December 7, 2022

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Deputy Assistant Attorney General Michael Kades Delivers Keynote Address at the ABA Antitrust Fall Forum

9 min read
<div>Good morning, everyone. That kind introduction almost makes up for having to speak at this early hour – almost. Thank you for the opportunity to address the Antitrust Section of the American Bar Association.</div>

Remarks As Prepared for Delivery

Good morning, everyone. That kind introduction almost makes up for having to speak at this early hour – almost. Thank you for the opportunity to address the Antitrust Section of the American Bar Association.

On July 9, 2021, something unique, at least in my lifetime, happened. The President of the United States, Joseph Biden, gave a 15-minute speech on competition, the most powerful person in the world, the leader of the free world, focused on the importance of competition.

If you have not watched the speech, I encourage you to. The President spoke with passion about the issue and ended by signing an Executive Order on Competition.

I want to take a moment here to pause and put that in context. The speech and the Executive Order occurred within seven months of President Biden’s inauguration. It was roughly a year after the most dramatic racial protests – not seen in scale or scope since the late 1960s. It occurred just six months after the Jan. 6 attack on the U.S. Capitol. That is how important the issue of competition is. Although slightly less unique overall, but still unique for me is that we have an Attorney General, Merrick Garland, who is an antitrust expert. He brings a personal commitment and leadership to antitrust enforcement.

Taking a moment to appreciate how important that speech and the executive order are does not mean pearl clutching and hand ringing that current leadership at the Department (which would include me) is going to destroy an untouchable consensus that will wreak havoc on the economy. Nor does it mean a patronizing dismissal of the project as naïve. Nor does it mean cynically mispresenting the scope and purpose of the Executive to suggest that anyone believes that antitrust enforcement is a panacea that will single handedly solve all the problems America faces.

With panel titles describing competition policy as a staple gun, rulemaking as duct tape, and consumers being measured with a tape measure, one might think the Fall Forum’s Theme “Repairing the World with Antitrust – A Peek into the Toolbox” has an ironic double meaning. I want to make clear: I don’t. Maybe that is because I’m corny enough that, after 25 years, I still get chills when I see the US Capitol as I cross Pennsylvania Avenue. Maybe that is because I have the unique honor of going to work everyday with the most dedicated and talented civil servants – the staff of the Antitrust Division.

Instead, I take this Forum on its face as a thoughtful exploration of what this moment means for competition policy and antitrust enforcement specifically.

The Executive Order

The Executive Order embraces a whole-of-government Competition policy. It cites not just the antitrust laws for this basis. It discusses a litany of statutes from the Packers and Stockyards Act to the Hatch-Waxman Act to the Dodd-Frank Act. The Executive Order explains, “These statutes independently charge a number of executive departments and agencies (agencies) to protect conditions of fair competition,” and identifies over a dozen Departments and agencies with responsibility to promote competition.[1]

As the Executive Order makes clear, antitrust enforcement is a critical tool – to embrace the theme of today – but not the only one to promote competition in the economy. Therefore, responsibility for achieving that goal falls on the whole federal government, not just antitrust enforcement agencies. The Executive Order identifies a number of industries that raise concerns. It mentions Agriculture nine times. So, I want to focus on Agriculture and discuss the broader concerns, what has already occurred, and how the whole-of-government approach works in practice. I know “Ag” is not the cool kids table. But what is the point of having a table without food?

The Importance of Agriculture and Competition

Before I started at the Division, Assistant Attorney General Jonathan Kanter asked me what I wanted to work on. He might have expected me to say tech or health care – both issues I have expertise in and would surely be grabbing headlines during our time at the DOJ. I had a different idea in mind, though. My answer was simple: “Ag,” I told him, “I want to work on Ag.”

That choice was easy for me. Agriculture and family farming are the backbone of our economy. I’m proud to call Wisconsin home, and farming is central to my state’s way of life. Until recently, family dairy farms across the state supported not just generations of families, but countless small and mid-sized communities.

Every state’s economy runs on agriculture. For most of us in the room here today, most Americans would get by just fine if they never had to see a lawyer. Ever. In their whole life. But, as the saying goes, everybody needs a farmer – three times a day. As FDR put it: “Prosperous farmers mean more employment, more prosperity for the workers and businessmen of New England, and of every industrial area in the whole country.”[2]

Historically, competition policy has played a critical role in promoting that prosperity. More than a century ago, farmers were fed up. Monopolies were pressing them from all sides. So, the farmers stood up, joined together, fought back, and eventually helped secure the passage of major legislation, including the Sherman Act, creating a competitive, thriving industry – creating the very prosperity FDR sought to preserve.

Today’s Crisis in Rural America and the Crisis in Competition

But for rural America, the promise of prosperity is now elusive. Across the country, family farms are disappearing. In 2018, Wisconsin was losing, on average, just under two dairy farms a day.[3] The nation lost more than 100,000 farms between 2011 and 2018; 12,000 of those between 2017 and 2018 alone.[4] Once thriving small towns are shuttered and silent. The opioid crisis has devastated rural America.[5] And phrases like “the hollowing out of middle America” and “the politics of despair” are commonplace.

Although the challenges facing rural America go beyond competition – or the lack of it, we cannot discount the connection between the two. Concentration has returned with a vengeance in agriculture. Family farmers often face monopolies when buying supplies and equipment they need and face monopsonies when selling their crops and livestock.

The statistics are sobering, but they’re worth emphasizing. Four companies now control eighty-five percent of the corn seeds market.[6] Three manufacturers control ninety-five percent of equipment production and maintenance.[7] Four companies control over 80 percent of beef packing.[8] The list goes on and on.

Antitrust scholars and economists can debate the meaning and implications of consolidation and concentration until – pun intended – the cows come home. This speech is not about that debate; however, I want to make a more basic point. Once firms acquire market power, they often exploit it, and that exploitation can violate the antitrust laws. And, we are hearing complaints that raise those concerns.

Here are a few examples:

  • As I will discuss in a moment, there are concerns that poultry processors are depressing wages of their workers and limiting competition for contract growers;
  • Ranchers and academics are raising concerns that the markets for cattle no longer reflect competitive dynamics;
  • Others worry that seed companies with dominant positions may be using intellectual property to inappropriately forestall competition.

Recent Developments in Enforcement in Agriculture

This Antitrust Division’s focus on agriculture is beginning to yield results. This past summer, the Division brought suit alleging a wide-raging agreement among poultry processors to suppress the wages of their workers.[9]

According to the complaint, for at least 20 years, poultry processors that dominate local poultry employment markets across the country and employ more than 90 percent of all such workers in the United States, collaborated on and assisted each other with compensation decisions. Ultimately, the conspiracy gave the poultry processors the ability to suppress competition and lower compensation below the levels that would have prevailed in a competitive market.

We reached a consent decree with Cargill, Wayne Farms, and Sanderson. That decree is groundbreaking in a number of ways.

First, it requires the processors to pay restitution to the workers.

Second, the companies are subject to an expansive monitor. That monitor will examine the Settling Defendants’ compliance with both the terms of the proposed Final Judgment and U.S. federal antitrust laws generally. Further, that scope applies to the processors’ entire poultry businesses.

Third, the consent decree provides protections from retaliation for poultry processing workers and growers who raise concerns about potential antitrust violations.

Fourth, a related consent decree effectively shuts down an information sharing company that participated in the agreements and bans its president from participating in the industry.

DOJ is not alone in focusing on market power problems in the agricultural sector. Recently, the Federal Trade Commission and a group of state attorneys general filed a case alleging anticompetitive exclusionary conduct in the pesticide industry.[10] Many states are vigorously pursuing investigations into abuses in the agriculture sector – we are fortunate to partner with them in many of these investigations.

Cooperation Matters  

“Whole-of-government” is not a slogan, so let me talk about how it works in practice in the poultry industry. Chicken growers work on contract and are compensated through a tournament system. They do not own the chickens they raise. Instead, the processor delivers the chicks, provides the feed, and has control over things like veterinarian care. The growers have to invest hundreds of thousands of dollars in building chicken barns, investments that can put their land and livelihood at risk.

After six weeks or so, the processor picks up the chickens and weighs them. The growers’ compensation depends on how they perform relative to a set of other growers. Those who perform worse are penalized and part of that penalty funds the bonuses for high performers. Moreover, small differences in the quality of the chicks the growers receive, or the feed supplied by the processors can be the difference between “winning the tournament” or losing the farm – literally.

In the poultry case I discussed above, we also alleged Wayne Farms’s and Sanderson Farms’s tournament system violated the Packers and Stockyards Act. That act was passed in 1921 to provide livestock producers a broad range of protections from packers and (as later amended) chicken processors. Under the Act, the United States Department of Agriculture (USDA) can refer violations to the Department of Justice, which can then bring an enforcement action.

We worked with the USDA to identify and pursue violations. And, under the consent decree, both Wayne Farms and Sanderson Farms will stop penalizing growers and will provide better disclosures so that the growers understand the risks and benefits they face.

Our work with the USDA reflects President Biden’s Executive Order on enhancing competition and the Administration’s whole-of-government approach. This approach unlocked many doors to broader interagency efforts. We have launched a new joint USDA-DOJ Farmer Fairness portal.[11] It is a one-stop shop to allow farmers and workers to report violations of U.S. competition laws. It will allow the DOJ and USDA to cooperate earlier and more deeply on these enforcement matters.

One exciting recent opportunity I can share is the USDA has announced an Agricultural Competition Challenge,[12] in response to requests from state AGs for financial and enforcement cooperation on agricultural matters. We will be supporting the USDA in their effort and will be working with USDA and our state partners to make sure cooperation is as effective as possible.          

Finally, let me end with one last example of the whole-of-government approach. The USDA has dedicated over a billion dollars in American Rescue Plan[13] funds to expand meat- and poultry-processing capacity. This is not an antitrust solution to consolidation. The program’s goal is, nonetheless, partially to increase competition and reflects a policy choice about the benefits of competition that would not necessarily be the province of antitrust enforcement.

At the same time, that policy choice has implications for antitrust enforcement. If the government is seeking to reduce concentration in the meat packing oligopoly, the Antitrust Division has a responsibility to prevent and stop antitrust violations that would frustrate those goals.

As I said, I see today’s program as grappling with the antitrust moment at hand and a part of the constructive conversation flowing from the President’s Executive Order. I can only hope that my remarks have helped frame the issues being discussed and provided some insight for the discussions that will occur today.

Thank you for your time.

 


[1] White House, Executive Order on Promoting Competition in the American Economy, https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-competition-in-the-american-economy/.

[2] Franklin D. Roosevelt, Public Papers and Addresses of Franklin D. Roosevelt 521-22 (1940).

[6] Center for American Progress, A Fair Deal for Farmers (May 7, 2019), https://www.americanprogress.org/article/fair-deal-farmers/.

[7] Nat’l Farmers Union, Working to Fight the Monopoly Crisis in American Agriculture, https://nfu.org/fairness-for-farmers/#statistics.

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