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Farm, Nutrition, and Bioenergy Act of 2007--Continued --

Floor Speech

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Location: Washington, DC


FARM, NUTRITION, AND BIOENERGY ACT OF 2007--Continued -- (Senate - December 13, 2007)

BREAK IN TRANSCRIPT

Mr. BROWNBACK. Mr. President, I want to speak in opposition to the Grassley amendment. I appreciate the heart of the Senator from Iowa, and his intent. He has been consistent. He has been longstanding and heartfelt on this issue. I have been in the meetings he has called with the head of packing and stockyard compensation about concerns of concentration in the agricultural industry. I have seen him press on this issue. I agree with his heart on this amendment and his effort and his desire.

I absolutely disagree with this amendment. I agree with the sentiment, what he is trying to get done. This is not the way. I would like to express to this body what I believe, clearly, will take place in my State were this amendment to pass.

The cattle industry is a major industry in my State. We are third in the number of cattle on ranches and feed yards--6.4 million. There are more than twice as many cattle than people in my State. It is big business. It is a feed yard business where a lot of cattle from all over the country come to be fed out and processed. It is a very big business. It is $6.25 billion in cash receipts a year in my State, my rural State.

This is a business where there are a lot of contractual engagements and obligations back and forth. A man may have cattle from Alabama, and he puts them on a feed yard near Dodge City, KS. The processing plant is near Dodge City and the feed yard may have a contractual arrangement with the processor, saying: I am going to deliver you a thousand head of cattle a day for every working day. That keeps your processing plant orderly and organized. In exchange for that, I am going to get a higher value of cattle that he then passes on to that Alabama cattleman who owns the cattle there.

It is an arrangement that has worked to produce a very highly effective system. Some people do not like the scale of it. In many respects I do not. I would rather it be dispersed to a huge number of family farms across the country the way it used to be, like the farm where I grew up where we had chickens and pigs and cattle. Instead, we have much more integrated operating units. But this would go right at the heart of this industry, as far as changing the burden of proof and changing it on one specific industry. It will not have the intended effect of recreating the family farm system. That is not what is going to be the spill-out of this.

What will end up taking place is the Alabama cattleman is going to end up getting less money for his cattle, and the consumer is going to get less of a directed product they want. I want to develop that for the body, to explain why I like the heart of the people proposing this, but this will not produce the results they want.

The amendment creates an Agricultural Competition Task Force with the stated purpose to examine problems in agricultural competition. The task force has virtually unlimited authority to investigate transactions and business arrangements in the livestock industry--read special counsel for agriculture. It puts in several millions of dollars in that area. The task force is unaccountable to anyone. It is not required to hold public meetings nor abide by the Administrative Procedure Act nor acquire evidence from all parties. Under this amendment, the livestock industry and entire agricultural industry could be subject to limitless reviews of transactions.

I think the biggest piece I have concern about--and I have concerns about
this as a lawyer, and as an agricultural lawyer I have concerns about this. This is the area that I taught in. This is the area I have written in. I have written on the Packers and Stockyards Act. It is an important piece of legislation that this Government passed in the 1920s, when we had a very diffuse agriculture with a very monopolistic packing industry. We said this is not fair, so we are creating the Packers and Stockyards Act to oversee this structure. That is what they have been charged with doing.

In this particular amendment they would shift the burden of proof in the justice system and say this is a guilty transaction, monopolistic in nature, and then you prove your way out of it. To support that, I want to quote from the Department of Justice letter they wrote on the particular provisions. I understand my colleague from Iowa has changed some of the provisions but not this piece of it.

This would change the standards of certain mergers, acquisitions, and actions under the Clayton Act. That is the base bill. In particular, in all agricultural merger cases brought by the Government, Federal and State, and all private cases where the merging parties' combined market share is 20 percent or more--this is the DOJ letter--it puts the burden of proof on the defendant to show the transaction would not substantially impact or lessen competition or tend to create problems in the marketplace.

I am paraphrasing monopoly in the marketplace at the end.

The current setting is, no, we have to prove that against the individual or the group. To date, the Federal antitrust laws apply unaltered to mergers across virtually all industries, with the overriding objective to protect competition to the benefit of consumers because the Department has not been prevented from challenging anticompetitive mergers. They can challenge, and do now, in agriculture under the current legal standards. Shifting the burden of proof is unnecessary. This is a big deal, to shift the burden of proof on one particular industry, and then also to put in industry-specific guidelines.

Let me tell you what is taking place now. I described the situation of an Alabama cattle producer who puts cattle on feed in Kansas, who gets more money for his cattle because they are on feed there and because that feed yard guarantees a certain flow of cattle. If you put this in place, it has lawyers paid for by the Government to go out and examine any contract that is taking place. It can go, pick a feed yard, a Kansas feed yard, and it can go out and say: You have a contractual arrangement with this packer, and we are going to examine that.

Now, you pay for lawyers to say this is not a noncompetitive transaction--and they are going to have to hire lawyers to do that. They are going to end up having a big legal bill on a shifted burden, where the guilt is assumed, not innocence is assumed. It is going to be different from any other industry around. You are going to then have people driving down the price of the commodity. And you have a number of groups that are in these innovative market mechanisms. I described one earlier, a group of people at the Knight Feedyard that have certified hormone-free, antibiotic-free beef. It is a group of producers. They formed an association. They go to a big packer and say: Will you process our cattle and deliver it to the shelves in Connecticut and New York as hormone-free, additive-free, antibiotic-free beef? The packer agrees to do so. That is a contractual arrangement that will be subject to investigation, that will be presumed guilty under this.

My Kansas producers, under this innovative marketing approach that they initiated, get a substantial benefit by being able to market this sort of product that the consumer wants, and they have to go to a major packer to do it because he is the person--that is the group that can process cattle and get it to the shelf in a good quality state.

But my guys are the ones who get the money out of the system. They will be presumed guilty. It will be presumed to violate this. It will be subject to a great deal of legal investigation taking place, and my belief is it will not happen. Then my producers get less money for their cattle, and the consumers do not get the product they want. This is a specialty product that people want. It costs more to produce this type of beef and the consumer is not going to get that product and my cattlemen are going to get less money for their product.

I appreciate the heart of the proposal. What it is going to end up doing is getting less money to cattlemen in particular. I can't speak for other agricultural or livestock industries as well as I can for business that is in my State. The National Cattleman's Beef Association is strongly opposed to this amendment. The Department of Justice is opposed to this amendment for reasons of shifting standards for one industry but not for any others; for having different standards for that industry. The cattlemen believe it is going to hurt them substantially, subject them to a number of legal costs that they do not currently have and that they cannot afford to deal with. It is going to hurt the consumer as well.

While I appreciate the intent, I appreciate the presentation of it--my family farms. My brother is a farmer. This is not going to take us in the right direction. I believe the route to go is what we have been doing in the Packers and Stockyards Administration and having industry standards that are similar across all industries, and that we should support the Packers and Stockyards Administration, support the laws that are there, fund those entities--which I support doing--maintaining those standards but allowing these innovative approaches to take place for a major industry in my State and for my producers and cattle producers across the country.

I know others want to speak on this issue. I may speak on it again in a while.

I yield the floor.

BREAK IN TRANSCRIPT

Mr. BROWNBACK. Mr. President, I wish to respond to the good Senator from Iowa and a couple of his comments about the amendment. But first I ask unanimous consent to insert in the Record after my statement a letter from the Department of Justice opposing the bill.

The PRESIDING OFFICER. Without objection, it is so ordered.

(See Exhibit 1.)

Mr. BROWNBACK. Mr. President, we just received this from the Department of Justice. They state in the first paragraph:

The Department of Justice strongly opposes the amendment.

To read their summation sentence, which I do not think is fair, given the detail and the work the Senator from Iowa has gone into on this, and substantial changes that he has made--we have been reviewing his amendment. I have the amendment.

But in the DOJ summary sentence, they state this:

However, DOJ believes certain provisions included in the amendment would not accomplish its stated goal of protecting rural communities and family farms and ranches, but instead would unnecessarily duplicate existing collaboration efforts, increase costs and uncertainty and may hinder effective antitrust enforcement and harm competition in agriculture and other industries. Therefore DOJ strongly opposes the amendment.

Then they go on further to develop the points they have here. As I said, I appreciate the modifications the Senator from Iowa has made. I can tell you in my State, and in the cattle industry, they view this as hurting the price that they are going to be able to get for cattle is the bottom line issue. They view this as driving up substantially their legal costs, and most farmers do not like to have any legal costs, let alone having a number of legal costs.

They believe this is going to do it, and that is not--that is coming from the National Cattlemen's Beef Association, it is coming from the Kansas Livestock Association, where I was a couple of weeks ago at their annual meeting. This was one of their lead concerns, and the reason it was one of their lead concerns is they are looking at that and saying: Look, we are going into a number of different marketing transactions now, and we feed cattle for a lot of people around the country.

My guess is a fair number of Iowa's cattle are on feed in my State in Kansas, and that that is taking place is a good thing. We invite more farms to come there because of the efficiency, of our feeding operations, because of the weather conditions for those, because of the packers that are located there, and the efficiency of being able to do that, and then of these innovative marketing arrangements so that they can get a premium price for Angus cattle that come out of Iowa or Alabama or California or somewhere else. They are able to get a premium price for those because they do special things. They say we are going to keep these Angus fed separately here, and we are going to track them through the whole system. Then we are going to make sure they are hormone free, if that is what the group wants, or we are going to do something else to have premium beef that is going to be marketed only in certain high-end restaurants.

All of that segments the marketplace, but those segmented marketplaces are through contractual arrangements, and they get a premium to the producer that will be under investigation with this. That is why DOJ opposes it. That is why the Kansas Livestock Association, when I was meeting with them, was very fearful of this.

I appreciate some of the changes that were made and were noted here. The base concerns remain what was stated here by the Department of Justice and by the Kansas livestock producers.

Now, different people look at this different ways. A lot of us are deeply concerned, and have been for some time, about the concentration that has taken place in the agriculture business. How do you go at it differently? I spent 6 years as agriculture secretary in Kansas, and many times was trying to come up with innovative, different market segments, whether we could do it on a small scale, farmers' markets, and getting products closer to consumers, whether we can do different products which are coming out now.

We are a big cotton producer in Kansas, looking at canola oil--some of it got going; some of it did not--or confection of sunflower seeds which are under contract, I might point out as well.

So we went through a period we are not making enough money off of the commodity-based business, and we have got to segment this. But when you segment it, that generally requires some sort of identity being preserved and some sort of contractual relationship. And, yes, you get a benefit for that, you get paid more than someone who just has a commodity product.

Well, now, if you say: You cannot do that, or if you do that, we are going to presume you are guilty and you are going to have to pay a lawyer to fight your way out of it. With all due respect to the people whose intent is pure on this, this is going to hurt producers in my State.

That is why many of them--not all, some--support this approach, but many would be strongly opposed to this, as the Department of Justice is.

I urge my colleagues to vote against it.

Exhibit 1

U.S. DEPARTMENT OF JUSTICE,

OFFICE OF LEGISLATIVE AFFAIRS,

Washington. DC, December 13, 2007.
Hon. Patrick Leahy,
Chairman, Committee on the Judiciary, U.S. Senate, Washington, DC.

Dear Mr. Chairman: The Department of Justice (DOJ) has reviewed Senate Amendment 3823 to H.R. 2419. DOJ works vigorously to ensure that the benefits of competition are maintained in all markets, including agricultural markets, to the benefit of American consumers. However, DOJ believes that certain provisions included in the amendment would not accomplish its stated goal of protecting rural communities and family farms and ranches, but instead would unnecessarily duplicate existing collaboration efforts, increase costs and uncertainty, and may hinder effective antitrust enforcement and harm competition in agriculture and other industries. Therefore, DOJ strongly opposes the Amendment.

Senate Amendment 3823 to H.R. 2419 calls on DOJ and the Federal Trade Commission (FTC) to issue agriculture merger guidelines. To date, the Federal antitrust laws apply unaltered to mergers across virtually all industries, with the overriding objective to protect competition to the benefit of consumers. As such, there is no need for any industry-specific merger guidelines. The Horizontal Merger Guidelines (Guidelines) issued by the DOJ and FTC apply consistently to mergers across the entire economy, and no need has been demonstrated to depart from that generally applicable approach. DOJ has not been prevented from challenging anti competitive mergers in agriculture under the current legal standards. To the extent that there is a suggestion that monopsony is a problem particularly significant to agriculture, the guidelines address monopsony and thus no industry specific guideline is warranted for that concern.

DOJ believes that current merger policy is sufficiently flexible to address market conditions that may be unique to agricultural markets. For example, DOJ and FTC recently issued a Commentary to the Horizontal Merger Guidelines (2006), which provides several examples of how agricultural matters are reviewed. This commentary, DOJ's merger challenges in matters such as General Mills/Pillsbury (2001), Archer-Daniels-Midland/Minnesota Corn Processors (2002), Syngenta/Advanta (2004). and Monsanto/DPt (2007), competitive impact statements issued as part of those challenges, and the closing statements DOJ has issued for certain agricultural matters, demonstrate that merger policy under the Guidelines is effective at protecting consumers and maintaining competition in agriculture industries. Changing the well-established policy is not necessary and could deter efficiency enhancing transactions that would benefit consumers by resulting in lower prices.

Subsection (c) of Senate Amendment 3823 creates an Agriculture Competition Task Force (Task Force), made up of representatives from DOJ, FTC, United States Department of Agriculture (USDA), State governments and attorneys general, small and independent farming interests, and academics or other experts. The Task Force is charged with devoting additional resources focused solely on agriculture industries to study competition issues, coordinate Federal and State activities to address ``unfair and deceptive practices'' and concentration, and work with representatives from rural communities to ``identify abusive practices.'' In addition, the Task Force shall report on the state of family farmers and ranchers. DOJ believes such a task force would at best duplicate existing enforcement activities, and at worst could impede existing coordination between DOJ, USDA, and state governments by creating a bureaucratic structure that would increase the cost to the American taxpayer without any benefit to competition or independent farmers. Furthermore, to the extent the amendment requires consideration of the effects on ``rural communities'' there is no clear explanation regarding how this factor should be considered, and such consideration could be inconsistent with overall antitrust objectives.

Subsection (e) of this amendment requires notification to the USDA of Hart Scott Rodino (HSR) filings with the FTC and DOJ as well as the sharing with the Secretary of Agriculture of any second request materials obtained under such merger reviews. Under this section, USDA may submit and publish comments on whether mergers ``present significant competition and buyer power concerns,'' such that further review by DOJ or the FTC is warranted. Congress provided essential confidentiality for HSR filings and for productions of documents under that process, and no need has been shown to change that important protection. Through the existing Memorandum of Understanding between DOJ, the FTC and USDA, the antitrust agencies seek expertise and information from USDA on agriculture matters, and as part of that cooperative relationship, USDA expresses its views regarding antitrust merger enforcement matters, and thus no need for radical change has been shown. In addition, concurrent jurisdiction likely would increase costs and time delays inherent in duplicative review and has the potential for inconsistent standards and outcomes.

DOJ shares the concern of the amendment's sponsors that agriculture, as a key part of our economy, should maintain its competitive nature so that producers and consumers alike benefit from adequate supply and choice of agricultural products at competitive prices. Moreover, we take seriously concerns expressed in the agriculture community about competitiveness in the agriculture sector. However, because Senate Amendment 3823 has several provisions that raise concerns for DOJ, both about unintended consequences as well as about competition and public policy, DOJ strongly opposes these provisions.

Thank you for the opportunity to provide our views on this proposed legislation. The Office of Management and Budget has advised us that there is no objection to this letter from the perspective of the Administration's program.

Sincerely,

Brian A. Benczkowski,
Principal Deputy Assistant Attorney General.

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