II 110th CONGRESS 1st Session S. 1759 IN THE SENATE OF THE UNITED STATES July 10, 2007 Mr. Grassley (for himself, Mr. Kohl, and Mr. Thune) introduced the following bill; which was read twice and referred to the Committee on the Judiciary A BILL To provide for the review of agricultural mergers and acquisitions by the Department of Justice, and for other purposes.

1.

Short title

This Act may be cited as the Agriculture Competition Enhancement Act of 2007.

2.

Definitions

In this Act: (1)

Agricultural commodity

The term agricultural commodity has the meaning given that term in section 102 of the Agricultural Trade Act of 1978 (7 U.S.C. 5602). (2)

Agricultural cooperative

The term agricultural cooperative means an association of persons that meets the requirements of the Capper-Volstead Act (7 U.S.C. 291 et seq.). (3)

Agricultural industry

The term agricultural industry means any dealer, processor, commission merchant, or broker involved in the buying or selling of agricultural commodities. (4)

Antitrust laws

The term antitrust laws has the meaning given that term in the first section of the Clayton Act (15 U.S.C. 12). (5)

Assistant Attorney General

The term Assistant Attorney General means the Assistant Attorney General in charge of the Antitrust Division of the Department of Justice. (6)

Broker

The term broker means any person (excluding an agricultural cooperative) engaged in the business of negotiating sales and purchases of any agricultural commodity in commerce for or on behalf of the vendor or the purchaser. (7)

Chairman

The term Chairman means the Chairman of the Federal Trade Commission. (8)

Commission merchant

The term commission merchant means any person (excluding an agricultural cooperative) engaged in the business of receiving in commerce any agricultural commodity for sale, on commission, or for or on behalf of another. (9)

Dealer

The term dealer means any person (excluding an agricultural cooperative) engaged in the business of buying, selling, or marketing agricultural commodities in commerce, except that no person shall be considered a dealer with respect to sales or marketing of any agricultural commodity produced by that person. (10)

Processor

The term processor means any person (excluding an agricultural cooperative) engaged in the business of handling, preparing, or manufacturing (including slaughtering) an agricultural commodity, or the products of such agricultural commodity, for sale or marketing in commerce for human consumption (excluding sale or marketing at the retail level). (11)

Secretary

The term Secretary means the Secretary of Agriculture. (12)

Special Counsel

The term Special Counsel means the Special Counsel for Competition Matters of the Department of Agriculture established under section 8. (13)

Task force

The term Task Force means the Agriculture Competition Task Force established under section 4.

3.

Deputy Assistant Attorney General for Agricultural Antitrust Matters

There is in the Antitrust Division of the Department of Justice a Deputy Assistant Attorney General for Agricultural Antitrust Matters, who shall— (1)be responsible for oversight and coordination of antitrust and related matters which affect agriculture, directly or indirectly; and (2)work in coordination with the Task Force and the Department of Agriculture on all agricultural competition matters.

4.

Agriculture competition task force

(a)

Establishment

There is established, under the authority of the Attorney General, the Agriculture Competition Task Force, to examine problems in agricultural competition. (b)

Membership

The Task Force shall consist of— (1)the Deputy Assistant Attorney General for Agricultural Antitrust Matters, who shall serve as chairperson of the Task Force; (2)the Special Counsel; (3)a representative from the Federal Trade Commission; (4)a representative from the Department of Agriculture, Office of Packers and Stockyards; (5)2 representatives selected jointly by the attorneys general of States desiring to participate in the Task Force; (6)2 representatives selected jointly by the heads of the departments of agriculture (or similar such agency) of States desiring to participate in the Task Force; (7)4 individuals who represent the interests of small family farmers, ranchers, and independent producers— (A)1 of whom shall be selected by the Majority Leader of the Senate; (B)1 of whom shall be selected by the Minority Leader of the Senate; (C)1 of whom shall be selected by the Speaker of the House of Representatives; and (D)1 of whom shall be selected by the Minority Leader of the House of Representatives; and (8)8 academics or other independent experts working in the field of agriculture, agricultural law, antitrust law, or economics— (A)2 of whom shall be selected by the Majority Leader of the Senate; (B)2 of whom shall be selected by the Minority Leader of the Senate; (C)2 of whom shall be selected by the Speaker of the House of Representatives; and (D)2 of whom shall be selected by the Minority Leader of the House of Representatives. (c)

Duties

The Task Force shall— (1)investigate problems in competition in the agricultural industry; (2)define and focus the national public interest in preserving an independent family farm and ranch sector; (3)coordinate Federal and State activities to address unfair and deceptive practices and concentration in the agricultural industry; (4)work with representatives from agriculture and rural communities to identify abusive practices in the agricultural industry; (5)submit to Congress such reports as the Task Force determines on the state of family farmers and ranchers, and the impact of agricultural concentration and unfair business practices on rural communities in the United States; and (6)make such recommendations to Congress as the Task Force determines on agricultural competition issues. (d)

Working group

(1)

In general

The Task Force shall establish a working group on buyer power to— (A)study the effects of concentration, monopsony, and oligopsony in agriculture, make recommendations to the Assistant Attorney General and the Chairman, and assist the Assistant Attorney General and the Chairman in drafting agricultural guidelines under section 6(b); and (B)select certain agricultural mergers and acquisitions that were consummated within the past 10 years, review the effects of such mergers and acquisitions on competition in agricultural commodities markets, and make recommendations to the Assistant Attorney General, the Chairman, and the Secretary. (2)

Members

The working group shall include any member of the Task Force selected under subsection (b)(8). (e)

Meetings

(1)

First meeting

The Task Force shall hold its initial meeting not later than the later of— (A)90 days after the date of enactment of this Act; and (B)30 days after the date of enactment of an Act making appropriations to carry out this section. (2)

Minimum number

The Task Force shall meet not less than 3 times each year, at the call of the chairperson. (f)

Compensation

(1)

In general

The members of the Task Force shall serve without compensation. (2)

Travel expenses

Members of the Task Force shall receive travel expenses, including per diem in lieu of subsistence, in accordance with subchapter I of chapter 57 of title 5, United States Code. (g)

Staff of Task Force; experts and consultants

(1)

Staff

(A)

Appointment

The chairperson of the Task Force may, without regard to the provisions of chapter 51 of title 5 of the United States Code (relating to appointments in the competitive service), appoint and terminate an executive director and such other staff as are necessary to enable the Task Force to perform its duties. The appointment of an executive director shall be subject to approval by the Task Force. (B)

Compensation

The chairperson of the Task Force may fix the compensation of the executive director and other staff without regard to the provisions of chapter 51 and subchapter III of chapter 53 of title 5 of the United States Code (relating to classification of positions and General Schedule pay rates), except that the rate of pay for the executive director and other staff may not exceed the rate of basic pay payable for level V of the Executive Schedule under section 5315 of title 5 United States Code, as in effect from time to time. (2)

Experts and consultants

The Task Force may procure temporary and intermittent services of experts and consultants in accordance with section 3109(b) of title 5, United States Code. (h)

Powers of the Task Force

(1)

Hearings and meetings

The Task Force, or a member of the Task Force if authorized by the Task Force, may hold such hearings, sit and act at such time and places, take such testimony, receive such evidence, and administer such oaths or affirmations as the Task Force considers to be appropriate. (2)

Official data

The Task Force may obtain directly from any executive agency (as defined in section 105 of title 5 of the United States Code) or court information necessary to enable it to carry out its duties under this section. On the request of the chairperson of the Task Force, and consistent with any other law, the head of an executive agency or of a Federal court shall provide such information to the Task Force. (3)

Facilities and support services

The Administrator of General Services shall provide to the Task Force on a reimbursable basis such facilities and support services as the Task Force may request. On request of the Task Force, the head of an executive agency may make any of the facilities or services of such agency available to the Task Force, on a reimbursable or nonreimbursable basis, to assist the Task Force in carrying out its duties under this section. (4)

Expenditures and contracts

The Task Force or, on authorization of the Task Force, a member of the Task Force may make expenditures and enter into contracts for the procurement of such supplies, services, and property as the Task Force or such member considers to be appropriate for the purpose of carrying out the duties of the Task Force. Such expenditures and contracts may be made only to such extent or in such amounts as are provided in advance in appropriation Acts. (5)

Mails

The Task Force may use the United States mails in the same manner and under the same conditions as other departments and agencies of the United States. (6)

Gifts, bequests, and devises

The Task Force may accept, use, and dispose of gifts, bequests, or devises of services or property, both real and personal, for the purpose of aiding or facilitating the work of the Task Force. Gifts, bequests, or devises of money and proceeds from sales of other property received as gifts, bequests, or devises shall be deposited in the Treasury and shall be available for disbursement upon order of the Task Force. (i)

Authorization of appropriations

There are authorized to be appropriated to carry out this section $1,000,000 for each of fiscal years 2008, 2009, and 2010.

5.

Authorization for additional staff and funding

There are authorized to be appropriated such sums as are necessary to hire additional employees (including agricultural law and economics experts) for the Transportation, Energy, and Agriculture Section of the Antitrust Division of the Department of Justice, to enhance the review of agricultural transactions and monitor, investigate, and prosecute unfair and deceptive practices in the agricultural industry.

6.

Ensuring full and free competition in agriculture

(a)

Burden of proof

Section 7 of the Clayton Act (15 U.S.C. 18) is amended by adding at the end the following: “In this paragraph, the term ‘covered civil action’ means a civil action brought against any person for violating this section in which the plaintiff alleges that the effect of a merger, acquisition, or other transaction affecting commerce may be to substantially lessen competition, or to tend to create a monopoly, in the business of procuring agricultural products from, or selling products to, agricultural producers in one or more geographic areas, and establishes that a merger, acquisition, or transaction is between or involves persons competing in the business of procuring agricultural products from, or selling products to, agricultural producers. In any covered civil action— (A)if the plaintiff is the Federal Government or a State government, the burden of proof shall be on the defendant or defendants to establish by a preponderance of the evidence that the merger, acquisition, or transaction at issue will not— (i)substantially lessen competition; or (ii)tend to create a monopoly in 1 or more geographic markets; and (B)for any other plaintiff, if the plaintiff demonstrates that the parties to the merger, acquisition, or other transaction have a combined market share of not less than 20 percent in any relevant market, the burden of proof shall be on the defendant or defendants to establish by a preponderance of the evidence that the merger, acquisition, or transaction at issue will not— (i)substantially lessen competition; or (ii)tend to create a monopoly in 1 or more geographic markets. . (b)

Agricultural guidelines

(1)

Findings

Congress finds the following: (A)The effective enforcement of the antitrust laws in agriculture requires that the antitrust enforcement agencies have guidelines with respect to mergers and other anticompetitive conduct that are properly adapted to the special circumstances of agricultural commodity markets. (B)There has been a substantial increase in concentration in the markets in which agricultural commodities are sold, with the result that buyers of agricultural commodities often possess regional dominance in the form of oligopsony or monopsony relative to sellers of such commodities. A substantial part of this increase in market concentration is the direct result of mergers and acquisitions that the antitrust enforcement agencies did not challenge, in large part because of the lack of appropriate guidelines identifying particular structural characteristics in the agricultural industry and the adverse competitive effects that such acquisitions and mergers would create. (C)The cost of transportation, impact on quality, and delay in sales of agricultural commodities if they are to be transported to more distant buyers result in narrow geographic markets with respect to buyer power. (D)Buyers have no economic incentive to bid up the price of agricultural commodities in the absence of effective competition. Further, the nature of buying makes it feasible for larger numbers of buyers to engage in tacit or overt collusion to restrain price competition. (E)Buyers with oligopsonistic or monopsonistic power have incentives to engage in unfair, exploitive, discriminatory, and exclusionary acts that cause producers of agricultural commodities to receive less than a competitive price for their goods, transfer economic risks to sellers without reasonable compensation, and exclude sellers from access to the market. (F)Markets for agricultural commodities often involve contexts in which many producers have relatively limited information and no bargaining power with respect to the sale of their commodities. These conditions invite buyers with significant oligopsonistic or monopsonistic power to exercise that power in ways that involve discrimination, exploitation, and undue differentiation among sellers. (G)Some Federal courts have incorrectly required a plaintiff to show harm to competition generally, in addition to harm to the producer of agricultural commodities when making a determination that an unfair, unjustly discriminatory, deceptive, or preferential act exists. Those same courts have also incorrectly held that it is a complete defense if a defendant can show any nonharmful justification for an act or practice, even though such conduct was not essential to the business activities of the defendant or there were less harmful ways to achieve a reasonably comparable result with respect to the legitimate and necessary interests of the defendant. (2)

Issuance of guidelines

The Assistant Attorney General and the Chairman, in consultation with the Special Counsel, shall issue agricultural guidelines informed and guided by the findings under paragraph (1) that— (A)facilitate a fair, open, accessible, transparent, and efficient market system for agricultural products; (B)reflect the national public interest in preserving a substantial and diverse family farm and ranch sector; (C)recognize that increasing competition in the purchase of agricultural products by highly concentrated firms from a sector in perfect competition is entirely consistent with the objective of the antitrust laws to protect consumers and enhance consumer benefits from competition; and (D)prevent any merger or acquisition in the agricultural industry, if the effect of that merger or acquisition may be to substantially lessen competition or tend to create a monopoly. (3)

Contents

The agricultural guidelines issued under paragraph (2) shall consist of merger guidelines relating to existing and potential competition and vertical integration that— (A)establish appropriate methodologies for determining the geographic and product markets for mergers affecting agricultural commodity markets; (B)establish thresholds of increased concentration that raise a presumption that the merger will have an adverse effect on competition in the affected agricultural commodities markets; (C)identify potential adverse competitive effects of mergers in agricultural commodities markets in a nonexclusive manner; and (D)identify the factors that would permit an enforcement agency to determine when a merger in the agricultural commodities market might avoid liability because it is not likely to have an adverse effect on competition. (c)

Agriculture competition task force working group on buying power

In issuing agricultural guidelines under this section, the Chairman and the Assistant Attorney General shall consult with the working group on buyer power of the Task Force established under section 4(d) and shall incorporate and implement the recommendations of that working group. (d)

Completion

Not later than 1 year after the date of enactment of this Act, the Chairman and the Assistant Attorney General shall issue agricultural guidelines under this section. (e)

Report

Not later than 1 year after the date of enactment of this Act, the Chairman and the Assistant Attorney General shall jointly submit a report to the Committee on the Judiciary of the Senate and the Committee on the Judiciary of the House of Representatives regarding the issuing of agricultural guidelines under this section.

7.

Post-merger review of agricultural transactions

(a)

In general

Not later than 5 years after the date of a covered merger or acquisition, the Assistant Attorney General or the Chairman, as the case may be, shall conduct a post-merger review to determine whether the effect of that covered merger or acquisition tended to substantially reduce competition in the agricultural industry. (b)

Sharing of results

The Assistant Attorney General or the Chairman shall submit the results of any post-merger review under subsection (a) to the Task Force, for its consideration in examining problems in agricultural competition. (c)

Definition

In this section, the term covered merger or acquisition means a merger or acquisition— (1)in the agricultural industry; (2)that is subject to the notification requirements under section 7A of the Clayton Act (15 U.S.C. 18a); (3)for which the Assistant Attorney General or the Chairman, as the case may be, required the submission of additional information or documentary material under section 7A(e)(1)(A) of the Clayton Act (15 U.S.C. 18a(e)(1)(A)); and (4)for which, after review under that section, the Assistant Attorney General or the Chairman, as the case may be— (A)did not institute a proceeding or action under the antitrust laws; or (B)instituted a proceeding or action under the antitrust laws that was resolved through a settlement agreement or consent decree.

8.

Special Counsel for Competition Matters

(a)

In general

There is established within the Department of Agriculture the Office of Competition and Fair Practices, headed by a Special Counsel for Competition Matters. (b)

Duties

The Special Counsel shall— (1)analyze mergers within the food and agricultural sectors, in consultation with the Chief Economist of the Department of Agriculture, the Assistant Attorney General, and the Chairman, as required under section 9; and (2)investigate and prosecute violations of the Packers and Stockyards Act, 1921 (7 U.S.C. 181 et seq.). (c)

Authorization for additional staff and funding

(1)

Additional staff

The Special Counsel shall hire sufficient employees (including antitrust and litigation attorneys, economists, and investigators) to appropriately carry out the responsibilities of the Office of Competition and Fair Practices under this Act. (2)

Authorization

There are authorized to be appropriated such sums as are necessary to carry out paragraph (1).

9.

Agribusiness merger review and enforcement by the Department of Agriculture

(a)

Notice

The Assistant Attorney General or the Commissioner, as appropriate, shall notify the Secretary of any filing under section 7A of the Clayton Act (15 U.S.C. 18a) involving a merger or acquisition in the agricultural industry, and shall give the Secretary the opportunity to participate in the review proceedings. (b)

Review

(1)

In general

After receiving notice of a merger or acquisition under subsection (a), the Secretary may submit to the Assistant Attorney General or the Commissioner, as appropriate, and publish the comments of the Secretary regarding that merger or acquisition, including a determination regarding whether the merger or acquisition may have a substantial adverse impact on rural communities or the family farm and ranch sector, such that further review by the Assistant Attorney General or the Commissioner, as appropriate, is warranted. (2)

Second requests

For any merger or acquisition described in subsection (a), if the Assistant Attorney General or the Chairman, as the case may be, requires the submission of additional information or documentary material under section 7A(e)(1)(A) of the Clayton Act (15 U.S.C. 18a(e)(1)(A))— (A)copies of any materials provided in response to such a request shall be made available to the Secretary; and (B)the Secretary— (i)shall submit to the Assistant Attorney General or the Chairman such additional comments as the Secretary determines appropriate; and (ii)shall publish a summary of any comments submitted under clause (i). (c)

Report

(1)

In general

The Secretary shall submit an annual report to Congress regarding the review of mergers and acquisitions described in subsection (a). (2)

Contents

Each report submitted under paragraph (1) shall provide a description of each merger or acquisition described in subsection (a) that was reviewed by the Secretary during the year before the date that report is submitted, including— (A)the name and total resources of each entity involved in that merger or acquisition; (B)a statement of the views of the Secretary regarding the competitive effects of that merger or acquisition on— (i)agricultural markets; and (ii)rural communities and small, independent producers; and (C)a statement indicating whether the Assistant Attorney General or the Chairman, as the case may be, instituted a proceeding or action under the antitrust laws, and if so, the status of that proceeding or action.

10.

Authorization for additional staff and funding for the grain inspection, packers, and stockyards administration

There are authorized to be appropriated such sums as are necessary to enhance the capability of the Grain Inspection, Packers, and Stockyards Administration to monitor, investigate, and pursue the competitive implications of structural changes in the meat packing and poultry industries by hiring litigating attorneys to allow the Grain Inspection, Packers, and Stockyards Administration to more comprehensively and effectively pursue its enforcement activities.