Alliance drafts letter to block Tyson deal

Merger forms monopoly, group says

A coalition of more than 80 trade organizations and faith-based groups are lobbying the U.S. Department of Justice to block the pending Tyson Foods Inc. acquisition of Hillshire Brands.

Opponents of the merger, in a letter sent Thursday, expressed concern that if the deal goes through, it would "substantially lessen competition or tend to create a monopoly" as outlined by the Clayton Antitrust Act. Having one company control so much of the meat and poultry markets would negatively affect consumers and farmers.

Among the issues addressed in the three-page letter signed by groups including Farm Aid and the Missouri's Best Beef Cooperative, are the impact that the merger would have on customer choices and pricing, the increased buying power for Tyson when negotiating with farmers and the undermining of rival slaughterhouses.

Bill Bullard, chief executive officer of trade group R-CALF United Stockgrowers of America, said Tyson -- which has reported more than $35 billion in annual sales -- is already exerting too much power in the marketplace.

Tyson announced July 2 that it had reached a definitive agreement to purchase all outstanding shares of Hillshire in a deal valued at $8.55 billion. Also part of the offer was Tyson agreeing to pay Pinnacle Foods $163 million to terminate a pending merger with Hillshire.

Opponents are concerned by the size of the two companies. Tyson is the largest meat and poultry company in the United States, and Hillshire is ranked 11th.

"Tyson is already an oligopoly in the marketplace and capable of asserting abusive market power on family farmers and ranchers and consumers," Bullard said. "We believe these companies have gotten so big that they can exploit producers at the supply end as well as consumers on purchasing end."

A Tyson spokesman said via email that the company had no comment on the letter. Tyson did not respond to a follow-up question on when the company expected a decision from the Department of Justice.

Food & Water Watch, a watchdog group focused on government regulation of food, water and fish production, helped organize the letter to the Department of Justice. Patrick Woodall, research director for the organization, said the timetable for the review was set for 14 days. The group's hope is that the federal agency will consider a second request for information from the companies and delay approval.

"We're hopeful the Department of Justice will hear the call to extend this merger review and not rubber stamp a giant merger between the nation's most powerful meat and poultry company and a very significant meat processing company. It warrants significant scrutiny."

How effective the fight will be is unclear to those involved. Organizers said the letter is merely part of a campaign to raise awareness and protest the merger.

"This is an ongoing conversation between family farmers and organizations advocating for them with the Department of Justice, the USDA and others," said Alicia Harvie, program manager for Farm Aid. "We've seen a real erosion of enforcement. What this letter does is send a signal we are paying attention. It's about constant vigilance."

A similar effort was organized in 2008 and the Department of Justice stopped JBS's attempt at acquiring National Beef Packing Company LLC. JBS was allowed to purchase Smithfield Beef Group Inc.

Attorneys general in 17 states joined the fight to block JBS from acquiring National Beef. Requests for similar involvement from attorneys general is ongoing, Bullard said.

It is also likely opponents of the merger will ask the Senate Judiciary Committee to conduct hearings into whether antitrust laws are being broken. A lawsuit against Tyson also is a possible step, Bullard said.

"There are other options," Bullard said. "We have not yet decided to pursue litigation, but we certainly will evaluate ways to enforce the law. We are concerned with these companies getting so big."

Business on 07/25/2014

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