Klobuchar: “The take-away message should be clear—a concentrated food supply chain is a vulnerable food supply chain”

WASHINGTON - At a Judiciary Committee hearing titled “Beefing up Competition: Examining America’s Food Supply Chain,” U.S. Senator Amy Klobuchar (D-MN), Chairwoman of the Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights, emphasized the need for increased competition in America’s food supply chain. 

The full transcript of remarks as given below and video available for TV download HERE and online viewing HERE.

Thank you very much, Chairman Durbin, Senator Grassley. Thank you for holding this hearing. As many of you know, Senator Lee and I have been conducting, as mentioned by the Chairman, a series of hearings in our subcommittee, examining the broad scope of America's monopoly problem, and today we are glad to explore the competition issues in the food supply chain.

The COVID-19 pandemic painfully exposed some of the inherent risks to our food supply chain resulting from such high levels of industry consolidation. 

As the spread of the virus forced closures at major meat packing facilities, for example, livestock producers were left with no willing buyers for their livestock. And due to consolidation in the meat processing industry, there weren’t really alternatives. The result for consumers was inflated retail prices for beef and pork products, and in some areas empty meat cases. 

Of course, COVID-19 has had devastating effects on many industries, but in the meat industry, those effects were exacerbated by the lack of competition up and down the supply chain. The take-away message should be clear—a concentrated food supply chain is a vulnerable food supply chain. 

And although meat products are back in supermarket meat cases and major meat packing facilities have resumed operation, the long-standing structural problems with our meat supply chain remain. Four companies, as noted by my colleagues, control more than 80 percent of beef processing; four companies control 70 percent of pork processing. 

That is why livestock producers are as concerned as ever about market consolidation and market power in the meat supply chain. This is especially true for independent livestock producers, who have seen their margins dwindle, as they are forced to sell at depressed prices and on unfavorable terms.

But we cannot just look at meat processors in isolation. Further down the supply chain, there are concerns about large retailers exerting buyer power to suppress product pricing from meat suppliers, putting pressure on wholesalers, packers, and livestock producers. According to the Open Markets Institute approximately 65 percent of grocery sales are controlled by the top four grocery companies nationwide—and that percentage can be much higher in local markets. 

Such retailer buyer power risks compromising independent retailers’ access to meat supply and other supply during times of market disruption and limits consumers' potential retail choices. It also risks harming livestock producers, food production workers, and the rural communities in which they live and work, as large national retailers capture a larger share of what consumers spend on products. 

We are focused on meat in this hearing, but it is important to point out that we have excessive consolidation and competition problems throughout our food supply chain. In addition to meat processing and retailing, we have seen a handful of large companies dominating food-related markets, such as corn and soybean seeds, fertilizer, pest control, farm equipment, food distribution, and food manufacturing. 

According to the American Antitrust Institute, only a small fraction of the 1,300 mergers in the food processing, manufacturing, and distribution sectors were challenged by the government, and the rate of agency Second Requests for mergers in these sectors have been steadily declining. 

So the meat issue is part of a larger problem. Monopoly and monopsony power exists up and down the food supply chain. 

If you look at history—at the Granger movement's fight against monopolies after the Civil War—competition issues in the farm and food economy are a big part of why we have antitrust laws in the first place. In fact, it was Senator Grassley's home state -- he wasn’t there after the Civil War, I just, okay -- it was Senator Grassley’s home state, Iowa, that passed the first state antitrust law in 1888 in large part to address concerns from farmers and livestock producers. And yet here we are today, still talking about the serious competition problems in our food supply chain. 

The antitrust division's ongoing prosecution against criminal price fixing in the poultry industry and its investigation into potential anticompetitive practices in the highly-concentrated beef processing industry are clear signs that consolidation in these markets is causing harm. 

As Chair of the Senate Competition Policy Subcommittee, I’ve been pushing for greater antitrust enforcement across the board and that’s why the bill Senator Grassley and I have—the Merger Filing Fee Modernization Act—is so important. Our enforcers need the resources. I thank this Committee for passing it through and it passed the Senate and is now awaiting action in the House. 

Secondly, the Competition and Antitrust Law Enforcement Reform Act would make sweeping changes. Many others, on both sides of the aisle, have been working on this issue so to me, this is the tip of the iceberg. But we’re very pleased to have this hearing today. Thank you, Mr. Chair. 

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