Legal News

Next Stop for Trust-Busters: The Beef Industry

By Dan Slater

Antitrust watchers, you can now add beef to your list of eggs, tomato products, cheese, milk and citrus fruit.

With food prices on the rise, the DOJ, along with 13 states, has challenged an acquisition of a U.S. beef company by one of the world’s largest beef producers, Brazil-based JBS. In a suit filed yesterday in Chicago federal court, the DOJ, according to this WSJ report, claims that JBS’s planned $560 million acquisition of National Beef would lead to higher prices in restaurants and on grocery shelves, while pushing down prices paid to ranchers for cattle.

In March, JBS announced a $1.1 billion expansion into the U.S. beef market. (The DOJ said it won’t challenge JBS’s other U.S. acquisition — a $565 million deal for Smithfield Foods).

“The deals would have taken the U.S. beef market from five significant competitors to three, accounting for 80% of the fed cattle in the U.S.,” said Thomas Barnett (pictured), the DOJ’s antitrust chief. JBS is currently ranked third in the U.S. beef-processing business, behind Tyson Foods Inc. and Cargill Corp. In its press release, the DOJ claims that, if not blocked, JBS’s acquisition of National would make it the largest U.S. beef packer, with an ability to slaughter more than 40,000 head of cattle per day (or more than one third of U.S. fed cattle packing capacity) and annual sales of more than $14 billion.

A JBS spokesman told the WSJ, “We’re disappointed about the decision to block our acquisition of National Beef and we’ll rise to its defense.”

Full post as published by Law Blog - WSJ.com on October 21, 2008 (boomark / email).