Time to bust the meat trust

The high prices that have consumers in an uproar trace back to consolidated power in the food industry

• Ted Genoways

Americans are spending a greater portion of their income on food than they have in decades. In the past few months, the growing outrage over price hikes has been expressed in a spate of lawsuits by mega-retailers — most recently, McDonald’s — against giant meat producers, accusing them of price-fixing and other monopolistic practices. But even if those lawsuits are settled, it won’t be enough to bring prices at restaurants or grocery stores back in line. Domestic cartels have a stranglehold on what we eat unlike anything we’ve seen in more than a century, and the federal government needs to enforce antitrust laws to break them up.

The origins of the current rise in food prices seem obvious enough: The Covid-19 pandemic caused labor shortages and supply-chain disruptions that drove up the cost of production. The price of meat, dairy and eggs rose especially sharply, but many shoppers, often reluctant to risk contracting the virus by bargain-hunting, simply paid up. As the pandemic subsided, the supply chain returned to normal — but costs at the drive-through and checkout aisle didn’t come down.

Economists often describe food prices as “sticky.” Once they go up, they tend to stay up. Even when prices level off, food producers often increase their profit margins by charging the same price for a slightly smaller product. That practice is known as “shrinkflation,” and President Joe Biden denounced it in his State of the Union address in February.

After becoming the Democratic presidential nominee, Vice President Kamala Harris vowed to do more than simply scold food producers. In a campaign statement in August, she promised that the first 100 days of her administration would include the “first-ever federal ban on price-gouging on food and groceries.”

To accomplish this, Harris said her administration would give the Federal Trade Commission authority to investigate and levy new penalties on food companies that profit unduly from market consolidation, reduced competition and unfair pricing. She also promised to crack down on middlemen, such as large grocery store chains.

The food industry was predictably upset. “The proposal calling for a ban on grocery price gouging is a solution in search of a problem,” said Greg Ferrara, president and chief executive of the National Grocers Association. He blamed “anticompetitive behaviors” of big-box retailers and large suppliers, and argued that the federal government should simply enforce existing antitrust legislation.

It’s a valid point. And nowhere is this more apparent than in the meat industry.

In June 2020, as pandemic prices were reaching a peak, the Justice Department revealed that top executives at chicken processors Pilgrim’s Pride and Claxton Poultry Farms had been indicted on charges of conspiring to fix prices in violation of federal antitrust laws. (Tyson Foods had agreed to cooperate with the investigators in return for immunity from prosecution.) Next, the department issued civil subpoenas to “The Big Four” beef processors — JBS, Tyson, Cargill, and National Beef — seeking information about possible collusion in that market as well. JBS and Tyson were also asked to produce documents related to their pork-processing plants. With the Big Four under investigation, I wrote at the time, there seemed a real chance of reestablishing a “fair and transparent” marketplace with lower costs for consumers.

It didn’t happen.

Instead, after posting record revenue in 2021 (up more than 60 percent from 2014), JBS reached a $52.5 million settlement with the Justice Department in February 2022, before the department had even concluded its investigation. In the months that followed, a jury in Colorado acquitted some of the executives from Pilgrim’s Pride, a subsidiary of JBS, and the government was forced to drop charges against the others after a federal court severely limited the evidence that the government could present in its case.

The prices of chicken and ground beef have continued to skyrocket — both over 30 percent higher now than they were at the outset of the pandemic in March 2020. The prices are so much higher that a stunning array of the meatpackers’ business partners have fought back. In recent months, major distributors Sysco and Sodexo, big-box retailers Target and BJ’s Wholesale Club, and grocery store chains Kroger and Aldi have all filed suit against the Big Four, alleging price-fixing and collusion. Just this month, burger giant McDonald’s filed its own lawsuit against JBS, Tyson, Cargill, and National Beef, claiming that the meatpackers “collude with seeming impunity,” collectively increasing or decreasing their production to keep prices high. Cargill has responded to several lawsuits by saying it is “confident in our efforts to maintain market integrity and conduct ethical business.” The other companies typically don’t comment at all.

If Kamala Harris hopes to bring down prices at the checkout in Kroger and the drive-through at McDonald’s, it will not be enough to ask the Justice Department to enter into settlements for anticompetitive behavior or empower the FTC to impose new fines. The meat industry is now more consolidated than it was at the turn of the 20th century, when it was taken on by the muckraking writing of Upton Sinclair and the trustbusting reforms of Teddy Roosevelt. The Big Four are too big to rein in with threats of fines or additional oversight. They have molded federal policy to their bottom lines and view government fines as a cost of doing business.

We must use antitrust laws to break up the Big Four. As the McDonald’s lawsuit notes, “Conspiracies are easier to organize and sustain when only a few firms control a large share of the market.” The Packers and Stockyards Act, which was enacted in 1921 after big meatpackers were found to be price-gouging consumers amid the economic downturn following World War I, already forbids the kind of collusive behavior that McDonald’s and its fellow plaintiffs allege. The Justice Department must simply investigate those charges and enforce the law.

Breaking up the 21st-century meat trust would help to reestablish a competitive market that would benefit livestock producers, plant workers and businesses in each successive link of the supply chain. Most important, it would release consumers from the stranglehold that these big producers have on the meat we eat and the price we pay.