The Beef with Big Meat: Meatpacking and Antitrust in America's Heartland

Article excerpt

The twenty-first century has seen dramatic changes in America's food system. Since the 1920s, however, the landscape of the meatpacking industry has changed very little. In 1919, the Federal Trade Commission ("FTC") found the five major meatpacking companies controlled around fifty-five percent of the market. Congress responded to the FTC's findings with the Packers and Stockyards Act in 1921. Despite the Act, agricultural antitrust laws have remained largely unenforced, and today, America has an even higher degree of concentration within the meatpacking industry. This concentration, in addition to increased vertical integration, forward livestock contracts, and a lack of government intervention, has led to the widespread conclusion that the largest packers' influence over the market is far too strong, and the market is not functioning competitively. Traditionally, the belief has been that only the federal government can solve the anticompetitive environment in the meatpacking industry. While this issue must be addressed at the federal level to dismantle the packer strongholds, state authorities, local authorities, and individual consumers can act to enhance competition, as each wields considerable power to be an effective part of the solution.

I. INTRODUCTION

The number of Americans participating in farming and ranching has dropped from twenty-five percent in the early twentieth century to only two percent as of the 1990s. (1) Most Americans do not know where their food comes from or how it is produced. (2) With the advent of modern technology and increased governmental activity in commercial agriculture, determining where our food originates has become simultaneously easier and more difficult. (3) While nearly impossible to pinpoint which ranch raised the cow that became a grocery store steak, it has become significantly easier to figure out which meatpacker processed that cow and transported it to the local grocery store. (4)

Since the beginning of the twentieth century, the United States meatpacking industry has consistently become more concentrated. (5) In the 1920s, five packing companies controlled fifty-five percent of the market. (6) Today, four companies, in varying combinations, control more than eighty-three percent of the beef industry, sixty-six percent of the pork industry, and approximately fifty-five percent of the poultry industry. (7) The ongoing, and unrestrained, consolidation of the meatpacking industry has contributed to the increasingly high degree of concentration within the industry. (8) Additionally, more companies are now vertically integrating in order to control all aspects of production, from the animal on the farm to the packaged steak on display at the deli counter. (9) This integration has led to a larger number of forward-contracted and packer-owned livestock, which has in turn diminished the livestock cash market. (10) Due to a lack of government tools and support to deal with the consolidation, many experts believe America has had a serious problem for decades, a problem that is growing rapidly. (11)

Because of its volatility, many ranchers have real incentive to leave the cash market and enter into forward contracts where they gain profitable and timely access to the marketplace. (12) When only a few packers control a large percentage of the industry, however, those few companies can then theoretically dominate and manipulate the market in ways that are most profitable to them. (13) Because ranching is one of South Dakota's leading industries, these issues are particularly relevant to this state. (14) In South Dakota, ninety-eight percent of the farms are family owned and operated, and the average size of that family-owned farm is 1374 acres. (15) Over 2500 farms in the state have been in the same family for more than one hundred years. (16) Small-scale family farming is the "life-blood" of the state, and protecting" that tradition is a priority for the South Dakota Department of Agriculture. …