the part of farmers, who ``are unable
to set their prices but must rely on what buyers will pay,'' and
concluded that ``[p]ackers have the market power in each livestock
market to influence or determine prices paid to producers of
livestock.'' \29\ In the context of South Dakota farmers, the court
noted the existence of an ``oligopsony'' among the state's three
packers.\30\
---------------------------------------------------------------------------
\28\ American Meat Institute and John Morrell & Company v. Mark
W. Barnett, Findings of Fact and Conclusions of Law, Civ 99-3017,
U.S. Dis. Court, South Dakota, Filed July 26, 1999 (upholding the
statute's price reporting provision; holding the statute's
prohibition on discriminatory pricing to be a violation of the
commerce clause).
\29\ Id. at 5.
\30\ Id.
---------------------------------------------------------------------------
(7) DOJ failed to consider information disparities in
agricultural markets:
The DOJ also failed to consider informational disparities
between farmers and large grain buyers. In Eastman Kodak Co. v.
Image Technical Services the Supreme Court expanded the notion of
market power, an element critical to most antitrust violations, to
include information.\31\ The Kodak decision recognizes a fundamental
economic point raised in the economics literature in the 1960s, when
information studies became prominent.\32\ As George Stigler pointed
out, market sellers do not simply accept the offer of the highest
bidder.\33\ Finding, or ``searching'' for, the highest bidder is a
costly process, involving significant transaction costs.\34\ Time is
perhaps the largest expense,\35\ especially for sellers of
perishable agricultural products. When the prices paid for a
commodity vary widely, indicating that some sellers did not find the
highest bidders in the market, information problems are in
evidence.\36\ That some sellers did not search for higher prices may
mean that they concluded the cost of the search would outstrip any
potential returns from higher prices.\37\ One method of reducing the
problem of poor information and the resulting ``price dispersion''
is the centralization of knowledge in one identifiable location,\38\
a solution similar to the recent calls for the mandatory reporting
of prices paid by meatpackers.\39\
---------------------------------------------------------------------------
\31\ 504 U.S. 451 (1992); Mark R. Patterson, Product Definition,
Product Information, and Market Power: Kodak in Perspective, 73
N.C.L. Rev. 185, 187 (1994) (arguing that Kodak ``incorporated into
antitrust law a body of economic teachings on product information
that the Court had previously neglected'').
\32\ GEORGE STIGLER, THE ORGANIZATION OF INDUSTRY 171 (1968).
\33\ Id. at 171.
\34\ Id.
\35\ Id. at 175.
\36\ Id. at 172.
\37\ Id. at 175.
\38\ Id. at 172, 176.
\39\ S. 19, 106th Cong., 1st Sess., Sec. 6 (requiring
meatpackers to report prices paid for livestock); Steve Marbery,
Debate Over Price Discovery Enters Critical Round, Feedstuffs, June
1, 1998.
---------------------------------------------------------------------------
Agricultural markets are defined by stark information
disparities. One study of Iowa hog farmers, for example, indicates
that price searching is very limited \40\ and that 85 percent of a
farmer's hogs are sold to the same packer, indicating a very limited
amount of price searching.\41\ Such a result is similar to DOJ
findings about the grain selling pattern of farmers, who ``generally
sell their grain within a limited geographic area surrounding their
farms.'' \42\ Commentators have noted how ``firms can exploit in
numerous ways the bargaining power that the lack of comparison
shoppers confers on them.'' \43\ The case for heightened scrutiny
for bargaining arrangements involving farmers is provided for the
Kodak analysis. as one commentator explained, ``Kodak suggests that
market power may be found wherever ignorant buyers can be exploited
through individualized bargaining,'' a conclusion which could also
apply to disorganized sellers.\44\ The power of possessing
information in grain trading was recently conceded by Cargill's head
of public affairs, ironically enough, when launching a new public
relations campaign: ``' If you look at our oldest business, which is
grain trading, whoever has been in that business has been reticent
to talk about the details' because a close hold on trading
information could be critical to profits.'' \45\ The importance of
information was also noted in the recent price reporting decision in
South Dakota, in which a federal court acknowledged that ``only
packers have complete knowledge of livestock purchases and prices''
and that ``[o]nly a relatively small portion of livestock purchasing
and pricing information is available to the public, including
producers.'' \46\
---------------------------------------------------------------------------
\40\ Market Access, 1995 Survey Results (Iowa Pork Producers
Association, In Cooperation with Iowa State University), at 3
(``Eighty-seven percent of the producers reported pricing their hogs
the day of, or the day before, delivery'').
\41\ Id., at 4; Merle D. Faminow, Monica de Matos, R.J.
Richmond, Errors in Slaughter Steer and Heifer Prices, 12
Agribusiness, 79, 79 (1996) (noting that the ``exploitation of
informational asymmetries can be one form of market power whereby
agricultural processing industries can exploit farmers who sell to
them'').
\42\ Complaint, at 4.
\43\ Alan Schwartz and Louis L. Wilde, Intervening in Markets on
the Basis of Imperfect Information: A Legal and Economic Analysis,
127 Cornell L. Rev. 630, 667 (1979).
\44\ Thomas C. Arthur, The Costly Quest for Perfect Competition:
Kodak and Nonstructural Market Power, 69 N.Y.U.L. Rev. 1, 15 (1994).
\45\ Jill J. Barshay, Cargill Steps Into the Light With Image
Campaign, Star Tribune (Minneapolis, Minn.), March 5, 1999.
\46\ AMI v. Barnett, at 5-6.
---------------------------------------------------------------------------
(8) DOJ failed to explain the benefits of the merger:
Given the DOJ's concerns about the anticompetitive consequences
of the merger, it is odd that no effort is made to justify its
approval of the merger. The fears of anticompetitive behavior set
forth in the complaint are not counter-balanced with a recognition
of post-merger efficiencies, for example. With no apparent benefit
to the merger and significant concerns expressed by many parties
about its approval, the natural reaction would be to halt he merger.
This response is further justified by the obvious difficulties that
accompany the reversal of market concentration once it has become an
economic fact.
(9) DOJ failed to consider a range of statutes that Congress
intended courts to consider when making decisions about agricultural
markets:
Perhaps the most glaring defect in the DOJ's analysis is its
failure to consider all of the relevant statutes. Robert Pitofsky,
Chairman of the Federal Trade Commission, has explained the
importance of construing the antitrust laws comprehensively.\47\
Pitofsky invokes the Supreme Court case United States v.
Hutcheson,\48\ which specifically interpreted the Sherman, Clayton,
and Norris-LaGuardia Acts as ``interlacing statutes.'' \49\ The
existence of agricultural statutes in pari materia, which ``relate
to the same thing'' as the antitrust statutes, requires that both be
considered as ``one law'' in judicial decision-making.\50\ Failing
to consider agricultural statutes eliminates critical factors to be
considered in antitrust decisions and undermines the designs of
legislator. \51\ As a broad principle, weighing an array of factors,
including closely related statutes, is recognized as an important
component of balanced legislative interpretation.\52\ If courts
consider the wider statutory regime and the particular problem it
addressed, judicial decisions can more properly reflect past
Congressional concerns about economic concentration and its negative
impact on the bargaining power of farmers.\53\
---------------------------------------------------------------------------
\47\ Robert Pitofsky, The Political Content of Antitrust, 127 U.
Pa. L. Rev. 1051, n.31 (1979).
\48\ 312 U.S. 219 (1941).
\49\ Id., at 232; See also, Fairdale Farms, Inc. v. Yankee Milk,
Inc., 635 F.2d 1037, 1042-32 (2nd Cir. 1980) (construing the Capper-
Volstead Act in light of subsequent agricultural statutes).
\50\ U.S. v. Freeman, 44 U.S. 556, 564 (1845) (``The correct
rule of interpretation is, that if divers statutes relate to the
same thing, they ought all to be taken into consideration in
construing any one of them, and it is an established rule of law,
that all acts in pari materia are to be taken together, as if they
were one law''); 73 Am. Jur. 2d Statutes Sec. 187 (1974) (Current
Through April 1998 Cumulative Supplement) (explaining that ``acts in
pari materia, and all parts thereof, should be construed together
and compared with each other. Because the object of the rule is to
ascertain and carry into effect the legislative intent, it proceeds
upon the supposition that the several statutes were governed by one
spirit and policy, and were intended to be consistent and harmonious
in their several parts and provisions. Under this rule, each statute
or section is construed in the light of, with reference to, or in
connection with, other statutes or sections'').
\51\ U.S. v. Ferman, at 564 (explaining that ``[t]he error'' in
the interpretation of a statute ``arose from that act having been
considered by itself, without any reference to other statutes
relating to [similar concerns]'').
\52\ William N. Eskridge, Jr. and Philip P. Frickey, Statutory
Interpretation as Practical Reasoning, 42 Stanford L. Rev. 321, 356
(1990).
\53\ Id., at 358 (also noting the importance of the purposive
inquiry; ``What problem was trying to solve, and what general goals
did it set forth in trying to solve it?'').
---------------------------------------------------------------------------
The DOJ, for example, failed to consider the Packers and
Stockyards Act (``P&SA'') of
[[Page 16010]]
1921.\54\ The purposes and provisions of the statute require
consideration when enforcing the Sherman, Clayton, and Federal Trade
Commission Acts. P&SA passed after these broader statutes became law
and was specifically directed toward a problem that seemed to
persist despite the existence of previous legislation. The
Congressional intent to promote the combined consideration and
construction of the antitrust statutes is evidenced by the shared
enforcement provisions of the P&SA.\55\
---------------------------------------------------------------------------
\54\ 7 U.S.C. Sec. 181 et seq.
\55\ The PS&A even allowed for divided enforcement between the
Secretary of Agriculture and the FTC. The FTC was to enforce the
``retail sales'' provision of the statute but the Secretary could
assume responsibility if the FTC was not already proceeding with a
similar investigation. Sec. 406(d). Per se illegality standards in
the Clayton and FTC Acts carry over to P&SA. Re ITT Continental
Baking Co. (1985) 44 Ag Dec 748.
---------------------------------------------------------------------------
Some courts have specifically held that the statute is designed
to go beyond the broad language of the Sherman, Clayton, and Federal
Trade Commission Acts, thereby recognizing the importance of
construing the statutes together.\56\ While refusing to purchase a
farmer's livestock might be acceptable under the Sherman or Federal
Trade Commission Acts, for example, it would not be acceptable under
the broad protective purposes of the P&SA.\57\ In making such
decisions, courts have recognized the problem of buyer power that
farmers face \58\ and which Congress attempted to address in the
P&SA.\59\ Furthermore, given the remedial nature of the statute, it
should be interpreted liberally to carry out its broad mandate and
purposes.\60\ When combined with the already broad language of the
statute, enforcement agencies are given wide regulatory powers over
the meatpacking industry,\61\ especially as it relates to injuries
inflicted upon farmers.\62\ One contemporary commentator described
the legislation as ``extending farther than any previous law in the
regulation of private business.'' \63\ Borrowing heavily from the
language of other antitrust laws, again confirming the
interconnectedness of the antitrust legal regime, the legislation
prohibits ``any unfair'' \64\ practices or ``any undue or
unreasonable preference or advantage'' to certain sellers. \65\ The
language of the PP&SA makes clear that particularly close scrutiny
should be given to the marketing problems of farmers.
---------------------------------------------------------------------------
\56\ Wilson & Co. v. Benson, 286 F.2d 891 (7th Cir. 1961).
\57\ Swift & Co. v. U.S., 393 F.2d 247, 255 (7th Cir. 1968).
\58\ Id., at 250-52 (finding that buyers of lambs agreed not to
pay over a certain price and that buyers agreed not to bid against
one another for lambs; the firm which bought the lambs then sold
them to another buyer which had agreed not to bid on the lambs).
\59\ Id., at 254 (``The lack competition between buyers, with
the attendant possible depression of producers' prices, was one of
the evils at which the Packers and Stockyards Act was directed'')
(citing Meat Packer Legislation hearings before the House Committee
on Agriculture, 66th Cong., 2d Sess., pp. 22, 229, 250, 303, 1047,
2284 (1920)).
\60\ Bruhn's Freezer Meats of Chicago, Inc. v. U.S. Department
of Agriculture, 438 F.2d 1332, 1336 (8th Cir. 1971) (citations
omitted); Glover Livestock Commission Company, Inc. v. Hardin, 454
F.2d 109, 111 (8th Cir. 1972) (describing the legislation as
remedial and requiring liberal construction to carry out its purpose
of (``prevent[ing] economic harm to producers and consumers at the
expense of middlemen'') (citing Bruhn's).
\61\ Id., at 1339 (``The Act was framed in language designed to
permit the fullest controls of packers and stockyards which the
Constitution permits, and its coverage was to encompass the complete
chain of commerce and give the Secretary of Agriculture complete
regulatory power over packers and all activities connected
therewith'').
\62\ Stafford v. Wallace, 258 U.S. 495, 514-15 (1922) (holding
that the ``chief evil feared is the monopoly of the packers,
enabling them unduly and arbitrarily to lower prices to the shipper
who sells'').
\63\ Current Legislation, The Packing Industry and the Packing
Act, 22 Colum L. Rev. 68, 70 (1922) (quoting Senate Agricultural
Comm., Rep. No. 77, 67th Cong., 1st Sess. 2 (1921)).
\64\ 7 U.S.C. Sec. 202(a) (italics added).
\65\ Id. at Sec. 202(b) (italics added).
---------------------------------------------------------------------------
The DOJ also failed to consider the Capper-Volstead Act.\66\
Among farmers in the late 19th century, a favored method of
responding to the economic concentration of buyers was the marketing
cooperative. Formal government efforts to aid farmer cooperatives
came with the passage of the Clayton Act in 1914.\67\ In order to
eliminate legal obstacles that might slow the growth of market power
among farmers through cooperatives, the legislation specifically
exempted non-stock agricultural cooperatives from the antitrust
laws.\68\ The inclusion of the farmer cooperative provision within
an antitrust statute offers further evidence of the importance
Congress placed on considering the economic disorganization of
farmers when applying the antitrust laws. Doubts about the
effectiveness of the Clayton Act exemption triggered legislative
efforts to draft a stronger statute.\69\ The result was the Capper-
Volstead Act of 1922, which broadened the exemption from the
antitrust laws beyond non-stock cooperatives.\70\
---------------------------------------------------------------------------
\66\ 7 U.S.C. Secs. 291-2.
\67\ 15 U.S.C. Secs. 12-27 (1983).
\68\ Id., at Sec. 17.
\69\ Wendy Moser, Selective Issues Facing Cooperatives: Can the
Customer continue to be the Company? 31 S.D.L.Rev. 394, 395
(explaining that Capper-Volstead was passed to ``clarify the Clayton
Act exemption provided to farmers'').
\70\ 7 U.S.C. Secs. 291-92.
---------------------------------------------------------------------------
With the passage of Capper-Volstead, Congress demonstrated its
intention to treat farmer cooperatives differently from the typical
corporate form and to give farmers the opportunity to build their
bargaining power relative to corporate buyers.\71\ By exempting
farmer cooperatives from the antitrust laws Congress sought to help
``farmers to compete with large corporations.'' \72\ According to
some commentators, the legislation was specifically designed to
``counterveil the monopsony power then held by the corporate
purchasers.'' \73\ The Supreme Court agreed that ``individual
farmers should be given, through agricultural cooperatives acting as
entities, the same unified competitive advantage--and
responsibility--available to businessmen acting through corporations
as entities.'' \74\ Without fear of antitrust prosecution, farmers
were to unify into farmer cooperatives that could employ their
bargaining power to negotiate with large food manufacturers for
better prices for their products.\75\
---------------------------------------------------------------------------
\71\ Fairdale Farms, 635 F.2d at 1043 (noting that
``agricultural cooperatives were `a favorite child of Congressional
policy' '') (quoting treatise); David Million, The Sherman Act and
the Balance of Power, 61 S. Cal. L. Rev. 1219, 1281 (1988) (``The
exemption of labor and agricultural combinations from the Sherman
Act's proscriptions further demonstrates that a deep concern about
social balance lay beneath statements of solicitude for those harmed
by the trusts. Several senators advocated exemption on the ground
that such combinations were necessary to counterbalance the economic
power of massed capital.''); Michael D. Love, Antitrust Law--
Fairdale Farms, Inc. v. Yankee Milk, Inc.:--The Right of
Agricultural Cooperatives to Possess Monopoly Power, 7 J.Corp.L.
339, 341 (1982) (explaining Congressional hopes of helping
``cooperatives to finance business operations of sufficient
magnitude to compete with corporations''); Kathryn J. Sedo, The
Application of the Securities Law to Cooperatives: A Call for Equal
Treatment for Non-agricultural Cooperatives, 46 Drake L. Rev. 259,
272 (1997) (noting the farmer cooperative exemption from the
securities laws, indicating the Congressional view that cooperatives
were favored organizations).
\72\ Sunkist Growers, Inc. v. Winckler & Smith Citrus Products
Co., 284 F.2d 1, 8 (9th Cir. 1960).
\73\ David L. Baumer, Robert T. Masson, and Robin Abrahamson
Masson, Curdling the Competition: An Economic and Legal Analysis of
the Antitrust Exemptions for Agriculture, 31 Vill. L. Rev., 183, 185
(1986) (``Congressional passage of the agricultural antitrust
exemption encouraged the formation of agricultural cooperatives
intended to counterveil the monopsony power then held by the
corporate purchasers'').
\74\ Maryland & Va. Milk Producers Ass'n v. United States, 362
U.S. 458, 466 (1960).
\75\ Note, Trust Busting Down on the Farm: Narrowing the Scope
of Antitrust Exemptions for Agricultural Cooperatives, 61 VA L. Rev.
341, 364 (1975) (``Capper-Volstead's authorization of collective
processing and marketing was an attempt to counter the bargaining
power of oligopsonist buyers, but the bargaining power gap is as
wide today as it was fifty years ago'').
---------------------------------------------------------------------------
The jurisprudence interpreting the Capper-Volstead Act
recognizes farmer disorganization and the power of large-scale
buyers. The court in Kinnet Dairies, Inc. v. Dairymen, Inc., for
example, noted that ``farmers needed congressional help'' since they
``had always been pricetakers, standing relatively helpless before
those who would purchase their products.'' \76\ In order to overcome
the monopoly problem common to agricultural markets, Congress
``deliberately set about to enable farmers to organize and band
together in order to acquire and exercise marketing power.'' \77\ If
farmers can muster enough bargaining power a ``bilateral monopoly''
between seller and buyer will result, conferring on farmers a fair
price for their products.\78\ The mirror image of
[[Page 16011]]
promoting farmer bargaining power is close attention to economic
activities that might increase the concentration among buyers and
contribute to their collusive potential. Accordingly, the wider
policy rationale of Capper-Volstead requires that DOJ and other
enforcement officials apply strict scrutiny to mergers or other
activities that enhances the power of buyers and worsens the
bargaining position of farmers.
Finally, the DOJ failed to consider Congressional concerns about
maintaining a balanced bargaining arrangement between farmers and
processors as manifest in the Agricultural Fair Practices Act (AFPA)
of 1967.\79\ The statute was designed to prevent corporations from
interfering in the formation of collective marketing organizations
among farmers.\80\ Congressional action stemmed from episodes in
which food processing corporations discriminated against cooperative
bargaining associations by refusing to buy their products.\81\
Courts have interpreted the ``overriding purpose'' of the resulting
legislation to be the protection of farmers' rights to cooperatively
organize.\82\ Throughout the 1970s, Congress considered additional
legislation to improve the bargaining power of farmers relative to
that of the corporate food processing sector.\83\ The AFPA's
recognition of the disorganized nature of farmer marketing \84\ and
the potential for abusive practices on the part of agricultural
processors adds further evidence of heightened Congressional concern
with market power among buyers.
---------------------------------------------------------------------------
\76\ 512 F.Supp. 608, 630 (M.D. GA. 1981); Northern Cal.
Supermarkets, Inc. v. Central Cal. Lettuce Producers Cooperative.,
413 F.Supp. 984, 988 (N.D. Cal. 1976) (noting that ``Congress
perceived farmers as being at the mercy of sharp dealers in the sale
of their produce and, therefore, made it possible for them to form
cooperatives to help themselves'').
\77\ Kinnet Dairies, 512 F.Supp. at 630. The court specifically
mentions the promotion of ``countervailing power'' as a function of
farmer cooperatives. Id., at 614.
\78\ National Broiler Marketing Assn. v. U.S., 436 U.S. 816, 842
(1978) (J. White dissenting) (``The specific goal of permitting
agricultural organizations was to combat, and even to supplant,
purchasers' organizations facing the farmer. Economics teach that
the result in such circumstances is `bilateral monopoly' with a
potentially beneficial impact on the eventual consumer and a sharing
of cartel profits between the organized suppliers and the organized
buyers''). The court also specifically mentions that chicken farmers
exist in an ``oligopsonistic'' market. Id., at 844 (quoting Brown,
U.S. v. Broiler Marketing Association: Will the Chicken Lickin'
Stand?, 56 N.C.L.Rev. 29, 44 (1978)).
\79\ 7 U.S.C. Secs. 2301-2306; Donald A. Frederick, Agricultural
Bargaining Law: Policy in Flux, 43 Ark. L. Rev. 679, 689 (noting
that the legislation was ``viewed as an important sanction of
agricultural bargaining'' and was a ``congressional reaffirmation of
the value of cooperative bargaining and marketing by agricultural
producers'').
\80\ 7 U.S.C. Sec. 2303 (forbidding corporations from coercing,
discriminating, or intimidating members of farmer bargaining
groups).
\81\ Randall Torgerson, PRODUCER POWER AT THE BARGAINING TABLE:
A CASE STUDY OF THE LEGISLATIVE LIFE OF S. 109 3-17 (1970).
\82\ Butz v. Lawson Milk Co., Division of Consolidated Foods
Corp., 386 F.Supp. 227, 235 (N.D. OH. 1974) (``the overriding
purpose of Congress in enacting the Agricultural and Fair Practices
Act of 1967 was to protect the individual producer of milk in his
right to band together with other producers or, in effect, to
unionize'').
\83\ National Broiler Marketing Assn., 436 U.S. at 837 (1978)
(Brennan, J., concurring) (noting the ``persuasive evidence that
Congress' concern for protecting contract growers vis-a-vis
processors and handlers has not abated''); Oliver and Snyder,
Antitrust, Bargaining, and Cooperative: ABC's of the National
Agricultural Marketing and Bargaining Act of 1971, 9 Harvard J.
Legislation 498 (1972); Frederick supra, Agricultural Bargaining
Law, at 691-693.
\84\ 7 U.S.C. Sec. 2301.
---------------------------------------------------------------------------
(10) DOJ failed to consider that the consent decree risks
leaving farmers without an effective outlet for legal redress:
The resulting consent decree will be reviewed by a district
court in the District of Columbia (``D.C.''), where it is less
likely that a federal judge will be familiar with agricultural
concerns. When seeking leverage in the negotiations over the consent
decree, the DOJ had a plane waiting to take a lawyer to Fargo to
file suit, indicating their understanding that a farm-state venue
would be more advantageous in litigation than Washington, D.C. The
D.C. Court of Appeals has also severely restricted the ability of
district courts to determine whether a consent decree is ``in the
public interest,'' making it more likely that the concerns of
interested parties will not be fully considered in a court of
law.\85\ One commentator has noted that the DC Court of Appeals
ruling ``threatens to eliminate any effective role for the courts in
reviewing antitrust consent decrees.'' \86\ The DC Court of Appeals
conclusion that a consent decree can be rejected only if it makes a
``mockery'' of judicial power is ``almost no standard at all and
places in jeopardy the Tunney Act [Antitrust Procedures and
Penalties Act] requirement that the district court independently
review the decree to ensure that it is in the public interest.''
\87\
---------------------------------------------------------------------------
\85\ United States v. Microsoft Corp., 56 F.3d 1448 (D.C. Cir.
1995).
\86\ Lloyd C. Anderson, United States v. Microsoft, Antitrust
Consent Decrees, and the Need for a Proper Scope of Judicial Review,
Antitrust L.J. 1, 3 (1996).
\87\ Id. at 4. See also Deborah A. Garza, The Microsoft Consent
Decree: The Court of Appeals Sets Strict Limits on Tunney Act
Review, 10 Antitrust 21 (Fall 1995) (arguing that the Tunney Act
``might reasonably be read to authorize a more substantial role for
the district court'').
---------------------------------------------------------------------------
If a federal court does not reject the consent decree, the next
logical step is for the attorneys general of farm states to
challenge the merger in federal court. Unfortunately, such a move is
extremely difficult given the limited enforcement budgets and
antitrust expertise of attorney general offices in Midwestern farm
states, leaving many of the states most affected by the merger hard-
pressed to marshal the resources necessary to challenge the merger,
especially given the wealth of Cargill, the largest private company
in the country.\88\ Larger states such as New York and California,
which have larger antitrust divisions, are not likely to challenge
the merger given their distance from the concerns of the Midwestern
farmer. Such conditions make it possible that those who have
advanced legitimate objections to the merger will not have their day
in court. As a result, one of the main reasons for the passage of
the Tunney Act--the fear of excluding interested third parties from
the merger review process--will be ignored.
---------------------------------------------------------------------------
\88\ The office of Attorney General in Minnesota currently has 2
and one-half attorneys who handle antitrust matters. The offices in
North and South Dakota do not have attorneys who work full-time on
antitrust matters. See generally Joseph F. Brodley, Antitrust
Standing in Private Merger Cases: Reconciling Private Incentives and
Public Enforcement Goals, Mich. L. Rev. 2, 38-41 (1995) (explaining
the limits on state action).
State merger enforcement is confined to a relatively few merger-
enforcing states and is dependent on the views of changing state
attorneys general and state budgetary support in a time of
increasing financial stringency . . . Resources and personnel limit
state merger enforcement. Merger cases are the most resource-
intensive antitrust litigation. Within a matter of weeks, sometimes
even days, the plaintiff must marshall a sophisticated antitrust
case involving proof of complex economic facts, including market
definition, market power, and oligopolistic conduct--an awesome
task, even for a large team of lawyers and economists representing a
billion-dollar corporation. Yet most states have only three to five
antitrust lawyers, others no more than one or two, and some states
none at all. In addition, almost none of the states has a staff
economist, and the tight time limits of merger litigation tend to
hamper the effective multi-state coordination that occurs in other
types of state antitrust litigation. Financial pressures also
inhibit state merger capability and growing budgetary limitations on
state finances may intensify these pressures.
---------------------------------------------------------------------------
Given the importance of this merger and the constraints on state
action if the consent decree is approved, I respectfully request
that the comment period for this merger be extended another sixty
days to December 12th. Several parties have expressed interest in
commenting on the merger and will not be able to do so by October
12th. In the interest of a fair hearing on this critical matter, I
urge DOJ to support a lengthening of the comment period, as allowed
under the Tunney Act.\89\
---------------------------------------------------------------------------
\89\ 15 U.S.C. & 16(d).
---------------------------------------------------------------------------
If the DOJ and the court do not see fit to extend the comment
period, OCM urges the court to reject the proposed consent decree
for failing to consider the factors set forth herein.
Sincerely,
Jon Lauck, Ph.D.,
Special Project Director, Organization for Competitive Markets.
Attachments to the comment filed by the Organization for
Competitive Markets are available for inspection in room 215 of the
U.S. Department of Justice, Antitrust Division, 325 Seventh Street,
N.W., Washington, DC 20530 (telephone: 202-514-2481) and at the Office
of the Clerk of the United States District Court for the District of
Columbia, 333 Constitution Avenue, NW, Washington, DC 20001. Copies of
these materials may be obtained upon request and payment of a copying
fee.
Pemiscot County Farm Bureau
P.O. Box 80, Caruthersville, MO 63830, (573) 333-4196, Fax: (573)
333-4537
August 2, 1999.
Judge Gladys Kessler,
US District Court, District of Columbia, 333 Constitution Ave. NW,
Washington, DC 20001.
Dear Judge Gladys Kessler: We are writing to request that you
protect competition in this part of Missouri.
We are concerned there may have been some misrepresentation in
the civil action
[[Page 16012]]
case #991875 that may lead you to a different conclusion.
Cargill was initially asked to divest itself of the Continental
Grain Cottonwood Point elevator. We believe this was done through an
error or misunderstanding about the location of this elevator. This
elevator sits on the Mississippi River at a place called Cottonwood
Point. Although it is 10 miles south of Caruthersville, MO it
carries that address. This is unfortunate because we believe it made
the anti-trust people feel it was too close to an elevator Cargill
owns at New Madrid, MO. These elevators are about 47 miles apart and
do not, to my knowledge, compete for business.
So we are asking that you permit the sale of this elevator to
Cargill to go ahead. We feel strongly that this will give local
farmers the most competitive prices for our grain.
Judge, we are asking that whatever happens, please don't let
Bunge, Inc., acquire this elevator because they own the next 3
elevators above it and the next 3 elevators below it (a distance of
84 miles).
I personally have farmed 13 miles inland from Cottonwood Point
for just over 30 years. All my grain has been sold almost equally to
Bunge and Continental during these years. If the grain producers in
this area do not have 2 or more strong competitors within 25 or less
miles, then our little world is going to get a lot more difficult
real quick.
Thank for your consideration in this matter.
Sincerely,
David Haggard,
Pemiscot County Farm Bureau Board President.
October 11, 1999.
Rural Life Office
511 Bear Creek Drive, Dorchester, Iowa 52140-7505; 1-800-772-2758
Roger W. Fones,
Chief, Transportation, Energy & Agriculture Section, Antitrust
Division, United States Department of Justice, 321 Seventh Street,
N.W., Suite 500, Washington, DC 20530.
Dear Mr. Fones: We are very concerned about the Department of
Justice's ``Final Ruling'' on the case of US of America v. Cargill,
Inc and Continental Grain Co. We ask that you please forward our
comments and the enclosed letter to Judge Kessler.
We work with farmers and rural communities all over the 30
counties of north east Iowa for the Rural Life Office of the
Archdiocese of Dubuque.
We do not find the Department of Justice's findings for the
merger of Cargill-Continental to be in the best interests of the
people we work with in the 30 counties of Northeast Iowa. Producers
will be even more limited in their markets than they currently are,
and they face the probability that Cargill/Continental will exert
strength in the organic and specialty markets with the take-over of
Continental's facilities. This has to be recognized as not being in
the public interest.
The laws of this country are meant to protect the advancement
and good of common people, not corporations. The action we request
would help government to move further in this direction.
Respectfully,
Mary and Don Klauke.
Western Organization of Resource Councils
2401 Montana Avenue, #301, Billings, Montana 59101; (406) 252-9672,
FAX (406) 252-1092
October 12, 1999.
Mr. Roger W. Fones,
Chief, Transportation, Energy and Agriculture Section, Antitrust
Division, United States Department of Justice, 325 Seventh Street,
NW, Suite 500, Washington, DC 20530.
By FAX: 202/307-2784
Dear Mr. Fones: On behalf of the Western Organization of
Resource Councils, I am writing to urge you to reopen your
investigation into the proposed acquisition of Continental Grain by
Cargill and extend the public comment period on the proposal.
Mergers and acquisitions in the agribusiness industry are closing
out the markets for family farmers and ranchers. The Department's
approval of this merger with a few required divestitures is wholly
inadequate to protect competition in the grain trade, which these
two firms dominate along with ADM.
As Jon Lauck has explained in his letter for the Organization
for Competitive Markets to you, the Department's analysis of this
proposal (1) fails to consider the wider concentration in
agricultural markets beyond grain buying; (2) fails to consider the
continuing potential for anticompetitive behavior in the post-merger
market; (3) fails to show that the divested remnants of Continental
will be a competitive force absent a large network of elevators
which buy grain; (4) fails to consider the nature of the grain
selling market; (5) fails to consider the economic disorganization
of farmers which can be exploited by powerful buyers; (6) fails to
consider information disparities in agricultural markets; (7) fails
to explain the benefits of the merger; (8) and fails to consider a
range of statutes that Congress intended courts to consider when
making decisions about agricultural markets.
We strongly urge your reconsideration of this action in an
analysis which weighs these issues. The Department's strong action
is needed here to preserve competition and free, competitive markets
against encroachment by monopolistic corporations.
Sincerely,
Shane Kolb,
Chair, Agriculture Issue Team.
Exeten, NE 68351,
Oct. 6, 1999.
Mr. Roger W. Fones,
Antitrust Division--U.S. Dept. of Justice, Washington, D.C. 20530.
Dear Mr. Fones: The merger concerning Cargill & Continental
Grain is a major concern to me as a farmer. This merger would unify
the second and third largest grain traders in North America, which
export 40% of the American agricultural commodities.
To demonstrate how confident these companies are of the merger,
a lady sold her grain to her elevator this year which is owned by
Continental (for years) and four days later she received her check
in a Cargill envelope. This merger has not been approved.
In my area Cargill has an elevator on the Burlington-Northern
rail line. They control the amount of rail cars available and the
time. This influences the prices paid for our grain in the
surrounding elevators and the York ethanol plant. All exist within
less than 25 miles of our farm. We need market transparency and
tougher anti-trust enforcement.
Keep competition open. Do not allow the merger.
Sincerely,
Cynthia Thomson,
State WIFE President.
Lincoln's Letter on Corporations
``We may congratulate ourselves that this cruel war is nearing
its end. It has cost a vast amount of treasure and blood * * * It
has indeed been a trying hour for the Republic; but I see in the
near future a crisis approaching that unnerves me and causes me to
tremble for the safety of my country.
``As a result of the war, corporations have been enthroned and
an era of corruption in high places follow, and the money power of
the country will endeavor to prolong its reign by working upon the
prejudices of the people until all wealth's aggregated in a few
hands and the Republic is destroyed.
``I feel at this moment more anxiety for the safety of my
country than ever before, even in the midst of war.''
This letter was written by Abraham Lincoln to William F. Elkins,
Nov. 21, 1864.
Alvo, Nebraska
Sept. 28, 1999.
Mr. Roger W. Fones Chief, Transportation, Energy and Agriculture
Section, Antitrust Division, U.S. Department of Justice, 325 Seventh
St. N.W. Suite 500, Washington, D.C. 20530.
Dear Sir: As a member of a family who has resided and made its
living on the same farm for five generations, I feel compelled to
write to you concerning the merger of Cargill and Continental Grain.
That merger is a major concern to all American farmers because
of the impact Cargill's monopoly of the grain trade will have on the
farms and communities in our areas.
The main thrust in our operation is wheat, corn and soybean
production and a cow/calf and cattle feeding program. That is our
source of income.
I believe family farmers who are producing food for the world,
below the cost of production, are at a disadvantage competing with
conglomerates such as the top four firms.
I urge you to use your authority to pressure the U.S. Department
of Justice to revisit its investigation of the Cargill/Continental
sale.
Respectfully yours,
Pauline Johnson.
Alvo, NE 68304
[[Page 16013]]
Sept. 29, 1999.
Roger W. Fones,
Chief, Transportation, Energy and Agriculture Section, Anti-Trust
Division in U.S. Dept. of Justice, 325 Seventh Street, NW, Ste 500,
Washington, D.C. 20530.
Dear Sir: Regarding merger of Continental and Cargill Grain Co.
Deep concerns of the shrinking but necessary family farmers.
Excessive mergers are forming monopolies. In the agriculture
sector it is putting more stress on your food producers (grain &
livestock).
Cargill may have already thought they have the merger sewed up
the merger as grain sold to the Continental Grain Co. was paid for
with a Cargill check?
I urge you to stop this mad rush of mergers with everything.
Seven corporations will rule the world. It is fast becoming
international.
Is this what our pioneer fore-fathers wanted?
Thank you for your time and thought.
Dyed in the wool American farm wife.
Senior Citizen,
Dorothy McKay.
Elmwood, NE 68349
Mr. Roger Fones,
U.S. Dept. of Justice, Antitrust Division, 325 Seventh St. N.W.
Suite 500, Washington, D.C.
Dear Mr. Fones: I am a family farmer in eastern Nebraska. I am
extremely concerned about the merger of Cargill and Continental
grain companies. The merger of these two giant grain companies would
lessen the competition in grains, locally, nationally and globally.
I urge you to consider the impact this would have on us and act to
stop the merger. This merger (proposed) needs immediate action by
the antitrust division and the U.S. Justice Department. The
antitrust laws are in place and need to be enforced!
Thank You.
Norma Hall.
Plentywood, MT
Mr. Roger W. Fones,
Chief, Transportation, Energy and Agriculture Section, Antitrust
Division, U.S. Dept. of Justice, 325 7th St. NW, Suite 500,
Washington, D.C. 20530.
Dear Mr. Fones, Having served as Transportation officer for WIFE
for many years, and seen just what `mergers'/`takeovers'/
acquisitions, etc. do to rural America in the field of rail
transportation, I write to ask that the U.S. Department of Justice
re-open its investigation of the Cargill's acquisition of
Continental Grain operations.
As farmers, we are already experiencing the loss of competition
in rural America. Producers who own one company's machinery find
that they may have to drive 100-150 miles to acquire some repairs
for its. Or wait until it can be mailed to them from some central
point thousands of miles away.
Those of us who have no alternative to shipping by rail have
found not only that we now are `served' by one carrier, but we have
to drive greater distances with our own farm trucks to reach a
terminal.
Formerly, Montana was the only state that was dominated by one
rail carrier. Now we see that, because of mergers, other states,
other industries, have lost the edge that competition in
transportation gives them. Those who have watched the developments
are not surprised that, no matter what reassurances are given by the
company that is benefitting by the takeover, the dire predictions by
those opposing the transaction have proven accurate.
So now we are again among those who are predicting that the
Cargill acquisition of Continental's grain operations will be
beneficial only to Cargill.
Competition is vital to not only our grain producers, but to the
farmers of the world. The takeover of Continental's operations is
going to dramatically affect not only those producers who are
directly served by the Cargill/Continental terminals, but by all
producers of grains in the U.S.
The Antitrust Division is our only hope, so we ask that you
exercise your authority before the amount of power exerted by one
company becomes too great, and producers lose one more battle to
keep competition working for them.
Sincerely,
Mary W. Nielsen,
Montana Transportation, WIFE.
September 27, 1999.
Mr. Roger W. Fones
Chief, Transportation, Energy & Agriculture Section, Antitrust
Division, US Department of Justice, 325 Seventh St. SW Suite 500,
Washington, DC 20530.
Re: Cargill & Continental Grain Company Merger
Dear Mr. Fones: It is my understanding that the final judgment
concerning the above matter will be determined in the middle of
October.
I want to urge you to consider this matter very carefully and
urge your affiliates to rule against this merger. Cargill's purchase
of Continental Grain would unify the second and third largest grain
traders in Nebraska, making it possible for Cargill to control the
export market much more than it does at the present time.
We do not need bigger companies with more control over our
markets. We have a Cargill elevator within 15 miles of our farming
operating. They have so many different plans for each agriculture
producer that it is unbelievable. They have determined that our
grain should be .5% dryer when brought into the elevator making more
money for the elevator and less for the producer. It may not seem
like a large amount but when you are paying the drying bill, it
definitely adds up. They also have a plan if you buy everything from
them--fertilizer, seed corn, chemicals, insecticide and deliver all
your grain to them--they will do this for you and that for you. They
definitely want control--both of the farmer and the market.
The farming industry is in very serious trouble with today's
markets so low and our cost of production going up.
We hope that in reading this letter that you will investigate
the merger more thoroughly and understand why this merger is being
challenged in the agriculture sector. Since this is harvest in the
Midwest, it would also be of some assistance if the deadline for
comment would be extended another sixty days to December 12, 1999.
Yours in Ag,
Frances Heinrichs,
Women Involved in Farm Economics (WIFE).
Tab 4
Greta Anderson, Iowa City, IA
September 19, 1999.
Judge Gladys Kessler,
U.S. District Court, for the District of Columbia, 333 Constitution
Ave. N.W., Washington, D.C. 20001.
Re: United States of America v. Cargill, Inc. and Continental Grain
Company
Dear Judge Kessler:
Presently before you awaiting your approval is a ``Final
Judgment'' filed by the U.S. Department of Justice relative to the
purchase of the grain merchandising division of Continental Grain
Co. by the Cargill Corp.
Legal precedent, according to the Department of Justice,
requires that ``[t]he balancing of competing social and political
interests affected by a proposed antitrust consent decree must be
left, in the first instance, to the discretion of the Attorney
General. The court's role in protecting the public interest is one
of insuring that the government has not breached its duty to the
public in consenting to the decree. The court is required to
determine not whether a particular decree is the one that will best
serve society. but whether the settlement is within the reaches of
the public interest.''
In its July 8, 1999 ``Final Judgment'' I believe in fact that
the Department of Justice has ``breached its duty to the public in
consenting to the decree'' and that its Final Judgment is not
``within the reaches of the public interest.''
As the Department of Justice's own ``Complaint'' states, the
Cargill purchase would ``substantially lessen competition for
purchases of corn, soybeans, and wheat in each of the relevant
geographic markets, enabling it unilaterally to depress the prices
paid to farmers. The proposed transaction will also make it more
likely that the few remaining grain trading companies that purchase
corn, soybeans, and wheat in these markets will engage in
anticompetitive coordination to depress farm prices.''
Using the Department of Justice's own figures and criteria we
see in its ``Complaint'' that even before this announced purchase
the U.S. grain trade was already dominated, if not monopolized, by
Cargill and nothing in the Department of Justice's ``Final
Judgment'' addresses itself to that important issue.
Likewise, the Department of Justice must consider more that the
grain buying operations of Cargill. The acquisition of Continental's
seventy elevators will enhance the economic power of Cargill as a
general matter. Such a result concerns farmers because Cargill's
assets and economic power can be deployed across a range of
agricultural sectors.
For example, Cargill stands out as a top-four firm in beef
packing, cattle feedlots, pork
[[Page 16014]]
packing, broiler production, turkey production, animal feed plants,
grain elevator capacity, flour milling, dry corn milling, wet corn
milling, soybean crushing, and ethanol production. Such a dominant
position across many agricultural markets will allow Cargill to
transfer resources between sectors according to the economic
conditions that are prevailing at a given time.
The ability to transfer assets will allow Cargill to maintain
its dominant status in all of these markets irrespective of its
competitive prowess. Unlike farmers, who are forced into bankruptcy
after a few bad seasons, Cargill will maintain its dominant status
over time regardless of economic performance over the short-term.
With Continental's assets, Cargill will become an even more powerful
and ``sophisticated'' firm, even more capable of strategic,
cooperative, and anti-competitive behavior.
To me, it is tragic that the government does not put the rights
of family farmers first, but rather participates in the idea that
there are ``too many farmers.'' Drive through rural America: you
will see that there are not too many farmers, but rather, too many
suburbanites and strip malls. The accumulation of capital such as
Cargills is not ``inevitable'', nor is this merger.
In the name of economic and social justice and the preservation
of the family farm system of agriculture in the United States I urge
you to recommend that the Department of Justice withdraw its ``Final
Judgment,'' study in far greater detail this ill-advised sale and
carefully consider the grave anti-trust issues that it presents and
the dire consequences to both producers and consumers of our food
supply.
Sincerely,
Greta Anderson.
Iowa City, IA
September 22, 1999.
Dear Sir: I am writing my concern over the merger of Cargill and
Continental. Bigger is not better, the market for cash grain is
already highly concentrated and yet another merger would spell doom
for the independent farmer.
Sincerely,
Vivian Anderson.
Cresco, IN
Dear Chief Fones: I was born and raised on a farm, coming from a
family of 13 children. Those were days of fair treatment, where
farmers could make a living (however big the family). I believe the
small average farmer meant something. These days we're used, to put
it bluntly (as doormats). Is it just the big shots (the powers that
be) that force us to do things their way, no matter who they step
on? Don't us little guys count? I was taught that God made us all
equal. Do you think the way the smaller people are being treated is
equal and fair? I don't, and I'm sure God didn't have plans for the
big corporations (such as Cargill) to be (in control); as they seem
to be doing. Haven't we been pushed down, stepped on, and ground in
the dirt enough? I think we count too. I beg you, Please don't let
Cargill have any more control. Seems we've been damaged about as
much as possible. We don't have a leg to stand on now; let alone if
you let Cargill and other big corporations have any more control. We
work very hard and can't squeeze a meager pauper's wage and living
now. Why can't we have a little cream of the crop? Are the (people
in control) entitled to all the cream and us little people can have
the skim milk or whey that is left over?
I think you should keep in mind that God made us all equal; and
you and I know the way things are now is way off balance.
Please don't let Cargill or any other of these big corporations
have any more control and completely wipe us out
Thank you Kindly,
Kay M. Barnes.
September 23, 1999.
Dear Sir: This is in response to the invitation for comments
regarding Final Judgment; the case of Cargill merging. This was
written up in the Minnesota Farmers Union August publication and got
me to thinking about how we little people are being squeezed and
eventually choked by big business
As a midwest dairy farmer, reading articles only depresses one
as there is a feeling of hopelessness implied by the ``powers that
be''. They talk and talk, attend meeting after meeting and declare
the poor farm situation must be addressed and so far in 1999 that's
as far as it goes.
The CEO's of the major grain mergers can only see $$ for their
own pockets and I suppose one can't judge harshly on that, but is it
fair to the hard working farmer to not have a decent cut for his
efforts. Every day in the business section someone's throat is cut
by the money people. I am thoroughly opposed to more merging. Let's
put a moratorium on mergers until someone figures out the
agriculture and dairy dilemma and really moves in the right
direction for all.
Sincerely,
Mary Beckrich.
Cologne, Minnesota
October 11, 1999.
Mr. Roger W. Fones,
Chief, Transportation, Energy and Agriculture Section, Anti-Trust
Division, U.S. Department of Justice, 325 Seventh Street, N.W.,
Suite 500, Washington, DC 20530.
FAX: 202/307-2784
Dear Mr. Fones: I am writing to request that you conduct further
investigation of the Cargill-Continental Grain sale and that you
extend the comment deadline for another sixty days.
Are you aware of what the creation of a large monopoly will do,
not only to grain farmers in this country, but also to all
consumers?
Monopolies always create higher prices for the consuming public.
They create even lower prices for those who must sell their
commodities to the monopolies. Grain prices are already far below
break-even.
Farmers are going broke in our state at an alarming rate. Across
the U.S., farm income is down by 70%. Depressed prices are ruining
not only farmers but all small-town businesses. I urge you to
conduct a more thorough investigation into the Cargill/Continental
Sale before submitting a final judgment on this.
Please give my request your serious consideration.
Sincerely,
Deari Borth.
October 11, 1999.
Meade, KS
Mr. Roger W. Fones,
Chief, Transportation, Energy and Agriculture Section, Anit-Trust
Division, U.S. Department of Justice, 325 Seventh Street, N.W.,
Suite 500, Washington, DC 20530.
FAX: 202/307-2784
Dear Mr. Fones: I am writing to request that you conduct further
investigation of the Cargill-Continental Grain sale and that you
extend the comment deadline for another sixty days.
Are you aware of what the creation of a larger monopoly will do,
not only to grain farmers in this country, but also to all
consumers?
Monopolies always create higher prices for the consuming public.
They create even lower prices for those who must sell their
commodities to the monopolies. Grain prices are already far below
break-even.
Farmers are going broke in our state at an alarming rate. Across
the U.S. farm income is down by 70%. Depressed prices are ruining
not only farmers but all small-town businesses. I urge you to
conduct a more thorough investigation into the Cargill/Continental
Sale before submitting a final judgment on this.
Please give my request your serious consideration.
Sincerely,
Greg Borth.
Honorable Judge Gladys Kessler
U.S. District Court, District of Columbia, 333 Constitution Ave.
N.W., Washington, DC 20001.
Re: United States of America v. Cargill, Inc. and Continental Grain
Company
Dear Judge Kessler: You have before you awaiting your approval a
Final Judgment filed by the U.S. Department of Justice relative to
the purchase of the grain merchandising division of Continental
Grain Co. by the Cargill Corp, which is a privately held
corporation.
Legal precedent, according to the Department of Justice,
requires that the balancing of competing social and political
interests affected by a proposed antitrust consent decree must be
left, in the first instance, to the discretion of the Attorney
General. The court's role in protecting the public interest is one
of insuring that the government has not breached its duty to the
public in consenting to the decree. The court is required to
determine not whether a particular decree is the one that will best
serve society, but whether the settlement is within the reaches of
the public interest.
In its July 8, 1999 Final Judgment I believe in fact that the
Department of Justice has
[[Page 16015]]
breached its duty to the public in consenting to the decree and that
its Final Judgment is not within the reaches of the public interest.
Clearly, as the Department of justice's own complaint states the
Cargill purchase would substantially lessen competition for
purchases of corn, soybeans, and wheat in each of the relevant
geographic markets, enabling it unilaterally to depress the prices
paid to farmers. The proposed transaction will also make it more
likely that the few remaining grain trading companies that purchase
corn, soybeans, and wheat in these markets will engage in
anticompetitive coordination to depress farm prices.
Using the Department of Justice's own figures and criteria we
see in its Complaint that even before this announced purchase the
U.S. grain trade was already dominated, if not monopolized, by
Cargill and nothing in the Department of Justice's Final Judgment
addresses itself to that important issue.
Likewise, the Department of Justice must consider more that the
grain buying operations of Cargill. The acquisition of Continental's
seventy elevators will enhance the economic power of Cargill as a
general matter. Such a result concerns farmers because Cargill's
assets and economic power can be deployed across a range of
agricultural sectors.
For example, Cargill stands out as a top-four firm in beef
packing, cattle feedlots (where Continental is the largest), pork
packing, broiler production, turkey production, animal feed plants,
grain elevator capacity, flour milling, dry corn milling, wet corn
milling, soybean crushing, and ethanol production. Such a dominant
position across many agricultural markets allows Cargill to transfer
resources between sectors according to the economic conditions that
are prevailing at a given time.
This vertical and horizontal domination by Cargill allows then
to maintain dominant status in all of these markets. While small
family farmers are forced into bankruptcy after a few bad seasons,
Cargill will maintain its dominant status over time because it can
afford to subsidize poor economic performance over the short-term.
With Continental's assets, Cargill will become an even more powerful
and sophisticated firm, even more capable of strategic, cooperative,
and anti-competitive behavior.
In the name of economic and social justice and the preservation
of the family farm system of agriculture in the United States I urge
you to recommend that the Department of Justice withdraw its Final
Judgment, study in far greater detail this ill-advised sale and
carefully consider the grave anti-trust issues that it presents and
the dire consequences to both producers and consumers of our food
supply.
Sincerely,
Marilyn Borchardt,
Daughter of a former farmer.
Meade, KS.
October 11, 1999.
Mr. Roger W. Fones,
Chief, Transportation, Energy & Agriculture Section, Anti-Trust
Division, U.S. Department of Justice, 325 Seventh Street, N.W.,
Suite 500, Washington, DC 20530.
FAX: 202/307-2784
Dear Mr. Fones: I am writing to request that you conduct further
investigation of the Cargill-Continental Grain sale and that you
extend the comment deadline for another sixty days.
Are you aware of what the creation of a larger monopoly will do,
not only to grain farmers in this country, but also to all
consumers?
Monopolies always create higher prices for the consuming public.
They create even lower prices for those who must sell their
commodities to the monopolies. Grain prices are already far below
break-even.
Farmers are going broke in our state at an alarming rate. Across
the U.S., farm income is down by 70% Depressed prices are ruining
not only farmers but all small-town businesses. I urge you to
conduct a more thorough investigation into the Cargill/Continental
Sale before submitting a final judgment on this.
Please give my request your serious consideration.
Sincerely,
Isabelle Borth,
Tri-Von Enterprises,
107 S. Celina Street, Roanoke, IL 61561-1097,
September 25, 1999.
Energy & Agriculture Section, Antitrust Division, U.S. Dept. of
Justice, 325 7th St. NW, Ste 550, Washington, D.C. 20530.
Attention: Roger W. Fones, Chief of Transportation
Dear Mr. Fones, We are concerned about the Cargill-Continental
merger. We do not believe it is required to compete in the global
economy and will be extremely detrimental to the agricultural
community. It is our opinion that this market is already highly
concentrated and we feel this will work to the destruction of the
few remaining independent farmers left here in our precious prairie.
Although we are not farmers, we sell computers to many of our
local farmers and know the sad situation this would put them in.
Independent farmers are the backbone of this nation and we must not
let corporate farming take over. Enough is enough!
Sincerely,
Loris von Brethorst.
Callicrate Feedyard
P.O. Box 748, St. Francis, KS 67756s
October 11, 1999.
Mr. Roger W. Fones,
Chief, Transportation, Energy & Agriculture Section, Antitrust
Division, U.S. Department of Justice, 325 Seventh Street, N.W.,
Suite 500, Washington, DC 20530.
Dear Mr. Fones, Mergers and concentration have gone too far.
Justice not only needs to deny the Cargill-Continental Merger but
also needs to reverse prior mergers and restore competition in
agricultural markets.
Companies like Cargill, ConAgra, ADM, Farmland and IBP are
destroying our food system and killing us. We are losing our towns
and communities with their low fixed commodity prices.
The big money of companies like Cargill is dominating government
policy and influencing the non-enforcement of antitrust laws for
their benefit; what about the people? Stop using the lame excuse of
``economies of scale and efficiencies,'' they have no more basis
today than when used as an excuse in Thomas Jefferson's day.
Sincerely,
Mike Callicrate.
New York Times,
October 11, 1999.
Essay By William Safire
Where is antitrust? I say No to the Cargill-Continental
Merger!--G.M. Calnon, St. Francis, KS 67756.
Clinton's Consumer Rip-Off
Jacksonville, Fla.--``You want to buy this new cable service
that's much faster than your old modem,'' my son the information
architect told me. Not wanting to become the slowpoke pundit, I
called my local cable company and ordered ExpressNet. A new black
box cost $150 and the monthly fee was $25.
Two weeks later, a disembodied voice called to say that the
superspeed Internet connecting service had merged with a Texas
conglomerate and if I didn't agree to the doubling of the monthly
rate, my service would end and I would be stuck with a useless $150
receiver.
I again called my local cable monopoly. Although I never reached
a human being, its complaint software signaled that I could continue
for six months at the original rate, after which it was double or
nothing.
This minor outrage came to mind in watching the gee-whiz, ain't-
these-big-numbers-fun accounts on television news of the latest
combinations of corporate colossi.
Worldcom, which last year bought MCI, was now swallowing up
Sprint for $115 billion.
This, analysts assure us, will allow the new supergiant to
compete with AT&T, which already is plunking down $58 billion for
Mediaone with the smiling approval of roundheeled Clintonites at the
Federal Communications Commission.
Why are we going from four giants in telecommunications down to
two? Because, the voice with the corporate-government smile tells
us, that will help competition. Now each giant will be able to hedge
its bets in cable, phone line and wireless, not knowing which form
will win out. The merger-manic mantra: In conglomeration there is
strength.
That's what they said a long generation ago when business
empire-builders boosted their egos by boosting their stock to buy
the earnings of unrelated companies. A good manager could manage
anything, they said, achieving vast economies of scale. As
stockholders discovered to their loss, that turned out to be
baloney.
Ah, but now, say the biggest-is-best philosophers, we're merging
within the field we know best. And if we don't combine quickly, the
Europeans and Asians will,
[[Page 16016]]
stealing world business domination from us. The urgency of
``globalization,'' say today's mergermaniacs, destroys all notions
of diverse competition, and only the huge, heavily capitalized
multinational can survive.
That's why we see the Old Seven Sisters of oil working their way
down toward two big sisters having fun with fungibility, and why our
former Big Seven accounting firms are headed to a Big Two. Unchecked
international combines can crush unions, water down professional
ethics, circumvent national regulation and stick it to consumers.
Here are two startling, counterintuitive thoughts: The fewer
companies there are to compete, the less competition there is. And
as competition shrinks, prices go up and service declines for the
consumer. (Say these reactionary words at the annual World Economic
Forum in Davos, and listen to the global wheeler-dealers guffaw.)
Who is supposed to protect business and the consumer from the
power of trusts? Republican Teddy Roosevelt believed it to be the
Federal Government, but the antitrust division of Janet Reno's
Justice Department is so transfixed by its cases against Microsoft
and overseas vitamin companies that it has little time to enforce
antitrust law in dozens of other combinations that restrain free
trade.
Our other great protector of the public interest in diverse
sources is supposed to be the F.C.C. When MCI merged with Worldcom
last year, the chairman appointed by President Clinton, William
Kennard, took no action but direly warned that the industry was
``just a merger away from undue concentration.'' Now that is
happening.
Why will the F.C.C., after asking for some minor divestiture,
ultimately welcome a two-giant waltz? For the same reason that the
broadcasters' lobby was able to steal tens of billions in the
public's bandwidth assets over the past few years: Mr. Clinton wants
no part of a communication consumer's ``bill of rights.''
Candidates Bradley, Bush and Gore look shyly away lest trust-
luster contributions dry up. Only John McCain dares to say:
``Anybody who glances at increases in cable rates, phone rates,
mergers and lack of competition clearly knows that the special
interests are protected in Washington and the public interest is
submerged.''
Today's populist message comes to you by my old, slow modem.
October 11, 1999.
Mr. Roger W. Fones,
Chief, Transportation, Energy and Agriculture Section, Anti-Trust
Division, U.S. Department of Justice, 325 Seventh Street, N.W.,
Suite 500, Washington, DC 20530.
FAX: 202/307-2784
Dear Mr. Fones: The purpose of this letter is to request that
you conduct further investigation of the Cargill-Continental Grain
sale and that you extend the comment deadline for another sixty
days.
The creation of a larger monopoly will not only depress grain
prices further in this country, but also be detrimental to all
consumers.
Monopolies always create higher prices for the consuming public.
They create even lower prices for those who must sell their
commodities to the monopolies. Grain prices are already far below
break-even.
Farmers are going broke in our state at an alarming rate. Across
the U.S., farm income is down by 70%. Depressed prices are ruining
not only farmers but all small-town businesses. I urge you to
conduct a more thorough investigation into the Cargill/Continental
Sale before submitting a final judgment on this.
Please give this your serious consideration.
Sincerely,
Don Nauereud.
Mary Gosserand.
Brooksville, MS
October 11, 1999.
Mr. Roger Fones,
Chief, Transportation, Energy & Agriculture Section, Antitrust
Division, U.S. Department of Justice, 325 Seventh Street, N.W.,
Suite 500, Washington, DC 20530.
Dear Mr. Fones: As a daughter and wife of farm producers, I have
a stake in the future of the American farm family. I am actively
involved in the operation and management of our operation. I am also
a homemaker--I have three teenage children. My family worked
diligently the last eighteen months--long hours, day after day--and
we would have lost less money if we had done nothing. This is
disheartening to say the least. Cattle and grain prices have
remained low and feed and other related costs have been high. I tell
you this not to whine but to explain our plight.
The rapid corporate concentration of the world's largest grain
and meat handlers is killing the farm family. When we are gone and
the people of this country who are accustomed to a relatively
inexpensive quality food supply realize what has happened, it will
be too late. Please stop the Cargill-Continental Grain sale for the
reason that it will further impact grain prices and farm income in
my community and in the U.S. in general. Please extend the comment
deadline for another sixty days. We must have a competitive market
in this country.
Thank you for your consideration of this matter. If you eat, you
have a stake in this ruling. When farm families are driven out of
business, the cost of foods will skyrocket. Make no mistake about
that. If you are a consumer, you are very vulnerable. Mr. Fones,
this includes you.
Sincerely,
Lori Chancellor.
September 20, 1999.
Judge Gladys Kessler,
U.S. District Court for the District of Columbia, 333 Constitution
Ave. N.W., Washington, DC 20001.
Re: United States of America v. Cargill, Inc. and Continental Grain
Company
Dear Judge Kessler: Presently before you, awaiting your
approval, is a ``Final Judgment'' filed by the U.S. Department of
Justice relative to the purchase of the grain merchandising division
of Continental Grain Co. by the Cargill Corp.
Legal precedent, according to the Department of Justice,
requires that ``[t]he balancing of competing social and political
interests affected by a proposed antitrust consent decree must be
left, in the first instance, to the discretion of the Attorney
General. The court's role in protecting the public interest is one
of insuring that the government has not breached its duty to the
public in consenting to the decree. ``The court is required to
determine not whether a particular decree is the one that will best
serve society, but whether the settlement is `within the reaches of
the public interest.'''
In its July 8, 1999 ``Final Judgment'' I believe in fact that
the Department of Justice has ``breached its duty to the public in
consenting to the decree and that its ``Final Judgment'' is not
``within the reaches of the public interest.''
Clearly, as the Department of Justice's own ``Complaint''
states, the Cargill purchase would ``substantially lessen
competition for purchases of corn, soybeans, and wheat in each of
the relevant geographic markets, enabling it unilaterally to depress
the prices paid to farmers. The proposed transaction will also make
it more likely that the few remaining grain trading companies that
purchase corn, soybeans, and wheat in these markets will engage in
anticompetitive coordination to depress farm prices.''
Using the Department of Justice's own figures and criteria we
see in its ``Complaint'' that even before this announced purchase
the U.S. grain trade was already dominated, if not monopolized, by
Cargill and nothing in the Department of Justice's ``Final
Judgment'' addresses itself to that important issue.
Likewise, the Department of Justice must consider more that the
grain buying operations of Cargill. The acquisition of Continental's
seventy elevators will enhance the economic power of Cargill as a
general matter. Such a result concerns farmers because Cargill's
assets and economic power can be deployed across a range of
agricultural sectors.
For example, Cargill stands out as a top-four firm in beef
packing, cattle feedlots (where Continental is the largest), pork
packing, broiler production, turkey production, animal feed plants,
grain elevator capacity, flour milling, dry corn milling, wet corn
milling, soybean crushing, and ethanol production. Such a dominant
position across many agricultural markets will allow Cargill to
transfer resources between sectors according to the economic
conditions that are prevailing at a given time.
The ability to transfer assets will allow Cargill to maintain
its dominant status in all of these markets irrespective of its
competitive prowess. Unlike farmers, who are forced into bankruptcy
after a few bad seasons, Cargill will maintain its dominant status
over time regardless of economic performance over the short-term.
With Continental's assets, Cargill will become an even more powerful
and ``sophisticated'' firm, even more capable of strategic,
cooperative, and anti-competitive behavior.
In the name of economic and social justice and the preservation
of the family farm system of agriculture in the United States I urge
you to recommend that the Department of Justice withdraw its ``Final
Judgment,'' study in far greater detail this ill-advised sale
[[Page 16017]]
and carefully consider the grave anti-trust issues that it presents
and the dire consequences to both producers and consumers of our
food supply.
Thank you.
Donald B. Clark,
Convener, United Church of Christ, Network for Environmental & Economic
Responsibility.
October 1, 1999.
Judge Gladys Kessler
U.S. District of Columbia, 333 Constitution Ave. NW, Washington, DC
20001.
RE: Cargill/Continental Grain Sale
Your Honor: It is my understanding you are taking public comment
regarding the sale of Continental Grain to Cargill. It is with this
understanding I write.
I believe every person has a right to the gifts of creations,
especially to the necessities of life. Respect for the dignity of
the human person also requires that each person has the right to
free enterprise, the right to undertake the work that is their
calling and the right to fair compensation for that work. This right
is compromised when too much control is concentrated to increase the
power of wealth of a few. Food, as well as the facilities for
production and distribution, should not be concentrated to the
benefit of a few.
The Cargill purchase of Continental Grain facilities will
increase Cargill's buying power and price control; it will decrease
the markets available to farmers and cause farmers to have to
transport grain farther, especially if some terminals are closed to
increase corporate profits; it will position Cargill to dominate
specialty or ``niche'' markets because of the acquisition of
Continental's storage facilities (markets that farmers are currently
using to try to find profitability in already heavily Cargill-
dominated markets).
Family farms are already struggling in the mid-west due to mega
hog, mega dairy and mega beef operations. This would put another
nail into the already partly closed coffin of family farms. Some of
the family farms in my part of Iowa have been in the same family for
100 to 150 years. These families keep my small town alive and
thriving.
The already rampant farm crisis is putting a squeeze on farm
families which in turn puts a squeeze on the small businesses in my
town, which in turn makes me have to drive further to purchase food,
clothing and essential items at a greater cost.
I realize that the farming community is only 2% of the political
vote but it is 100% of food production. One family farm feed
approximately 212 persons. If the current farm crisis continues
statistics show 6000 Iowa family farms will go belly up in the next
couple years. Should this happen 112,000 non farming people will be
affected. There are 49 other states in the union that I haven't even
included in these figures.
I've been told that mega corporations are going to be the future
of the US. It it my belief that mega corporations will only happen
if we give up the fight. America has always been known as the land
of opportunity and I see no reason for that to change. As Abraham
Lincoln once said, ``Let us have faith that right makes might; and
in that faith let us to the end dare to do our duty as we understand
it.'' or in the words of Margaret Mead, ``Never doubt that a small
group of thoughtful committed citizens can change the world; indeed,
it's the only thing that ever has.''
Thank you for listening to me.
Sincerely,
Shari Cummings.
October 11, 1999.
Mr. Roger W. Fones,
Chief, Transportation, Energy & Agriculture Section, Antitrust
Division of Justice, 325 Seventh Street, N.W., Ste 500, Washington,
DC 20530.
Via FAX: 202-307-2784
Dear Mr. Fones: As the Executive Vice President and Director of
a small rural community bank outside of Memphis, Tennessee, and as
the daughter of a farmer. I have personally witnessed the demise of
the ``family farmer.'' I have seen ``up close and personal'' the
struggles of these hard working people for all of my life. While
they seem to easily take into stride their battle with the
environmental elements, their struggles with rising production costs
and stagnant to declining harvest prices has driven countless
operations out of business. Ten years ago, our bank financed about
two dozen local operations, and today, we have only two operations
remaining viable. Given the very small size of our community, these
numbers are quite staggering to our local economy.
Without exception, their demise is due to the ever increasing
production costs and stagnant or declining harvest prices. One does
not habe to look very hard at the reason for this problem. The
biggest issue that has driven hundreds of thousands of US family
farmers is the rapid corporate concentration of the world's largest
grain and meat handlers. While the family farmers harvest prices
remain stagnant, or even declined, the prices in the grocery store
has SOARED!! Most of the general population is oblivious to this
issue, but, when they are finally aware of it, it will be too late!
I can no longer sit idly by and not speak on behalf of this
vital segment of our nations economy, but also on behalf of all
consumers. With the absence of the family farmer, the cost of food
will skyrocket.
It is for this reason, that I implore you to prevent the
Cargill-Continental Grain sale and stop the negative impact on grain
prices and farm income in my community and across this nation.
Please extend the comment deadline for another sixty days. You have
the power to ``do the right thing,'' or else we will be ``paying the
price'' for generations to come.
Sincerely.
Peggy B. Daugherty,
Executive Vice President, The Bank of Moscow, Moscow, Tennessee.
Mr. Roger Fones,
Chief of Energy & Ag. Section, Antitrust Division, U.S. Dept. of
Justice, 325 7th St., N.W., Suite 500, Washington, D.C. 20530.
Sir: Please do not approve of the purchasing of the grain
division of Continental by Cargill.
We raise cattle, wheat and barley in this area of Montana.
There is little competition in the world markets placing the
farm and ranches at the mercy of a few international companies.
There will be no chance to improve the depressed prices with so
little competition. Our rural life style will continue to
deteriorate as low prices are driving farmers and ranchers out of
business.
Sincerely,
Lymen and Darlene Denzer.
Dewell Motor Co.
P.O. Box 109, Fowler, Kansas 67844
10 October 1999.
Mr. Roger W. Fones,
Chief, Transportation, Energy and Agriculture Section, Anti-Trust
Division, U.S. Department of Justice, 325 Seventh Street, N.W.,
Suite 500, Washington, D.C. 20530.
FAX: 202/307-2784
Dear Mr. Fones: I am writing this to request that you conduct
further investigation of the Cargill-Continental Grain sale and that
you extend the comment deadline for another sixty days.
Are you aware of what the creation of a larger monopoly will do,
not only to grain farmers in this country, but also to all
consumers?
Monopolies always create higher prices for the consuming public.
They create even lower prices for those who must sell their
commodities to the monopolies. Grain prices are already far below
break-even.
Farmers are going broke in our state at an alarming rate. Across
the U.S., farm income is down by 70%. Depressed prices are ruining
not only farmers but all small-town businesses. I urge you to
conduct a more thorough investigation into the Cargill/Continental
Sale before submitting a final judgment on this.
Please give my request your serious consideration.
Sincerely,
Steve Dewell.
Dobbs Ranch
957 Manns Creek Road Weiser, Idaho 83672-5523
October 11, 1999.
Mr. Roger W. Fones
Chief of Transportation, Energy and Agriculture Section
Dear Mr. Fones: Please extend the public comment period for a
minimum of 60 days on the Continental/Cargill Grain merger. Please
conduct a more thorough investigation of this sale before submitting
a Final Judgment in this matter.
Please do this for your children, grandchildren and all future
generations of food consumers in this great country. The
monopolization of America's food supply is one of the most
frightening things that is happening in this country. As a family
[[Page 16018]]
farmer/rancher I beg you to continue your investigation.
Sincerely yours,
Grant and Mabel Dobbs.
Blvd Island, MN
September 25, 1999.
Mr. Roger W. Fones,
US Dept of Justice, 325 7th Street NW Suite 500, Washington, DC
20530.
Dear Mr. Fones: Considering the months of hearings regarding
Bill Gates's Micro Soft monopoly, and (over a decade ago) the
breakup of AT&T because they were too large, it seems unfathomable
that you would Consider giving Cargill total control of the world
with the Cargill-Continental merger. Cargill is already a monster
that everyone is afraid of. Have you seen any news on any media that
would dare till about Cargill's present control . . . let alone the
total control they would have after this merger? No . . .
Furthermore you wont because Cargill has the power to crush any
media that would tell the story. Cargill has cleverly contributed to
charities that don't want their funds cut off so NO ONE is
objecting.
Cargill already owns the docks in major foreign countries so
ships of grain other than Cargill's are not allowed to dock.
We live in rural Minnesota where the independent farmer has few
options. Please allow us the few we have left.
This affects much more than farm prices--this merger spells doom
for our entire free enterprise system.
Please have the courage and backbone to stop this Cargill-
Continental merger!
Sincerely,
C.K. Dresser.
Jordan Valley, OR 92910
September 11, 1999.
Dear Mr. Fones: We are cattle producers in the state of Oregon
and we are requesting that you conduct a more thorough investigation
of the Cargill/Continental Grain companies. This will exaserbate the
detremental effects of concentration in the grain and livestock
industries. Agriculture in America is in trouble, involving the
safety of our food supply the survival of rural communities and the
survival of agriculture producers. To have this much concentrated
purchasing power in the hands of one company, is unthinkable. It
shouldn't be difficult for our government to recognize the inherant
with such a merger.
Also, we would ask that you extend the comment period on the
merger.
Thank you.
Richard & Margene Eiguren.
Englehart Ranch
Meadow, SD 57644-7502
Judge Gladys Kessler
U.S. District Court for the District of Columbia, 333 Constitution
Ave. NW, Washington, D.C. 20001.
Re: United States of America v. Cargill, Inc. and Continental Grain
Company
Dear Judge Kessler: Presently before you, awaiting your
approval, is a ``Final Judgment'' filed by the U.S. Department of
Justice relative to the purchase of the grain merchandising division
of Continental Grain Co. by the Cargill Corp.
Legal precedent, according to the Department of Justice,
requires that ``[t]he balancing of competing social and political
interests affected by a proposed antitrust consent decree must be
left, in the first instance, to the discretion of the Attorney
General. The court's role in protecting the public interest is one
of insuring that the government has not breached its duty to the
public in consenting to the decree. ``The court is required to
determine not whether a particular decree is the one that will best
serve society, but whether the settlement is `within the reaches of
the public interest.' ''
In its July 8, 1999 ``Final Judgment'' I believe the Department
of Justice has ``breached its duty to the public in consenting to
the decree and that its ''Final Judgment'' is not ``within the
reaches of the public interest.''
Clearly, as the Department of Justice's own ``Complaint''
states, the Cargill purchase would ``substantially lessen
competition for purchases of corn, soybeans, and wheat in each of
the relevant geographic markets, enabling it unilaterally to depress
the prices paid to farmers. The proposed transaction will also make
it more likely that the few remaining grain trading companies that
purchase corn, soybeans, and wheat, in these markets will engage in
anticompetitive coordination to depress farm prices.''
Using the Department of Justice's own figures and criteria we
see in its ``Complaint'' that even before this announced purchase
the U.S. grain trade was already dominated, if not monopolized, by
Cargill and nothing in the Department of Justice's ``Final
Judgment'' addresses itself to that important issue.
Likewise, the Department of Justice must consider more than the
grain buying operations of Cargill. The acquisition of Continental's
seventy elevators will enhance the economic power of Cargill as a
general matter. Such a result concerns farmers because Cargill's
assets and economic power can be deployed across a range of
agricultural sectors.
For example, Cargill stands out as a top-four firm in beef
packing, cattle feedlots (where Continental is the largest), pork
packing, broiler production, turkey production, animal feed plants,
grain elevator capacity, flour milling, dry corn milling, wet corn
milling, soybean crushing, and ethanol production. Such a dominant
position across many agricultural markets will allow Cargill to
transfer resources between sectors according to the economic
conditions that are prevailing at a given time.
The ability to transfer assets will allow Cargill to maintain
its dominant status in all of these markets irrespective of its
competitive prowess. Unlike farmers, who are forced into bankruptcy
after a few bad seasons, Cargill will maintain its dominant status
over time regardless of economic performance over the short-term.
With Continental's assets, Cargill will become an even more powerful
and ``sophisticated'' firm, even more capable of strategic,
cooperative, and anti-competitive behavior.
I've seen our market opportunities slowly shrinking. We
currently have wheat in storage going into its third year in the
bin. Why, because the price is so low on today's market that it is
worth more to leave it in the bin as an asset on our bank's
financial statement. As the market for wheat becomes more
concentrated in the hands of fewer traders, the farmer will receive
less, the huge agricorporations will depress the market at will and
eventually force the farmers into bankruptcy. In South Dakota we
have little access to wheat buyers, we are dependent upon those in
our local area now currently dealing with farmer owned cooperatives
who ship it to the big terminals by truck. This merger will remove
what little competitiveness now remains in the wheat trade. Making
Cargill even bigger will give them even greater power in all
segments of agriculture. The competition is being narrowed to the
point that the family farm, which has been the very foundation of
this great nation, will go down in bankruptcy, despair, and
desolation. This corporatization of agriculture will destroy us, the
family rancher and farmer. We are human beings (generations of
families) that have worked, nurtured, conserved, and loved the land
while feeding this nation's population at the ``lowest cost per
capita income'' of any country in the world.
In the name of economic and social justice and the preservation
of the family farm system of agriculture in the United States, I
urge you to recommend that the Department of Justice withdraw its
``Final Judgment''. Please study in far greater detail this ill-
advised sale; carefully consider the grave anti-trust issues that it
presents and the dire consequences to both producers and consumers
of our food supply.
Sincerely,
Llewellyn Englehart.
Karen Englehart.
Buffalo Livestock Auction
Buffalo, Wyoming
To: Mr. Roger W. Fones
Chief of Transportation, Energy & Agriculture.
I am urging you to please conduct a much more thorough
investigation into the Cargill/Continental Grain sale before
submitting a Final Judgment on the matter. Contrary to what the
large multi national corporations tell you, putting the power into
the hands of a few does not increase competition in the marketplace,
but is having, and will only get worse, a devastating effect to the
independent Ag producers in this country.
I would also encourage you to please extend the public comment
period for another sixty days to allow this matter to be more fully
investigated and commented on.
Thank you,
Jay Godley.
Epworth, IA 52045
We believe: Every person has a right to the gifts of creations,
especially to the necessities of life. Respect for the dignity of
the human person also requires that each person has the right to
free enterprise, the right to undertake the work that is their
calling and the right to fair compensation for that work. This right
is
[[Page 16019]]
comprised when too much control is concentrated to increase the
power and wealth of a few. Food, as well as the facilities for
production and distribution, should not be concentrated to the
benefit of a few.
We live on a centery farm. And our oldest boy, 20 years old,
would love to go farming with us and someday take over the centery
farm. But because of the hag prices we had to liquidate our farrow
to finish hog operation. All we have left now is our grain. Letting
Cargill and Continental gain together would take away another buyer
and would not give the family farms a promising future. Help save
the Family Farms.
Dan & Judy Gotto.
Epworth, IA 52045
Dear Roger: I urge you to revisit the investigation of Cargill/
Continental sale and to extend the comment period for at least 60
days.
It is my feeling that the family farm will not survive if we
have all these large companies going together and not having any
competition.
We believe: Every person has a right to the gifts of creations,
especially to the necessities of life. Respect for the dignity of
the human person also requires that each person has the right to
free enterprise, the right to undertake the work that is their
calling and the right to fair compensation for that work. This right
is comprised when too much control is concentrated to increase the
power and wealth of a few. Food, as well as the facilities for
production and distribution, should not be concentrated to the
benefit of a few.
Yours truly;
Grace Gotto.
Bowling Green, NC 63334
To Roger W. Fones: For the Justice Department's stand in siding
with the multinational grain Cartel System, today's AG markets have
totally stolen from independent family farmers. I believe this to be
the most daring issue to ever be suffered by the Family Farmers and
Rural Economics, Consumer and Taxpayer Mergers are the stealing of
open markets, and this action now has the Seal of Approval from many
Federal Agencies to hold accountable.
These agencies have failed in their selected duties to perform
on behalf of the Public to the Common Welfare and Protection of all
United States Citizens.
George Grover.
Okolona, MS 38860
October 13, 1999.
Roger W. Fones,
Chief, Transportation Energy & Agriculture Section, Antitrust
Division, U.S. Department of Justice, 325 Seventh Street, NW, Suite
500, Washington, DC 20530.
Dear Mr. Fones: Please stop the Cargill-Continental Grain sale.
It would further impact grain prices and farm income in my community
and in the U.S. in general. Please extend the comment deadline for
another sixty days.
This sales would be extremely detrimental to the U.S. family
farmers. Our farm has operated for over 50 years, and is really
feeling the effects lately. It was very obvious that somebody, the
middleman, made money during the hog crisis. The farmer was paid
very little for the hogs, but the prices in the supermarkets never
went down.
Thank you for your time in considering this.
Sincerely,
Bob Gregory.
Okolona,, MS 38860
Cresco, IA 52136
October 6, 1999.
Roger W. Fones,
Chief, Transportation, Energy & Agriculture Section, Antitrust
Division, U.S. Department of Justice, 321 Seventh Street, Suite 500,
Washington, DC 20530.
Roger W. Fones: I am an Iowa resident concerned about the
impending takeover of the Continental Grain facilities by the
Cargill Company. With this merger, the ability of the Cargill
Company to price control and decrease the markets available to
farmers will not only effect the farmers but every person in the
United States who buys food. With Cargill Compnay having such a
large monopoly they will be able to overwhelmingly control the U.S.
grain trade. I urge you to rethink your investigation of the
Cargill/Continental sale.
The antitrust laws do not seem to include farming and farm
products; I think it is time for that to be reevaluated in the light
of this impending merger.
Thank you for your time and consideration.
Mary Hargrafen.
Cresco, IA 52136
October 6, 1999.
Judge Gladys Kessler,
U.S. District Court for the District of Columbia, 333 Constitution
Ave., NW, Washington, DC 20010.
Judge Gladys Kessler: I am an Iowa resident concerned about the
impending takeover of the Continental Grain facilities by the
Cargill Company. With this merger, the ability of the Cargill
Company to price control and decrease the markets available to
farmers will not only effect the farmers but every person in the
United States who buys food. With Cargill Compnay having such a
large monopoly they will be able to overwhelmingly control the U.S.
grain trade. I urge you to rethink your investigation of the
Cargill/Continental sale and extend the comment period for a longer
period so that more people can comment.
Thank you for your time and consideration.
Mary Hargrafen.
Callicrate Feedyard
P.O. Box 748, St. Francis, KS 67756
October 11, 1999.
Mr. Roger W. Fones
Chief, Transportation, Energy & Agriculture Section, Antitrust
Division, U.S. Department of Justice, 325 Seventh Street, N.W.,
Suite 500, Washington, DC 20503.
Dear Mr. Fones: Mergers and concentration are out of control.
Please stop the Cargill-Continental Merger as it will further
deteriorate grain prices and farm income in my community and in all
of the rural communities in the U.S.
Companies like Cargill, ConAgra, ADM, Farmland and IBP are
eliminating our safe food system and bankrupting us. Our small towns
and communities are being devastated by their low fixed commodity
prices.
Please enforce antitrust laws and help the people of this
nation.
Sincerely,
Vernon E. Heim,
Manager.
The Organization for Competitive Markets (OCM)
P.O. Box 540061, Omaha, NE 68154-0061
September 16, 1999.
Mr. Roger W. Fones
Chief, Transportation, Energy & Agriculture Section, Antitrust
Division, U.S. Department of Justice, 325 Seventh Street, N.W.,
Suite 500, Washington, DC 20503.
Re: United States of America v. Cargill, Inc. and Continental Grain
Company
Dear Mr. Fones: This letter concerns important considerations
that may have been over looked by the Department of Justice during
its review of the proposed merger of Cargill and Continental Grain.
On November 30, 1998, former Congressman Neal Smith of Iowa sent
a detailed letter (copy enclosed) to Attorney General Janet Reno
emphasizing the importance of looking at the futures trading
positions of the two companies in order to understand the impact of
the proposed merger on the price of grains and soybeans which are
determined in the futures markets (see John W. Helmuth, Grain
Pricing, Commodity Futures Trading Commission (CFTC), Economic
Bulletin Number 1, September 1977.)
While I understand individual company information cannot be made
public, the Department of Justice has given no public indication
that you have performed any of the essential analysis called for in
Mr. Smith's letter. The DOJ cannot claim to have adequately
investigated the impacts of the merger without analyzing the
fundamental elements called for by Mr. Smith.
The judge reviewing this matter cannot make an informed decision
without this fundamental information.
Sincerely,
John W. Helmuth, Ph.D,
Agricultural Economist, Member of the Board, OCM.
November 30, 1998.
Attorney General Janet Reno
Main Justice Building, Room 5111, 10th and Constitution Avenue,
Washington, DC 20530.
Re: Cargill Buyout of Continental Grain
Dear Attorney General Reno: Please be advised that, while I am
an agricultural producer like millions of others, I do not represent
any of the parties on either side
[[Page 16020]]
directly involved in the subject matter of this letter, but am
sending this letter because of my long-time interest in
international grain marketing during the more than 30 years in
Congress during which I authored the CFTC Act and other legislation
dealing with grain exports.
The recent announcement of Cargill's plan to buy the grain
operations of Continental is subject to federal government approval
pending antitrust review. I believe the outcome of that review will
have far reaching effects on US and international grain markets for
decades to come. The size of the two companies (measured by market
share) is of obvious importance to these considerations, especially
since there are so few international grain trading companies. But
there are other equally important considerations that should be
taken into account by any comprehensive, objective review. These are
discussed below.
The Importance of Information in World Grain Markets
Detailed, accurate, daily information on literally hundreds of
variables impacting the worldwide supply and demand of grain is
essential for any company engaged in grain marketing. There are two
sources of such information: public and private.
Public information is generally gathered and disseminated by
governments around the world. The accuracy of such information
varies across countries. US, Canadian, and European information
generally set the standard for timely accuracy. By definition,
public information is available to anyone and has as one of its
goals to provide ``a level playing field'' for anyone buying and
selling grain.
Private information is gathered by companies and/or individuals
and is usually not disseminated to others, or is disseminated
selectively to the advantage of the ``owner'' of the information.
Arguably some of the most valuable private information involves
details of major transactions engaged in by grain trading companies.
The larger the company and the larger the transaction, the more
valuable is the ``inside'' information.
For example, if the largest firm in the industry makes a large
sale of US wheat for export, public knowledge of such a sale is
likely to result in higher US (and World) wheat prices. It is very
much in the exporting firm's best interest to buy the US wheat (and
possibly large numbers of US wheat futures contracts) before
knowledge of the export sale becomes public, and before wheat prices
increase. Such transactions, based upon inside knowledge are not
prohibited in cash or futures markets for agricultural commodities,
as they are in the Securities markets.
Placed in perspective, large grain trading companies have access
to the same public information everyone else has, plus they have
knowledge of their own transactions, and information gathered by
their worldwide offices and subsidiaries, and information gathered
by their privately owned reconnaissance satellites. Thus, while the
playing field may be level with regard to public information, and US
farmers may voluntarily give away valuable supply information about
their crops for USDA crop surveys out of a sense of national duty,
private companies are making daily trading decisions based on
jealously guarded private (mostly demand) information.
Given this fact, combining the number one and number two
companies in the grain marketing industry not only aggregates their
physical facilities, it also aggregates their inside information
gathering capabilities and increases at least proportionately their
information advantage in the US and World grain markets.
Number of Buyers, Price Competition
Price competition exists, if and only if, a market is
characterized by a large number of buyers and sellers. ``Large
number'' is not defined by economists. However, most economists
would agree it is probably greater than two.
With respect to the market for farmers' grain at the local
level, the number of buyers appears to be as low as one or two. To
my knowledge, the federal government has not documented the number
of grain buyers since the mid-1970's. In any event, when a local
market currently has two buyers which happen to be Cargill and
Continental, there will be only one buyer if the companies merge.
However, it should be understood that the local impact on grain
prices will be mostly confined to what is called ``the basis'' which
is the nearby futures price adjusted to reflect local conditions.
The major price impact, in dollars and cents per bushel, is likely
to occur in the grain futures markets.
The Number of Entities Making Economic Decisions
Fundamental to consideration of the Cargill acquisition of
Continental Grain is to weigh the impact on economic decision
making. Over fifty years ago Noble Laureate Frederick von Hayek
elucidated the core strength and flexibility of market capitalism as
being the making of economic decisions by many relatively small
resource owners, who are close to the economic circumstances of time
and place. Such market structure results in the most efficient use
of resources and competitive markets. Hayek clearly pointed out that
the concentration of economic decisionmaking in a relatively small
number of individuals, regardless of whether those individuals are
government bureaucrats as in the former Soviet Union or corporate
executive in large companies, the result is the inefficient use of
resources and non-competitive markets.
If Cargill acquires Continental, economic decision making
clearly will become more concentrated and the efficiency of
capitalistic grain markets is very likely to decline.
A Level Playing Field: Grain Markets Compared to Securities Markets
Federal regulations affect grain markets based upon the
authority, inter alia, of the Commodity Exchange Act and the
Commodity Futures Trading Commission Act. Federal regulations affect
securities markets based upon the authority of the Securities
Exchange Act. While these laws contain equally clear and strong
language with respect to fraudulent activities, regulations
promulgated by enforcement agencies are markedly different in the
grain (futures) markets and the securities markets.
The table below highlights the difference in federal enforcement
of anti-fraudulent regulations between the grain futures markets and
the securities markets.
Comparison of Anti-Fraudulent Regulations
------------------------------------------------------------------------
Securities Grain futures
markets markets
------------------------------------------------------------------------
Insider trading prohibited......... yes.............. no.
Short selling prohibited unless yes.............. no.
last price change was an up-tick.
Short selling limited to actual yes.............. no.
stock certificates borrowed from
owner.
------------------------------------------------------------------------
International grain companies with overseas offices also have a
way to avoid the speculative limits applying to local grain
elevators and producers. Despite efforts, which have been strongly
opposed by those who benefit, this loop hole has not been closed. In
one instance, twice as much grain was covered in the futures market
as the customer took delivery of, and before the public was aware of
the sale, and the balance was then sold at a big profit after the
public overreacted to the exaggereated report.
In considering any merger in an area so involved with
international trade affecting the most local of U.S. businesses, and
such a history, great caution should be observed.
The American public and American farmers in particular, are
entitled to an answer to the question: ``Why are the playing fields
different?''
If the two largest U.S. securities firms were proposing a
merger, federal authorities would undoubtedly consider the impact on
securities markets. No less is necessary regarding the Cargill-
Continental merger and its potential impact on grain futures
markets.
Consider the Impact on Other Agricultural Markets
Finally, an astute observe reported that Continental is the
largest cattle feeder in the U.S. (an industry that has been rapidly
concentrating over the last two decades) and that public statements
by Continental officials indicate a company objective of expanding
its cattle operations. Such an objective could be realized with the
proceeds of the sale of Continental's grain operations.
While considering the grain market implications, federal
officials should also consider the possible impacts on other
agricultural markets such as livestock. Such impacts could be
substantial and far reaching.
Sincerely,
Neal Smith,
Former Member of Congress from Iowa.
Minnetonka, MN
October 8, 1999.
Roger W. Fones
Chief, Transportation, Energy & Agriculture
[[Page 16021]]
Section, Antitrust Division, United States Department of Justice,
325 Seventh Street, N.W., Suite 500, Washington, DC 20530.
Dear Mr. Fones: I have been following with great interest the
Cargill-Continental merger. I work in an office with many policy
analysts and they understand in a more technical way what is going
on. I do the administrative work and have never really been
interested in technical jargon except to file it. But I am very
interested in the lives of people. No longer should people's lives
be caught up in the technical jargon but it is time to seriously
take a look at the holocaust happening within the rural communities
of our nation. It is a slow demise of the family farmer and if you
ask the farmer they are slowly losing hope for a culture that made
this country great.
I also worked at Cargill many years ago, I am aware of the hug
offices, the money that they have accrued on a personal level is
incredible and that money was made off the very product that our
family farms produced for you and I to eat. It is a product that we
use everyday of our lives in some way or other and the farmers
worked hard everyday of their lives to bring it to us. They were not
looking for ways to make more money to satisfy their stockholders,
they did not have an insatiable need for more things. What they did
was take their land, put the seed into the ground tend to the crops,
harvest it and then turned around and sold it to people like Cargill
and Continental. I was always amazed when I worked at Cargill the
amounts of product that were shipped from ordinary farmers and the
amounts of money they made on trading and selling it. I didn't
understand at that time nor was I very interested but today as I
watch and listen to farmers story my heart is breaking for those
people you are not listening to.
I don't want to be a part of our country's holocaust when it
comes to our farmers. I do know that by letter in the Cargill
Continental merger happen you are saying to the farmers you are not
very important but money is and the bottom line is money not people.
How can I say that? Because it is the message I'm hearing loud and
clear from you. Whitney McMillan, Cargill McMillan, and the other
McMillan's have more money that I or most of our farmers will ever
dream of. Who do you think they made that money from? How much is
enough? And do we have to lose a whole culture so they will make
enough to satisfy their insatiable need for more money? Look at who
they say they are competing with how many companies is it really?
Some of the competition comes from within. My husband is in the
wallcoverings business competition is there all the time for him but
he doesn't go out and buy all the business out so he can make more
money. We are satisfied with the money we make, we work hard for it
but it allow us to live with integrity.
You can listen to all the technical jargon, you can look at all
the numbers but in the end we are talking about people's lives here.
Our farmers need us to stand with them. They need the very
government that they have helped support through hard work and toil
to stop and listen very closely to do the right thing that will make
the most money. Hitler was working on economic health when he came
into power and look what happened. Please stop this merger, let the
farmers be heard throughout the land, help them to find solutions
don't put the nails in the coffin of rural America. These people are
your neighbors, your friends, your community, remember it is people
you are dealing with here not just numbers.
Thank you.
Sincerely,
Kathy Hiltsley.
Tulsa, OK 74133
10 October 1999.
Mr. Roger W. Fones,
Chief, Transportation, Energy and Agriculture Section, Anti-Trust
Division, U.S. Department of Justice, 325 7th Street, NW, Suite 500,
Washington, DC 20530.
FAX: 202/307-2784
Dear Mr. Fones: I am writing this to request that you conduct
further investigation of the Cargill-Continental Grain sale and that
you extend the comment deadline for another sixty days.
Are you aware of what the creation of a larger monopoly will do,
not only to grain farmers in this country, but also to all
consumers?
Monopolies always create higher prices for the consuming public.
They create even lower prices for those who must sell their
commodities to the monopolies. Grain prices are already below break-
even.
Farmers are going broke in our state at an alarming rate. Across
the U.S., farm income is down by 70%. Depressed prices are ruining
not only farmers but all small-town businesses. I urge you to
conduct a more thorough investigation into the Cargill/Continental
Sale before submitting a final judgment on this.
Please give my request your serious consideration.
Sincerely,
Barbara Hook.
Madison, MN 56256
October 7, 1999.
Mr. Roger W. Fones
U.S. Dept. of Justice, 325 Seventh St. NW, Suite 500, Washington, DC
20530.
Dear Mr. Fones: I am writing to you because of my concern abut
the proposed merger between two grain handling giants. I am a pastor
of a Catholic parish of about 600 people in western Minnesota. Our
economy in Madison is very much tied to agriculture. When farm
commodities are depressed, it does not simply mean hard times.
Businesses fold and do not reopen. More and more of our population
flees to other towns and areas. Of course there are other
contributing factors, but there is no denying that an unhealthy
agricultural sector spells rapid decline for our town and region.
Ten years ago, it was well known that 90% of the world's grain
exports were done through just five corporations. Cargill and
Contentntal are two of the five. There is already too much
concentration in this area of agriculture. This merger would mean
even less competition in the marketplace. It would be great for the
few corporations left, but it would certainly be detrimental to
small and medium sized farms that are less able to hang on to their
grain until markets improve. Even if one believes that bigger farms
are always better, there is considerable danger in allowing such
large corporations to merge when there is already very limited
competition. Add to this the fact that we are dealing with food, and
the danger of monopolizing the market becomes even more grave.
For all of these reasons, I strongly urge you and your
department to disallow this merger between Cargill and Continental.
Thank you for your consideration.
Sincerely,
Rev. Jeff Horejsi.
Roger W. Fones
Chief, Transportation, Energy and Agriculture Section, Antitrust
Division, U.S. Dept. of Justice, 325 7th Street NW, #500,
Washington, DC 20530.
Please stop the Cargill-Continental Grain Sale because it will
hurt the small farmers in my area and the U.S. It will also
eventually raise food prices. Please extend the comment period for
60 days.
Reena Kazmann.
October 07, 1999.
Roger W. Fones,
Chief, of Transportation, Energy & Agriculture Section, Antitrust,
Division, 325 Seventh St. NW, Suite 500, Washington, DC 20530.
Dear Sir: I am writing to concerning the Cargill-Continental
merger. I wanted to let you know that the market for our grain on
the farm is already highly concentrated. The Cargill-Continental
Merger would spell doom for the independent farms we have left on
the prairie. Small farmers are struggling the way it is. Please
consider this before you vote.
Sincerely,
Robin Kleven.
Corporate Agribusiness Research Project
P.O. Box 2201, Everett, Washington 98203-0201
October 8, 1999.
Roger W. Fones
Chief, Transportation, Energy & Agriculture Section, Antitrust
Division, U.S. Department of Justice, 325 Seventh Street N.W., Suite
500, Washington, DC 20530.
Dear Mr. Fones: In accordance with the ``Antitrust Procedures
and Penalties Act'' (APPA) of the U.S. Code I am enclosing a recent
issue of The Agribusiness Examiner,'' a weekly e-mail newsletter
which I edit and publish devoted to monitoring corporate
agribusiness from a public interest perspective.
I am sending this copy to you as my way of making a ``public
comment'' regarding the Justice Department's ``Final Judgment''
regarding the sale of Continental Grain's grain merchandising
division to Cargill. I will look forward to the Department's
comments in the Federal Register regarding the various issues raised
in this issue of my newsletter.
[[Page 16022]]
I should also note that this newsletter is distributed on a
weekly basis to nearly 850 people through the U.S. and the rest of
the world, including many family farmers, farm organizations and
public interest food advocates.
Thank you for your time and consideration of the enclosed.
Sincerely,
A.V. Krebs,
Director.
Subject: The Agribusiness Examiner #50
Date: Fri. 08 Oct 1999 01:15:46-0700
From: ``Albert V. Krebs'' ([email protected])
To: [email protected]
SPECIAL EDITION
The Agribusiness Examiner
Monitoring Corporate Agribusiness From a Public Interest Perspective
Issue #50 October 8, 1999
A.V. Krebs, Editor/Publisher.
Urgent Appeal: Effort to Block Cargill/Continental Sale--Public
Comment Deadline at Hand
October 12, 1999 remains the deadline for public comment on the
U.S. Department of Justice's Anti-Trust Division's ``Final
Judgment'' relative to the sale by Continental Grain of its grain
merchandising division to Cargill, the world's largest grain trader.
After characterizing what it publicly called an almost year long
``investigation'' of the sale the Department of Justice (DofJ) in
fact filed a formal ``Complaint'' with the U.S. District Court for
the District of Columbia. However, the DofJ totally neutralized its
``Complaint'' by filing it on the same day (July 8, 1999) and at the
same time that it furtively filed a consented ``Final Judgment,''
agreed to by all parties. While the DofJ's ``Final Judgment'' now
awaits the approval of presiding U.S. District Court Judge Gladys
Kessler, the public comment period regarding the Department's
decision remains open until October 12.
In their ``Complaint'' the DofJ formally charged that Cargill's
purchase would ``substantially lessen competition for purchases of
corn, soybeans, and wheat in each of the relevant geographic
markets, enabling it unilaterally to depress the prices paid to
farmers. The proposed transaction will also make it more likely that
the few remaining grain trading companies that purchase corn,
soybeans, and wheat in these markets will engage in anticompetitive
coordination to depress farm prices.''
Commentary
Liberals and progressives and those individuals and
organizations that seemingly care so deeply about the plight of the
nation's family farmers may pride themselves on being on the cutting
edge of today's economic and social issues such as genetic
engineering and the upcoming World Trade Organization meeting in
Seattle, Washington.
At the moment, however, agrarian populists and thousands of
family farmers throughout the U.S. see such issues, as important as
they may be for the future of agriculture, merely as additional logs
on that fire that is intended to smoke them out of the business of
farming.
Meanwhile, the crucial issue that is today deeply distressing
family farmers to the point of near hopelessness is the rapid
corporate concentration within agriculture as exemplified by the
recent announced purchases by Cargill of Continental Grain's
merchandising business and Smithfield Foods buying up of Murphy
Family Farms and Tyson Food's Pork Group.
While Dan ``Of the Grain Trade, By the Grain Trade and For the
Grain Trade'' Glickman may be ``very pleased that the Department of
Justice has taken * * * steps to protect American farmers from the
potential adverse effects'' of the Cargill/Continental sale by its
recent ``Final Judgment'' and divestiture order, farmers from
Stockton, California to Hampton Roads, Virginia see the
consolidation of two of the world's largest grain traders as nothing
but more economic and social adversity for them and their families.
Thus, in an attempt to force the Department of Justice anti-
trust division to conduct a more thorough investigation of the
Cargill/Continental sale, efforts are currently underway to
forestall the Department from submitting its ``Final Judgment'' for
the approval to presiding U.S. District Court Judge Gladys Kessler.
This ``Special Issue'' of The Agribusiness Examiner is part of that
effort.
For once, not simply acting as a mere mouthpiece for corporate
agribusiness, but actually serving as ``a voice for American
Agriculture,'' American Farm Bureau President Dean Kleckner, has
rightfully observed that ``the time has come for the Justice
Department to have someone with agricultural expertise to oversee
such concentration issues. Agriculture is a unique industry. It
requires someone with the experience and background to ensure anti-
trust laws are not being violated and that opportunities for all
farmers are protected''
The hour is late, the deadline for public comment on the
Cargill/Continental ``Final Judgment'' is Tuesday, October 12.
No matter what one's degree of involvement in various and
related public interest issues might be or what political or
ideological persuasion one might be if they care about who grows
their food, who produces and manufacturers it, its availability, its
safety, its cost and the future of family farming agriculture the
effort to block this sale is one that deserves their immediate and
highest priority.
The ``Antitrust Procedures and Penalties Act'' (APPA) of the
U.S. Code provides that any person may submit to the United States
written comments regarding the proposed ``Final Judgment.'' Any
person who wishes to comment should do so by October 12. The
comments and the response of the United States will be filed with
the Court and published in the Federal Register.
Written comments should be submitted to: Roger W. Fones, Chief,
Transportation, Energy & Agriculture Section, Antitrust Division,
United States Department of Justice, 325 Seventh Street, NW, Suite
500, Washington, DC 20530.
Legal precedent, according to the DofJ, requires that ``[t]he
balancing of competing social and political interests affected by a
proposed antitrust consent decree must be left, in the first
instance, to the discretion of the Attorney General. The court's
role in protecting the public interest is one of insuring that the
government has not breached its duty to the public in consenting to
the decree.
``The court is required to determine not whether a particular
decree is the one that will best serve society, but whether the
settlement is `within the reaches of the public interest.' [A]
proposed decree must be approved even if it falls short of the
remedy the court the would impose on its own, as long as it falls
within the range of acceptability or is `within the reaches of the
public interest.'.''
Letters specifically demonstrating and/or documenting the impact
of Cargill's monopoly of the grain trade and how the Continental
purchase will affect that situation on one's own family farm
operation or upon the rural community in which one lives will be
most valuable. Copies of such letters should also be sent to the
letter writer's state attorney general's office urging that office
at the same time to utilize their good offices in not only calling
upon the U.S. Department of Justice to revisit its ``investigation''
of the Cargill/Continental sale, but requesting that the deadline
for comment be extended another sixty days to December 12.
Whether or not Judge Kessler concludes that the consent decree
is ``within the reaches of public interest'' the corporate
audaciousness of Cargill in attempting to summarily own this
nation's grain trade with its purchase of Continental's grain assets
is breathtaking. One need only look at the facts brought to light in
the DofJ's own ``Complaint'' to see such covertness.
OCM'S Fred Stokes: ``A Dark Day for Agriculture''
``If the Cargill merger goes through, it is a dark day for
agriculture,'' is the way Fred Stokes, a Mississippi cattlemen and
recently elected President of the Organization for Competitive
Markets (OCM) describes the Cargill/Continental sale. ``The loss of
Continental Grain as a competitor while creating a more powerful
Cargill will drive farmers' share of the retail dollar even lower.
Continental Grain will then plow the new money into further
consolidating the livestock industry.''
Alone among farm organizations who have denounced the Department
of Justice's ``Final Judgment'' decree the Organization for
Competitive Markets is a non-profit, non-partisan organization of
farmers, ranchers, academics and attorneys which provides
information to the public about the importance of true competition
in the agricultural marketplace.
Keith Mudd, a Missouri farmer and OCM board member, adds,
``Farmers used to have several choices of elevators to market their
grain. Mergers have reduced the number of buyers to two in many
geographic areas. If the Cargill merger goes through, many farmers
will have only one buyer. I fail to
[[Page 16023]]
understand how the Department of Justice can view this merger as
promoting competition.''
``The immediate effects of the merger will be less market
choices for farmers, more control over exports and a heightened
ability by Cargill to unilaterally affect the futures markets,''
stated Dr. John Helmuth, agricultural economist and OCM board
member. ``The subsequent effects will be pressure for other grain
merchandisers and their customers to merge in order to equal the
market power of Cargill.''
OCM's Jon Lauck and other Midwest farm activists have been
meeting in recent weeks with both Republican and Democrat state
attorney generals, in efforts to line up support for a lawsuit to
block the sale.
``Not too long ago,'' Lauck recently told The Corporate Crime
Reporter,'' antitrust officials would have looked at something like
this and decided--this is obviously too large, these are two
dominant players. We are never going to allow something like this to
go through.
``Given the DOJ's concerns about the anticompetitive
consequences of the merger,'' Lauck stresses, ``it is odd that no
effort is made to justify its approval of the merger. The fears of
antitcompetitive behavior set forth in the `Complaint' are not
counter-balanced with a recognition of post-merger efficiencies, for
example. With no apparent benefit to the merger and significant
concerns expressed by many parties about its approval, the natural
reaction would be to halt the merger. This response is further
justified by the obvious difficulties that accompany the reversal of
market concentration once it has become an economic fact.''
One argument that defenders of the recent wave of corporate
mergers within agribusiness have sought to make is that such
mergers, specifically within the grain trade, are necessary so as
enable U.S. companies to compete with foreign ``parastatal
monopolies.''
Recently, the corporate agribusiness dominated International
Policy Council on Agriculture, Food and Trade (IPC) issued a call
for the elimination of parastatal monopolies in the next round of
world trade talks. Although the Australian and Canadian Wheat Boards
were not mentioned by name the IPC report bemoaned the fact that the
monopoly power of such agricultural state-trading enterprises
(STE's) ``have the ability to distort domestic markets and
international trade flows,'' even if they are not directly supported
by government payments.
``As long as they enjoy exclusive powers or advantages not
shared by their competitors, monopolies will not behave like ``at
risk'' enterprises,'' the IPC said. ``To end the resulting market
distortions, the monopolies themselves should be eliminated,
preferably by the end of the implementation period of the next
round.''
But, as Dr. Helmuth has noted, ``when fewer and fewer
individuals make more and more of the economic decisions, whether
those individuals are in government or big business, the results is
anti-competitive, inefficient and harmful to society as a whole;
when more and more individuals make more and more of the economic
decisions, the result is more competitive and more efficient and
beneficial to society as a whole.
``There is even greater irony in that the principal advocates of
centralized economic planning--the former Soviet Union and Eastern
European countries--are abandoning it as an economic failure, at the
very time American industries are becoming more and more centrally
planned by those few firms with greater and greater economic power
resulting from ever increasing industry concentration,'' he adds.
Cargill: To Become More Powerful and Sophisticated Firm ``Capable
of Strategic, Cooperative and Anti-Competitive Behavior''
In a recent letter to Roger W. Fones, Chief of the
Transportation, Energy & Agriculture Section of the Antitrust
Division, United States Department of Justice, Organization for
Competitive Markets Jon Lauck wrote that Cargill's acquisition of
Continental Grain Company ``would unify the second and third largest
grain traders in North America, which export 40% of American
agricultural commodities.''
Specifically, Lauck, the author of a law review article entitled
``Toward an Agrarian Antitrust,'' 75 North Dakota Law Review
(August/September 1999, objected ``to the analysis used by the
Department of Justice when reviewing the acquisition. DofJ's
analysis: (1) fails to consider the wider concentration in
agricultural markets beyond grain buying; (2) fails to consider the
continuing potential for anticompetitive behavior in the post-merger
market; (3) fails to show that the divested remnants of Continental
will be a competitive force absent a large network of elevators
which buy grain; (4) fails to consider the nature of the grain
selling market; (5) fails to consider the economic disorganization
of farmers which can be exploited by powerful buyers; (6) fails to
consider information disparities in agricultural markets; (7) fails
to explain the benefits of the merger; (8) and fails to consider a
range of statutes that Congress intended courts to consider when
making decisions about agricultural markets.
``In recent years,'' he continues, ``agricultural processing
markets have become highly concentrated. From a top-five
concentration ratio of 24% in the early 1980s, for example, the
beef-packing sector's five-firm concentration ratio has grown to 85
percent. Similar statistics apply to several other sectors of the
agricultural processing economy.
``The DofJ's analysis did not consider the wider context of
consolidation in the agricultural system and instead focused on the
grain buying activities of Cargill and Continental. Growing
concentration in agricultural markets should have been considered by
the DofJ given the continuing consolidation of agribusiness firms,''
he adds.
``It was the growing power of agribusiness firms that triggered
concerns among farmers and inspired the passage of the Sherman Act.
And it was continuing concentration in agricultural markets,
particularly through merger, that prompted passage of additional
antitrust statutes such as the Clayton Act. The importance of the
antitrust laws to farmers is explained by the difficulties inherent
in farmers bargaining with large and powerful agribusiness buyers.
Legislators and courts have fully recognized these concerns in
statutes and in cases, respectively, but the DOJ's merger analysis
failed to weigh these considerations.''
Lauck's letter goes on to warn the Department of Justice that it
``must consider more that the grain buying operations of Cargill.
The acquisition of Continental's seventy elevators will enhance the
economic power of Cargill as a general matter. Such a result
concerns farmers because Cargill's assets and economic power can be
deployed across a range of agricultural sectors. For example,
Cargill stands out as a top-four firm in beef packing, cattle
feedlots (where Continental is the largest), pork packing, broiler
production, turkey production, animal feed plants, grain elevator
capacity, flour milling, dry corn milling, wet corn milling, soybean
crushing, and ethanol production.
``Such a dominant position across many agricultural markets will
allow Cargill to transfer resources between sectors according to the
economic conditions that are prevailing at a given time. The ability
to transfer assets will allow Cargill to maintain its dominant
status in all of these markets irrespective of its competitive
prowess. Unlike farmers, who are forced into bankruptcy after a few
bad seasons, Cargill will maintain its dominant status over time
regardless of economic performance over the short-term. With
Continental's assets, Cargill will become an even more powerful and
`sophisticated' firm, even more capable of strategic, cooperative,
and anti-competitive behavior.
``The DofJ argues in its complaint that within particular draw
areas very few firms buy grain. It argues that if Continental's
operations where absorbed `Cargill would be in a position
unilaterally, or in coordinated interaction with the few remaining
competitors, to depress prices paid to producers and other suppliers
because transportation costs would preclude them from selling to
purchasers outside the captive draw areas in sufficient quantities
to prevent the price decrease.' Divestitures in a few of these
markets as proposed by the DofJ does not address this problem. Even
with the divestitures, grain buying would remain heavily
concentrated and susceptive to collusive and cooperative activity,''
Lauck's letter warns.
``Furthermore, it is unclear how Continental will remain an
effective competitor with Cargill after selling almost all of its
elevator capacity. The few facilities that will not be acquired by
Cargill hardly constitute a legitimate competitive threat. As the
DofJ emphasized in its complaint, grain buying involves a large-
scale network of facilities. The few remaining Continental
facilities, stripped of their internal networks which provide them
with competitive flexibility and information about grain flows, will
be powerless in comparison with Cargill, with its $51 billion in
annual revenues and 81,000 employees in 60 different countries.
``Continental's decision to sell off its grain buying operation
may also indicate that it no longer considers grain buying a
priority. In
[[Page 16024]]
short, there is no assurance that the remaining facilities will even
compete in the markets that concerned the DofJ. Given the need for a
network of elevators to compete in the grain buying business, it is
also highly unlikely that any new firms will enter the market to
challenge Cargill. The DofJ openly concedes in its complaint that it
is `unlikely that Cargill's exercise of market power will be
prevented by new entry, by farmers and other suppliers transporting
their products to more distant markets, or by any other
countervailing competitive force'.''
Lauck concludes his carefully documented 13-page letter to Fones
by emphasizing that ``given the importance of this merger and the
constraints on state action if the consent decree is approved, I
respectfully request that the comment period for this merger be
extended another sixty days to December 12th. Several parties have
expressed interest in commenting on the merger and will not be able
to do so by October 12th. In the interest of a fair hearing on this
critical matter, I urge DofJ to support a lengthening of the comment
period, as allowed under the Tunney Act. If the DofJ and the court
do not see fit to extend the comment period, I urge the court to
reject the proposed consent decree for failing to consider the
factors set forth herein.''
Iowa State Study: Why Did Continental Sell? Why Did Cargill Become
a Buyer?
Prior to the Department of Justice's ``Final Judgment'' Iowa
State Department of Economics professors Marvin Hayenga and Robert
Wisner addressed the questions of why Continental sought to sell its
grain merchandising division and why Cargill became such a willing
buyer.
The complete text of the Hayenga-Wisner paper can be viewed at:
http://www.econ.iastate.edu/outreach/agriculture/marketing/hayenga.
Professors Hayenga and Wisner note in their January, 1999 paper,
``Cargill's Acquisition of Continental Grain's Grain Merchandising
Business,'' that industry speculation was that Continental excelled
in very large volume bulk export trading, and had not diversified
enough into the value added processing to compete effectively in a
market environment where export volumes have been sharply reduced in
recent years.
``To compete effectively by restructuring their operations at
this late date,'' they add, ``would require too much capital and too
much risk. Continental's storage capacity declined significantly
over the last ten years, while Cargill, ADM and Peavey [ConAgra]
expanded. Their capital could be more productively employed in their
other agricultural and financial businesses.''
In seeking answers as to why Cargill expected the Continental
purchase acquisition to contribute to its ability to compete
effectively in a rapidly changing market environment the Iowa State
study summarized that the acquisition will contribute to ``more
effective knowledge acquisition and transfer from an expanded global
presence and a broader base of grain origination facilities in the
countries where grain is produced.
``The grain merchandising system is a high fixed cost system.
Cargill hopes to compete more effectively and keep a large share of
the Continental volume, capturing economies of scale by running more
volume through without equivalent changes in the costs of managing
their system. Further, Cargill expects that it will be more able to
take costs out of the system, not just through fewer people, but by
dedicating some facilities to specialized products and getting more
efficiencies in operations (shorter barge turnaround times, longer
runs in elevator handling, etc.).
Hayenga and Wisner point out that Cargill's new joint venture
with Monsanto to arrange production and to market value-added
specialty grains and oilseeds for the feed and processing industries
``will require greater capacity to handle segregated grain flows
throughout the domestic and export marketing system. Continental has
had a significant presence in the identity preserved grain market,
with half its international feed customers converted to high oil
corn.
``Cargill expects to better serve the producer by enhancing
productivity and passing some of those cost savings on in the form
of better prices to their suppliers and customers. They also plan
offer many more price risk management alternatives and advice,
financing, etc., to farmers,'' they add.
The study goes no to add that ``the basic concern expressed by
some farmers, politicians, and industry participants is that Cargill
bought Continental to remove a significant competitor, particularly
in the export market, and expand merchandising margins. The ability
to `control' more facilities and larger volumes of grain and
soybeans might adversely influence competition and the transparency
and effectiveness of the price discovery process in the grain
marketing system.''
The two professors then ask a series of key questions: Will the
merger result other merchandisers and processors having to conform
to Cargill standards in grain merchandising? Will the merger result
in exclusivity in marketing arrangements with Cargill such that
firms that do business with Cargill are excluded from or penalized
for doing business with other merchandisers? Will Cargill bundle
products or terms into their merchandising arrangements, like
requiring its buyers and suppliers to use Cargill transportation or
Cargill risk management tools? Will Cargill control so much grain at
various stages of the system that fewer negotiated prices and price
reports are available to keep the price discovery system
transparent?
It is these questions that many farm critics feel that the
Department of Justice's ``Final Judgment'' fails to answer.
``Captive Draw Areas'' and the HHI
Although Cargill and Continental have from the outset sought to
minimize the monopoly situation the purchase would have created
within the grain trade the facts are that farmers typically sell
their crops to rural grain elevator operators, many of which are
owned by cooperatives and small companies. These elevators then
either export the grain or resell it to flour mills and other food
processors with much of it being sold to grain trading corporations
such as Cargill, Continental and Archer Daniels Midland (ADM) and it
is these companies that own and operate the larger grain elevators,
rail links, terminals, barges and ships needed to move grain around
the country and the world.
The role of the grain trade in a nation that is constantly
touted as being ``the world's breadbastket'' cannot be over
emphasized as the respected University of Missouri rural sociologist
William Heffernan points out, 75% of the world's food (based on dry
weight) is grain based.
In discussing the nation's grain network the DofJ in its
``Complaint'' notes that in each instance, the geographic area from
which a country elevator, river elevator, rail terminal, or port
elevator receives grain is limited by transportation costs and is
known as the ``draw area'' for that facility. Draw areas they
conclude, expand and contract only slightly in response to normal
economic fluctuations in crop supply, crop demand, and
transportation costs.
For many country elevators, river elevators, railroad terminals,
and port elevators, draw are Cargill and Continental often operate
facilities that have overlapping draw areas, and they therefore
compete with one another for the purchase of wheat, corn, and
soybeans from the same producers or other suppliers. In some areas
within these overlapping draw areas, Cargill and Continental have
been two of a small number of competing grain trading companies.
``Sometimes they are the best,'' DofJ observes, ``and
occasionally the only realistic alternative purchasers of grain from
producers and other suppliers. By acquiring Continental's facilities
that purchase grain from these `captive draw areas,' Cargill would
be in a position unilaterally, or in coordinated interaction with
the few remaining competitors, to depress prices paid to producers
and other suppliers because transportation costs would preclude them
from selling to purchasers outside the captive draw areas in
sufficient quantities to prevent the price decrease.''
By way of evaluating concentration is these ``captive draw
areas'' the Department of Justice uses a criteria based on the
Herfindahl-Hirschman Index (HHI), a commonly accepted measure of
market concentration. The HHI is calculated by squaring the market
share of each firm competing in the market and then summing the
resulting numbers.
For example, for a market consisting of four firms with shares
of 30, 30, 20, and 20 percent, the HHI is 2,600 (302 + 302 + 202 +
202 = 2,600). The HHI takes into account the relative size and
distribution of the firms in a market. It approaches zero when a
market is occupied by a large number of firms of relatively equal
size and reaches its maximum of 10,000 when a market is controlled
by a single firm. The HHI increases both as the number of firms in
the market decreases and as the disparity is size between those
firms increases.
Markets in which the HHI is between 1000 and 1800 are considered
to be moderately concentrated, and markets in which the HHI is in
excess of 1800 are considered to be highly concentrated.
Transactions that
[[Page 16025]]
increase the HHI by more than 100 points in highly concentrated
markets presumptively raise significant antitrust concerns under the
Department of Justice and Federal Trade Commission 1992 Horizontal
Merger Guidelines.
In their ``Complaint'' the DofJ vividly shows that even prior to
the purchase agreement Cargill and Continental were two of a very
small number of grain trading companies competing to purchase grain
in four key ``captive draw area'' including: the Pacific Northwest
port range, which include western Minnesota, eastern North Dakota,
and northeastern South Dakota; the Central California port range,
which include the areas around Stockton, California, to West
Sacramento, California; elevators in the Texas Gulf port range,
which include portions of Texas and Louisiana; elevators along the
Illinois river stretching from Morris, Illinois, to Chicago,
Illinois, and on the Mississippi river in the vicinities of Dubuque,
Iowa, and New Madrid/Caruthersville, Missouri, and the captive draw
areas for rail terminals in the vicinities of Salina, Kansas, and
Troy, Ohio.
Each of those ``captive draw areas'' is already highly
concentrated based on HHI figures. The potential combination of
Cargill and Continental would have dramatically and substantially
increased concentration in already highly concentrated grain
purchasing markets.
For example, in the Pacific Northwest port range markets for
corn and soybean purchases are highly concentrated, with the top
four port elevator operators accounting for 100% of all corn and
soybean purchases in these markets as Cargill alone accounts for
about 44% of all soybean purchases and 23% of all corn purchases.
Continental, in a joint venture with Cenex Harvest States, accounts
for about 50% of all soybean purchases and 30% of all corn purchases
in the same port range.
After the proposed acquisition, Cargill would have accounted for
94% of Pacific Northwest soybean purchases and about 53% of Pacific
Northwest corn purchases. The approximate post-merger HHIs for
purchases of soybeans and corn in the Pacific Northwest port range
would be about 8868 and 5004, with increases in the HHIs of 4400 and
1364 points, respectively, resulting from this transaction.
Likewise, the Central California port range market for wheat is
highly concentrated, with Cargill and Continental accounting for
virtually all wheat purchases in this market. The approximate post-
merger HHI for purchases of wheat in the Central California port
range would be about 10,000, with an increase in the HHI of 7,888
points resulting from this transaction.
In the Texas Gulf port range markets for soybeans and wheat are
also highly concentrated, with the top three purchasers accounting
for 100% of all purchases of soybeans and the top four purchasers
accounting for 79% of all purchases of wheat in these markets.
Cargill accounts for about 16% of all soybean purchases and 25% of
all wheat purchases in the Texas Gulf port range. Continental
accounts for about 33% of all soybean purchases and 9% of all wheat
purchases in the same port range.
After the proposed acquisition, Cargill would have accounted for
about 49% of Texas Gulf soybean purchases and about 34% of Texas
Gulf wheat purchases. The approximate post-merger HHIs for purchases
of soybeans and wheat in the Texas Gulf port range would be 5105 and
2611, with increases in the HHIs of 1056 and 451 points,
respectively, resulting from this transaction.
Other geographic markets in which Cargill and Continental
compete for purchase of corn, soybeans, and wheat are also highly
concentrated. These markets include river elevator markets on the
Illinois River and the Mississippi River, authorized delivery points
on the Illinois River for corn and soybean futures contracts, and
rail terminal markets in Kansas and Ohio. The proposed transaction
would have increased the HHIs in each of these markets to over
3,000.
Divestiture: Trade Collusion by Any Other Name?
In its ``Final Judgment'' the Department of Justice not only
directs Cargill to divest all of its property rights in the port of
Seattle elevator, East Dubuque and Morris river elevator, but also
mandates that Continental is ordered and directed to divest all of
its property rights in the Lockport and Caruthersville river
elevators, the Salina rail and Troy rail elevators, the Beaumont,
Stockton and Chicago port elevator to an Acquirer acceptable to the
United States in its sole discretion.
When one totals the elevator capacities of those facilities that
Cargill must relinquish and those Continental elevators which it is
prohibited from operating some rather curious figures emerge.
The total domestic storage capacity for Cargill and Continental
in January of 1999 was 463 million bushels for Cargill and 169
million bushels for Continental. This compares to 1981 figures of
148 million bushels for Cargill and 110 million bushels for
Continental. The total capacity of the Seattle port and Morris River
elevators and one third of the Havana river elevator (see below) is
some five million bushels while the storage capacity of the
Lockport, Caruthersville, Salina and Troy rail elevators and the
Beaumont and Stockton port elevators totals some 15 million bushels.
If hypothetically one independent corporation should buy all these
elevators its combined storage capacity would be but between three
and four percent of Cargill's storage capacity and a similar
percentage of ADM's total storage capacity.
The DofJ directs that Cargill and Continental's assets shall be
made to an Acquirer for whom it is demonstrated to the sole
satisfaction of the United States that: (1) the purchase is for the
purpose of using the Asset to compete effectively in the grain
business, (2) the Acquirer has the managerial, operational, and
financial capability to use the Asset to compete effectively in the
grain business; and (3) none of the terms of any agreement between
the Acquirer and defendant(s) give defendant(s) the ability
unreasonably to raise the Acquirer's costs, to lower the Acquirer's
efficiency, or otherwise to interfere in the ability or incentive of
the Acquirer to compete effectively.
Among the other terms of the ``Final Judgment`` Cargill shall
not purchase, lease or acquire any interest in the Lockport river
elevator, Caruthersville river elevator, Salina rail elevator, Troy
rail elevator, Beaumont port elevator, Stockton port elevator or
Chicago port elevator, or any interest in the river elevator at or
near Birds Point, Missouri (in which Continental formerly owned a
minority interest, and had a right of first refusal to purchase
grain).
Cargill was also directed to enter into a throughput agreement
that makes one-third \1/3\ of the daily loading capacity at its
river elevator located at or near Havana, Illinois, or one barge-
load per day, whichever is greater, to an independent grain company
acceptable to the United States in its sole discretion (the ``Havana
Throughput Agreement``). Daily loading capacity shall be the
capacity registered with the CBOT.
A ``Standard Throughput Agreement'' means an agreement that
allows one grain company to move its grain through an elevator
operated by another person, with unloading, storage, loading and
ancillary services provided by the operator pursuant to terms,
conditions and rates that are common in the grain industry.
The independent grain company that obtains the throughput right
from Cargill (the ``third party``) must be qualified under CBOT
rules and regulations to make delivery of at least one barge-load of
corn and soybeans per day for the settlement of CBOT corn and
soybean futures contracts, and must agree to register that capacity
at the Havana facility with the CBOT.
The ``Havana Throughput Agreement`` shall allow the third party
to use its share of the loading capacity at the Havana facility to
transload grain from trucks onto barges for commercial purposes
unrelated to futures contract deliveries, as well as to make
deliveries under CBOT futures contracts. Cargill, however, is not
obligated by the ``Final Judgment'' to provide storage services to
the third party in excess of the storage services required to
accommodate the transloading of grain shipments from trucks to
barges. Load to barge loading, may not exceed the load-out fees.
Cargill: Getting the ``86'' in Seattle?
In the Department of Justice's original ``Complaint,'' the anti-
trust division asserted that competition for the purchase of grain
and soybeans from farmers and other suppliers would have been harmed
by combining Cargill's and Continental's competing port elevators in
the Pacific Northwest, which purchase corn and soybeans from farmers
in portions of Minnesota, North Dakota, and South Dakota. Currently,
nearly 40% of Cargill's corn shipments abroad go through their Pier
86 elevator in Seattle.
Yet, in ordering the divestiture of Cargill's 4.2 million bushel
terminal in Seattle, presently leased from the Port of Seattle, the
nation's largest private corporation will now operate in part the
TEMCO three million bushel grain elevator at the nearby Port of
Tacoma. TEMCO or Tacoma Export Marketing Corp. has operated the
terminal as a joint venture for Continental and Cenex
[[Page 16026]]
Harvest States Co-op, now in the process of merging with Farmland
Industries, to form United Country Brands, the nation's largest
agricultural cooperative. (See Issue #25)
Slightly over 100 miles to the south of Tacoma, Mitsubishi Corp.
a leading Japanese trading company, recently announced it has
acquired about a 10% stake in the Kalama Export Company LLC equally
owned by ConAgra Inc. and Archer Daniels Midland Co. (``Supermarkup
to the World''). Kalama Export Company LLC operates a grain elevator
along the Columbia River in Washington State, with hourly shipping
capacity of around 3,000 tons and storage capacity of about 50,000
tons. It also plans to increase storage capacity to 90,000 tons by
the end of 2000.
Yet Cargill spokeswoman Lori Johnson said the Justice Department
was concerned that her company would have too much business
concentrated in the Pacific Northwest because of Continental's
leasing of the Tacoma grain-storage facility. ``We fought the
Justice Department; not to include Seattle,'' said Johnson. ``We
still need to sit down with Port officials and talk about the
options and make it work for everyone,'' she said. ``But we do have
an obligation under the lease.''
According to the DofJ's divestiture order the Seattle port
elevator may enter into a Standard Throughput Agreement with
Cargill, or any joint venture involving the Tacoma elevator to which
Cargill is a party (the ``Cargill Joint Venture''), provided that:
(1) The Acquirer has no interest in Cargill or the ``Cargill Joint
Venture''; (2) the throughput agreement gives Cargill or the ``Joint
Venture'' no more rights concerning the operations of the facility
than are commonly granted to sublessees in Standard Throughput
Agreements; and (3) Cargill or the ``Cargill Joint Venture'' obtains
continuing rights to move no more than 8.5 million bushels of grain
and oilseeds combined in any given month through the Seattle port
elevator.
``Moreover,'' the Justice Department states, ``the United States
must be satisfied, in its sole discretion, that any Standard
Throughput Agreement that may be negotiated between Cargill or the
`Cargill Joint Venture' and the Acquirer of the Seattle port
elevator: (1) Would leave the Acquirer with sufficient capacity for
it to be a viable and effective competitor for the purchase of corn
and soybeans in the Pacific Northwest draw area; and (2) would not
adversely affect the Acquirer's ability or incentives to compete
vigorously for the origination of corn and soybeans in the Pacific
Northwest draw area, by raising the Acquirer's costs, lowering its
efficiency, or otherwise interfering in the ability or incentive of
the Acquirer to compete effectively.''
The DofJ notes, however, that Cargill need not divest the
Seattle port elevator if it does not buy, lease or otherwise acquire
an interest in Continental's port elevator at or near Tacoma,
Washington.
If another firm, however, acquires the Tacoma port elevator
pursuant to a right of first refusal (and Cargill retains the
Seattle port elevator), Cargill shall not subsequently purchase or
lease the Tacoma port elevator. If another firm acquires the Tacoma
port elevator pursuant to a right of first refusal, Cargill shall
not subsequently acquire any other interest in that facility
(including a joint venture interest) without the written consent of
the United States.
As for the Seattle elevator, the Seattle Times business
correspondent Patrick Harrington recently reported, ``with Cargill
now planning to shift operations to Tacoma after all, it remains to
be seen whether there is a player big enough to fill its shoes.''
``Cargill, even before it acquired Continental last month, was
the nation's largest exporter of grain; Continental was the second
largest. Illinois-based Archer Daniels Midland, another large grain
company, had earlier expressed interest in the facility, according
to Port of Seattle officials, but spokesmen for the company refused
to comment.''
Banking on the Futures
The issues of concentration in the grain trade, even prior to
the Continental purchase by Cargill was promising to become a major
issue in the year 2000, when new delivery terms take effect for the
Chicago Board of Trade's (CBOT) corn and soybean futures contracts
as Toledo, Ohio, will cease being a delivery point for the CBOT
contracts, and delivery points will instead be clustered up and down
the Illinois River where a large portion of grain facilities, on the
northern portion of that river, are owned by Cargill or Continental,
and likely will be combined.
In its ``Complaint'' the DofJ stresses that by consolidating the
Cargill and Continental river elevators on the Illinois River, their
proposed transaction would concentrate approximately 80% of the
authorized delivery capacity for settlement of Chicago Board of
Trade corn and soybean futures contracts in two firms. ``This
concentration,'' they emphasize, ``would increase the likelihood of
price manipulation of futures contracts by those firms, resulting in
higher risks for buyers and sellers of futures contracts.''
For farmers like Floyd Schultz who currently transports his
grain by truck just four miles to Lockport, Illinois where he can
choose between Cargill and Continental grain terminals, sitting side
by along a canal leading to the Illinois River, the proposed merger
of the two grain companies will leave the nearest competitor an
Archer Daniels Midland terminal 30 miles and another 10 cents a
bushel in shipping costs away. While Cargill could lower its prices
and improve its margins, he notes, ``we as farmers would be the ones
who pay.''
In Marvin Hayenga and Robert Wisner's 1998 study, ``Cargill's
Acquisition of Continental Grain's Grain Merchandising Business,''
(see above), the authors obvious area of concern at that time was
the northern section of the Illinois River. They noted at the time
that even if the Continental sale to Cargill was approved, ADM will
remain the largest firm on the river, controlling 36% of storage
space.
Faced with such a situation Sid Love, analyst with Joe Kropf &
Sid Love Consulting Services in Overland Park, Kansas, told the Wall
Street Journal that he regrets the possible departure of Continental
from the grain market. ``My concern is deliveries on the Illinois
River,'' Love said. ``Now, you'll basically have two big companies,
and if they're both bullish, you won't have any deliveries,'' since
they could export the grain rather than meet contract obligations.
Reacting to the initial announcement of the purchase one
Illinois farmer also speculated that if Continental was unable to
successfully compete financially with other grain trading companies
to the extent that it was willing to sell its assets to a competitor
why would anyone believe that an independent elevator operator could
achieve success in such a concentrated market?
``Throughput Arrangements'' High Costs Discourage Competition
The Department of Justice's willingness to use ``throughput
agreements'' as part of its Cargill/Continental divestiture order
has received sharp criticism from Dan McGuire, a member of the
American Corn Growers Association and the Nebraska Farmers Union.
``Our department,'' he said, ``will take a close look at this
proposed merger. It is our job to further competition in private
business and industry, and if we allow Samson and Delilah to merge
we may be doing the consumer a disservice.''
The chairman of Samson protested vigorously that merging with
Delilah would not stifle competition, but would help it. ``The
public will be the true beneficiary of this merger,'' he said. ``The
larger we are, the more services we can perform, and the lower
prices we can charge.''
The president of Delilah backed him up. ``In the Communist
system the people don't have a choice. They must buy from the state.
In our capitalistic society the people can buy from either the
Samson or the Delilah Company.''
``But if you merge, '' someone pointed out, ``there will be only
one company left in the United States.''
``Exactly,'' said the president of Delilah. ``Thank God for the
free enterprise system.''
The Anti-Trust Division of the Justice Department studied the
merger for months. Finally the Attorney General made this ruling.
``While we find drawbacks to only one company being left in the
United States, we feel the advantages to the public far outweigh the
disadvantages.''
``Therefore, we're making an exception in this case and allowing
Samson and Delilah to merge.''
``I would like to announce that the Samson and Delilah Company
is now negotiating at the White House with the President to buy the
United States. The Justice Department will naturally study this
merger to see if it violates any of our strong anti-trust laws.''
August 30, 1999.
Department of Justice, Antitrust Division, San Francisco Office.
From: Riley Lewis (Forest City, Iowa)
Sent: Wednesday, June 23, 1999 6:52 AM
To: WEB JPR
Subject: Cargill-Continental Merger
As your dept. dwells on the merger-acquisition of Continental
Grain by Cargill I would like to comment as a 5th Generation Iowa
farmer on the merits. I am against it--
[[Page 16027]]
farming for thirty years I've seen this many times in smaller
amounts of suppliers to agriculture. When you have dealerships-coops
etc that are of the larger scope I find the less competition tends
to maker service less and more expensive with a take it or leave it
attitude. Grain bids are our income and competition just as we sell
hogs to three packers makes better bids. In a small town nearby
there where two aggressive shoe stores five years ago--people come
from big cities to buy brand name shoes at competitive bids--then
one year the owner of one store died with no heirs and the store
closed. The other raised his bids for shoes and within two years he
went out of business as business went to a larger town. Great
example of what competition does and here as your good producer we
need competition--not mergers!
Thank you.
Riley Lewis.
October 11, 1999.
Mr. Roger W. Fones,
Chief, Transportation, Energy and Agriculture Section, Anti-Trust
Division, U.S. Department of Justice, 325 Seventh Street, N.W.,
Suite 500, Washington, DC 20530.
FAX: 202/307-2784
Dear Mr. Fones: I am writing to request that you conduct further
investigation of the Cargill-Continental Grain sales and that you
extend the comment deadline for another sixty days.
Are you aware of what the creation of a larger monopoly will do,
not only to grain farmers in this county, but also to all consumers?
Monopolies always create higher prices for the consuming public.
They create even lower prices for those who must sell their
commodities to the monopolies. Grain prices are already far below
break-even.
Farmers are going broke in our state at an alarming rate, Across
the U.S. farm income is down by 70%. Depressed prices are ruining
not only farmers but all small-town businesses. I urge you to
conduct a more thorough investigation into the Cargill/Continental
Sale before submitting to final judgment on this.
Please give my request your serious consideration.
Sincerely,
Todd Lewis.
September 21, 1999.
Roger W. Fones,
Chief of Transportation, Energy and Agriculture Section, Anti-Trust
Division, U.S. Department of Justice, 325 Seventh St. NW, Suite 500,
Washington, D.C. 20530.
Dear Mr. Fones: Please stop the Cargill Continental Merger.
Cargill is so big already. They are in the seed, banking,
fertilizer, chemical business. They manipulate the markets for cheap
grain. They are in the feeding business. They own packing plants.
What happened to our Anti-trust to stop all this. It is ruining the
township and county rural life. They do not do business locally.
They are giving mega bucks to the University of Minnesota to
have the do research that they will own. They have the biggest
lobbying effort in Washington DC.
They only way rural life can fight this big giant is through
political action. We have let it go to far. Look what happened in
Russia when the food supply wasn't done individually. Look at
Roosevelts monument and DC and read the words. It will help you
understand why the Cargill-Continental merger can go on.
I request you stop all mergers including the co-ops. They are
big business and have forgotten about the patrons who built them.
Rick Lundebrek,
Township Officer, Benson, Minnesota 56215.
First Security Bank
September 21, 1999.
Roger W. Fones,
Chief of Transportation, Energy and Agriculture Section, Anti-Trust
Division, U.S. Department of Justice, 325 Seventh St. NW, Suite 500,
Washington, DC 20530.
Dear Mr. Fones: How can you let Cargill and Continental Merger.
The marketing is so concentrated already. Cargill is dominating the
full chain: Seed, fertilizer, chemical, banking, end process, meat
industry, meat packing. This is ANTI-TRUST. Please stop it now.
Sincerely,
Vice President,
First Security Bank, 215 13th St. So. Benson, Minnesota 56215.
The family farmer is who I work with. They can't believe this
has happened in America. They look at Cargill like a sleeping giant.
September 24, 1999.
Judge Gladys Kessler,
U.S. District Court for the District of Columbia, 333 Constitution
Ave. N.W., Washington, D.C. 20001.
Re: United States of America v. Cargill, Inc. and Continental Grain
Company
Dear Judge Kessler: Presently before you awaiting your approval
is a ``Final Judgment'' filed by the U.S. Department of Justice
relative to the purchase of the grain merchandising division of
Continental Grain Co. by the Cargill Corp.
Legal precedent, according to the Department of Justice,
requires that ``the balancing of competing social and political
interests affected by a proposed antitrust consent decree must be
left, in the first instance, to the discretion of the Attorney
General. The court's role in protecting the public interest is one
of insuring that the government has not breached its duty to the
public in consenting to the decree. The court is required to
determine not whether a particular decree is the one that will best
serve society, but whether the settlement is `within the reaches of
the public interest.' ''
In its July 8, 1999 ``Final Judgment'' we believe the Department
of Justice has ``breached its duty to the public in consenting to
the decree'' and that its ``Final Judgment'' is not ``within the
reaches of the public interest.''
As the Department of Justice's own ``Complaint'' states, the
Cargill purchase would ``substantially lessen competition for
purchases of corn, soybeans, and wheat in each of the relevant
geographic markets, enabling it unilaterally to depress the prices
paid to farmers. The proposed transaction will also make it more
likely that the few remaining grain trading companies purchasing
corn, soybeans, and wheat in these markets will engage in
anticompetitive coordination to depress farm prices.''
Using the Department of Justice's own figures and criteria, we
see in its ``Complaint'' that even before this announced purchase
the U.S. grain trade was already dominated, if not monopolized, by
Cargill. Nothing in the Department of Justice's ``Final Judgment''
addresses itself to that issue.
The Department of Justice must consider more than the grain-
buying operations of Cargill. Acquisition of Continental's seventy
elevators will enhance the economic power of Cargill. This concerns
farmers, because Cargill stands out as a top-four firm in beef and
pork packing, cattle feedlots (where Continental is the largest),
broiler and turkey production, animal-feed plants, grain-elevator
capacity, flour milling, dry corn milling, wet corn milling, soybean
crushing, and ethanol production. This dominant position across
wide-ranging agricultural markets will allow Cargill to transfer
resources between sectors according to the economic conditions
prevailing at a given time.
The ability to transfer assets will allow Cargill to maintain
its dominant status in all of these markets irrespective of its
competitive prowess. Farmers are forced into bankruptcy after a few
bad seasons, but Cargill will maintain its dominant status over
time, regardless of economic performance over the short term. With
Continental's assets, Cargill will become an even more powerful
firm, even more capable of strategic, cooperative, and anti-
competitive behavior.
In the name of economic and social justice and the preservation
of the family-farm system of agriculture in the United States, we
urge you to recommend that the Department of Justice withdraw its
``Final Judgment,'' study in far greater detail this ill-advised
sale, and carefully consider the grave anti-trust issues it presents
with dire consequences to both producers and consumers of our food
supply.
Sincerely,
Muriel Marvin,
Lawrence Marvin,
Placerville, CA 95667.
Dear Attorney General Reno: I am writing to you to express my
deep concern with the giant agriculturer marketer Cargill and its'
agriculture anti-trust actions when it concerns small farmers in
this nation. There should be an immediate investigation to see if
Cargill is violating anti-trust laws.
Thanks for your time.
[[Page 16028]]
Sincerely,
Jerome McCollom,
Department of Justice, August 30, 1999, Antitrust Division, San
Francisco Office.
Alta Vista, KS 66834
October 8, 1999.
Roger W. Fones,
Chief, Transportation, Energy & Agriculture Section, Antitrust
Division, U.S. Department of Justice, 325 Seventh Street, N.W.,
Suite 500, Washington, D.C. 20530, FAX: 202-307-2784.
Dear Mr. Fones: Please do not approve corporate mergers and
buyouts such as Cargill with Continental Grain or Smithfield Foods
with Murphy Farms and Tyson Food's Pork Group. I believe such
mergers and buyouts serve to weaken American national security by
forcing reliance upon foreign markets rather than promoting a sound
domestic agriculture production and delivery system.
While capitalism favors competition, such mergers and buyouts
represent the same command and control favored by communism.
Totalitarian food production and delivery systems have failed in all
nations where they were the dominant system. Why would Americans
believe such a system could work here? We use food and medicine as a
political tool with nations reliant on imports. Do we truly wish to
open our own country to similar political leveraging?
The merging of Cargill and Continental Grain will not favorably
improve grain prices for farm producers. As farm stability weakens,
so does it's surrounding community. As communities lose their
economic base, they lose their ability to adapt to fluctuations of
market, economy and social unrest.
Through the past decades, we have seen a reduction in the number
of industry competitors of steel, auto and textile manufacturing as
well as food and fiber production. The reduction to a few industry
giants has given the impression of reduced consumer prices and
strong economy. However, such mega-corporations are not flexible.
Labor problems, interest rates, consumer choice, environmental
impact, and many other factors can result in massive employee lay-
offs, plant closings, unmanageable pollutants, labor strikes,
unstable housing, overburdening of community services and other
negative impacts that are too great for the community to effectively
handle.
I believe in world trade, competitive trade with choice and
options rather than singular avenues. I support the government use
of anti-trust laws when corporate mergers and takeovers threaten the
competitive edge of all America for the sake of exorbitant short-
term gain for relatively few beneficiaries. Thank you for your
consideration.
Sincerely,
Carissa McKenzie
Westminster College
501 Westminster Avenue, Fulton, Missouri 65251-1299, 314 642-3361
October 1, 1999.
Roger W. Fones,
Chief, Transportation, Energy and Agriculture Section, Antitrust
Division--U.S. Department of Justice, 325 Seventh Street, N.W.,
Suite 500, Washington DC 20530.
Dear Mr. Fones: Antitrust legislation is in place to protect
consumers and competitors against a company dominating the market
and taking unfair advantage. For that reason, I object to the
Cargill purchase of Continental's grain operations. This purchase
would move Cargill from the category of dominator to the category of
terminator of everyone else.
When I hear that the Cargill/Continental sale is in your hands,
I hope that you will consider the impact on rural communities of
this merger. I have had the chance to see these big players operate
firsthand. I live across the road from a Cargill hog operation. The
arrogance of these corporate fellows is astonishing. Making these
guys more powerful would be another nail in the coffin for diverse
rural communities like mine.
When independent operators are put out of business by big
operators, as has happened in my community, everybody suffers. The
markets have already gotten so concentrated that an out-of-favor
producer can be cut off from being able to make a living. The big
operators create environmental disasters that are impossible to
regulate. When regulators get involved, they are ignored or tied up
in court.
Consumers are hurt by this concentration, too. Consumers suffer
from price-fixing and from lack of choice in the marketplace.
National policy has made corporations more powerful, and this
needs to stop. These big operations do not treat producers like
independent businessman. Instead, they are paid as little as
possible while keeping as much as possible in the corporation. This
hurts us all.
Please do all you can to stop this merger.
Sincerely,
Margot Ford McMillen
Sept. 27, 1999.
I am very much opposed to the Cargill-continental merger. Can't
anyone see what is happening? Going big is not better--look what is
happening to our schools, our little towns etc.--look at our grain
prices now--the farms are all getting too big--soon there will be
only a few farms left in each county--please use some common sense
in this situation!
Darlene Milbreadt,
Echo, MN 56237.
September 28, 1999.
Mr. Roger W. Fones,
Chief, Transportation, Energy & Agriculture Section, Antitrust
Division, United States Department of Justice, 325 Seventh Street
N.W., Suite 500, Washington, D.C. 20530.
Re: United States of America v. Cargill, Inc. and Continental Grain
Company
Dear Mr. Fones: I am writing to express my opposition to Cargill
Inc. purchasing the grain division of Continental Grain Co. I will
leave the technical analysis to those qualified to do so and mainly
focus on the human element involved. I want you to know how this
will affect me and my community and hundreds of thousands like
myself and their communities across this country.
I am a farmer from Northeast Missouri. I wish I could tell you
that the proposed acquisition would leave me with one fewer choice
when it came time to market the grain I raise. I can not make that
claim as there is no Continental elevator in my area. I wish there
were because then my choices of elevators would almost be double
what they now are. I say almost because I have one soybean processor
(ADM) who normally pays 7-10 cents more that their competitor (?),
Bunge, who does not process soybeans at their location. It is
reversed for corn and wheat as Bunge outbids ADM by substantial
margins on these two crops 90% of the time. Thus you can see why I
would welcome another elevator, regardless of who owns it.
Following are some of my reasons for opposing the merger:
1. This area of northeast Missouri, west central Illinois, and
southeast Iowa are all part of a captive draw area for ADM in
regards to soybean purchases. As recently as 10 years ago this tri-
state area had no less than 4 competitive bidders for soybeans. Two
processors, ADM and Quincy Soybean Co., and two river terminals, MFA
Incorporated and Bunge. All of the soybeans purchased at the small
country elevators eventually ended up being sold to one of these 4
purchasers. Within the last 10 years ADM has purchased Quincy
Soybean Co. and Bunge has bought out MFA Inc.'s river terminal. That
leaves the area where we are today with ADM and a non-competitive
Bunge. I know first hand what a lack of competition means when it is
time to sell my crops.
2. I use the Chicago Board of Trade to hedge my grain. I do not
pretend to be an expert on the operation of the board but it
concerns me when one firm will control 80% of the delivery points
for futures settlement. I have read that this could lead to
manipulation of futures contracts.
3. The United States agricultural community has been caught up
in a frenzy of mergers and buyouts. This may be the weakest argument
to make legally, but it is the strongest from the human element
standpoint. This merger, like most of those before, is really a
double edged sword. One side of the blade cuts out the
inefficiencies of smaller entities when they increase economic size.
The other edge cuts the fabric of Rural America. Each business we
lose, be it a elevator, seed company or machinery manufacturer
lessens competition among those who we do business with. This
lessening of competition drives up cost which in turn drives
producers from business.
It is extremely difficult for anyone not in the rural areas of
the Midwest to fully understand rural infrastructure. I live near a
town with a population of 2700. This size community, like thousands
across this country, depends upon farmers and ranchers to provide a
large portion of the fuel for their economic engines. Consolidation
is killing rural America. Will stopping this merger or any other
single acquisition reverse this
[[Page 16029]]
trend? No--but it will be a start to the revitalization of the rural
areas of this country. Without a healthy rural area our country can
not be whole. It is time for someone in a position of authority to
step up and draw a line on this insanity. I hope this message
reaches someone who has the courage and insight to do just that.
Sincerely,
Keith G. Mudd
Roger W. Fones,
Antitrust Division, U.S. Department of Justice, 325 7th St. NW,
Suite 550 Washington, D.C. 20530.
October 9, 1999.
Dear Sir: Please consider this letter regarding the Cargill
Continental merger very carefully.
Cargill, a company from my state of Minnesota, has been ruthless
in dealing with farmers and small businesses. They practice buying
the narrow point in the pipeline and using that position to control
and dominate the industry.
I have personally experienced this when I sold three ship loads
of corn to the Egyptian feed millers in 1995. The corn was to be
loaded to Egyptian ships at the port of Duluth. Cargill would not
load it and the deal fell through. The same scenario happened at the
Port of New Orleans to the N.F.O.
This summer Cargill was bidding 20 cents above Chicago for corn
delivered by rail to Duluth, however Cargill had booked all the rail
cars so independent elevators could not take advantage at that
price. Truck bid for the same commodity was 20 cents under Chicago.
Thus Market Domination.
This merger would give Cargill control of most of the major
ports and loading facilities on the U.S. and thus control of the
movement of grain and other commodities in the U.S.
It is not wise or in the best national interest to allow one
company to control this much of the food supply of the United States
of America.
Sincerely,
Winton Nelson,
Darwin, MS 55243, 320-693-7966.
September 21, 1999.
Roger W. Fones,
Chief, of Transportation, Energy and Agriculture Section, Anti-Trust
Division, U.S. Department of Justice, 325 Seventh St. NW, Suite 500,
Washington, D.C. 20530.
Dear Mr. Fones: Please stop all these big corporate mergers.
This is to stop the Cargill-Continental Merger as well as all large
Ag corporate Mergers. Last winter in Texas in one county alone
Cargill was feeding 83,000 head of beef feeders. Two miles away
Continental was feeding 83,000 head. This has got to stop. They
purchased alot of these cattle cheap from the drought in Texas and
so forth. They purchased all the cheap feed manipulated by their
marketing. Look into it yourself as they made mega bucks on the meat
division. All this is ruining the family farmers. This is also
ruining rural areas. Farmers spend their money locally. Cargill is
in the seed, fertilizer, banking, chemical business. They do not
support local areas at all. Farmers that are desperate to keep
farming farm land all over for them. This does not help local areas.
We need a stop on all mergers now.
They do not support local schools, or rural infrastructure. Do
you want Cargill to get even bigger. They are farming land down in
South America and paying the locals $250.00 per month. They are glad
to farm down there because there is no infrastructure there. Do we
want this to continue.
The grain marketing now is so concentrated. They are in the
livestock business as well. They own the packing plants. Please look
into these problems. They concentrate animals in large numbers. Look
at the livestock in the large hog operations in North Carolina. We
are going to pay for all this concentration.
Rural Areas need help from people like you. We need to have the
anti-trust laws enforced. When Cargill Owns the Food Policy we will
PAY.
Sincerely,
David Olson
Lei `Ohu Farm
46-3615 Kahana Drive, Ahualoa, Honokaa, Hawaii, Phone: (808) 775-
9473
FAX TO: Mr. Roger W. Fones, (202) 307-2784
FAX FROM: Glenn Oshiro
FAX #: (808) 775-9473
DATE: October 11, 1999
Re: Cargill, etc.
Please extend the period for public input on the Cargill
Continental Grain matter. This is the first day I've heard of your
deliberations, and I consider myself to be well informed. My
business calls for me to be in touch with small farmers and
ranchers. As you can imagine, this is ongoing and intensive being
that there are few consistent means to reach the small producer,
e.g. there are few, if any, umbrellas that cover small farmers and
ranchers. Much of what I do to attract the attention of my clients
is word of mouth, one on one.
While I'm not suggesting that you solicit responses from small
producers individually, more time is necessary for word of the
public comment period to reach small producers.
I am a farmer, business person, and stockholder.
Glenn S. Oshiro,
Buy from the Farmer.
September 18, 1999.
Judge Gladys Kessler,
U.S. District Court for the District of Columbia, 333 Constitution
Ave., N.W., Washington, D.C. 20001.
Re: United States of America v. Cargill, Inc. and Continental Grain
Company
Dear Judge Kessler: After reading that the Department of Justice
itself has admitted that the Cargill purchase of the Continental
grain division would ``substantially lessen competition for
purchases of corn, soybeans, and wheat in each of the relevant
geographic markets, enabling it unilaterally to depress the prices
paid to farmers,'' I can only urge you to put a stop to it. This
purchase is not in the public interest.
More and more lately I read in the business news about mergers
between already massive corporations.
More and more I hear about how desperate farmers across America
are again being squeezed between high costs they pay to raise
animals and grow crops and low prices they're being offered for
their livestock and produce.
Here in rural Mendocino and Sonoma counties, in Northern
California, beautiful old apple and pear orchards are being bought
from family farmers and then razed at a frantic price by investment
corporations anxious to plant vineyards, the money-making crop of
the moment. Other local ag producers and ranchers are finding the
costs of farming and raising livestock too high to resist the
pressure to sell off their land for vineyard conversions or rural
residential subdivisions.
It is our government's duty to prevent any more mergers that
further increase the costs to American family farmers. America needs
to grow its own food. Putting agriculture in the hands of
international corporations instead of the family farmers--as seems
to be happening more and more rapidly--is a social and environmental
disaster.
Thank you.
Jennifer Poole,
Willits, CA 95490, Mendocino County.
Mon., Oct. 11, 1999.
From: ``Mike Callicrate'' [email protected]>
To: Undisclosed-Recipient:@secure06.levon.net;>
Date: Mon., Oct. 11, 1999, 12:22 PM
Subject: [HeartbeatUSA] last day for comment on Continental-Cargill
merger
Consumers, family farmers, small-town business owners: Today,
October 11, is your last chance for public comment on the creation
of the world's largest food monopoly. It is the merger of Cargill
and Continental Grain. Its effect will be to raise consumer prices
and reduce the earnings of already-hurting family farmers and small
businessmen. Monopolies always hurt the consumer by destroying
competition.
You may register your objections to the above deal simply by
faxing the Chief of Transportation, Energy and Agriculture Section
(Mr. Roger W. Fones) at the following Fax number: 202/307-2784.
Use a simple, brief message like the following:
``Please conduct a more thorough investigation into the Cargill/
Continental Grain sale before submitting a Final Judgment on the
matter. Please extend the public comment period for another sixty
days.''
Public comment period officially closes tomorrow. Fax your
message today.
[email protected]
As states above.
Rae Powell
Amanda Bray
October 9, 1999.
Roger W. Fones,
Chief of Transportation, Energy and Agriculture, Anti Trust
Division, U.S.
[[Page 16030]]
Department of Justice.
Dr. Fones: I urge you to Conduct a more Complete investigation
into the sale of Cargill-Continental Grain, before submitting a
final judgment.
Farm income in the United States is down by 70%.
Depressed prices are running farmers and small town business
people.
Please delay the Comments deadline for another 60 days.
I appreciate your consideration.
Sincerely,
N. Ramsey,
Mesquite, TN 75150.
September 22, 1999.
Dear Mr. Roger Fones: The merger of Cargill & Continental Grain
Co. Is a major concern of ours. This merger will take away our
market freedom. Already we are hurting because to few people control
our markets and tell us what they will give us and we have to take
it.
I always believed the anti-trust laws were to protect the little
man but it seems like no one abides by them any more and they just
find ways to go around them. We know that it is not fair! Cargill is
already one of the top 4 firms in beef, pork, turkey, chicken, corn,
soybean and production in merger would just make these more
powerful.
Thank you for reading this,
Mrs. Jan Richardson
A copy has also been sent to Attorney General Ken Salazor.
September 18, 1999.
Judge Gladys Kessler,
U.S. District Court for the District of Columbia, 333 Constitution
Ave. N.W., Washington, D.C. 20001.
Re: United States of America v. Cargill, Inc. and Continental Grain
Company
Dear Judge Kessler: Presently before you awaiting your approval
is a ``Final Judgment'' filed by the U.S. Department of Justice
relative to the purchase of the grain merchandising division of
Continental Grain Co. by the Cargill Corp.
In the name of economic and social justice and the preservation
of the family farm system of agriculture in the United States I urge
you to recommend that the Department of Justice withdraw its ``Final
Judgment'', study in far greater detail this ill-advised sale and
carefully consider the grave anti-trust issues that it presents and
the dire consequences to both producers and consumers of our food
supply.
Sincerely,
Howard H. Sargent,
Consumer, Boulder, CO 80303.
Central City, NE 68826
Sept. 26, 1999.
Department of Justice,
United States Government, Washington, D.C. 20510.
ATTN: Dept. for Comments on proposed Cargill-Continental merger
Dear Sirs: I am writing to voice my concern on the proposed
Cargill buyout of Continental Grain Co. I would ask you to please
disapprove this merger on the grounds that with the merger-mania of
the past 20 years, the agricultural industry has become so
concentrated that there is no free market.
Both the meat-packing plants and grain companies have gained a
dangerous stranglehold on U.S. food production and prices. Shouldn't
our anti-trust laws protect the people from such monopolies?
Eventually, even our farmer co-ops will have little influence in
agriculture when they are up against such giants.
It is probable that thousands of family farmers will be going
out of business this year--a tragedy for their families and for the
nation. For the most part their only customers are the corporation
giants which can name their own price--way below the cost of
production, and the result of the over-concentration in the
agricultural industry.
What safeguards are in place to make certain that food will
continue to be affordable if family farms become a thing of the
past?
Please use our anti-trust laws to protect all Americans.
Sincerely,
Lois Schank
Clyde Southern
Steele, MO 63877.
July 23, 1999.
The Honorable Judge Gladys Kessler,
U.S. District Court, District of Columbia, 333 Constitution Ave.,
NW, Washington, D.C. 20001.
Civil Action #991875 Filed 7-8-99.
Dear Judge Kessler: I write to you as a second-generation farmer
located in the Missouri Bootheel area, along the Mississippi River
at the juncture of Missouri, Arkansas and Tennessee. My family is
primarily engaged in the production of soybeans, wheat, corn, and
rice and we have experienced the great advantage of river barge
transportation of our farm produce for many years. We like to think
that we contribute to the prosperity of our nation by our
involvement in international trade, not to mention our bountiful
production that has alleviated hunger and starvation throughout the
world.
The above civil action involves the Continental Grain Elevator
which is located at Cottonwood Point (a historic ferry crossing),
some ten miles south of our county seat at Caruthersville, and
within a couple of miles of Arkansas. We have been privileged to
sell grain to all of the grain elevators within this area, and
conditions have always been amicable. In this flat alluvial valley,
we can see many of the elevators along the river, and the
Continental Storage Tanks are within sight of our farm.
I certainly agree with Joel Klein's statement in the Attorney
General press release, which states ``This enforcement action
demonstrates the Department's commitment to preserve competition in
agriculture.'' Over the years I have seen significant improvement in
competition along the river, and producers in other parts of the
nation are envious of the prices we receive on the spot market and
the ability to book a favorable basis at local elevators or at the
Chicago Board of Trade. Now comes a point of jeopardy which we
perceive exists in one small portion of the divestitures listed in
the final judgment of the civil action claim filed under Section 7
of the Clayton Act, as amended (15 U.S.C. 18).
I respectfully refer to Page 2, of the Final Judgment
(Definitions) Paragraph F, ``Caruthersville river elevator``.
Although this elevator has a mailing address of Route 1,
Caruthersville, MO 63830, it is known locally as the Cottonwood
Point facility, which is located 10 miles south of Caruthersville,
near the Arkansas border. The nearest town and postoffice is Cooter,
Missouri, three miles west. A modern bridge crossing to Tennessee
along Interstate 155, leads to other elevators (within sight of the
Continental elevator at Cottonwood Point). We have no trepidation or
fear of monopoly practices from Cargill, which has an elevator at
New Madrid, Missouri 45 miles to the north. The present fear is that
one of the largest members of the International Grain Cartels is
interested in purchasing the Continental facility at Cottonwood
Point. We learn that Bunge Grain Company may have entered into
negotiations to purchase the Continental elevator, which would pose
a definite lack of competition for local grain farmers in their
choice of port outlets in the area. The proximity of current Bunge
elevators in our area of operation could artificially depress the
prices offered for our grain.
Nearby--Bunge has an elevator at Caruthersville (10
miles), one at Huffman, Arkansas (8 miles), one at Booths Point
(across the river in Tennessee at the Interstate Bridge--15 miles),
and one at Heloise directly across the river in Tennessee within
eyesight of Continental.
If Bunge purchases Continental at Cottonwood Point,
this would given them a total of seven elevators along the river
within a fifty-mile distance.
It is common knowledge locally that other large grain trading
facilities are interested in purchasing the Continental facility at
Cottonwood Point. Cargill would probably provide trade opportunities
without restraint of trade in the area, and of course we would be
happy to see Continental remain at its current location and with the
same ownership.
However, we would like to offer one caveat in regard to the
selection or location of any grain-trading firm at the current
Continental Cottonwood Point site. The owners and operator must be
large enough to trade and offer strong competition in the
International trading arena. It would likely be impossible for a
small independent grain elevator to offer competitive prices to
local producers if it did not have the ability to compete and trade
in a worldwide arena of International trade.
During this critical time of agriculture stress, it is
imperative that we continue to have strong competition and fair
prices for producers in our area. Therefore, we strongly insist that
Bunge Grain should not be allowed to purchase the Continental Grain
facility at Cottonwood Point, thus creating a near monopoly
situation which would invalidate the current anti-trust action.
[[Page 16031]]
Sincerely,
Clyde Southern
October 12, 1999.
Mr. Tom Miller,
Iowa State Attorney General, Hoover State Office Building, Des
Moines, Iowa.
Re: Cargil-Continental Grain Merger
Dear Mr. Miller: As a graduate of one of the finest Universities
in the middlewest, Iowa State at Ames, with a major in soils and a
minor in Agricultural Economics, I strongly urge you to vote NO for
this merger. This merger will dictate less market choices for
farmers, large and small alike. Today, a bushels of corn, (56 pounds
of beautiful raw protein) will not buy a cheap hamburger in many
restaurants. This merger, IF APPROVED, will lower the farmer's share
of the retail market even still more.
Following my senior year at Iowa State, I took advantage of the
long established ISU Ag. travel trip. It was a 10,000 mile
accredited trip visiting areas in Detroit, Washington, D.C.,
Gainsville, Austin, and Denver. With four major stops per day, we
studied crops, soils, and we also visited with farmers and ranchers
along the way. One very interesting stop was along the lake area in
Michigan where a overseas grain buyer/shipper was located by the
name of Spencer. (No relation to me). I would like to see our
government encourage the escalation of these small shippers. This
would increase competition and help the family farmer win a fairer
share of the consumer's food dollar. Please vote no for the merger
of giant self serving corporations like Cargil and Continental.
Sincerely,
Lyle D. Spencer,
Goldfield, Iowa.
Blooming Prairie, MN 55917
September 28, 1999.
Mr. Roger W. Fones,
Chief, Transportation, Energy & Agriculture Section, Antitrust
Division, U.S. Department of Justice, 325 Seventh St. NW Suite 500,
Washington, DC 20530.
Dear Sir: The merger of Cargill and Continental Grain Co. is a
major concern to the American farmer. This would increase Cargill's
monopoly of the grain trade. Why should Cargill be any different
than other big monopolies? Isn't this what anti-trust laws are for?
I am proud to be an American farmer. We feed the people! This is
the most important occupation in the world! Why can't we be given
the respect we deserve? We need fair prices at today's standard of
living, not yesterday's!
If this merger goes through, Cargill will have even more power
to control the farmer's prices and life. Look at the example of the
hog farmer. What a shame the small hog farmer has been driven to
give up. Why do all that hard work to lose money constantly?
Prices are already so horribly poor in all the markets we are
hanging on only by the hope things will improve. When? Farmers can't
wait much longer. Farmers work as hard as anybody in the world, yet
can't get a fair price for all their hard work. Most everybody
else's wages increase with the years. Not ours!
Look at rural America's communities. Their livelihood depends on
what the farmer buys in town. There are many vacant stores in rural
America. When the farmer doesn't have money, he stops buying
everything but the bare necessities. It will trickle to the big
cities eventually. Think depression! It's already here in rural
America.
The U.S. Department of Justice needs to further investigate this
merger and stop it! Also extend the deadline for comment and really
get out in the rural communities and on the farms. See and listen to
what its really like. Feel the hopelessness and pain!
What can the government do? Show us you care and stop this
merger. Investigate who or what is really controlling the market.
It's not the farmers who work so hard to feed the people!
Sincerely,
Ellen Stebbins
Pennack, MN 56279
October 6, 1999.
Roger W. Fones
Chief of Transportation, Energy And Agriculture Section, Antitrust
Division, US Dept of Justice, 325 7th St., NW, Suite 550,
Washington, DC 20530.
Dear Mr. Fones: As a retired owner of a 160 acre farm, my first
interest is in farming and I am writing to protest the Cargill-
Continental merger. Why are these big companies allowed to merge?
Many years ago when I was in school there were antitrust laws to
prevent monopolies. It seems that monopolies are now allowed so that
among others, farmers have no say in setting prices on their
products.
Monopolies are not only bad for farmers, they are bad for
telephone users, cable to users, medical services and huge grocery
store patrons. I think it is time to bring all of this to a stop.
Please do what you can to help farmers.
Sincerely,
Eleanor Stehieg
Stockton Ranch
Box 182,
Grass Range, MT 59032
October 11, 1999.
Roger W. Fones,
Chief of Transportation, Energy, and Agriculture Section, Fax: (202)
307-2784.
Dear Mr. Fones: the merger between Cargill and Continental will
destroy any vestige of a competitive market for grains. I urge you
to do a more thorough investigation before submitting a final
judgment. Also the comment period has been too short for farmers to
adequately respond to, please extend it by at least 60 days.
Sincerely yours,
Gilles Stockton
Lakin, Kansas 67860
October 12, 1999.
Mr. Roger Fones,
Chief Transportation, Energy & Agriculture Section, Antitrust
Division, US Department of Justice, 325 Seventh Street, NW, Suite
500, Washington, DC 20530.
Dear Mr. Fones: I WISH TO REQUEST THAT YOU GRANT FURTHER
CONSIDERATION TO THE PROPOSED CARGILL AND CONTINENTAL GRAIN SALE.
PLEASE GRANT A SIXTY DAY COMMENT PERIOD EXTENSION AS I KNOW THAT
MANY PEOPLE DID NOT COMMENT AS THEY WERE MADE TO BELIEVE BY MEDIA
PRESENTATIONS THAT IT WAS A ``DONE DEAL.''
Please conduct a more thorough investigation and abide by your
requirements to give all facets of the matter due consideration.
Thank you for your attention to the issue and your service to all
the American public. We would not wish to believe the allegations
that such a takeover with extremely grave consequences for farmer
and the consuming public would not have your serious evaluation.
With sincere respects,
Dr. Frankie M. Summers
Greenwich, NY 12834
October 4, 1999.
Judge Gladys Kessler,
U.S. District Court for the District of Columbia, 333 Constitution
Ave. NW, Washington, DC 20001.
Re: United States of America v. Cargill, Inc. and Continental Grain
Company
Dear Judge Kessler: Presently before you awaiting your approval
is a ``Final Judgment'' filed by the U.S. Department of Justice
relative to the purchase of the grain merchandising division of
Continental Grain Co. by the Cargill Corp.
Legal precedent, according to the Department of Justice,
requires that ``[t]he balancing of competing social and political
interests affected by a proposed antitrust consent decree must be
left, in the first instance, to the discretion of the Attorney
General. The court's role in protecting the public interest is one
of insuring that the government has not breached its duty to the
public in consenting to the decree. The court is required to
determine not whether a particular decree is the one that will best
serve society, but whether the settlement is ``within the reaches of
the public interest.` ''
In its July 8, 1999 ``Final Judgment'' I believe in fact that
the Department of Justice has ``breached its duty to the public in
consenting to the decree'' and that its ``Final Judgment'' is not
``within the reaches of the public interest.''
Clearly, as the Department of Justice's own ``Complaint'' states
the Cargill purchase would ``substantially lessen competition for
purchases of corn, soybeans, and wheat in each of the relevant
geographic markets, enabling it unilaterally to depress the prices
paid to farmers. The proposed transaction will also make it more
likely that the few remaining grain trading companies that purchase
corn, soybeans, and wheat in these markets will engage in
anticompetitive coordination to depress farm prices.''
Using the Department of Justice's own figures and criteria we
see in its ``Complaint'' that even before this announced purchase
the
[[Page 16032]]
U.S. grain trade was already dominated, if not monopolized, by
Cargill and nothing in the Department of Justice's ``Final
Judgment'' addresses itself to that important issue.
Likewise, the Department of Justice must consider more that the
grain buying operations of Cargill. The acquisition of Continental's
seventy elevators will enhance the economic power of Cargill as a
general matter. Such a result concerns farmers because Cargill's
assets and economic power can be deployed across a range of
agricultural sectors.
For example, Cargill stands out as a top-four firm in beef
packing, cattle feedlots (where Continental is the largest), pork
packing, broiler production, turkey production, animal feed plants,
grain elevator capacity, flour milling, dry corn milling, wet corn
milling, soybean crushing, and ethanol production. Such a dominant
position across many agricultural markets will allow Cargill to
transfer resources between sectors according to the economic
conditions that are prevailing at a given time.
The ability to transfer assets will allow Cargill to maintain
its dominant status in all of these markets irrespective of its
competitive prowess. Unlike farmers, who are forced into bankruptcy
after a few bad seasons, Cargill will maintain its dominant status
over time regardless of economic performance over the short-term.
With Continental's assets, Cargill will become an even more powerful
and ``sophisticated'' firm, even more capable of strategic,
cooperative, and anti-competitive behavior.
In the name of economic and social justice and the preservation
of the family farm system of agriculture in the United States I urge
you to recommend that the Department of Justice withdraw its ``Final
Judgment,'' study in far greater detail this ill-advised sale and
carefully consider the grave anti-trust issues that it presents and
the dire consequences to both producers and consumers of our food
supply.
Sincerely,
Daniel J. Swartz,
A SEED Europe.
Auburn University, Alabama 36849-5406
College of Agriculture, Department of Agricultural Economics, and
Rural Sociology, 202 Comer Hall, Telephone: (334) 844-4800, FAX:
(334) 844-5639
September 15, 1999.
Mr. Roger W. Fones,
Chief, Transportation, Energy & Agriculture Section, Antitrust
Division, United States Department of Justice, 325 Seventh Street
N.W., Suite 500, Washington, D.C. 20530.
Re: United States of America v. Cargill, Inc. and Continental Grain
Company
Dear Mr. Fones: I am writing to state my opposition to Cargill's
acquisition of Continental Grain Company. My opposition is based not
on disapproval of either Cargill or Continental as individual firms,
but on the merger as it relates to the reorganization of global
agriculture that is unprecedented in terms of size and speed.
My objections to this merger are that it would: (1) Continue the
erosion of competition in agriculture markets, (2) increase the
imbalance of economic power favoring agribusiness giants at the
expense of the farmer, and (3) decrease land and resource
stewardship incentives in the emerging system.
Competition is fading in agricultural markets in part because of
unprecedented mergers and acquisitions, and in part because of
insidious joint ventures, strategic alliances, interlocking
directorates and partial ownership of related agribusiness firms.
These alliances, which are very difficult to trace, result in a
fuzzy web of corporations and cooperatives that soften, if not
threaten, competition. In some circles, the alliances are
appropriately referred to as ``corporate incest.''
As just one example out of thousands of alliances that threaten
competition, I would point to a Cargill corn processing plant in
Eddyville, IA, which is connected by pipeline to a Heartland Lysine
plant nearby. Nearing completion is a Midwest Lysine plant located
in Blair, NE, which will also be connected to the Cargill corn
processing plant. Midwest Lysine is a joint venture between Cargill
Degussa Corp, while Heartland Lysine is owned by the Japanese firm,
Ajinomoto, of lysine price-fixing fame. Are Midwest Lysine and
Heartland Lysine going to engage in rigorous competition? Hardly.
Arrangements such as this do not appear to be properly considered in
DOJ evaluations of mergers.
Perhaps of more concern than softening competition is the
increasing economic power of giant corporations over farmers. The
emerging food system has a few vertically integrated supply chains
like Cargill, in which production is increasingly contracted out to
farmers. With contract production, farmers have little economic
power and continue in farming at the discretion of the supply chain
corporations. Supply chain corporations can thus extract essentially
all of the economic profits, leaving the contract farmer with a
subsistence level of income composed of very low returns to
management and labor.
Agricultural cooperatives were established under the Capper-
Volstad Act as a way for farmers to horizontally organize to
countervail market (economic) power held by corporations.
Unfortunately, the giant cooperatives have drifted from this
mission. Giant cooperatives are evolving to a vertical structure,
run more for the benefit of managers that for benefit of the farmer
members. At best, the farmer member is relegated to the position
held by a minority stockholder in a corporation. At worst, the
farmer member is a minority stockholder that cannot get his equity
out of the corporation until death.
Cooperatives have formed hundreds of alliances and joint
ventures with the giant corporations like Cargill. For example,
Cargill has a 50-50 joint venture with Delta Growers Association, a
Cooperative. Deals like this have the potential for a subtle ``co-
opting of co-ops'' by corporations. Thus, in my opinion, many of the
existing cooperatives should not be viewed as countervailing
corporate power.
In this emerging vertically integrated supply system, the giant
corporations do not own the land and other resources used in
production agriculture, yet input and production decisions are
dictated by CEO's. Incentives for conservation of land and other
resource are thus lost, and could lead to degradation of natural
resources. Furthermore, having land management decisions made by
people (CEO's) who are not intimate with the land is asking for
trouble.
Those of us in major poultry production areas have witnessed
contracting for over 30 years. The bottom line is that contract
producers invest one-half of the capital in the industry, yet
capture a proportionally much smaller percentage of the returns.
Moreover, contract poultry producers know that if they speak out
against ``The Man'' (the integrator) they will be instantly
bankrupt. Is this the kind of Society we want?
Individually, many of the recent mergers, acquisitions and joint
ventures involving large agribusiness corporations may appear
innocuous. Collectively, however, they are quickly moving us down
the road to agricultural feudalism with only a few firms controlling
much of the world's food supply. The DOJ appears to assess mergers
in terms of horizontal competition, without giving adequate
consideration to vertical power imbalances.
I respectfully request that you stop the merger of Cargill and
Continental. All mergers of corporations and cooperatives alike
should be blocked pending a thorough, objective evaluation of
whether the frenzy of mergers, acquisitions and alliances is in
Society's best interest.
Thank you.
Sincerely,
C. Robert Taylor,
ALFA Eminent Scholar and Professor of Agricultural Economics.
To: Mr. Roger W. Fones
Sent: 10/10/1999 at 2:44:56 PM
Subject: Cargill/Continental Grain Merger
Dear Sir: I respectfully request that you conduct a more
thorough investigation of the Cargill/Continental grain sale before
submitting a final judgment on the matter. Please extend the public
comment period for another sixty days.
Sincerely,
Janice Urie,
Rt. 1, Box 28B, Lakin, KS 67860.
October 11, 1999.
Dear Sirs: I want to strongly oppose the proposed merger of
Cargill and Continental Grain.
As a farmer from South Dakota we need all the competing entities
we can get it called capitalism!
No No No
Sincerely,
James H. Peht,
Keldion, SD 57634.
October 11, 1999.
Mr. Roger W. Fones,
Chief, Transportation, Energy and Agriculture Section, Anti-Trust
Division, U.S. Department of Justice, 325 Seventh
[[Page 16033]]
Street, NW, Suite 500, Washington, DC 20530.
FAX: 202/307-2784
Dear Mr. Fones: The purpose of this letter is to request that
you conduct further investigation of the Cargill-Continental Grain
sale and that you extend the comment deadline for another sixty
days.
The creation of a larger monopoly will not only depress grain
prices further in this country, but also be detrimental to all
consumers.
Monopolies always create higher prices for the consuming public.
They create even lower prices for those who must sell their
commodities to the monopolies. Grain prices are already far below
break-even.
Farmers are going broke in our state at an alarming rate. Across
the U.S., farm income is down by 70%. Depressed prices are ruining
not only farmers but all small-town businesses. I urge you to
conduct a more thorough investigation into the Cargill/Continental
Sale before submitting a final judgment on this.
Please give this your serious consideration.
Sincerely,
Gerald Luin.
Litchfield, MN
Roger W. Fones: Please do not let Cargill merge with
Continental. Cargill is the most disliked name in Agriculture.
Cargill don't respect other businesses. It thinks of Cargill's
bottom line only. They are making massive amounts of money on
farmers. In the mean time farmers are making record low profits.
USDA census reports 50% of farmers in the U.S. are making a profit
and 50% are not. They flood the market with livestock. I would
rather see farmers produce the livestock. Wouldn't you? When I drive
around my county I see empty livestock facilities everywhere. Rural
America is getting very ugly. It is very depressing.
Cargill also imports grain into the U.S. which floods our
markets and this lower our prices. Cargill is giving up in South
America to buy grain down there to flood the world with more grain.
I know a very reputable grain elevator owner. He is furious with
Cargill. He sells his grain to loading facilities on the river. He
is faced to sell most of his grain to Cargill because of lack of
competition. Cargill treats this elevator owner very poorly. Cargill
close at 3:00, which doesn't allow much time to haul grain there 70
miles away. There was also a problem with the size of the trucks he
uses. They don't want him hauling there anymore. They are simply
disrespectful people.
Farmers could buy chicken manure from a large complex here.
Cargill moved in and bought up all the manure and are not doubling
the price for the manure. I am an organic farmer. I need to
stockpile manure for six months. I called Cargill to see if I could
pick it up myself and they said no.
Cargill also got into the scrap metal industry recently. The
scrap prices dropped to record low levels. Both of our scrap metal
buyers are going out of business in one year. Is there a connection?
I tried to buy a bag of salt and without the Cargill name on it.
Six out of eight businesses sold Cargill band salt in my town.
We heard that other countries get very poor quality grain from
Cargill. These countries would like to try farmer direct to get
better quality. We've tried to do that, but the facilities would not
allow that. We need public facilities. Could the government buy
Continental Grain? Cargill also has a negative impact on government
for farmers.
This company is getting too big. It doesn't respect other people
in business. There is a lot of people trying to make a living in
this country. It is unfair to let the big get bigger and the small
independents get swept under the rug.
I will not do business with Cargill, and I know many other
people who also will not.
It's time to realize bigness is hurting independent business in
this country. This is making rural US.
Please think PEOPLE BEFORE MONEY. It's time to regulate how big
a company can get. It's our responsibility to secure our future for
he young people who want to be independent.
Thank you for reading my letter. Please do the right thing.
Sincerely,
Scott D. Anderson.
Mr. Roger Fones, Chief, Transportation, Energy & Agriculture,
Antitrust Division, US Dept. of Justice, 325 Seventh Street, NW,
#500, Washington, DC 20530.
Re: Final Judgment on Cargill's proposed purchase of Continental
Grain
Dear Mr. Fones: We are very opposed to this purchase! It will
less competition and decrease prices for farmers. This is bad for
all farmers who are not large agri businesses. We ask you to deny
this purchase.
Rosie Seymour,
Superior WI 54880
Bob,
Superior WI 54880
Michael C. Cramey,
Foxboro, WI 54836
Connie M. Cramey,
Chaffey Rd, Foxboro WI 54836
Laura Cenley,
Superior, WI 54880
Janice Watten,
Duluth, MN 55805
Carol Stevens,
Superior, WI 54880
Dear Mr. Roger Fones: As an independent agricultural producer, I
strongly urge you to conduct a more thorough investigation of the
Cargill/Continental Grain sale. Please extend the public comment
period for another sixty days.
Sincerely,
[no signature]
[FR Doc. 00-4591 Filed 3-23-00; 8:45 am]
BILLING CODE 4410-11-M