By James C. Webster
© Copyright Agri-Pulse Communications, Inc.
WASHINGTON, June 24 -- Just over a month after it sued to block the sale of a Tyson Foods chicken plant to a smaller rival, the Department of Justice announced Thursday that it has agreed to drop the suit as long as George’s Inc. makes several capital improvements at the Harrisonburg, Va., processing plant. The upgrade, which George’s said last month that it was planning before the suit, “will avert the likely adverse competitive effects that would arise from the acquisition,” DOJ said.
But it also appears to satisfy the objections of Virginia politicians – the two Democratic U.S. senators and the Republican governor and Member of Congress from the area – who had urged the government to drop the suit. But it may disappoint one of the most active supporters of the Obama Administration’s stepped-up scrutiny of food industry concentration. The political pressure puts DOJ “in a bit of a rumpus in Virginia,” Bert Foer, president of the American Antitrust Institute wrote June 2. “I hope they don’t chicken out.”
It a federal judge in Harrisburg approves the proposed settlement, it would resolve the May 10 suit. “The proposed settlement enhances the competitive viability and increases the production of the Harrisonburg poultry processing plant, which translates into more opportunities to grow and process poultry,” said Christine Varney, assistant attorney general for the Antitrust Division. “This resolution not only benefits poultry growers, but also the Shenandoah Valley community.”
The suit had alleged that the sale would “have the anticompetitive effect of reducing the prices paid to Shenandoah Valley area farmers who raise chickens.” But DOJ said Thursday that the capital investment required by the settlement agreement “will lead to a significant increase in the number of chickens that will be processed at the facility.” Adding new freezing and deboning “will allow George’s to produce a variety of highly valued products,” it said, creating an incentive to increase local poultry production and “increasing the demand for grower services and averting the likely adverse competitive effects arising from the acquisition.”
DOJ conceded in its court documents what Tyson and George’s had maintained last month – “that there were significant concerns associated with the viability of the Harrisonburg processing plant, which was operating at a loss over the past few years. Taking all of the facts and circumstances into consideration, including the likely benefits resulting from the required improvements, the department determined that the proposed settlement is an effective remedy.”
AAI’s Foer didn’t question Tyson’s right to make a unilateral decision to get out of a market but asked whether there might have been “less anticompetitive alternatives to George’s, such as, for example, a growers’ co-op capable of buying and operating the plant.” The latter model was pursued successfully in the same area by turkey growers who banded together and bought a plant that Pilgrim’s Pride had decided to close in 2004.
George’s is the 11th largest chicken processor in the U.S. with plants in Virginia and Springdale and Cassville, Mo. Tyson Foods, headquartered in Springdale, is the largest chicken processor in the country with plants in several states. Both have headquarters in Springdale, Ark.
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