[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
REVIVING COMPETITION, PART 5: ADDRESSING
THE EFFECTS OF ECONOMIC CONCENTRATION ON AMERICA'S FOOD SUPPLY
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON ANTITRUST, COMMERCIAL,
AND ADMINISTRATIVE LAW
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
SECOND SESSION
----------
WEDNESDAY, JANUARY 19, 2022
----------
Serial No. 117-48
----------
Printed for the use of the Committee on the Judiciary
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via: http://judiciary.house.gov
REVIVING COMPETITION, PART 5: ADDRESSING THE EFFECTS OF ECONOMIC
CONCENTRATION ON AMERICA'S FOOD SUPPLY
REVIVING COMPETITION, PART 5: ADDRESSING
THE EFFECTS OF ECONOMIC CONCENTRATION ON AMERICA'S FOOD SUPPLY
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON ANTITRUST, COMMERCIAL,
AND ADMINISTRATIVE LAW
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
SECOND SESSION
__________
WEDNESDAY, JANUARY 19, 2022
__________
Serial No. 117-48
__________
Printed for the use of the Committee on the Judiciary
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via: http://judiciary.house.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
48-713 WASHINGTON : 2022
COMMITTEE ON THE JUDICIARY
JERROLD NADLER, New York, Chair
MADELEINE DEAN, Pennsylvania, Vice-Chair
ZOE LOFGREN, California JIM JORDAN, Ohio, Ranking Member
SHEILA JACKSON LEE, Texas STEVE CHABOT, Ohio
STEVE COHEN, Tennessee LOUIE GOHMERT, Texas
HENRY C. ``HANK'' JOHNSON, Jr, DARREL ISSA, California
Georgia KEN BUCK, Colorado
THEODORE E. DEUTCH, Florida MATT GAETZ, Florida
KAREN BASS, California MIKE JOHNSON, Louisiana
HAKEEM S. JEFFRIES, New York ANDY BIGGS, Arizona
DAVID N. CICILLINE, Rhode Island TOM McCLINTOCK, California
ERIC SWALWELL, California W. GREGORY STEUBE, Florida
TED LIEU, California TOM TIFFANY, Wisconsin
JAMIE RASKIN, Maryland THOMAS MASSIE, Kentucky
PRAMILA JAYAPAL, Washington CHIP ROY, Texas
VAL BUTLER DEMINGS, Florida DAN BISHOP, North Carolina
J. LUIS CORREA, California MICHELLE FISCHBACH, Minnesota
MARY GAY SCANLON, Pennsylvania, VICTORIA SPARTZ, Indiana
SYLVIA R. GARCIA, Texas SCOTT FITZGERALD, Wisconsin
JOE NEGUSE, Colorado CLIFF BENTZ, Oregon
LUCY McBATH, Georgia BURGESS OWENS, Utah
GREG STANTON, Arizona
VERONICA ESCOBAR, Texas
MONDAIRE JONES, New York
DEBORAH ROSS, North Carolina
CORI BUSH, Missouri
AMY RUTKIN, Majority Staff Director and Chief of Staff
CHRISTOPHER HIXON, Minority Staff Director
------
SUBCOMMITTEE ON ANTITRUST, COMMERCIAL,
AND ADMINISTRATIVE LAW
DAVID N. CICILLINE, Rhode Island, Chair
PRAMILIA JAYAPAL, Washington, Vice-Chair
JOE NEGUSE, Colorado KEN BUCK, Colorado, Ranking Member
ERIC SWALWELL, California DARREL ISSA, California
MONDAIRE JONES, New York MATT GAETZ, Florida
THEODORE E. DEUTCH, Florida MIKE JOHNSON, Louisiana
HAKEEM S. JEFFRIES, New York W. GREGORY STEUBE, Florida
JAMIE RASKIN, Maryland MICHELLE FISCHBACH, Minnesota
VAL BUTLER DEMINGS, Florida VICTORIA SPARTZ, Indiana
MARY GAY SCANLON, Pennsylvania SCOTT FITZGERALD, Wisconsin
LUCY McBATH, Georgia CLIFF BENTZ, Oregon
MADELINE DEAN, Pennsylvania BURGESS OWENS, Utah
HENRY C. ``HANK'' JOHNSON, Jr.,
Georgia
SLADE BOND, Chief Counsel
DOUG GEHO, Minority Counsel
C O N T E N T S
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Wednesday, January 19, 2022
Page
OPENING STATEMENTS
The Honorable David N. Cicilline, Chair of the Subcommittee on
Antitrust, Commercial and Administrative Law from the State of
Rhode Island................................................... 2
The Honorable Jim Jordan, Ranking Member of the Committee on the
Judiciary from the State of Ohio............................... 4
The Honorable Jerrold Nadler, Chair of the Committee on the
Judiciary from the State of New York........................... 5
The Honorable Ken Buck, Ranking Member of the Subcommittee on
Antitrust, Commercial and Administrative Law from the State of
Colorado....................................................... 7
WITNESSES
Allison Johnson, Sustainable Food Policy Advocate, Natural
Resources Defense Council
Oral Testimony................................................. 9
Prepared Testimony............................................. 11
Supplemental Materials......................................... 15
Michael S. Needler, Jr., Co-Owner, Generative Growth II
Oral Testimony................................................. 61
Prepared Testimony............................................. 63
Trina McClendon, Owner, Trinity Poultry Farm LLC
Oral Testimony................................................. 73
Prepared Testimony............................................. 75
Joe Maxwell, President, Board of Directors, Farm Action
Oral Testimony................................................. 78
Prepared Testimony............................................. 80
Supplemental Materials......................................... 89
Peter St. Onge, Research Fellow, Economic Policy, The Heritage
Foundation
Oral Testimony................................................. 151
Prepared Testimony............................................. 153
Geoffrey A. Manne, President and Founder, International Center
for Law and Economics
Oral Testimony................................................. 161
Prepared Testimony............................................. 163
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Materials submitted by the Honorable Greg Steube, a Member of the
Subcommittee on Antitrust, Commercial and Administrative Law
from the State of Florida, for the record
An article entitled, ``HSUS' Maxwell Says `Less Meat' is
Good,'' Brownfield Ag News................................... 226
An article entitled, ``Campaign to outlaw sow housing in
Florida advances,'' The American Veterinary Medical
Association.................................................. 232
An article entitled, ``Eating Humanely--Plant-based eating
benefits people, animals, and the planet,'' The Humane
Society...................................................... 234
Materials submitted by the Honorable David N. Cicilline, Chair of
the Subcommittee on Antitrust, Commercial and Administrative
Law from the State of Rhode Island, for the record
Statement from Claire Kelloway, Manager, Fair Food and Farming
Systems Program, Open Markets Institute...................... 258
Statement from Rob Larew, President, National Farmers Union.... 267
Statement from Bill Bullard, CEO, Ranchers-Cattlemen Action
Legal Fund United Stockgrowers of America.................... 271
Statement from Steven Etka, Policy Director, Campaign for
Contract Agriculture Reform.................................. 276
Statement from George Slover, Senior Policy Counsel, and
Michael Hansen, Senior Scientist, Food, Consumer Reports..... 298
Statement from Doug Kantor, General Counsel, National
Association of Convenience Stores............................ 301
Statement from the National Sustainable Agriculture Coalition.. 305
Statement from a coalition of organic farmers from Maine,
Vermont, New Hampshire, and New York......................... 310
Statement from Margaret Krome Lukens, Policy Director, and
Aaron Johnson, Challenging Corporate Power Program Manager,
Rural Advancement Foundation International................... 313
Statement from Anthony Perrone, International President, United
Food and Commercial Workers International Union.............. 323
Statement from Ruarri Miller, Owner, Union Burrito............. 331
Statement from Kayte Barton, an advocate for individuals with
disabilities................................................. 333
Statement from Amanda Hitt, Director, Food Integrity Campaign,
Government Accountability Project............................ 334
APPENDIX
Statement from Julie Anna Potts, President and Chief Executive
Officer, North American Meat Institute, submitted by the
Honorable Ken Buck, Ranking Member of the Subcommittee on
Antitrust, Commercial and Administrative Law from the State of
Colorado, for the record....................................... 342
An article entitled, ``Analysis: High U.S. meat prices: packer
profiteering or capacity crunch?'' Reuters, submitted by the
Honorable Scott Fitzgerald, a Member of the Subcommittee on
Antitrust, Commercial and Administrative Law from the State of
Wisconsin, for the record...................................... 354
Statement from Thomas M. Collins, II, President, Luke Family of
Brands, submitted by the Honorable David N. Cicilline, Chair of
the Subcommittee on Antitrust, Commercial and Administrative
Law from the State of Rhode Island, for the record............. 359
QUESTIONS AND ANSWERS FOR THE RECORD
Questions to Trina McClendon, Owner, Trinity Poultry Farm LLC,
from the Honorable Dan Bishop, a Member of the Subcommittee on
Antitrust, Commercial and Administrative Law from the State of
North Carolina, for the record................................. 364
Responses to questions from Trina McClendon, Owner, Trinity
Poultry Farm LLC, to the Honorable Dan Bishop, a Member of the
Subcommittee on Antitrust, Commercial and Administrative Law
from the State of North Carolina, for the record............... 365
Questions to Peter St. Onge, Research Fellow, Economic Policy,
The Heritage Foundation, from the Honorable Dan Bishop, a
Member of the Subcommittee on Antitrust, Commercial and
Administrative Law from the State of North Carolina, for the
record......................................................... 366
Responses to questions from Peter St. Onge, Research Fellow,
Economic Policy, The Heritage Foundation, to the Honorable Dan
Bishop, a Member of the Subcommittee on Antitrust, Commercial
and Administrative Law from the State of North Carolina, for
the record..................................................... 367
REVIVING COMPETITION, PART 5: ADDRESS-
ING THE EFFECTS OF ECONOMIC CONCEN-
TRATION ON AMERICA'S FOOD SUPPLY
----------
Wednesday, January 19, 2022
House of Representatives
Subcommittee on Antitrust, Commercial,
and Administrative Law
Committee on the Judiciary
Washington, DC
The Committee met, pursuant to call, at 10:05 a.m., via
Zoom, Hon. David N. Cicilline [Chair of the Subcommittee]
presiding.
Members present: Representatives Nadler, Cicilline, Neguse,
Jones, Jeffries, Raskin, Jayapal, Demings, Scanlon, Dean,
Johnson of Georgia, Jordan, Buck, Issa, Gaetz, Johnson of
Louisiana, Steube, Fischbach, Spartz, Fitzgerald, and Bentz.
Staff present: John Doty, Senior Advisor and Deputy Staff
Director; Moh Sharma, Director of Member Services and Outreach
& Policy Advisor; Cierra Fontenot, Chief Clerk; John Williams,
Parliamentarian and Senior Counsel; Merrick Nelson, Digital
Director; Joseph Van Wye, Professional Staff Member/Legislative
Aide for Antitrust, Commercial, and Administrative Law; Slade
Bond, Chief Counsel for Antitrust, Commercial, and
Administrative Law; Phillip Berenbroick, Counsel for Antitrust,
Commercial, and Administrative Law; Mary Helen Wimberly,
Detailee for Antitrust, Commercial, and Administrative Law;
Ella Yates, Minority Member Services Director; Douglas Geho,
Minority Chief Counsel for Administrative Law; Elliott Walden,
Minority Counsel; Andrea Woodard, Minority Professional Staff
Member; and Kiley Bidelman, Minority Clerk.
Mr. Cicilline. The Subcommittee on Antitrust, Commercial,
and Administrative Law will come to order. Welcome. It is our
first fully virtual ACAL hearing so it is great to see everyone
and thank you again to our Witnesses for joining us today.
The Subcommittee will come to order and without objection,
the Chair is authorized to declare recesses of the Committee at
any time.
Good morning, and welcome to this hearing on the harmful
effects of consolidation on America's food supply.
I would like to remind Members that we have established an
email address and a distribution list to circulate exhibits,
motions, or other written materials that Members might want to
offer as part of our hearing today. If you would like to submit
materials, please send them to the email address that has been
previously distributed to your offices and we will circulate
the materials to Members and staff as quickly as we can.
I would also ask all Members to please mute your
microphones when you are not speaking. This will help prevent
feedback and other technical issues. You may, of course, unmute
yourself any time you seek recognition.
I now recognize myself for an opening statement. Across the
country, food prices are soaring, families are going hungry,
and small businesses are suffering. In the wake of weather
disruptions and recent COVID outbreaks caused by the Omicron
variant, people cannot believe their eyes when they see entire
barren sections of the grocery stores. Across the country,
workers are calling out sick due to surging COVID cases, truck
deliveries and other shipments that are facing delays, and
people panic buying, all leading to product shortages.
Small businesses and food banks are struggling and with
pandemic profiteering driving up costs, our most vulnerable
neighbors are buying their groceries at dollar stores just to
make ends meet. While prices are declining, and I expect them
to continue to fall in the months ahead, we have seen versions
of this story play out repeatedly in recent years due to deep
structural problems in our economy.
Today, nearly every link of America's food supply chain is
dominated by less than a handful of corporations. We have seen
consolidation trigger more consolidation which has caused a
domino effect for our nation's food supply. In the meat
processing markets, for example, four dominant companies
control 85 percent of the market. The four largest poultry
processing companies made up more than half of the market in
2015, up from 35 percent of the market in 1986.
In the pork market, the top four firms control more than
two-thirds of the market and doubled their market share from
1976. According to Open Markets Institute, waves of mergers
have resulted in four grocery chains controlling 72 percent of
local markets.
In 2019 alone, there were more than 300 food industry
mergers and acquisitions. A joint investigation by The Guardian
and Food and Water Watch likewise revealed that four firms or
fewer controlled more than 40 percent of market share for the
vast majority of grocers. They note and I quote, ``The size,
power, and profits of these mega companies have expanded thanks
to political lobbying and weak regulation which enables a wave
of unchecked mergers and acquisitions.''
As a result, hard-working Americans all across this country
are paying more as food prices skyrocket, particularly for
meat. Large corporations have also squeezed out independent
businesses that are lifelines for our local communities and
critical sources of competition for these dominant firms.
As Michael Needler will testify today, dominant retail
companies have become so powerful that they have become
essential gatekeepers for America's food suppliers in their
power to extract discriminatory terms, better prices, more
favorable terms, and unfair allocation of products.
Beyond the cost of food this unchecked consolidation has
resulted in the presence of chokepoints throughout America's
food supply chain, creating much of the fragility Americans are
experiencing every day. In competitive markets, there are many
businesses of different sizes that can offer a variety of
solutions in response to disruptions, such as extreme weather.
If one supplier has a problem, others can fill the gap.
The corporate consolidation we are seeing in the food
industry has destroyed that diversity. In my district, Ruarri
Miller, the owner Union Burrito, said in a statement for
today's hearing that while mergers may create some economies of
scale, ``show me the savings I have enjoyed when rocked by
bottlenecks and price hikes in centralized supply chains for
the last 18 months.''
In many cases, small or more agile independent businesses
have left the market, leaving fewer and larger corporations
that are unable to pivot quickly or offer different solutions
to supply disruptions. When a single facility controls a large
portion of production, one problem with that one factory's
production process can have ripple effects throughout the
country.
As the American Antitrust Institute has noted, ``These food
goliaths have exercised their market power to suppress
competition which alone is problematic, but as the COVID-19
crisis has demonstrated, such concentration has also
contributed to unstable supply chains.''
For example, in 2019, a fire at a Kansas meat production
facility affected 6 percent of the entire beef market in the
United States, causing shortages for ground beef and steak
throughout the country. After the fire, prices for beef soared
to $153 per cattle to $344 just a week later, while profit
margins climbed 10 percent in the entire industry.
In April of 2020, Chair of Tysons took out full-page
advertisements in The New York Times to warn that, and I quote,
``The food supply chain is breaking,'' adding that millions of
pounds of meat will disappear from the supply chain due to
closures in the wake of the pandemic. Last year, an organized
cyberattack forced JBS Foods, which controls nearly a quarter
of beef processing in the United States, to close all those
facilities in the United States, resulting in steep reduction
of beef processing and spiked the prices.
More recently, winter storms and COVID outbreaks have
caused delivery delays and empty shelves in grocery stores
across the Eastern Seaboard and jacked up prices for locally
owned businesses.
In the backdrop of these trends there is also widespread
evidence of corporate profiteering. Why? ``They are raising
prices because they can,'' as Federal Reserve Chair Jay Powell
recently testified. For example, early this month, Walmart and
Kroger, the two most dominant grocery chains in the country,
announced they would jack up the price for rapid COVID tests
following the expiration of an agreement with President Biden
to maintain them at affordable levels. This is nothing less
than pandemic profiteering as we enter the third year of an
economic and public health crisis.
As prices are rising, corporations are seeing record
profits, demonstrating that they are not absorbing the supply
shock exacerbated by the pandemic; instead, they are taking
advantage of the American people to line their pockets in the
midst of this crisis. In some cases, companies are using the
cover of reduced supply to drive prices even higher while
consumers and workers suffer. Farmers, ranchers, and other
producers are also earning less than ever before. According to
some estimates, only 50 cents of every dollar spent at the
grocery goes to farmers and producers.
We have a perfect storm. Markets are monopolized, demand is
high, Omicron is surging across the country, and front-line
workers are showing up to their jobs under enormously stressful
and unsafe conditions, often for wages that are insufficient to
put food on their own table or to pay the rent.
Across party lines, people are tired, angry, and fed up
with the corporate greed and runaway consolidation that are at
the heart of this crisis. In response, President Biden has
undertaken a series of actions as part of his economic agenda
to rebuild the backbone of the country, the middle class.
Earlier this month, President Biden announced a four-part plan
to create a fair, more competitive, more resilient meat and
poultry supply chain. This follows actions last year to address
supply chain risks for critical inputs and an Executive Order
directing a whole-of-government approach to promoting
competition in the United States, including through the
rigorous enforcement of antitrust laws.
We can do more, and we must do more, to bring all policy
tools to bear to address this crisis. We need to create choice
for consumers, even playing fields for independent businesses,
safe workplaces for essential workers, and protect the
livelihoods of farmers by breaking up monopolized sectors in
the food system.
We need to pursue criminal charges for corporate executives
who engage in cartel activity such as price fixing and other
forms of criminally anticompetitive conduct. In Congress, we
must build new tools to address these problems as part of the
Subcommittee's work to address shortcomings in current law. We
need to strengthen worker protections, prohibit price-gouging,
and explore price controls as part of industrial policy to
address the outbreak of inflation for essential business
services and industries that are plagued by profiteering.
In short, we need an all-of-the-above approach to bring
down costs and to rebuild our economy. I very much look forward
to hearing solutions to these problems at this very hearing and
I thank our panel of esteemed Witnesses for appearing before us
today.
I note the Ranking Member, Mr. Buck, is having some
technical issues, so we will turn now to the Ranking Member of
the Full Committee, Mr. Jordan, for his opening statement.
Mr. Jordan. Thank you, Mr. Chair. I don't have an opening
statement, but I would want to welcome our Witnesses, and in
particular, Mr. Needler, from the great State of Ohio. We
appreciate him being with us today and I look forward to
hearing from each of our Witnesses and to the discussion that
will follow. I yield back.
Mr. Cicilline. Thank you, Mr. Jordan. I will now turn to
the Chair of the Full Committee on the Judiciary, Mr. Nadler,
for his opening statement.
Chair Nadler. Thank you, Mr. Chair, for holding today's
important hearing on America's food supply. Our attention to
this topic is timely. As you noted, this weekend's winter
storms impacted food supply up and down the eastern seaboard.
The ongoing effects of climate change will cause more and more
weather disturbances like this from coast to coast and as the
unprecedented global destructions caused by the COVID-19
pandemic continue, everyone is feeling the pinch of higher
costs and higher prices. Everyone except for one group, the
giant corporations that control huge swaths of our food supply.
Because of unchecked consolidation, a few large
corporations own every link in the food supply chain. The beef,
poultry, and pork processing markets are each dominated by four
huge corporations. The grocery retail market similarly is
concentrated in the hands of just a few companies. This major
concentration of power has had significant negative
consequences for consumers and the workers in these industries.
This consolidation occurred over the course of decades and the
statistics are startling. According to recent reporting, the
market share of the four leading firms in beef processing rose
from 25 percent in 1977 to over 80 percent today. In grocery
retail, the share of the 20 largest food retailers increased
over 85 percent from 1990-2019. The top four grocery giants now
control almost 70 percent of the market.
The real-world impact behind these numbers is stark. Quite
simply, corporate concentration of food markets is bad for
Americans. Consumers are paying higher prices and workers in
these industries have lost their ability to demand a living
wage. Anyone who has gone to the grocery store recently has
seen the price of food go up, with the price of meat, poultry,
and eggs rising at a clip that far surpasses the rest.
Why? Because those are the product markets with the fewest
competitors. Those are the ones dominated by just a few
corporate giants. Decades of consolidation and wage stagnation
has also given employers in highly concentrated markets the
economic power to lower or even to fix wages in concert with
other employers. Consequently, many of our essential workers
who work in the food supply industry are not making enough to
cover their necessary expenses like food and housing.
The results of this monopoly problem are striking. Three
out of four poultry farmers live below the poverty line. A
leaked 2018 internal document from the retail grocery chain,
Kroger, showed that Kroger executives knew that hundreds of
thousands of their employees lived in poverty because of the
company's low wages.
Furthermore, the investigation by the Select Committee on
the Coronavirus Crisis revealed that in the wake of the
pandemic, meatpacking companies prioritized profits and
production over workers' safety, continuing to employ practices
that led to crowded facilities in which the virus spread
easily.
Consolidation also takes an economic toll on independent
businesses. Often, they are squeezed by powerful corporations
that dominate the food system and control prices and output. A
prime example of this is one of our Witnesses today, Trina
McClendon, who owns an independent poultry farm in Mississippi,
and I look forward to hearing her testimony.
As Chair Cicilline already explained, concentration of our
food system is responsible for much of the supply chain
fragility that we are currently experiencing. That is not all.
Not only do giant corporations help cause supply chain
problems, but they are also benefiting from them. Throughout
the pandemic, dominant businesses have exercised their power to
earn record profits while most Americans have seen their
paychecks buying less and less. This is nothing short of
pandemic profiteering at the expense of everyone else.
Accordingly, this hearing is part of a larger effort not
only to diagnose the problems facing our food system, but also
to come up with meaningful solutions. To that end, I applaud
the Biden-Harris Administration for taking critical actions to
remedy America's consolidation problems. With that in mind, I
look forward to hearing what our distinguished panel of
Witnesses have to say on this critically-important topic.
I thank the Chair for holding today's hearing and I yield
back the balance of my time.
Mr. Cicilline. Thank you, Chair Nadler, and I know Ranking
Member Buck is still having some technical difficulties, so I
will proceed with introducing our Witnesses and then I will
recognize Mr. Buck for his opening statement as soon as he
arrives.
It is my pleasure to introduce our first Witness, Allison
Johnson. She is the Sustainable Food Policy Advocate at the
Natural Resources Defense Council. She is an expert on building
sustainable food systems and on the impact of food businesses
and their responsible practices on the environment. Before
joining the NRDC, Ms. Johnson practiced environmental and land
use law at Shute, Mihaly & Weinberger. Additionally, she worked
with the California Certified Organic Farmers as an organic
certification and policy specialist. Ms. Johnson received her
bachelor's degree and J.D. from the University of California at
Berkeley, as well as a master's degree in gastronomic science
from L'Universita di Scienze Gastronomiche.
The second Witness is Michael Needler, the President and
CEO of Fresh Encounter, Inc. A third-generation grocer, Mr.
Needler's company manages 100 stores under many successful
banners, including Save A Lot, Community Markets, and Needler's
Fresh Markets. Before joining Fresh Encounter in 2009, Mr.
Needler worked in banking and capital markets in Los Angeles
for five years. He has served on the boards of the National
Association of Grocers, the Food Industry Association, and the
Findlay Family YMCA.
Mr. Needler received his bachelor's degree from Hanover
College and his master's from the University of Michigan's Ross
School of business. He also completed the Executive Management
Development Program at Cornell University.
Our third Witness is Trina McClendon, co-founder and owner
of Trinity Poultry Farm, LLC, in southwest Mississippi. In
2003, Trina and her late husband, Rusty McClendon, built a
commercial poultry operation and started working full-time in
the agricultural industry. Over the past 19 years, Trinity
Poultry Farm has raised 129 million pounds of chickens and
created jobs for the local community. Trinity consistently
ranks as one of the top poultry growers in her region of
Mississippi. Ms. McClendon currently serves on the board of
directors for Mississippi Women in Agriculture and works to
promote women-owned farms and help women enter the agricultural
industry.
Today's fourth Witness is Joe Maxwell, President of the
Board of Directors at Farm Action. Mr. Maxwell founded Farm
Action, formerly the Family Farm Action Alliance, to advocate
for a food system that works for everyone. As a farmer, Mr.
Maxwell knows from experience the impact that consolidation has
had on our food system. He has served in both Missouri's House
of Representatives and State Senate, and was Lieutenant
Governor of Missouri from 2000-2005. Mr. Maxwell received his
bachelor's degree and J.D. from the University of Missouri.
Our fifth Witness is Peter St. Onge, a Research Fellow of
Economic Policy at The Heritage Foundation. Prior to joining
The Heritage Foundation, Mr. St. Onge worked extensively in
academia as a fellow at the Mises Institute, a senior fellow at
the Montreal Economic Institute, and Assistant Professor of
International Trade and Marketing at Taiwan's Feng Chia
University. Before entering academia, Mr. St. Onge worked in
strategy and marketing Takara Toys in Japan and Harris
Corporation in Florida. Mr. St. Onge received his bachelor's
degree from McGill University and a Ph.D. from George Mason
University.
Our last Witness is Geoffrey Manne, President and founder
of the International Center for Law and Economics. He is also a
distinguished fellow at the Northwestern University Center on
Law, Business, and Economics. Prior to founding ICLE, he was a
law professor at Lewis & Clark Law School. He also taught at
the University of Chicago School of Law and the University of
Virginia School of Law. Prior to his time in academia, Mr.
Manne practiced antitrust law and appellate litigation at
Latham & Watkins and worked as a research assistant for Judge
Richard Posner. He additionally recently served for two years
on the Federal Communications Commission's Consumer Advisory
Committee. Mr. Manne received both his bachelor's degree and
his J.D. from the University of Chicago.
I am now pleased to report that our Ranking Member, I
thought I just saw him, Mr. Buck, has overcome his technical
difficulties and has joined us and now I recognize him for his
opening statement.
Mr. Buck. Thank you, Mr. Chair, and I am not sure I
overcame my technical difficulties, but I have staff that did
that, and I appreciate the staff for doing that.
Americans across the country are facing once-in-a-
generation economic headwinds thanks to the disastrous policies
implemented by President Biden. In an economy that should be
growing and recovering from government-mandated lockdowns is
instead stagnating over record-setting inflation, labor
shortages, and a crippled supply chain.
We can have a philosophical debate over the concentration
of power in our food supply and I welcome a discussion of
Amazon's acquisition of Whole Foods and its anti-competitive
pricing and delivery practices that force small independent
grocers out of business. Amazon has consistently distorted
market outcomes to the detriment of small businesses and must
be held accountable.
To suggest that changes to antitrust law will heal what
ails our economy at this moment is disconnected from reality.
President Biden implemented massive government spending that
ushered in seven percent inflation. President Biden has refused
to bring labor unions to the negotiating table to solve the
grave crisis at our ports. President Biden has paid Americans
to stay home and out of the work force.
Americans are paying more for their groceries than they
have in decades, if they can even find the products that they
are looking for, and the responsibility for that falls squarely
on the shoulders of President Biden.
The food supply industry has not changed overnight, nor
could it. The only change we've seen in the past year is a
shift from pro-growth policies under President Trump to the
tax, spend, and regulate policies of President Biden. The
results: Extreme prices and back orders for farmers to buy
needed equipment, labor shortages across the agricultural
industry, and, ultimately, pain in the pocketbooks of many
hard-working Americans.
Unfortunately, this isn't the first time President Biden
and his allies have attempted to shift the blame for
skyrocketing prices. In November, President Biden claimed,
without evidence, that oil companies were driving up prices at
the pump, instead of recognizing that begging OPEC for
production increase was terrible policy and unleashing the
American energy industry, President Biden, with no basis,
attacked the industry for alleged anti-competitive practices.
This may focus on a different sector of the economy, but is
following the same playbook.
As I said, there are legitimate concerns about anti-
competitive practices by actors in the food supply chain like
Amazon's grocery business that could lead to productive
discussions. However, if my colleagues across the aisle insist
upon using limited concentration in America's food supply as a
scapegoat for failed liberal policies, Congress will never make
it to that conversation.
Mr. Chair, I yield back.
Mr. Cicilline. The gentleman yields back. We again welcome
all our distinguished Witnesses, and we thank you for your
participation.
I will begin by swearing in our Witnesses who I would ask
to turn on their audio and make sure that I can see your faces
and your raised right hand while I administer the oath.
Do you swear or affirm under penalty of perjury that the
testimony you are about to give is true and accurate to the
best of your knowledge, information, and belief, so help you
God?
Thank you. Let the record reflect that the Witnesses
answered in the affirmative. You may be seated to the extent
you stood for that oath.
Please note that your written statements will be entered
into the record in their entirety, and I thank you for them.
They were really useful to all Members of the Committee.
Accordingly, I ask you to summarize your testimony in five
minutes. To help you stay within that time frame, there is a
timing light on your screen. When the lights changes from green
to yellow, you have one minute to conclude your testimony. When
the light turns red, it signals that your five minutes have
expired.
I now recognize Ms. Johnson for five minutes.
STATEMENT OF ALLISON JOHNSON
Ms. Johnson. Chair Cicilline, Ranking Member Buck, and
Members of the Committee, thank you for exploring the harmful
impacts of consolidation in good and agriculture today.
Our food system is in crisis and with it are our
environment and farming communities and especially the
hardworking and talented people who make sure food moves from
the fields to our tables.
They say that bad luck comes in threes, but in
concentration we often speak in fours. You have heard some of
this already this morning. Four companies control half of the
global seed supply. Four companies control over 80 percent of
the U.S. beef slaughter. Four companies control nearly half of
the retail grocery market. At almost every key link in our food
chain, a few huge companies are profiting wildly at everyone
else's expense.
Our health, ecosystems, and climate are threatened by
emissions, runoff, and dangerous chemicals from industrial
agriculture. Food system workers, farmers and ranchers, and
consumers are all struggling to make ends meet and stay healthy
and safe, to be paid a living wage and eat nourishing foods.
The long, complex supply chains that we rely on daily to eat
are extremely vulnerable to disruption by health and
environmental disasters.
These problems are united by a common theme, power and
balances related to size. So, if you take one thing away, say
it be that size matters, and for more than economic reasons.
Our antitrust laws attempt to keep companies from getting too
big because when you are big you have more power. More economic
power, but also more political and social power.
An outsized power is a problem for democracy. Bigness can
mean the power to unilaterally set agendas, to drown out other
voices, and to extract wealth, waiver, and resources with no
meaningful repercussions.
Unfortunately, in recent decades narrow antitrust
enforcement has sidelined political and social protections and
set the stage for unprecedented consolidation and a precarious
food system.
Today, the biggest food companies have disproportionate
power to influence who eats what, where, and at what price, as
well as who profits, and who bears the costs. As I mentioned,
four companies control half of our seed market and three of
those four are also major pesticide companies. These companies
and their predecessors that they have gobbled up, have steadily
decreased seed diversity while also promoting dangerous
chemicals. Their dominance leaves farmers little choice about
what to grow and how to grow it and leaves our food system
highly vulnerable in a changing climate. They also drive
research, marketing, and lobbying efforts that undermine public
support for organic and other climate friendly agricultural
systems that offer significant public benefits. These companies
do not shoulder the vast societal health costs they create, and
they are not held responsible for contributing to climate
change and crops' eco-systems. They profit and everyone else
pays with the heaviest burdens falling on the most vulnerable
people and places.
So, how do we balance the power and shift toward the fair,
healthy, and climate friendly food system we desperately need?
It is going to take a cohesive and multi-prong approach.
Antitrust enforcement is key. We have strong, flexible laws,
but we are not using them to address modern problems and to
succeed, the enforcement agencies need budgets to match the
size of the problem.
For perspective, if DOJ's Antitrust Division dedicated its
entire budget to challenging a single major retailer and that
retailer dedicated a year of its profits to defense, the
company could outspend DOJ for 70 years. That is not a fair
fight.
Congress should also step-up direct oversight of the
dominant companies in every food sector and examine the impacts
and public costs of consolidation on the environment workers,
farming communities, small businesses, and consumers.
Parallel tax reforms are essential to reining in corporate
power, and finally, we need agricultural policies and
investments that account for distributional impacts so that
they help smaller scaled diversified farms and ranches, they
remedy injustices that have stripped Black, indigenous, and
other communities of color of land and wealth, and make healthy
foods more affordable and accessible for everyone.
Concerns about consolidation cross party lines because
there are so many people, places, and resources who benefit
from fairness and so few who benefit from outsized wealth and
power. So, as we proceed today remember, size matters. Thank
you.
[Statement of Ms. Johnson follows:]
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Mr. Cicilline. Thank you, Ms. Johnson. I now recognize, Mr.
Needler for five minutes.
STATEMENT OF MICHAEL NEEDLER, JR.
Mr. Needler. Good morning, Mr. Chair, Ranking Member Buck,
and Members of the Antitrust Subcommittee. Thank you for
inviting me to testify at this critical hearing regarding
concentration of the food supply chain.
My name is Michael Needler, Jr. and I am the President and
CEO of Fresh Encounter, an independent, retail grocer based in
northwest Ohio. I am testifying on behalf of National Grocers
Association and the independent retailers and wholesalers that
they represent.
I am going to start by noting that my professional career
started on Capitol Hill when I interned for Congress Michael G.
Oxley, and then again for the House Financial Services
Committee. Those summers taught me how demanding your jobs are.
I thank you very much for all your service.
We operate a hundred grocery stores in Ohio, Indiana,
Kentucky, and Florida. I am a third-generation grocer. My
grandfather started the business in 1964 and I recently
acquired the business from my father. Our mission is to delight
our customers, nourish our community, and inspire pride in our
team. We serve a broad spectrum of markets from inner city to
rural and in many cases, we can be the only full-service
grocery store in the community.
When I was named President about 12 years ago, our stores
faced a very difficult decision. We were confronted with
incredible margin compression, failed, shrinking, and many
cases the retail prices of our competitors were well below our
acquisition costs. I determined the only way for us to survive
was to scale up and took big risks to do so. Over the course of
several years, I was able to acquire struggling companies, put
together a portfolio of stores that hopefully would become
sustainable and with each transaction, our size and
sophistication grew. That brings us where we are today. We have
100 stores over four states, and have about 3,500 team mates.
In spite of our growth and scale, we still see that the road to
sustainable competition is steep and potentially
insurmountable.
Our view is this, America's food supply chain problems are
a result of increasing concentration and unchecked buyer power
by a few dominant retail firms. They force suppliers to
discriminate against independent and grocery channels. The
result is a system that benefits a few at the expense of
everyone else including consumers, workers, independent
retailers, and producers. Consumers have a narrowing range of
choice to shop for the goods and services they need.
Entrepreneurs and independent businesses struggle to start up
and sustain businesses and producers such as farmers and
ranchers are forced to accept unfavorable, economic terms,
conditions and prices imposed by the largest members of the
consolidated supply chain.
Although these problems are not new, the grocery power
buyers have taken advantage of the pandemic and supply chain
disruptions to further entrench their dominance at the expense
of smaller competitors like myself and producers.
Independent grocers like me struggle throughout the
pandemic to stock most of the need-to-have products like paper
products, cleaning supplies, critically packaged goods like
canned soups. Meanwhile, large national chains have exercised
buyer power to demand on time complete orders and in some cases
secure excess supplies. As a result, everyday Americans who
rely on main-street grocers, especially rural and urban areas,
cannot access products that they need for their families and
are forced to travel sometimes at long distances to visit our
chain competitors.
These same Americans foot the bill for inflation pressures
that dominant players have the power to refuse inflationary
pressures and inflationary price increases from suppliers. Like
squeezing one end of a waterbed, suppliers have no choice but
to increase prices on smaller customers like myself. Due to
concentration and relentless economic discrimination imposed by
dominant grocery chains with fire power, the number of
independent grocers in America is declining. When independent
grocers leave, small towns begin to fall apart. I think we have
all seen this happen in our communities. Our government
oftentimes will react by sending billions of dollars to reverse
the food deserts that are created, and to be clear, we do
support legislation like that introduced by Ranking Member Buck
to provide tax credits to grocers who invest in food deserts,
but this approach treats the symptom rather than the cause.
Unfortunately, oftentimes it is too late for the
independent--once an independent grocer has left. Prevention is
the only way to stop the erosion. So, over 80 years ago
Congress led by this very Committee wrote laws like the
Robinson-Patman Act to prohibit any competitor economic
discrimination against independent businesses. Those laws are
still on the books, but the FTC and the DOJ have brought--have
not brought a Robinson-Patman case in over 20 years. It is time
to dust off the tools, go to work to protect the free and fair
market to preserve the food supply chain and American
consumers.
Thank you very much for taking the time to hear me today.
There are so many pressing issues that we face, and I think
that the health of our food supply chain is one of those very
issues. I welcome any questions.
[Statement of Mr. Needler follows:]
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Mr. Cicilline. Thank you so much, Mr. Needler. Perfectly on
time, so thank you.
I now recognize Ms. McClendon for five minutes.
STATEMENT OF TRINA McCLENDON
Ms. McClendon. Thank you, Mr. Chair, Ranking Member, and
the Committee Members today. I appreciate you calling me to
testify.
I'm going to reintroduce myself. My name is Trina
McClendon, and I am a contract poultry grower in southwest
Mississippi. From a young age, I just always dreamed of being a
farmer, and in 1985 I married my husband Rusty, and I moved to
his family's farm in Mississippi from Louisiana.
Rusty and I raised cattle all while working 9-5 jobs. We
always dreamed about farming full-time. In 2003, Sanderson
Farms, a poultry production company in Laurel, Mississippi,
offered us a 15-year contract to grow chickens, which seemed to
be an answer to our prayers.
We soon realized that while we thought we were in a
partnership with Sanderson, the truth is that our contract was
very one-sided. We had no say over quality of chicks, quality
of feed, and many other issues related to growing a good bird.
The fact that five farm deficiencies could bankrupt us,
causing to lose the family farm and our home, created untold
stress. After 16 years of bearing the stresses of raising
chickens, my husband passed away, of 34 years, from a massive
heart attack.
I was left a widow and sole owner of an eight-house poultry
farm, and I had to do what all farmers do in times of trouble.
I had to put away my grief and get on with the job at hand,
raising the best chickens that I could.
This leads me to why I am testifying today. Sanderson Farms
is a vertically integrated company, meaning that they own all
aspects of the chicken supply chain, which include, again, the
quality of chicks, feed, and medication, among many other
things.
As a contract poultry grower, I'm responsible for the cost
of building the houses, all the maintenance, the utilities, all
equipment costs, and all costs to maintain and run the houses,
along with a $1.4 million debt burden.
Another aspect of contract growing is the tournament
system. This is the way that growers paid. This system favors
the integrator over the farmer.
It allows the company to maximize efficiency and cost, but
it penalizes the growers by keeping our pay low and demanding
that we continually make upgrades to the houses that keep us in
debt for many years. Growers just never seem to get ahead.
Because we are kept in debt for many years, it is a known
statistic that over 71 percent of all poultry growers who
solely rely on poultry for their income are below the poverty
level.
This leads me to why I'm testifying today. In August of
2021, I learned at the same time as everyone else that
Sanderson Farms had concluded a deal with Cargill and
Continental Grain to sell their company for $4.5 billion. Just
two days after this announcement, I was handed a pay cut.
In this take-it-or-leave-it relationship with Sanderson,
they told me that they were going to reduce my income by one-
third. Whether I signed this pay contract, that all Sanderson
growers, only within the State of Mississippi, would receive
this pay cut.
After this, I decided to speak out as a whistleblower to
shed light on the abuses by Sanderson and other integrators in
the contract grower model. I reached out through RAFI and the
Government Accountability Project, and they put me in touch
with Senator Grassley's staff so that I could make a
whistleblower disclosure about the problems that I and other
growers faced with the Sanderson buyout.
So, today, I am here to make a request. I am asking for
three things.
First, I am asking you to stop this buyout and send a clear
and concise message to Sanderson Farms, Cargill, and
Continental Grain that the consolidation of our feed industry
is detrimental to the continued practice of a free and fair
market economy.
Second, I am asking that you simply enforce the rules that
were written to protect our country's food supply, and that you
place a temporary moratorium on all large feed and agribusiness
mergers.
Last, I urge you to protect all Americans across this
country. You can do this by protecting our most important
asset, our food and the farmers who grow it.
In conclusion today, I believe that I speak for all rural
Americans and all family farmers across this country when I say
that we love our jobs, and we love growing food for this
country.
So, I am asking that all of you show bipartisan support for
the women like myself and men who feed this great nation by
creating a fair and transparent market for all American-grown
food. Thank you.
[Statement of Ms. McClendon follows:]
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Mr. Cicilline. Thank you so much, Ms. McClendon.
I now recognize Mr. Maxwell for five minutes.
STATEMENT OF JOE MAXWELL
Mr. Maxwell. Chair Cicilline, Ranking Member Buck, Chair
Nadler, Ranking Member Jordan, and Members of the Subcommittee,
thank you for this opportunity to testify. I will be
highlighting the on-the-ground implication of the heavily
concentrated food system.
I am the President of Farm Action. We look at the broader
impact of market concentration in the food system, developing
policy recommendations to bring about economic vitality in
rural America. I have degrees in agriculture, economics, and
law, and 30 years' experience in policy development. My brother
and I farm in Missouri.
Economists State market abuses are likely to occur when the
concentration ratio of the top four firms exceeds 40 percent.
Today, the ratios in nearly every sector are far beyond this
point. Beef is at 85 percent.
At these levels, the understanding and application of
supply and demand modeling fails to explain the market dynamics
of concentrated corporate power. What we see are dominant firms
exerting their power to extract excessive wealth up and down
the supply chain.
Today's grain farmers are trapped in an economic system
dependent upon government subsidies for survival. When
commodity prices are high, dominant firms simply raise prices
of input.
Today, commodity grain prices are up, but fertilizer prices
have doubled. While the cost of manufacturing fertilizer has
increased, these increases do not justify a 680 percent
increase in gross margins for fertilizer companies. This spike
in fertilizer would cost the farmers in the communities in
Stearns County, Minnesota, over $8.5 million, requiring farmers
to continue to rely on government subsidies. When commodity
prices drop below production cost, farmers only survive if they
do what it takes to receive government subsidies.
The real beneficiary of this taxpayer-supported agriculture
system are big meatpackers, who benefit from cheap feed. We
call this model of government-supported production the feed-
meat complex.
Meatpackers either own or control the majority of the
livestock needed to meet their plant demand, putting livestock
producers in direct competition with the corporations they
depend on to buy their livestock. This gives the beef-packer
the market power to slow their demand for cattle purchased in
the marketplace, cutting the price they pay to producers.
The majority of poultry farmers don't even sell chickens.
They borrow money, millions of dollars, to build poultry barns
to raise the poultry processing company's birds, hoping the
company will keep sending them flocks so they can make enough
to pay their mortgages.
SBA determined the contract poultry grower has no
independence and is under the mandates of the processor. One
wrong move, one wrong statement, and they lose their homes and
farms.
As concentrated corporate power drives farmers off the
land, the vertical integration of the food supply chain means
the company provides everything it needs. No buying from local
businesses. As farmers and businesses are pushed out, rural
America is hollowed out.
Farmers of color in their communities have felt the pain of
power since the beginning of this country. Concentrated market
power has continued the cycle of abuse.
The experience of Nicodemus, Kansas, the oldest remaining
African American farming settlement west of the Mississippi
River, and the stories of farmers on tribal land should be a
part of your understanding of the impact of concentration on
America's farmers.
Food chain workers are in the most unsafe and unhealthy
conditions at the workplace for some of the lowest wages. As
reported, the oppression is so great that some front-line food
chain workers have to wear diapers because their employer will
not show them the dignity of a bathroom break.
Dominant firms in the food sector have so much power they
profit from the supply chains disruptions. Shortage of natural
gas, the fertilizer companies gouge the farmer. A fire at a
beef plant, they gouge the consumer while cutting the price to
producers.
Today, consumers are experiencing a 6.9 percent inflation
rate. A Nasdaq headline sums up the power of concentration in
the food supply during the pandemic: Who's Hungry? Food
Companies Are Gobbling Up Profits.
Failing to include concentrated corporate power in any
analysis of the current rise in inflation misses the mark.
Blaming increased wages and increased government support during
an unprecedented pandemic says to American workers, you can
never make a livable wage. Doing so will cause too much
inflation.
The U.S. capitalist economic system will not work without
government safeguards to ensure competition. The administration
has a plan. It states they will invest a billion dollars from
funding from this congress in local and regional meat and
poultry processes.
They will strengthen and provide greater enforcement of
antitrust laws, including the Packers and Stockyards Act. They
must do everything they have said. Congress needs to take
action as well.
Our policy recommendations are included in our submitted
documents. I thank you all so much for the opportunity to
testify here today.
[Statement of Mr. Maxwell follows:]
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Mr. Cicilline. Thank you very much, Mr. Maxwell.
I now recognize Mr. St. Onge for five minutes.
STATEMENT OF PETER ST. ONGE
Mr. St. Onge. Mr. Chair, Ranking Member, Members of the
Committee, thank you for this opportunity to testify today. My
name is Peter St. Onge. I'm a research fellow in economics at
Heritage Foundation. I'm also a former professor teaching
corporate strategy, and I have worked at both small companies
and large manufacturers. The views I express in this testimony
are my own and should not be construed as representing any
official position of The Heritage Foundation.
In my comments today I'll make two key points.
First, the data strongly suggest that food production, and
in particular meatpacking as well as grocery stores, is among
the most competitive and efficient industries in America,
indeed in the world.
Second, the inflation Americans are currently suffering
across the economy is due to a series of administration
blunders that unfortunately continue. This administration is
scapegoating food producers for this own mistakes.
So, first, the question at hand. Does food industry
concentration, especially in the meatpacking industry, explain
food inflation? There are several key data points that argue
strongly against this claim.
First, the food industry has been highly concentrated for
decades, and meatpacking has been at today's level of
concentration since 1994. Yet, during those decades American
food has been exceptionally cheap.
One study found as a percent of income; Canadians pay 50
percent more for food than Americans. Many European countries
pay twice as much. Europeans are often amazed when they come
here and see how cheap our food is.
Indeed, American food is so cheap that we are among the
biggest food exporters on Earth. We export 25 percent of what
we produce, specifically because our industry is so competitive
and so efficient.
The other key data point is profit margins. Across the food
industry, and specifically in meatpacking, profit rates are
among the lowest in our entire economy. Consumer companies
often register 20-30 percent profits margins--this is revenue
going to shareholders--yet the top four meatpackers have
margins between 5-8 percent. For grocery stores, also
scapegoated by the administration's allies, profit margins
hover around one percent. For comparison, on the same method,
Citibank is at 30 percent, Apple 26 percent, and Berkshire
Hathaway, Warren Buffet's collection of folksy businesses like
See's Candies, comes in at 25 percent.
In sum, the numbers suggest strongly that our food
industry, including meatpackers, are among the most competitive
and most efficient on earth. We shouldn't be attacking them; we
should be holding them up as a model.
So, what is driving today's inflation in food? The same
things that are driving inflation across the board: Misguided
policies from this administration that have led to too much
money chasing too few goods.
These include, first, flooding the economy with trillions
in deficit spending, which drives a wall of money up against an
already struggling supply chain.
Second, paying millions of people not to work or to drop
out of the workforce altogether. Now threatening to drain
millions more via vaccine mandates, or the separation of work
and benefits in Biden's Build Back Better proposal.
Third, soaring regulations, including environmental and
labor mandates, which can raise costs, reduce supply in the
store of markets, all of which drive inflation, while
incidentally tilting the playing field in favor of larger
companies that are better able to negotiate these regulations
at the cost of smaller or local businesses.
Fourth, protecting union monopoly chokeholds over critical
infrastructure, such as the Ports of Los Angeles and Long
Beach, which are essential to the flow of goods and inputs to
American factories and to American families.
Finally, this administration has conducted what I would
characterize as a war on production, particularly on energy
production, in the form of regulation, mandates, distortions
that can both hike prices and that can soak up an ever-greater
share of the consumer dollar, leaving less and less for the
people who actually make the things we need.
I thank you for your time.
[Statement of Mr. St. Onge follows:]
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Mr. Cicilline. Thank you, Mr. St. Onge.
I now recognize Mr. Manne for five minutes.
STATEMENT OF GEOFFREY MANNE
Mr. Manne. Thank you, Chair Cicilline, and thank Ranking
Member Buck, Chair Nadler, Ranking Member Jordan, Members of
the Subcommittee. Thanks for having me here today.
As Mr. St. Onge suggested, there are a number of possible
explanations for the rise in consumer food prices over the last
year: Increased demand driven by fiscal stimulus, disruptions
arising from an unprecedented set of simultaneous supply and
demand shocks, the incentive effects of government responses to
the COVID pandemic, and an increase in money supply, among
others.
They're all interrelated and surely all have contributed in
some degree to current headline inflation woes. What's not a
plausible explanation is increased concentration in the
exercise of market power in the food supply chain.
It's hardly surprising that shifting consumption patterns
and the post-vaccine reopening of the economy have led to
short-term frictions like backlogs and shortages and disruption
throughout the supply chain, all which are clearly associated
with important relative price movements.
They aren't strictly inflation in the sense that all prices
and wages aren't increasing together. These shocks are mostly
likely transitory, and higher prices will recede when the
supply chain returns to normal. That is, as long as sensible
economic fiscal policies predominate.
In the face of the harsh political realities of the current
State of affairs, there's no guarantee that they will. Rather
than accepting these extremely likely causes of the recent
increase in prices, some, including the White House, have
seized the opportunity to blame inflation on a widespread
pandemic of greed and collusion, but business, especially that
of meatpackers, grocery stores, and oil companies.
Corporate concentration is bad for Americans is a nice
slogan, but it's not economic analysis. Correlation isn't
causation.
It's no coincidence either that food and energy prices are
excluded from core inflation because they are particularly
sensitive to demand and supply disruptions and can be
misleading. Yet, those are exactly the industries we're looking
at today as if they're bellwethers.
Critics of American business blame years if not decades of
so-called rising concentration. It's claimed that the increase
in concentration stems from mergers and acquisitions over the
years that were blessed by lax antitrust regulators or merely
overlooked by agencies.
These critics give the impression that in virtually all
corners of the American economy lurk sleeper cells of colluding
cartels that activated their plans just as the country went
into lockdown.
Under this thinking, vigorous antitrust enforcement will
punish the colluders and stop the scourge of rising prices, but
it won't. The purpose of antitrust law in the U.S. is to
protect competition, not to guarantee low prices in and of
themselves. When demand suddenly spikes and the labor pool
suddenly dries up, higher prices are a good thing as a result
of competition, not monopolization.
It's entirely misguided to look at extremely long-term
causes for short-term problems. Consumer prices have been
sharply increasing for less than a year. Market concentration
numbers in every relevant market at issue have been in place
for far longer, decades even. I don't really understand how a
market structure that hasn't changed since 1990 can be blamed
for a sharp, radical rise in prices in 2021.
The closest anyone has come to a legitimate answer to that
question is to say that the ability to exercise market power
enabled by those market structures is dramatically increased
when demand and supply shocks occur because they can facilitate
the pass-through of higher costs.
This explanation, still the best one there is, contains the
seeds of its own demise. Its very premise is that there exists
an exogenous demand and supply shock that's being exacerbated
by existing market structures. By definition, the exacerbating
force isn't the cause of the underlying shock.
At the same time, even within the industries that have seen
particularly newsworthy price increases, the subject of today's
hearing, the complex competitive dynamics of those industries
responding to disruption offer far more plausible explanations
of current prices.
In the first place, I should say it's not entirely clear
where claims of dramatically increased food prices actually
come from. It's not that food prices aren't up, they are. It's
that food prices aren't up by appreciably more than overall
consumer prices.
That's important because it suggests that explanations for
food price increases that rely on industry-specific exercise of
market power aren't supported by the data. Indeed, virtually
every economist and scholar who studies the industry pegs last
year's food price increases to shifts in consumption patterns
and supply chain disruptions related to the pandemic.
Plenty of those commentators recognize the concentrated
nature of elements of the food supply chain, particularly in
meatpacking. Yet, copious studies explained that concentration,
and none find the causal connection between it and higher
prices.
In fact, quite the opposite. Several studies find that
there is market power among meatpackers that correlates with
increased concentration, but also that scale and scope
efficiencies more than outweigh, sometimes by orders of
magnitude.
When you move past the tendentious headlines of political
scapegoating, it turns out that the specific characteristics of
the responses to disruptions from COVID are consistent with
competitive markets. Thank you very much.
[Statement of Mr. Manne follows:]
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Mr. Cicilline. Thank you, Mr. Manne. Thank you to all the
Witnesses for your opening statements. We'll now proceed under
the five-minute rule with questions, and I'll begin by
recognizing myself.
Mr. Maxwell, I'm going to start with you. One question many
of us have about rising prices is really why now? Some of my
colleagues just made an argument that it was really government
regulation, which of course has existed forever, and spending
under the Biden Administration that are really the culprits.
Which of course ignores the fact that after the COVID-19
outbreak, former President Trump signed bills providing $3.4
trillion in relief funds, and gave a $1.9 trillion tax cut to
the wealthiest Americans at biggest corporations. So, that
money was pumped into the economy.
By comparison, the American Rescue Plan, signed by
President Biden rendered $1.9 trillion of aid to everyday
working people in this country struggling to make ends meet.
So, it's kind of hard to figure out why that would be the
cause.
So, that's my question, is it fair to blame current price
increases on the Biden Administration, or does the problem lie
in the way that our markets are structured? If so, what can we
do about it? That's for you, Mr. Maxwell.
Mr. Maxwell. Thank you, Mr. Chair for the question. First,
what we need to do about it is to look at putting a moratorium
on acquisitions and mergers and increasing further
concentration.
The Sanderson Farms deal with Continental-Cargill will take
the poultry CR4 from 54-60 percent. That's the wrong direction.
Or, as Trina outlined, those farmers will continue to be in
harm's way.
We need to have a lookback provision. I agree with Mr.
Manne, if everything is going right then there shouldn't be a
problem with providing a lookback provision like Senator
Klobuchar's legislation is.
I think that what we have to do is we have to take a strong
review of what has happened in the marketplace, look at the
profits within certain sectors like the fertilizer sector, and
make the determination if that market power has extracted
excessive wealth from those communities.
Mr. Cicilline. Thank you. Mr. Needler, you're a third-
generation Ohio grocer who's witnessing every day what is
happening to America's Main Street in the face of rampant
consolidation by corporate giants. What can we do to make sure
that individual grocers like you have a fair shot competing
with the big box companies?
What is your response to those who say that independent
businesses are looking for a handout or some special rules to
just thwart larger, more successful competitors?
Mr. Needler. That's a great question, thank you very much.
Look, I think that we're equipped to compete if the rules are
fairly enforced. I think we're asking you all to look at an
enforcement strategy on the rules that are already there.
If we can buy truckloads of the same lumber and the same
quantities that the large few can, then it's not really an
efficiency, it's really a market power issue, right. So, we can
deliver products, we can serve our communities just as
efficiently as they can.
If I'm buying a truck, really the incremental value of one
truck versus three trucks versus 100 trucks really becomes
marginal and you can't see much efficiency gain. If we could
just get the fair shake to have a level playing field, we will
compete. We'll deliver product in efficient manners to rural
communities, inner cities, and the like.
Mr. Cicilline. Thank you, Mr. Needler. Ms. McClendon, thank
you very much for your testimony today and the work that you've
done to bring a light to how extreme market competition has
harmed poultry farmers like yourself.
You noted that the poultry industry is dominated by a few
vertically integrated companies like Sanderson who maximize
efficiency at the expense of contract growers struggling to get
by.
You explained how, within days of Sanderson announcing that
it was being bought for four and a half billion dollars,
Sanderson offered you a take-it-or-leave-it contract cutting
your income by a third.
What can we do to help ensure that independent poultry
growers are in a position to negotiate fair terms and keep
their businesses open and successful?
Ms. McClendon. Thank you, Mr. Chair, for that question. In
the poultry industry, one of our biggest burdens, of course is
our debt. This is the burden that keeps us from speaking out.
The contract is very one-sided.
So, I would ask this Committee to--I'm not a fan of
regulations, but I would ask this Committee to protect the
farmer.
A business partnership, you negotiate a contract fairly and
equally for both parties. In the vertically integrated poultry
industry, the farmer is not given a fair contract. It really is
a take-it-or-leave-it. So, I would ask you to look at that
issue that we have as growers and see what could be done to
help give the farmer a fair shake.
Mr. Cicilline. Thank you so much. My time has expired, and
I now recognize the gentleman from California, Mr. Issa, for
five minutes.
Mr. Issa. Thank you, Mr. Chair. Boy, I'll tell you this--
I'll never forget when President Obama said elections have
consequences, and I've never felt it more than today.
I am perplexed. What is it at the docks that makes 100-plus
ships sit out there, and what is it that makes those containers
cost $17,000 a piece, if you can find them, instead of $3,500,
which was the rate on the last day that President Trump was in
office?
Is it some sort of mystical hand or Archer Daniel or some
large wholesale buyer, or is it Albertsons or Kroger?
Apparently, it's one of them, isn't it? Perhaps Mr. Onge, St.
Onge.
Mr. St. Onge. St. Onge. Yes, the ports themselves are a
huge part of it. The unions, the longshoreman unions who run
those two Southern California ports, they have for years fought
automation.
The World Bank came out with a study late last year where
they found that U.S. ports are among the absolute least
efficient on earth, those two ports specifically, Los Angeles
and Long Beach. They actually rank below Mombasa, Kenya or Dar
es Salaam, Tanzania.
We have atrocious port productivity, far lower than our
major competitors. The reason for that very specifically is
that those unions have fought any form of automation to
safeguard their jobs, which incidentally pay roughly $200,000.
Mr. Issa. Well, Mr. St. Onge, let me just maybe narrow it.
In your opening remarks, and certainly we know that there's
been no major mergers in this industry over the last one year
or two years.
Are we having an antitrust hearing because we have a
disrupted supply chain, some gaming, certainly, by large
companies to try to get their supplies?
I'll give you just a quick example for you to opine on. I
don't happen to have one in food, but I can tell you that when
I visited on a bipartisan basis with the Port of Long Beach,
what I discovered were containers stacked up that were not
going back to Asia. So, ships were going back empty.
I also discovered a number of the--and this included the
longshoremen, explaining to me that large companies were buying
whole ships to get their goods. That includes Amazon and so on.
So, the question is, is the supply chain disruption, is the
failure to deal with that on a national basis, creating an
advantage for large companies by definition and fixing the
supply chain, normalizing the workforce?
Wouldn't that be the best way to give the small
entrepreneur a fighting chance? In a time of shortage, aren't
you going to always favor the people like Warren Buffet that
can buy a whole ship if that's what it takes to get his
deliveries?
Mr. St. Onge. That's a great point, and absolutely. In
fact, that's a theme throughout any sort of government
intervention or regulation is that it tends to help the big
guys and then the smaller operators have a much harder time of
it. So, without a doubt, right.
Larger companies are able to navigate this crisis better
than smaller companies, that's a general pattern. So,
normalizing supply chains would help those smaller firms.
Mr. Issa. Question to follow up. Isn't that essentially big
always a tradeoff? This is an antitrust Subcommittee, so we'll
move off the pandemic for a moment.
Isn't big, including our Witness from northwest Ohio who
struggled to go from a few stores to over 100 stores, isn't big
always the tradeoff of economy of scale, versus, quite frankly,
coming up against the antitrust laws?
Isn't that always been a tradeoff where you struggle to get
as much economy of scale, as much market advantage, until or
unless you come up against these laws which are designed not to
give you an unfair advantage?
Mr. St. Onge. Absolutely, and it's important in this
discussion to remember that what's driving bigness is
consumers. Consumers want lower prices; they want affordable
goods that are of high quality. This is not some nefarious
conspiracy. Consumers want lower prices.
Now, large firms still compete very vigorously: Coke vs.
Pepsi, Burger King vs. McDonald's. Indeed, the margins in
grocery stores at sub one percent suggest that they can compete
extremely fiercely.
Fundamentally, we don't want to lose sight of the fact that
the consumer's welfare is served by in many industries
economies of scale.
Mr. Issa. Last question--
Mr. Cicilline. No, the time of the gentleman has expired. I
let the Witness answer the question well beyond your time.
So, I now recognize the Chair of the Full Committee, Mr.
Nadler.
Chair Nadler. Ms. Johnson, I'd like to ask you about how
concentration in the food system impacts workers, in your
opinion.
The United Food and Commercial Workers Union, which
represents 1.3 million workers in the United States and Canada,
submitted a statement for the record that described the impact
of COVID-19 on workers in meatpacking plants as devastating. It
explained that meatpacking workers reported too crowded and
closed facilities where they got sick and died in numbers
disproportionately higher, relative to other industries.
At the same time, these workers are paid wages that did not
allow them to cover their medical expenses. How does
concentration impact workers' wages and their safety in markets
such as meatpacking, and how can our antitrust laws and other
laws ensure that workers have safe work conditions and are paid
livable wages?
Ms. Johnson. Thank you for the question, Chair, and the
discussion actually relates directly to the point that was just
made around price and efficiency. When you set prices so
artificially low that it allows only companies with access to
large resources to survive, they have pretty much free rein to
set wages, to establish working conditions with little
repercussion.
So, as we see sectors that have only a few companies in
control, there's no meaningful check on the circumstances that
they create for their workforce.
So, there's a limit and a balance to how low you can drive
prices and then a need to ensure that the costs of doing
business are encompassed within that pricing model.
In addition, there's not a linear relationship between
prices and business practices at large. So, what you see in
these large meatpacking companies as well as other dominant
elements of the food system is a decision by these companies to
profit and to cut costs in ways that harm workers, that harm
the environment, and that are really completely disconnected
from the price issues that we're seeing.
Chair Nadler. Thank you very much. Mr. Maxwell, as Chair
Cicilline noted, many of us are asking why prices are rising
now. Is it fair to blame current prices on the Biden
Administration or does the problem lie in the way our markets
are structured?
Mr. Maxwell. Thank you, Mr. Chair. I think that it is ill-
placed to blame this administration or the previous
administration's response to an unprecedented pandemic, to
blame the response of this Congress on the spike in inflation
costs that we're seeing today.
I think it's ill placed to blame inflation on the backs of
the working men and women in this country. It is to tell them
that they cannot ever have a livable wage because it will
increase inflation to too high of a point.
What I think we should look at is companies like fertilizer
companies. We have submitted to this Committee a paper that we
published yesterday that describes price gouging within the
market.
Yes, costs went up. The cost of goods went up from one
company 51 percent. They have chosen to increase their
manufactured gross margin by 680 percent. Fertilizer prices
doubled. Farmers had expected to make a profit. Commodity
prices are up. That would be good news for the Congress because
that means farmers would need less subsidies. Fertilizer prices
skyrocketed.
Chair Nadler. Thank you.
Ms. McClendon, thank you for your testimony. I appreciate
independent farmers like you who continue to work hard to
provide this country with the food we all need to survive.
I'd like to know what we can do make sure you and other
independent farmers are able to stay in business, and what are
the consequences for independent farmers and for consumers if
the poultry market remains concentrated to just a handful of
large companies controlling the industry?
Ms. McClendon. Well, I feel that the lack of competition is
not always a good thing. When you have competition in the
marketplace it allows for better contracts, better prices, a
more open and free fair market, as I talked about.
I'm not really sure exactly what you all can do. Part of
the issues that we have as contract growers is that we were
asked to take on a tremendous amount of debt burden in the
hopes that we were promised that we're going to make big money
and, yes, we do. My income is significant.
However, none of that money sticks and because of the cost
of rising prices right now; the cost of propane is my number-
one expense today and just propane for the winter months will
cost me anywhere from $20,000-40,000, and that's a tremendous
amount of income pouring out of my farm.
Mr. Cicilline. The time of the gentleman has expired. I
thank you for your testimony.
I now recognize Mr. Fitzgerald of Wisconsin for five
minutes. I'm sorry.
Mr. Fitzgerald. Thank you, Mr. Chair. Mr. Manne, recently
the Biden Administration has looked to antitrust as a way to
fight inflation. For example, in relation to oil and gas, and
also concerning, as we were just speaking about, agriculture
and meat prices.
Senator Warren said firms are too big, that Congress should
expand antitrust laws and we should break up the big grocers.
Another proposal is amending section 7 of the Clayton Act.
Others have said antitrust is too focused on consumers and
prices and instead should focus on a number of conflicting
goals. Even some economists, including Larry Summers and Jason
Furman, have characterized this as a distinction from Biden
Administration's worsening supply chain crisis.
Is it accurate that expanding antitrust laws as proposed by
some of my colleagues on the other side of the aisle would
simply reduce supply while stimulating demand, which,
obviously, would be a recipe for more inflation?
Mr. Manne. That's a good point. I think there's a couple
things to mention here. Number one, I think it's notable that
Senator Warren's call to break up big grocers was aimed
particular at Kroger, which has about a 10 percent market
share, and it operates in a very competitive market. It really
strains credulity to think that presents an antitrust problem
that we should be addressing and the cure will be worse than
the disease.
To your point, all the suggested interventions that we have
been talking about today aimed or responding in the first place
to increased prices, everything I hear today suggests solutions
that would further increase prices.
Now, there may be very good policy reasons to do that. It
may be an important idea to protect farmers in certain
circumstances, to protect the environment, to adopt regulations
that have the effect of increasing prices. They will have that
effect and I think that's the most important thing to keep in
mind.
That doesn't mean that the policies are inherently bad. It
does mean, though, that those policies are raising prices.
Now, if you're looking for things that raise prices,
antitrust intervention into competitive markets is, certainly,
one of them.
So, I think it's incumbent on us to acknowledge those
consequences of some of the regulations we have seen. That
doesn't mean they're inherently bad, but let's acknowledge what
the consequences are.
Mr. Fitzgerald. Very good. Thank you. If I can turn to Dr.
St. Onge. Doctor, you have significant experience and expertise
in inflation-related issues and supply chains. So, I'm so glad
that you're here today.
It seems that this hearing would be better of examining how
the President's favoritism towards unions is backing up the
ports right now. I mean, that's real. That's a real thing
that's happening out there and how in more of an ancillary way
or a more comprehensive way environmental regulations have had
an impact on the rising prices of food and overall effect on
the supply chain.
Could you give some examples of how those policies rather
than industry concentration better explain the inflation that
we see today?
Mr. St. Onge. Absolutely. Thank you. That's a great
question.
California really kind of makes the case on regulation--how
they contribute to the supply chain crisis. There are really
two areas there--labor and emissions--and those two together
they directly attack the supply chain at just about every
stage.
Truckers, railroads, warehouse workers, retail workers, all
these groups are affected by labor mandates that can drive up
the cost to employers, therefore, making it harder for them to
employ more people.
They can also, in California, for example, under the CARB
standards on truck emissions those hit at the wrong time. They,
effectively, took actually the majority of trucks in the
country out of commission when it comes to the State of
California.
They actually wait at the border of California. They have
to wait for a truck that's allowed in California to come to the
border, which is about four hours. They transship and then that
compliant truck goes back.
This is insane during the worst supply chain crisis in a
generation and, of course, the concern is that those California
regulations there are Democrats in Congress who are interested
in taking those nationwide.
On the labor side with the PRO Act, which does not look
like passing at the moment, and on emissions the EPA has
expressed interest in bringing California emission standards
over the rest of the country.
If that occurs, that could spread the supply chain crisis
far beyond California, which is key, because it's not the whole
country--that could spread it across the country.
Mr. Cicilline. The time of the gentleman has expired.
I will say this as I recognize the next Witness--I will
say, Mr. Manne, I don't think the Antitrust Subcommittee has
ever heard testimony that claims antitrust interventions raise
prices. That's the first time we have ever heard that. It's an
interesting perspective for this Committee.
With that, I recognize the gentleman from New York for five
minutes, Mr. Jones.
Mr. Jones. Thank you, Mr. Chair, and good morning everyone.
I'm very grateful to our Witnesses for joining us today. I also
want to recognize, of course, the distinguished Chair of the
Full Committee for participating and holding this vital
hearing, along with the Chair of the Subcommittee.
Thanks to President Biden's American Rescue Plan our
economy is experiencing the fastest recovery in United States
history. Obviously, we still have work to do.
Today, the American people are facing higher prices,
especially for food. The biggest corporations have sold us a
self-serving story about why prices are high. They want us to
believe that, due to the pandemic, they've had no choice but to
increase prices on the rest of us.
That's simply not true. Sure, costs are up for many
businesses. No one disputes that. Last year, United States
corporations made their highest profit margins since 1950.
Consider the biggest driver of rising food prices, meat.
According to the National Economic Council, since the start of
this pandemic, four of the largest meat processing firms have
increased their collective profits over 120 percent, or more
than double.
Tyson increased beef prices so much that although they sold
less beef than before, they made more money. These firms have
even given $3 billion to shareholders in stock buybacks and in
dividends.
The truth is massive corporations do not have to impose
record price increases on ordinary Americans amid this
pandemic. Instead of paying their fair share of rising costs,
they're making us pay the price, literally.
Of course, if they actually faced competition from other
companies, they couldn't get away with this. As we have heard
today, they rarely face competition at all. President Biden put
it best. Capitalism without competition is exploitation.
Now, Ms. Johnson, you testified that key links in the food
chain are controlled by just four massive corporations. For
instance, in 1977 the four largest beef-processing firms
controlled just a quarter of the market.
Today, they control over 80 percent, and as an
investigation by the Guardian and the nonprofit Food and Water
Watch documented, four firms or fewer dominate the markets for
nearly 80 percent of groceries.
You opened your testimony by saying that although bad luck
comes in threes, market concentration comes in fours. Would you
care to elaborate on that for us, specifically, how does the
domination of a market by just four corporations enable those
firms to raise prices beyond competitive levels?
Ms. Johnson. Thank you for the question, Congressman. I'd
like to talk about the rule of fours, and then also raise some
questions about it.
So, as a general concept, when you have very few companies
who have outsized resources and power relative to any other
competitors in the marketplace, their power and wealth becomes
sort of self-reinforcing.
They can undercut competitors with artificially low prices
until they drive them out of business and then hike up prices
once they're gone. They can enter into new markets, kind of
self-subsidizing until they have their foothold established,
and then use their resources to change rules, to lobby, to
market and do whatever it takes to succeed there at the expense
of everyone else.
At the same time, I do caution against an over-focus on
these numbers, because the other fundamental elements of our
antitrust laws are qualitative, they're just political, they're
social, and they're about influence.
Part of the problem with recent decades' trends in
antitrust enforcement is an outsized focus on the numbers alone
and an outsized focus on driving down prices with no political
and social checks.
So, what we're ultimately seeking with antitrust laws is to
balance influence with price fairness and to ensure that
companies bear their own costs of doing business, not the
public.
Mr. Cicilline. The time of the gentleman has expired. I
presume the gentleman yields back. I now recognize the
gentleman from Florida, Mr. Gaetz, for five minutes.
Mr. Gaetz. Thank you, Mr. Chair. The American people are
fatigued and frustrated by rising prices, by not being able to
get the goods that they want or need. We've had a Biden
Administration that has printed money like it's going out of
style. It's declared a war on work with vaccine mandates, by
paying people to stay home. In some circumstances encouraging
school closures or allowing them so that people are forced to
stay home. They've backed lockdown strategies that have killed
restaurants, causing more people to increase demands at grocery
stores.
What you're being told by some in this hearing is that the
reason that we are fatigued and frustrated at the grocery story
is because Big Food, not because of big government. That's an
assumption that I certainly think deserves challenging.
I guess my first question is for Mr. St. Onge. Have the
lockdown policy choices increased grocery demand in a way that
might have spurred some of these challenges that consumers are
facing?
Mr. St. Onge. Thank you for that question. I do want to
take a moment to agree with the other Witness, Mr. Manne, that
antitrust often does raise prices. So, I would second that
opinion.
Thank you for that question. Without a doubt, it did. Part
of the impact was just the mix of products. People tend to buy
higher priced cuts when they're cooking at home. A school
cafeteria or restaurant might optimize lower prices. Then part
of it was also simply supply disruptions.
So, there was a long period during the pandemic where there
were too many cows, not enough beef. We also saw similar
dynamics in lumber. So, there have been disruptions really
across the economy.
Final point is that inflation itself tends to create a sort
of illusion of profit. Many firms will book the goods they sell
at the purchase price, right. Now, you could argue they should
look at the replacement price, but at any rate, a certain
amount of apparent profit during in an inflation is an
illusion, so right.
There are a number of factors, either related to the
lockdowns during the pandemic or to this inflation itself.
Mr. Gaetz. In your research, have you looked at the extent
to which the policy choices that have disincentivized work have
impacted the supply chain and the amount of folks that are able
to move product and onboard product and shelve product for our
fellow Americans?
Mr. St. Onge. Absolutely. That's precisely what's been
happening with the benefits, delinking benefits from work. That
does not take dentists out of the business, it takes warehouse
workers, retail workers, transportation workers out.
Mr. Gaetz. So, the worst things that the Biden
Administration has done to the workforce are felt most in some
of these areas that impact our food, isn't that right?
Mr. St. Onge. That's exactly right.
Mr. Gaetz. Now, one of the policy recommendations that
we've heard some of our colleagues reference in this hearing
support moratoriums on mergers and acquisitions. Of course,
we're the United States Congress, we only have jurisdiction
over what happens in our country.
If we were to do that, what impact would it have, if any,
on global consolidation? Because I seem to see that
particularly Chinese investors are consolidating globally. If
we were to deconstruct American companies, would that make us
less competitive with the Chinese problem?
Mr. St. Onge. Yes, that's a great point, and that would be
the tendency.
Mr. Gaetz. I have to say there's a specific circumstance,
Mr. Chair, that deeply concerns me. So, while we may not get
bipartisan agreement for a total moratorium on mergers and
acquisitions, the Smithfield Foods case study is one where I
think we could get agreement.
In that case, Smithfield Foods, Inc., sold to China. They
sold to the WH Group of China. Now, they're a wholly owned
subsidiary. So, the largest in the world, based in Virginia,
that runs a lot of the pork brands that American consumers are
familiar with, is Chinese.
I don't think that's good for our fellow Americans, and I
don't think that makes us more resilient. So, maybe if we don't
stop Americans from buying American companies, we can at least
stop the Chinese from consolidating and improving their
advantage over us.
Mr. St. Onge, the regulatory environment has persistently
put pressures on food prices. If the USDA allowed more direct
to consumer for smaller, most sustainable, more environmentally
friendly farms, would that help people access more locally
grown food at a lower price?
Mr. St. Onge. Yes, it absolutely would. That's one of the
areas that the industry could really benefit from congressional
action is making it easier to enter the industry, particular
for smaller businesses. We've got a couple Witnesses here
represent that group.
So, without a doubt, whether it's making inspection regimes
more logical with more input, whether it's waters--there are a
number of environmental rules that cause a lot of risks for--
costs for growers. So, absolutely, being proactive in that area
would help.
Mr. Cicilline. The time of the gentleman has expired.
Mr. Gaetz. I yield back.
Mr. Cicilline. The gentleman yields back. I now recognize
the distinguished gentleman from New York, Mr. Jeffries, for
five minutes.
Mr. Jeffries. Thank you, Mr. Chair, for your continued
leadership on this important issue.
I also thank Ranking Member Buck for his continued work and
partnership to try to work through these issues, not as
Democratic issues or Republican issues, but as American issues,
to try to resolve on behalf of everyday Americans and the
American consumer.
Let me ask first Michael Needler, you testified I believe
that grocery store conglomerates have used the pandemic to
entrench their market power. That process has hurt small and
independent grocers. Could you elaborate on this testimony?
Mr. Needler. Sure thing. So, when we go to market, there's
a couple of ways you can go to become more competitive in the
marketplace. The first way is to be an EDLP, and I think we all
know that the largest players get basically the lowest price on
a regular basis.
Smaller retailers like myself will pay a little bit higher
on the regular basis, but then we'll have promotion prices that
will be passed through, what are called allowances. There's
also shopper marketing dollars, slotting dollars, so on and so
forth, that are--that the consumer-packaged goods try to
deliver to us.
During the pandemic, because of the demand, they didn't
want to promote anything. As a result, our costs went up,
meaning if four out of every five weeks we pay X, but then that
fifth week we can pay less, we can buy in, we can be more
efficient, then we can try to flex and compete.
Well, during the pandemic, we definitely had no ability to
get those deals. Consequently our costs went up considerably
higher than our competition on an EDLP basis.
In addition to that, we gained market share. Why did we
gain market share? Because I think consumers wanted a smaller,
more convenient shopping experience, a cleaner shopping
experience, places they could trust a little bit better.
That's all well and good, but in spite of the fact that we
gained market share, the CPGs acted almost irrationally. They
continued to allocate additional products to our competition,
who had lost that market share.
Why did they do that? Why would that act irrationally, you
might ask, and I think it's because of supplier power--or
excuse me, buyer power. So, they exerted some of that quasi-
monopolistic power.
You can look at the chicken farmer on this panel who poses
a very good example, but then you can think about a major CPG
like Proctor & Gamble or Clorox, right? They are almost in the
same boat as Ms. McClendon is when you're competing or when
you're trying to sell to a huge organization like--I'll name
Walmart for example. Their power is so great that they can
influence access to the products, they can influence the
pricing of the products. In the short run, it might feel like a
positive impact for the consumer, but in the long run, I can
give very real examples where Mr. Manne said that, you know,
that it ultimately will impact the pricing, but there in a
negative way.
I could tell you that--
Mr. Jeffries. Well, let me stop you right there and ask
that question.
Mr. Needler. No problem.
Mr. Jeffries. So, if in the short term these major
conglomerates are able to extract lower prices based on their
concentration of power, but if that ultimately results in small
businesses, small grocers going out of business, how does that
ultimately impact the consumer?
Isn't it logical, I believe, as Ms. Johnson testified, that
ultimately that will have an adverse impact on the consumer?
Because once the competition is wiped out, the market will
allow for them to dramatically increase prices.
Mr. Needler. Look, bigger isn't necessarily bad. We just
are looking for a fair playing field, right. So, if they can
use undue power to influence their supply, undue power then to
take that margin, keep it, and apply it to smaller markets,
they can wipe the small independents out of business.
At that point, and I've seen it happen, they will
underserve the community with higher prices and lower--and
higher out-of-stock conditions.
Mr. Jeffries. Isn't it also fair to say that sort of small,
more independent grocer who's got a familiarity with the
communities that they serve can actually be more responsive,
given the great diversity that we have in America across many
different measures, as compared to if we just were served by
the larger big box entities?
Mr. Needler. Mr. Chair, I see almost ten seconds to answer,
so I'll be quick. The answer is yes. We feel that we're very
resilient and we can be very agile because we are smaller. We
contract with hundreds of independent and locally owned farms
to try to supplement our supply chain. We have multiple
wholesalers do our upwards of $30 billion.
So, we've got efficiency, and we've got resiliency. I think
that that ultimately could benefit us, and has benefitted us
through the pandemic.
Mr. Jeffries. Thank you so much. I yield back.
Mr. Cicilline. The gentleman yields back. I now recognize
the gentleman from Louisiana, Mr. Johnson, for five minutes.
Mr. Johnson of Louisiana. Thank you, Mr. Chair. Apologize,
I'm multitasking this morning, like all of us, and I've heard
parts, bits and pieces of the answers and questions.
I don't want to retread a lot of ground here, but I just do
need some clarity in think for, not only for myself, but for a
lot of my constituents who may be watching this hearing now or
seeing the tapes later. So, let's boil it down to the essence
of this thing.
Everybody agrees that we've got a crisis on our hands in
regard to empty store shelves and inflation and all the rest.
The food chain supply is big problem. I have constituents in
Louisiana who are spending half of their paychecks on groceries
right now. It's not a sustainable trajectory that we're on.
So, we all agree on the problem, the question is what are
the actual drivers of this crisis? My Democrat colleagues tend
to blame corporate greed. I'm not sure that that is the best
analysis of what we're facing here.
So, I know we have differing viewpoints on this, but let me
just ask Dr. St. Onge to summarize as best you can. Is it
corporate greed, or what would say if you had to identify in
layman's terms what the biggest drivers for all this inflation
truly are?
Mr. St. Onge. Thank you for that. Some of it is simply
rebounding from COVID. There are shortages, there are price
hikes all over the world. Now, the U.S. is far worse than
Europe or Japan, so something bad is happening here. In my
opinion, that is being driven by poor policy choices.
So, spending, paying people not to work, regulations,
particularly on labor and emissions, and union chokeholds on
critical infrastructure.
Mr. Johnson of Louisiana. When we talk about policy
choices, is it specifically Federal over-regulation that you
think, of the food chain supply that is partially responsible
for the inflation problem?
Mr. St. Onge. Yes, I think regulations, in general, are
partially responsible. As Mr. Manne alluded earlier, any sort
of scrutiny, rules, micromanaging impositions, these tend to
distort markets. They also tend to drive prices up and supply
down.
Mr. Johnson of Louisiana. Yeah, and I appreciate Mr.
Manne's opinion on that as well. What about vaccine mandates,
this idea that we've given out billions of dollars in free
money under the American Rescue Plan. I mean, are those also
contributing factors to this?
Mr. St. Onge. In my opinion both are. Vaccine mandates take
ever more workers out of the supply chain and, of course,
benefits unlinked to work also induce people to stay home.
Mr. Johnson of Louisiana. See, our view as differs the
Republican response to this is different than the Democrat. Not
to make this a partisan issue, but the approach to the crisis
is different. So, our Democrat colleagues want to--their
reflexive response is to further grow the Federal government,
to give more power to the FTC and the DOJ and other agencies.
We look at the response and say no, that is putting fuel on a
fire. That makes it worse. We need to get back to the free
market.
So, Dr. St. Onge, how would you characterize the effect of
the Biden Administration's attempt specifically on the vaccine
mandate? I mean, we instinctively sort of intuitively know
that's part of the problem, but these private employers are
telling us that this is imposing a real hardship.
It's fair to say farmers, meatpackers, truck drivers, and
other workers in the food chain are adversely affected by this.
Isn't that, right? Is that intuition that we have, is that
correct?
Mr. St. Onge. That's absolutely right. The National
Truckers Association has been really sounding the alarm. A lot
of truckers do not want to get vaccinated and we need them
right now.
Mr. Johnson of Louisiana. How specifically--I'm running out
of time here, but how specifically do you think Congress could
rein in inflation and improve economic circumstance for the
American people? What are specific policy choices, if we were
going to the opposite, what do you think we should do in a
minute?
Mr. St. Onge. Probably the single biggest changes are
bringing competition to the port monopolies. That would likely
have a very quick impact. Then regulation really across the
board against producers standing down on some of this scrutiny
and sort of going after them. Rather actually removing
regulations.
President Trump did do that early in the pandemic, right.
Supply chains were creaking, there was a lot of concern. He sat
down with various industries and said how can we, the Federal
government, proactively get out of the way. That's what could
be done.
Mr. Johnson of Louisiana. What a concept, right? Get the
Federal government out of the way. Reagan said, ``Government is
not the solution to our problem, government is the problem.''
We subscribe that. I'm out of time, I yield back.
Mr. Cicilline. Thank you, Mr. Johnson. You're not actually
out of time, so if you wanted to yield that last 16 minutes and
just say one sentence.
Bringing competition to monopolies and more regulation is
what Mr. St. Onge just recommended. That's exactly what this
Committee is committed to doing, more competition. So, that's a
good market-based answer.
I now recognize Mr. Neguse from Colorado for five minutes.
Mr. Neguse. Thank you, Mr. Chair, for holding this hearing
today. Over the course of the pandemic, we have seen, and as
we've heard today during the course of this hearing, that when
major suppliers of consumer products are faced with limited
supply and high demand, they prioritize their biggest retail
customers like Walmart and Amazon over small and independent
retailers.
Those choices impact not only the businesses, but
ultimately the communities that they serve. Independent grocers
are more likely to be located in lower income or rural areas,
including parts of my district, rather than chain stores. These
communities are more likely to experience hardship when trying
to access essential goods.
There are businesses, many of which, that drive our Main
Street economies and are at the heart of our communities.
Without them, we can expect to see the number of food deserts
increase and employee wages decrease. So, it's essential that
this Committee steps in once again to promote competition
before it's too late.
Mr. Needler, and I know this has been discussed already
during the course of this hearing, but independent grocers,
which as you know are family- or employee-owned grocery
retailers, often act as an economic anchor in their
communities, attracting consumers, generating foot traffic that
creates opportunities for other area businesses.
Food and Water Watch recently reported that 70 percent of
all grocery sales come from the four largest grocery chains in
the country, up from 23 percent in 1993. I wonder if you could
expound a bit on what that kind of high level of concentration
in the grocery market means for the ability for small
independent grocers to be able to keep their shelves stocked.
Mr. Needler. Thank you for your question, and I think your
comment started out with the impact of independent grocers. I
think a lot of us have either started our first careers in a
grocery store bagging groceries or we know somebody in our
family who has.
We teach ethics, a work ethic, we teach accountability, and
it's a great starting point for a lot of the communities from
an entry point in the workforce. We also are a great career for
many people, with good paying jobs with a good trade and a good
skill. Cutting meat is not something that you can just come off
the street and know how to do.
We produce a lot of products in our store, and we nourish
our community with healthy, wholesome products, which
apparently really is noticed when we leave. When you create
food deserts, all of a sudden someone realizes what they were
taking for granted.
So, as you see the growth and consolidation of these power
buyers, they are able to influence an undue influence over the
supply chain and the suppliers. If we could just--all we're
asking for is an enforcement of existing legislation. Maybe we
need to tweak it and look at something that was written 70 or
80 years ago.
The fact is what we're trying to do is increase competition
by just having a fair set of rules. If I'm going to buy as much
as my competition, then hopefully that will allow me to have
the same price. That price is a very, very important
determination in where people choose to support for their
grocery choices.
So, yes, fair competition, fair competition is great. I'm
not saying big is bad, I'm just saying we want to have rules
that ensure that folks like me can come to the table and get
specific types of products. They hide under class of trade.
So, they'll give dollar stores a smaller item, and they'll
be charging more per ounce, but it looks like a cheaper price
than something that's on my shelves. Well, I'm not even able
by, the CPGs, won't even sell that to me. That's not fair. I
want a fair table set for me to compete.
Mr. Neguse. Well, I certainly agree. It touches on
something you mentioned in your written testimony with respect
to suppliers no longer allowing or eliminating the promotional
allowances that they had typically, conventionally done for
independent grocery stores on many products.
So, in any event, I think the request that you and
independent grocers are making across the country is a
reasonable one for an even playing field. I think that
statistic that I mentioned, the fact that we've gone from 23
percent of grocery sales in 1993, coming from the four largest
grocery chains, to 70 percent, literally almost three-fourths
of the entire market should--it's a sobering statistic, and it
should alarm every American.
I think this Committee has a role to play in terms of doing
its part to promote competition, which in turn benefits our
constituents and consumers writ large.
So, with that, Mr. Chair, I would yield back the balance of
my time.
Mr. Cicilline. I thank the gentleman. The gentleman yields
back. I now recognize the Ranking Member of the Full Committee,
Mr. Jordan, for five minutes.
Mr. Jordan. Thank you, Mr. Chair.
Mr. Manne, in opening statements from my Democratic
colleagues, they said that the concerns in our food supply and
concerns with pricing are due to--if I got this right, they
said that it's due to the virus, it's due to weather, and it's
due to some large companies.
I didn't hear, and I had to step out for a different event,
and I just got back, but I didn't hear anything about that
attack on American energy we've seen from Democrats.
I sat in a hearing a couple months ago where a colleague
for mine from the Democrat side of the aisle with oil and gas
companies that said, will you pledge today to decrease
production? I'm like, what do they want, eight-dollar gas?
Everyone knows when you drive up the price of fuel, you
drive up the price of every other good and service that the
American people get. Because it costs more to transport in this
situation that we're talking about today, to transport food
products to the American people.
I didn't hear any mention about the pipeline that they've
stopped, which further exacerbates the problem. When you tell
American companies don't produce more, pledge to produce less,
and, oh, by the way, we're going to get rid of a pipeline. I
didn't hear anything of that.
Frankly, I didn't hear anything, maybe it's come up since--
while I was gone maybe it came up. I didn't hear anything about
the record level of spending from Democrats, which has given us
a 40-year high in inflation.
Then my friend from Ohio, Mr. Needler, raised a potential
remedy. I don't know if it's the right remedy or not, but it's
a law that's on the books, the Robinson-Patman Act. Last time I
checked, to bring that kind of action, it has to come from the
FTC or the DOJ. They're both controlled by Democrats, and I
don't know of any initiative from the FTC or the DOJ regarding
that.
So, I guess what's next, and we've already heard Democrat
Senators talk about this, are they're going to look at price
controls? Which anyone with any common sense in economics will
tell you is only going to exacerbate the problem that we have.
So, am I missing something, Professor, or is that a fair
summation of what we heard?
Mr. Manne. That's pretty darn good. I don't know that I
have too much to add to it. As I said before, regulatory
interventions for particular social or political purposes
typically raise prices. Now, they may be justified, or they may
be thought to be justified. Pretending like they don't have
that consequence is silly.
So, if you're looking for a culprit, that's doubtless one
of them, part of it. I don't know how much, but it's certainly
part of it.
You're absolutely right about oil and gas in particular. As
you said, there's no question that if you curtail the
production of oil and gas, you're ultimately going to end up
raising transportation costs, and then prices for consumers.
Whether that's a good idea or not, I don't know, but again,
let's not pretend like that isn't the consequence. It
absolutely is.
With respect to the Robinson-Patman Act, think there aren't
a lot of areas in economics that everyone agrees on, virtually
everyone agrees on. The consequences of Robinson-Patman Act
enforcement is one of those.
It shouldn't be surprising. The intention behind that law
was to raise prices. So, that Robinson-Patman Act enforcement
would raise prices is--shouldn't be very surprising, but it
absolutely does.
Now, again, whether there may be some countervailing
benefits to that, I don't know. Let's not pretend like that
doesn't happen.
Mr. Jordan. When you spend like crazy and create a 40-year
high in inflation, when you make the cost of fuel higher, and
when you add regulation, you will drive up costs. So, those are
the three things that we know have been done, and it seems to
me the Democrats are suggesting we keep doing all three and
somehow, oh, it'll work this time.
So, I just don't see that. I think that's probably going to
exacerbate a problem. If there are some real solutions that we
can focus on, I'm all for them. I don't think my good friends
on the other side of the aisle are offering up those solutions.
With that, Mr. Chair, I would yield back.
Mr. Cicilline. The gentleman yields back. I now recognize
the gentlelady from Pennsylvania, who is graciously managing
our floor on the bill in a moment. A little out of order, Ms.
Dean for five minutes.
Ms. Dean. Thank you, Mr. Chair. Thank you for bringing us
this important hearing. Thanks for recognizing me now.
I also want to thank our testifiers, particularly the
growers and independent retailers, who take such pride in their
work feeding our country. Of course, providing terrific jobs
and choice along the way.
We all know that we're in the midst of a global pandemic
and an economic recovery. The last thing that Americans need to
worry about is putting food on their table. I represent
suburban Philadelphia, Montgomery, and Berks Counties in
Pennsylvania. In my district, the average price of food went up
about 1.6 percent between 2020 and 2021.
Mr. Needler, I was reminded when you said, ``that one of my
very first jobs was as a cashier and bagger at an independent
grocery store when I was in college.'' Americans are paying
higher prices for groceries. With higher prices, everyday
Americans face difficulty.
Grocery stores such as yours are also having trouble
keeping their shelves stocked. In my district, we enjoy some
terrific smaller, midsize, independent retail grocery stores
like O'Neill's and Delilah & Dean--it's no relation to me--
George's Market, and others. They provide jobs, they provide
choice. They stimulate our economy. What challenges do
independent grocers like these have in stocking their shelves
and continuing to grow our economy and feed America?
Mr. Needler. Thank you very much for your question. The
crux of my position today is that, if we could try to--Mr.
Manne talks about the short-term impact on Robinson-Patman, but
I think that you need to look at it almost like a zero-sum
game. If you push down on one side of a waterbed and the other
side goes up, it doesn't necessarily mean that there is--
because it was rising on one side doesn't mean there is more
water in the bed. It is just shifting. So, if you have market
power in a few that pushes the cost to the rest, it is a zero
sum, but it makes it an unfair advantage for the long run.
So, the goal I think that we are trying to have is a very
stable supply chain in terms of pricing and a fair supply
chain. So, what challenge we would be facing is, as costs go up
throughout the entire chain from producers to transportation,
we can point to a lot of things, and the gentlemen have already
done a great job of articulating that--labor, freight, all very
real, very real costs that we are experiencing. The biggest
players are able to resist that. That is good in the short
term. The suppliers have to pass that on. They have to pass
that on, and the only people that they will be able to
negotiate--and really, we don't have a choice--is the small
guy, like myself, and we have to take the higher prices.
So, actually, I was in a supplier meeting the other day
that they were going to pass this on, and we will keep an eye
on whether the competition moves their retail or not, and if
they don't, we will come back to you. I don't even know what I
am supposed to do with that. How do I explain that to my
customer? So, that is a very real example, and I can tell you
lots of real-time examples of where I think we have got
economists looking at big data, metadata perhaps.
I can tell you very real examples where I just need people
to go to work and come to work. We have experienced an
unprecedented turnover, over 100 percent turnover, during this
last year. Never heard of anything like that. Folks are not
interested in going to work, and if we could get people back to
work faster, that would certainly start helping.
Ms. Dean. Okay. Thank you. Mr. Maxwell, you discuss the
concentration of America's food supply and agricultural market.
Can you explain how this makes supply chains brittle and unable
to withstand the shock of the COVID-19 pandemic?
Mr. Maxwell. Yes. Thank you for the question. With growth
and expansion, and add vertical integration, our supply chains
now are stretched not only nationally, but globally, with one
dominant firm or three dominant firms controlling that supply
chain. When there is a disruption in the middle, one of the
links breaks, then it affects or impacts a larger community;
whereas, if we would focus on local and regional food systems,
which have shorter chains and links, then a disruption or a
break in a link would have less impact on great numbers of
people. It would have impact on fewer numbers of people.
So, building resiliency into the food system should be a
priority of the Congress, and looking at local/regional systems
to do that. Mr. Needler's stores are very important in that
system. He has a Yellowbird Foodshed, I believe, in Ohio that
is a tremendous service during the pandemic. It is not time to
talk about it here, but someone ought to talk to Mr. Needler or
the friends we have out in Ohio about how important that is.
Ms. Dean. How all these workers are front-line workers and
how they served us during this pandemic.
Thank you. My time has expired. I yield back.
Mr. Cicilline. The gentlelady yields back. I now recognize
Mr. Steube, the gentleman from Florida, for five minutes.
Mr. Steube. Thank you, Mr. Chair. Mr. Maxwell, is it true
that you are the Vice President of outreach and engagement for
the Humane Society of the United States?
Mr. Maxwell. I am not currently the Vice President of the
Humane Society of the United States. I was in the past a Vice
President of their outreach and engagement and rural
development.
Mr. Steube. Is it also true that you advocated for
Americans to eat less meat, saying that it is, quote, ``good
for the planet, for the environment, and for the animals.'' Is
that correct?
Mr. Maxwell. I don't know that quote, but what I would say
is this: What is extremely important for us in this country is
to have a local/regional food system that feeds our neighbors
healthy, safe foods; that respects the land, the animals, and
the community for which the production and processing occurs.
That is my view.
Mr. Steube. I would ask unanimous consent, Mr. Chair, to
put into the record Brownfield Ag News, January 21, 2015,
titled, ``HSUS' Maxwell Says `Less Meat' Is Good.''
Mr. Cicilline. Without objection.
Mr. Steube. Thank you.
[The information follows:]
MR. STEUBE FOR THE RECORD
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Mr. Steube. Also, are you aware, Mr. Maxwell, that the
Humane Society of the United States fought for the campaign in
Florida against gestation crates for pigs and swine producers?
Mr. Maxwell. I am. I believe they also did so in California
and in maybe Massachusetts.
Mr. Steube. Are gestation crates allowed in Missouri?
Mr. Maxwell. Gestation crates are allowed in Missouri. On
my farm, we do not have gestation crates. Caging an animal, a
sentient being, for their entire life in a two-foot by seven-
foot cage, in the name of industrial agriculture, is just
wrong. We are the custodians, the farmers are the custodians of
that which we have.
Mr. Steube. So, the organization that you just--right.
Mr. Maxwell. We should take care of those animals that are
within our care, whether our sheep, cattle, or hogs.
Mr. Steube. Okay, it is my time. I am the one asking the
questions.
Mr. Maxwell. Oh, I am sorry. Pardon me. Pardon me.
Mr. Steube. So, you have admitted that you were the Vice
President of outreach for the Humane Society. You also just
stated the Human Society of the United States was responsible
for backing the gestation crate amendment in the State of
Florida, which systematically put out of business every swine
producer in the State of Florida.
So, today, in your testimony, you stated that four firms'
control, and I quote, ``four firms control 67 percent of the
hog market.'' I was one of 670,000 hog farmers in the U.S.
Today, I am one of the remaining 64,000 hog farmers. It is a
direct result of the policies that you supported as Vice
President of the Human Society that put your competitors in
Florida completely out of business.
So, you are complaining today that there are only four
manufacturers of the hog market, four firms that control 67
percent of the hog market in the United States, which is a
direct result of the policy positions that you have taken in
your organization that you were Vice President of, which has
led us to where we are.
Interestingly enough, the State that you hail from--
Mr. Maxwell. That is not--
Mr. Steube. --does allow for gestation crates--
Mr. Maxwell. That is not an accurate representation of--
Mr. Steube. Whether you do or not is relevant. The State
that you hail from allows for gestation crates, but it is
disallowed in States like Florida, which has directly resulted
in small swine producers in the State of Florida completely
going out of business and not being able to compete with
farmers, say, in your State of Missouri that are allowed to use
gestation crates for the production of swine.
Therefore, I find it very difficult to take your testimony
when you have opened advocated against the growth in the
livestock market. Yet, today, you purport to opine on what is
best for it.
I represent a district with over 500,000 head of cattle. We
don't have swine anymore, thanks to the Human Society of the
United States pushing for that amendment in the State of
Florida. Yet, here you are, telling us what is best for the
livestock in the United States.
Mr. Manne, there has been a push by Democrats for sweeping
antitrust reforms. They are making sure not to let a crisis go
to waste and are using inflation as a justification for those
reforms. The Biden Administration is looking to blame problems
like inflation and supply chain issues on anything, but their
own policies. Big companies are an easy scapegoat.
I disagree with the Democrats' premise and approach, but if
lack of competition really is the issue, then wouldn't lowering
regulatory barriers to entry and, in turn, promoting more
competition be a solution?
Mr. Manne. Yes, no question that is right. I also agree
that there is some scapegoating going on. There is a much
longer standing policy agenda, and this is an opportunity to be
opportunistic and take advantage of the situation to try to
promote it.
I will also note that very antitrust agenda that we heard
some mention of earlier, that focuses on worker welfare and
supplier welfare, and small firms versus big firms, the neo-
Brandeisian approach, again--and I know I sound like a broken
record--it will raise prices. We can debate whether it is worth
that or not, but we cannot debate that that will be a
consequence of it. We should judge the value of those kinds of
policies in their full context, and part of that context is
higher prices for consumers.
Mr. Steube. Mr. Chair, I have a unanimous consent request.
Mr. Cicilline. Please state your request.
Mr. Steube. An excerpt from the American Veterinary Medical
Association article by Bridget Kuehn, September 15, 2002, where
the pig crate issue was backed by the Humane Society of the
United States. I ask unanimous consent that this is added to
the record.
Mr. Cicilline. Without objection.
Mr. Steube. I, also, ask that the Humane Society of the
United States' Eating Humanely website is also entered into the
record.
Mr. Cicilline. Without objection.
[The information follows:]
MR. STEUBE FOR THE RECORD
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Mr. Cicilline. The gentleman's time has expired.
I now recognize the gentlelady from Washington, Ms.
Jayapal, for five minutes.
Ms. Jayapal. Thank you, Mr. Chair, for this very important
hearing. My colleagues, we do have an agenda. It is to fight
for Americans to be able to have choice; for consumers to be
able to shop at local grocery stores; to stop the consolidation
of industries where that consolidation results in higher
prices. That is the agenda that I think we are very focused on,
and in many situations, it is actually a bipartisan agenda as
well. I appreciate that.
Amidst the new pandemic wave, the American food supply
chain is hemorrhaging. Products are disappearing from shelves
or listed for far higher prices. Essential workers are subject
to massive COVID outbreaks and unhygienic conditions. In
contrast, dominant food suppliers like Tyson Foods have record
profits and CEO pay.
In fact, just a few months ago, my home State, Washington,
our State's Attorney General sued Tyson Foods, Inc., Pilgrim's
Pride Corp., and a number of other big chicken producers for
conspiring to inflate and manipulate prices, rig contract bids,
and coordinate supply reductions to boost profits. As AG
Ferguson said, ``If you've eaten chicken in the last decade,
this conspiracy touched your wallet and cost middle-class and
low-income Washington families more money to put food on their
table.''
The unprecedented consolidation of these companies in the
food supply chain has driven out competitors and has ignored
poor working conditions and increased consumer prices. As
dominant food suppliers consolidate, profits normally funneled
into local communities get siphoned out to Wall Street. For
example, in the last two decades, Tyson and many others have
acquired dozens of smaller firms.
Mr. Maxwell, as an economist and cofounder of Farm Action,
how has market consolidation in the supply chain impacted the
profits of local farmers?
Mr. Maxwell. Concentration has stripped the farmer of the
market. The fact is the market is dead. We are not here today
to talk about government intervention into competitive markets.
Farm Action is here today to talk about government safeguards
in markets that have no competition.
That is the reality that the farmer faces--one or two
buyers for their cattle. They are competing directly head-on
with their buyer. The majority of the cattle are either owned
by the packer or controlled by the packer, and that is the same
person that the farmer, the cattle producer, has to sell their
livestock to. The packer just simply slows down its purchasing
in the marketplace, lowering the price the farmer gets, and
puts the money in their pocket. It is that way in every sector.
America's farmers farm dependent upon government subsidies,
and they are being driven out of business by the concentration
of power.
Ms. Jayapal. Thank you.
Mr. Maxwell. They are losing their businesses and they are
losing their rural communities. It is a hollowing-out of
America.
Ms. Jayapal. Thank you very much.
Access to essential items has been particularly difficult
during the COVID-19 pandemic, and there have been extensive
outbreaks at places like Tyson Foods in my home State of
Washington that resulted in plant shutdowns and even deaths.
Ms. Johnson, as a food sustainability expert, can you
discuss how the pandemic worsened the working conditions in the
consolidated food industry?
Ms. Johnson. Thank you for the question, Congresswoman.
Yes, COVID has created a set of risks in the workplace that
we are all trying to understand how to deal with. It is
dangerous to go to work in a way that it hasn't been before,
and the dangers fall most heavily on those who are also poorly
paid and already endure dangerous workplaces.
Meatpacking, in particular, is an extremely dangerous
profession with very high turnover and a vulnerable workforce.
So, we are layering on top of existing risks another challenge.
I have heard this idea that people don't want to go to work
coming up, as if it is a preference. People are afraid to go to
work, and they are trying to protect themselves and their
families, while also trying to afford food and meet their basic
needs.
The pandemic has shed light on dynamics that were already
there, that have really been there since the beginning of the
United States and our food system. It is premise is relying on
exploitative labor practices. So, what we have now is an
opportunity. It is not opportunistic in an exploitative sense,
but it is opportunistic in that we can see what is before us,
and this is an opportunity to make change and remedy the unsafe
working conditions that so many people endure.
Ms. Jayapal. Thank you so much.
My time is expired, but I am really excited that we are
having this hearing, Mr. Chair, and I think it is important for
the American consumer that we fight for consumers and small
businesses across the country.
Thank you so much. I yield back.
Mr. Cicilline. Thank you. The gentlelady yields back.
I now recognize the gentlelady from Minnesota, Ms.
Fischbach, for five minutes.
Ms. Fischbach. Thank you very much, Mr. Chair.
Mr. St. Onge, in your testimony, you mention the challenges
for entrance into the processing market, I believe, such as
achieving the economies of scale necessary to compete. An
additional factor as well that we have been seeing in the Ag
Committee is the incredible capital cost that it takes to even
start a modestly sized meat processor. These are expensive
pieces of equipment that go into the facilities.
Can you expand further on those challenges for a new
entrant into the processing industry?
Mr. St. Onge. Mr. Manne may know the processing industry
better.
In general, the compliance costs, setup costs, all these
are far harder for smaller entrants. This is true not only in
food production, but this is also really true--it is true in
retailing; it is true across the economy.
Of course, what we are discussing today has the potential
to raise not only the compliance and the regulatory risks--or
sorry--costs, but also risks on top of that, right? If a firm
is sort of afraid of coloring outside the lines and getting
into a lot of trouble for that, then they can often end up
taking choices that are not only bad for the business, but
could actually be bad for the consumer. So, an example of that
is that a company might be actually afraid to offer customer
discounts because they are afraid of running afoul of some
requirement.
Ms. Fischbach. Since you mentioned Mr. Manne, Mr. Manne, do
you have anything to add or respond to that question regarding
the process?
Mr. Manne. Yes, I think a couple of things. First, I would
point out that there have been copious studies on the
meatpacking industry, on its history and economic consequences.
It is pretty remarkable how consistently they find that there
has been increased concentration. I don't think anyone can deny
that. That increased concentration correlates with some
increase in market power. Yet, there has been such an increase
in efficiencies that it dwarfs the potential harm from exercise
of market power.
There is lots of speculation about exactly what the source
of those efficiencies is. Everyone agrees that larger meat
processing plants is more efficient; no question about that.
That doesn't inherently mean that many plants have to be owned
by one company. So, there is a lot of speculation about
economies of scope, and there is a lot of research to suggest
that there are some.
I will give you one example. If you are able to process and
sell meat products from multiple different species, and you are
selling to a wholesaler that is interested in buying meat
products from many different species, you may have a much
easier time negotiating with them the marketing margin that the
wholesaler is making smaller--all because you have access to a
wider range of types of supply. That is just one of many, many
examples.
Ms. Fischbach. Maybe it is a yes-or-no question, but are
any of those challenges that are faced by the meat processors,
and getting into the business, are any of those related to
matters of antitrust policy?
Mr. Manne. Let's see, difficulties getting into the
business are not related to antitrust policies. They can be
related to regulation, though.
Ms. Fischbach. Okay. Maybe you could expand a little bit on
the regulation. That was going to be one of the other questions
that I asked about--kind of the challenges of regulation and
how that deals with the supply chain.
Mr. Manne. Yes. So, again, there may be perfectly good
justifications for this. Obviously, safety of the food supply
is very important. One consequence of that is absolutely
extraordinarily high compliance costs.
I would point out, for example, that the recent Biden USDA
announcement of a billion dollars or so to support small
businesses in the meatpacking industry, a chunk of that
specifically goes to defraying the cost of compliance with USDA
inspections and other regulations. Now, it is a very real cost,
and certainly, that makes a lot of sense, actually. It is the
one element of that proposal that makes some sense. Actually,
what doesn't make sense is why you don't do that for all
providers, because, of course, those costs apply at an even
greater level to a larger processor.
Yes, it is very real, and it certainly impedes entry at the
margin. I don't know exactly how much, but certainly at the
margin it would impede it.
Ms. Fischbach. Thank you very much. Mr. Chair, I yield
back.
Mr. Cicilline. The gentlelady yields back.
I now recognize the gentleman from Maryland, distinguished
Professor Raskin.
Mr. Raskin. Mr. Chair, thanks so much for this excellent
hearing.
Mr. Maxwell, the administration itself recently observed
that high levels of market concentration in the meat processing
industry is a textbook example of how diminished competition
hurts consumers who pay more, farmers and workers who are paid
less, and the economy more broadly. Can you explain the role
that meat processors play in the supply chain today? Do you
agree with the White House analysis that the high level of
concentration in meat processing is a problem for Americans
generally?
Mr. Maxwell. Meatpackers are, for the producer and for
access choice to the consumer, are the bottleneck within the
supply chain. The number of processors, meatpackers, or poultry
processors is extremely limited today to four dominant firms.
Therefore, they control the market at their processing plant.
We agree with the assessment, as we stated in our opening
statement, that market power, the concentration of the dominant
firms, has to be part of the analysis as it relates to
inflation and the increased spike in cost that we are facing
today during this pandemic. We believe that there are other
factors, which are some supply chain disruptions that have
increased cost, but many of those supply chain disruptions are
within that vertically integrated supply chain that is within
the control of that packer, as it relates specifically to meat.
Mr. Raskin. Well, some people seem to want to be blaming
antitrust laws for inflation. In 2021, Pilgrim's Pride, which
is one of the big producers of broiler chicken, pleaded guilty
to charges that it criminally conspired to fix prices and rig
bids for broiler chicken products. In 2019, the DOJ intervened
in a civil lawsuit alleging that Tyson Foods and Pilgrim's
Pride conspired together to fix chicken prices.
Do you agree that aggressive enforcement of antitrust laws,
or what we are proposing, which is strengthening of antitrust
laws, leads to inflation? Or do you think it will help us to
restrain inflation?
Mr. Maxwell. I believe that it will help restrain price
gouging by dominant firms within a marketplace. You have
mentioned the litigation that has gone on. Oddly enough,
Kroger, which has been mentioned here during this testimony,
was one of the plaintiffs that brought a collusion case against
the big poultry processors. So, even the big is admitting there
are problems within the system. Congress needs to act.
Mr. Raskin. Thank you.
Ms. McClendon, the poultry industry is a highly
concentrated and dominated industry by just a handful of large
companies. Your firm was directly injured by Cargill's 2021
acquisition of Sanderson Farms. Can you explain to us what the
impact of that acquisition and merger was on your business?
Ms. McClendon. Well, there is a couple of impacts. Of
course, the pay decrease that we are getting is going to reduce
my pay by one-third, which is a tremendous amount on all
poultry farmers. Our prices, too, continue to rise--the price
of gas, the price of electricity, the price of supplies like
fan motors and feed motors, and all those costs are rising for
us. So, to introduce a pay cut is extremely detrimental to us,
as farmers.
Again, I just believe that, as we continue to consolidate
into big three, that we run into the issues that have been
discussed here today, which is the price-fixing issues. These
large corporations have a lot of power. I am for capitalism,
and in capitalism, you need competition, and we just don't have
that in the poultry industry today.
Mr. Raskin. Well, can I ask you, but why are people paying
more for chicken when they go buy it at the store, but you, as
a farmer, are getting paid less?
Ms. McClendon. Because the model is set up so that
Sanderson Farms and Cargill/Continental Grain can all achieve
the highest profit that they can get. So, they are maximizing
their profits, while we, as farmers, are basically tenant
farmers. At times, that is what I feel like. It is like the big
man is in charge and a little guy is getting shoved out and
will never make what they need to make to even survive.
Mr. Raskin. Well, thank you for your excellent testimony.
Mr. Chair, Ms. McClendon's story is the story of countless
farmers and workers across the country, and we need to get back
to being in the business, as government, of aggressive
antitrust enforcement, so we can achieve what Ms. McClendon is
talking about, which is real market competition which benefits
everybody, as opposed to monopoly.
I yield back.
Mr. Cicilline. The gentleman yields back. Thank you,
Professor Raskin.
I now recognize the gentlelady from Indiana, Ms. Spartz,
for five minutes.
Ms. Spartz. Thank you, Mr. Chair. I appreciate your
hearing. I wanted to share with you a little bit of my personal
perspective, as someone, actually, not as a legal scholar, but
as a farmer, who actually used to get on the combine, someone
who used to pull the wagons. I will tell you one thing, as
somebody who actually used to be in Fortune 500 America an
auditor who worked at a largest company. Actually, that is what
led me to run for Congress.
If we continue on this path on destroying small business
with government regulations, we will have oligopolists control
all of the sides of the market, which they control most. I will
tell you that government-controlled monopolies is very
dangerous, a very dangerous structure because they can hire
very expensive CPAs like me and attorneys, and also have
lobbies to create a lot of loopholes and don't follow the
rules.
Actually, our environmental regulations, which a lot of
them are unreasonable, we want to have reasonable. They created
a lot of land restriction and views, and that destroyed a lot
of farming. We are talking about fertilizers. We were trying to
put a fertilizer facility in Indiana, and actually, I aligned
with some liberal Democrat because they were trying to push
carbon onto the Madrid Fault in Indiana, and he was very
nervous about that. So, now, we will rely on Japan and on
foreign countries to buy fertilizer, and our prices are going
to increase.
The same when we are talking about propane. I think Ms.
McClendon brought an issue. In the fossil fuels, we will see it
will double the price of propane, and it is destruction for the
little guy.
I just recently met with some farmers. My husband and the
Farm Bureau, and I met with some farmers, hog farmers. I told
them, okay, we do have significant oligopoly problems. I told
them, why couldn't--I know it requires capital, and access to
capital, as a small business owner, is very limited. I have
struggled with that myself. I said, ``Why couldn't we just
create a profitable business? Why cannot we create a new
facility to slaughter and butcher hogs?'' I actually was told
that we cannot use this word anymore; we have to use ``harvest
hogs.'' Well, I will still use ``slaughter,'' since English is
not my first language. So, I go to the dictionary because it is
ridiculous to say that we are ``harvesting hogs.''
Anyway, I said, ``Why couldn't we just start a facility?
You have some people. You have some businesspeople.'' He said,
``Oh, yes, we had some colleagues who tried to start a hog
facility in Indiana,'' and they told me, ``Well, wait for USDA
inspectors, it will take you a year to get them, and then, they
constantly have to check these facilities.'' If you are not a
big company connected to the government, they are not going to
show up. So, all big companies have political power and capital
to control.
So, my suggestion would be, to my fellow colleagues, if we
want to put all this FDA and USDA and the jurisdiction of DOJ
and the FTC--how much restriction to competition they are
creating--I would be all for it because the government is
destroying small enterprise. We are destroying manufacturing.
We are destroying mining. Now, we are coming after the farm. If
we continue on this path, now we are crying, that we are going
to be dependent on China and Russia. Well, we will be begging
for pork from China and grains from Russia, if we continue on
this path.
I don't know, Mr. Manne, do you have any suggestions what
you think that is really reasonable and common sense? Because
it is a very serious issue. Unfortunately, in many cases it is
not protecting competition, but competitors, and puts us in the
middle of global oligopolists.
Mr. Manne. You want to know what suggestions I might have
for--
Ms. Spartz. For increased competition. We really need to
protect competition because all we are doing: Setting prices
benefits government-controlled monopolies and is destroying the
little guy.
Mr. Manne. Well, in the industry that I am most familiar
with, in the beef industry, I would say that I don't see any
reason--there is no intervention we need to do to increase
competition. There is lots of competition, despite there being
a small number of firms. It is well understood that number of
firms does not correlate to the amount of competition, even
though we hear that repeatedly.
Everyone says, ``Four firms.'' Four firms. Actually, it
turns out that there are some studies, by the way, in the
telecom industry that suggest four firms is the optimal number
of firms for maximizing efficiency in a market.
Regardless, there seems to be a lot of competition. I am
not sure what we should do to increase competition, but, as I
said before--
Ms. Spartz. Well, I have an example. My farmers said that
USDA precludes competition.
Mr. Manne. Yes, exactly, I was just going to say--
Ms. Spartz. You know what I mean? We cannot say, as a
little guy--and I don't know if you have been business or not,
but I have started a lot of businesses. It is very difficult to
go against big oligopolies that government controls and they
are very close to the government. That is the biggest problem
we have. It is not just because--I mean, we cannot just neglect
and say, ``Oh, markets are going to work. They do not exist in
a lot of areas.''
I think my time has expired, but I would love to continue a
conversation and maybe see who can answer issues of
anticompeti-tiveness created by our agencies.
I yield back.
Mr. Cicilline. Thank you. The gentlelady yields back.
I now recognize the gentlelady from Florida, Ms. Demings,
for five minutes.
Ms. Demings. Thank you so much, Mr. Chair. Let me be clear
on this: I don't want a government-controlled monopoly. I just
want every Florida family to be able to afford a decent meal.
Mr. Chair, as all of you know, I grew up in a rural part of
Jacksonville, Florida in a family that did not have a lot. So,
you can imagine food that was affordable was critical to our
family. My parents grew vegetables, they raised chickens, they
traded with neighbors, and relied on our local independent
grocery stores. Coming together as a community, although it was
tough many days, we were able to make it work.
Now, I think every business wants to make a profit, but
greed is a different thing, and that's what we are here to talk
about today.
We have seen consolidation of the people who buy crops and
meats from our farmers and ranchers giving them the power to
squeeze both for greater profits for themselves and reduce
profits for those they buy from. This is just wrong. The
National Grocers Association affirmed that with limited
supplies independent grocery stores have not received their
fair share, seeing whole pallets of the products missing from
independent shelves in the big box retailers across the street.
The evidence is clear: Big corporations have squeezed and
continued to do so independent stores and food producers out of
the marketplace leaving us with a fragile food system.
Mr. Maxwell, Florida has a significant agriculture economy
providing the State with a wide variety of safe and dependable
food products and large and stable economic base. According to
the USDA in 2019 Florida ranked first in the U.S., in the value
or production of bell peppers, for fresh market grapefruits,
oranges, sugarcane, fresh market tomatoes, and watermelons,
second in the value of production for bell peppers, fresh
market sweet corn, and strawberries, and third in fresh market
cabbage, peanuts, and squash.
Mr. Maxwell, how does the consolidation of our food system
from middleman to food companies to grocers affect the
availability of fresh, healthy, and affordable food for
Floridians and the livelihoods; we all should care about it, of
Florida ranchers and farmers and the economy in Florida?
Mr. Maxwell. Thank you for the question. The issues that
you present within your question clearly need to be framed
within the domination that the firms--dominant firms have, the
CR4, and the power that they then have. As your farmers raise
their produce there are limitations in who will stand ready to
buy that produce and then to process that produce.
For the cattle producer there's a limitation on the number
of firms that will buy those fat cattle. You have great cattle
production, beef production in the State of Florida, and it is
getting more and more heavily concentrated. Farmers are facing
harder and harder times to find a fair price.
What it does to the consumer is that there's a bottleneck,
a bottleneck in the processing. These chains, these supply
chains are so extended globally and nationally that it limits
the amount of choices that a consumer has in a grocery store.
Mr. Needler already testified on how he's not given the same
fair deal for his opportunities to present to his customers as
are the large box stores. So, those bottlenecks in the supply
chain create barriers for producers, access markets, and
consumers to access choices at the grocery store.
Ms. Demings. Mr. Maxwell, thank you so much.
Mr. Needler, over the past several years Florida has seen a
reduction of grocers in many communities leaving many
Floridians in food deserts. How are small and independent
grocers helping address the problem of food deserts
particularly in underserved communities including rural areas
like the one I grew up in?
Mr. Needler. Well, I think you should start by looking at
once the--one of the biggest issues of food deserts is, once
somebody's gone, the barrier to entry really is the capital
intensity that's required to open the store.
So, independent retailers have been nimble enough to take
on different formats and different types of stores. Like, my
example would be that we've grown over the years because I've
been able to take on a different type of store, a smaller
format, a bigger format, and we've been able to be nimble and
try to serve the community with what we've got. We don't have
to build a brand-new store; we just try to step in and keep it
going as long as we can to serve that community, nourish that
community.
So, I think independent retailers have been more willing to
try and take risks versus playing large-scale capital
allocations across markets.
Ms. Demings. Again, thank you all.
Mr. Chair, I yield back.
Mr. Cicilline. The gentlelady yields back. I now recognize
the gentleman from Oregon, Mr. Bentz, for five minutes.
Mr. Bentz. Thank you, Mr. Chair.
Thanks to the Witnesses for this excellent hearing,
although I think the focus should be a little more on the
opportunities that exist for folks on the smaller end of
things.
The reason I say that is because I am a member of a five-
generation ranch family from Oregon and involved in the cow/
calf producing space for many, many, many years. I have watched
as a family operation, of which I am no longer a part, has
grown from 600 mother cows to something in the 4,000-5,000
mother cow range, which of course one would suggest listening
to today's hearing is some horrible example of consolidation,
but in point of fact it is a reflection of what has been
happening in the agricultural arena for a very long time.
I would take us back to the 1930s when some 25 percent of
all Americans were engaged in one way or another in farming, or
seven million family farms then and down to two million now,
and I would just say that this is consolidation. In addition,
the price of food over that period of time has declined from
17.5 percent of a family's budget in 1960 to around 9.9 percent
today. So, when we are here talking about how awful it is that
people are paying more for groceries, I would simply say, gosh,
look back to 1960. I don't want to go back there. That is my
point.
Now, this is not to say that the packers or the feed lot
operators or the retailers are above reproach; they are not,
but there are ways of I think approaching what we are talking
about today that will advance the interests of the producers
and the interests of the American people without bringing more
government into it.
With that as kind of a background, I would like to turn
to--I will take Dr. Manne for a moment and ask him about the
addition of some additional packing capacity; as I understand
it plants were already being built somewhere across the United
States, some actually in Idaho, new packing plants that would
add to the capacity of the nation when it comes to packing and
also alternative places to take your cattle, and ask if that is
kind of a natural process of our economy.
Dr. Manne?
Mr. Manne. Yeah, no, I think that's exactly right. When
prices go up, of course you see companies expanding to try to
capitalize on that, and ultimately that drives prices down.
So, actually, in the meatpacking industry, it's sort of
interesting: There's evidence to suggest that--or, sorry,
there's been claims that, following COVID and the price
increases during COVID, the meatpackers have sort of
artificially constrained supply in an effort to capitalize on
increased prices by increasing the prices even more. The best
studies on this point out that only did that not happen, but
the level of market power that existed before the pandemic
would have suggested vastly larger increases in price than
actually happened.
So, what it tells me is it seems like--and who knows
exactly what is motivating this--the beef packing industry is,
again, no one is above reproach and there certainly have been
problems there and elsewhere, but generally speaking, with
respect to the pandemic response, they've been increasing
capacity as much as possible. They have not been trying to
constrain capacity. They're literally building new capacity and
really responding in a very commendable sort of fashion to an
emergency situation that was certainly not of their making.
Mr. Bentz. I might say this is not limited--just because of
the nature of today's hearing it might mislead folks to think
that it is. This is not--this higher price situation we find
ourselves in, I would just simply talk about computer chips for
a moment. How about the automobile industry and what has
happened to the cost of a used car? Why don't we haul all the
used car dealers in here and accuse them of gouging? Because I
just noticed the other day when I went out to look for a used
car that the price was up 37 percent. So, where is the hearing
and the--I mean why aren't we running around there?
The reason of course is I think we all understand that
because of COVID there was a movement away from contracting for
computer chips and now we are reaping the harvest of not having
those computer chips made here in the United States, among
other things.
Mr. Chair, I just want to say as a member of a community
that relies upon cow/calf producers, I want to emphasize the
packing space is not above reproach, but I think adding more
capacity in the form of these smaller plants is a really good
step in the right direction. They were already coming along
before COVID and I wish them the very best because I think
broader markers are good for all of us, but breaking things
up--I don't want to go back to the 1930s. With that, Mr. Chair,
I yield back.
Mr. Cicilline. I thank the gentleman for yielding back.
It's nice to hear a Republican Member of this Committee
praising one of the Biden Administration's initiatives on
helping develop capital formation to bring more meatpacking
operations into our country. So, that was duly noted.
With that I would recognize the gentlelady from
Pennsylvania, Ms. Scanlon, for five minutes.
Ms. Scanlon. Thank you, Chair Cicilline. Concentration and
consolidation in our food supply chain has been shown now to
pose a serious threat to our food markets, the food industry
workforce, and financial stability for the American consumer.
Our ability to provide adequate and nutritious food to
consumers is a matter of national security, so we need to act
to ensure that the continuity of the industry is assured.
The pandemic, as with so many other things, has highlighted
the fragility of the U.S. food supply chain as meat processing
plants, grocery stores, seed and green markets, all which have
become steadily more concentrated in recent decades, were
unable to meet demand and Americans were left at various times
with empty shelves and increasing costs.
In a resilient and healthy food supply system redundancy
and diversity of suppliers would have helped to insulate
consumers from the harmful costs or supply impacts of the
pandemic and other similar events. More sources, processors,
and distributors of food means that if something goes wrong in
one part of the market, there are plenty of competing
businesses to pick up the slack.
In speaking with supermarket owners and operators and
others in our food supply chain we have seen the direct impact
of industry concentration when something goes wrong such as a
COVID surge leading to workers getting sick or having to take
time off to take care of family members, which then reduces
supply, which then increases prices.
Additionally, in studying the concentration of the food
supply chain it is so important that we look at the impact on
labor markets. Workers in meat processing and grocery
industries have seen elevated levels of risk during the COVID-
19 pandemic, but because just a few companies control such
large shares of the grocery and meat processing markers, they
are able to depress wages and subject their workers to poor
working conditions.
What we end up getting are companies in the national
grocery chains that rely on a really perverse form of corporate
welfare. They have a business model that relies on paying
employees so little that they are forced to rely on food stamps
and other government benefits. Studies show that the families
of employees of some of these corporate giants often go hungry
while the employees are literally surrounded by food. This
isn't just a perverse way to run a grocery business in the
wealthiest nation in the world; it's immoral.
We must have a food system in the U.S. that respects the
dignity of workers, is resilient even in the face of
unprecedented supply chain shocks, and that provides affordable
quality food for all Americans. Addressing concentration within
these markets is an important way to ensure a more secure food
supply chain, and so I look forward to discussing with you some
solutions to these problems.
Ms. Johnson, I have spoken to independent and small grocers
in my district about their challenges in getting supplies and
they have spoken at length about the impact of market
concentration on the meat industry. They were overwhelmingly of
the opinion that the price increases we have seen lately have
had a large part to do with that concentration because it has
drastically reduced the number of meatpacking plants and
suppliers. Then when the pandemic hits those places, they don't
have enough people to produce the pounds of protein that they
are used and the need for social distancing further reduced
their ability to produce the pounds of protein that they were
used to. So, the law of supply and demand then causes prices to
rise.
Both you and Mr. Needler have mentioned enforcement of
existing antitrust laws as a tool to address shortages. Can you
explain how that helps and what Congress might do or need to do
to improve enforcement or get additional enforcement tools?
Ms. Johnson. Thank you for the question, congresswoman, and
I couldn't agree more with your comments.
I think what's helpful here is to think in terms of fair
and affordable prices and get out of this high/low dynamic
because one point that we often miss is that the consumers who
are struggling to afford food are also the workers who are
having their wages suppressed. So, we need to align our
enforcement strategies and complementary policies to ensure
fair outcomes.
It's not necessarily the case that we always want to seek
the lowest possible price if that comes at the expense of
health, of environmental protection, and foists other costs
onto the public. That diverts public resources away from other
social problems that urgently need attention and it allows
corporate profits to skyrocket.
So, we need to ensure that our enforcement approach
addresses the tendency to externalize costs and to put those
onto the public and then at the same time invest in public
policies that will support our workers and our consumers and
ensuring that everyone can afford the food they need.
Ms. Scanlon. Thank you. I see my time is expired. I yield
back.
Mr. Cicilline. The gentlelady yields back.
I now recognize the Ranking Member of the Antitrust
Subcommittee, the very distinguished gentleman from Colorado,
Mr. Buck, for five minutes.
Mr. Buck. I thank the Chair. I will pass, Mr. Chair, and I
don't think I will have questions at any point. I thank the
Chair for recognizing me.
Mr. Cicilline. All right. The gentleman yields back. I now
recognize Johnson of Georgia.
Mr. Johnson of Georgia. Thank you, Mr. Chair, for holding
this hearing and I will note for the record that hardworking
people across this country, including those who own family
farms, are stressed out, working so hard that they are
literally working themselves to death.
So, Ms. McClendon, I want to offer my condolences on the
loss of your dear husband.
As President Biden recently said, ``Capitalism without
competition isn't capitalism; it's exploitation.'' Ms.
McClendon, the story you shared today about you and your
husband's experience with Sanderson Farms is a classic case of
exploitation. Would you agree?
Ms. McClendon. Yes, sir, I would.
Mr. Johnson of Georgia. In response to a question, you were
asked earlier you said that although you are not a fan of
government regulations, you feel that our government should do
something to protect family farmers like you from exploitation
by greedy corporations like Sanderson Farms, correct?
Ms. McClendon. That is correct.
Mr. Johnson of Georgia. So, Ms. McClendon, you would agree
that it has not been too much government regulation that has
hurt your business, but it has been a lack of adequate
regulation that has hurt your business. Is that correct?
Ms. McClendon. I would say that it is a lack of the
enforcement of the laws that are already on the books.
Mr. Johnson of Georgia. All right. Fair enough.
I think it is quite telling that the two Republican
Witnesses testifying today are against regulations that promote
competition. They are against enforcement of competition laws.
One of them testified point blank that the rise in consumer
food prices is not caused by increased market concentration in
the food industry. The other Republican Witness said that food
production, particularly meat-
packing, is among the most competitive industries in America.
Ms. McClendon, as the owner of a poultry farm do you agree
that market concentration in the poultry industry is killing
your ability to make a fair profit?
Ms. McClendon. Congressman, I am not qualified actually to
answer that question. I am not overly familiar with all the
rules and regulations that are currently before Congress, and
so I would decline to give an opinion on that.
Mr. Johnson of Georgia. Okay. Well, thank you, ma'am.
Mr. Maxwell, what would you say in response to that
question?
Mr. Maxwell. Well, thank you for the question,
representative. I believe that what we face in the poultry
industry is extreme concentration and probably the best example
of the abuse of power within agriculture. Either the power they
have to deny workers bathroom breaks, the power they have to
walk in and throw a contract down in front of a contract
poultry grower and say this is how much we're now going to pay
you in spite of having millions borrowed.
Mr. Johnson of Georgia. That is what happened to Ms.
Sanderson, right?
Mr. Maxwell. Say again?
Mr. Johnson of Georgia. That is what happened Ms.
Sanderson, right? I mean Ms. McClendon. Correct?
Mr. Maxwell. Yes. That's exactly what happened to her.
She's lived that experience. What we tried to present today is
the--you know, we can talk about economic theory, but these are
the lived experiences and the outcomes of this very economic
theory that some are defending today. These are real. Real
people, real impact on rural communities. Look at the hollowing
out of rural America, the depopulation, the loss of tax base.
It's because there are dominant firms that are controlling
almost every aspect of rural life today.
Mr. Johnson of Georgia. Mr. Maxwell, would it be fair to
say that the two Republican Witnesses are not paying close
attention to the reality on the ground of what is happening to
family farmers like Ms. McClendon due to the anticompetitive
concentration the market concentration in the meatpacking
industry that is the most significant driver of higher food
prices for consumers and lower prices for farmers?
Mr. Maxwell. Well, I think that the Witnesses that you've
referenced are bringing their perspective as they know it
through their academic education and their experiences within
the segments of the industries that they have represented. What
they don't bring here today is the lived experiences on the
ground of the outcomes of the economic theories that rely upon
certain assumptions.
What I would ask those Witnesses to do is go back and
question the assumptions. Question the assumptions. Why are
these the outcomes? Why did fertilizer costs go up 51 percent,
but the cost of the gross margin, manufacturing margin went up
680 percent and farmers saw a doubling in prices? Go back and
scratch your head and rethink the assumptions based upon your
economic theory, because it's not playing out on the ground.
Mr. Johnson of Georgia. Well, the problem is money--
Mr. Cicilline. The time of the gentleman has expired.
Mr. Johnson of Georgia. Thank you, Mr. Chair.
Mr. Cicilline. I didn't mean to cut you off mid-sentence.
Mr. Johnson of Georgia. I would just point out that the
problems are money and politics. The big agribusinesses are
paying for the regulations that are not being enforced to not
be enforced. It is what they are doing. Then we have got two
Witnesses who are testifying on their behalf and they happen to
be Republican Witnesses. With that, I yield back.
Mr. Cicilline. All right. Thank you. The gentleman yields
back. I now ask unanimous consent to add a number of statements
and letters regarding the harmful effects of consolidation on
our nation's food supply to the hearing record.
The first is a statement from Claire Kelloway, Manager of
the Fair Food and Farming Systems Program at the Open Markets
Institute; testimony from Rob Larew, President of the National
Farmers Union; a statement from Bill Bullard, CEO of the
Ranchers-Cattlemen Action Legal Fund, the United Stockgrowers
of America; testimony from Steve Etka, Policy Director of the
Campaign for Contract Agriculture Reform; a letter from George
Slover, Senior Policy Counsel, and Michael Hansen, Senior
Scientist, Food, both of Consumer Reports; a statement from the
National Association of Convenience Stores; a statement from
the National Sustainable Agriculture Coalition; a statement
from a coalition of organic farmers in New England; testimony
from Margaret Krome-Lukens, Policy Director, and Aaron Johnson,
Challenging Corporate Power Program Manager, of the Rural
Advancement Foundation International; a statement from Anthony
Perrone, International President of the United Food and
Commercial Workers International Union; a statement from Rhode
Island resident Ruarri Miller, owner of Union Burrito; a
statement from Kayte Barton, an advocate for persons with
disabilities; and, finally, testimony from Amanda Hitt, a
director of the Food Integrity Campaign of the Government
Accountability Project, without objection.
[The information follows:]
MR. CICILLINE FOR THE RECORD
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Mr. Cicilline. I want to thank the Witnesses for their
testimony today and my colleagues on both sides of the aisle
for participating in this hearing.
Today we had the opportunity to hear firsthand from
farmers, experts, and business owners on the effects of
economic concentration on America's food supply. This hearing
has made clear that our food system is in crisis, harming
consumers and small businesses throughout the supply chain.
Excess concentration has caused not only a rise in prices, but
also harm to the environment, our health, worker safety, and
the stability of the entire food system.
Unprecedented concentration and vertical integration at
every link of the supply chain threatens our economic system by
eliminating competitive markets. It threatens the livelihood of
farmers by squeezing them at both ends, buyers and sellers, and
particularly impacting farmers of color.
Independent grocers and small retail outlets are struggling
to stock their shelves and keep their doors open in part
because dominant big box chains and large suppliers abuse their
power to force small retailers to pay higher prices for
products or withhold products from them entirely.
Small poultry farmers are living in poverty and struggling
to survive because a handful of vertically integrated firms
control every stage of the supply chain.
This outsized control of America's supply by a handful of
immensely powerful companies has also made clear that we need
real solutions to these problems by strengthening our antitrust
laws to outlawing abusive practices in the marketplace. We need
to make sure our nation's competition system and economy works
for everyone.
They also underscored the dire need for reforms across the
board, implementing President Biden's four-point plan to lower
food prices and creating choice for hardworking Americans to
tackle price-gouging and other symptoms of corporate
profiteering.
Again, thank you to our Witnesses for extraordinary
testimony.
This concludes today's hearing. Without objection, all
Members will have five legislative days to submit additional
written questions for the record or additional materials for
the record. Without objection, this hearing is adjourned.
[Whereupon, at 12:49 p.m., the Subcommittee was adjourned.]
APPENDIX
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QUESTIONS AND ANSWERS FOR THE RECORD
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