BOSTON (06/14/2000) - The U.S. Department of Justice has initiated an investigation to determine whether a business-to-business exchange set up by six of the nation's largest meat producers violates antitrust laws.
The exchange, being developed by IBP Inc., Tyson Foods Inc., Gold Kist Inc., Farmland Industries Inc., Smithfield Foods Inc. and Cargill Inc. along with its subsidiary Excel Corp., has been under fire from farmers and lawmakers in Minnesota since is was announced last April.
Minnesota State Rep. Doug Peterson said Wednesday morning he was glad the Justice Department had begun the probe into what he has called the "OPEC of meat."
"We hope they will be aggressive with their investigation as well," said Peterson, a Democrat from the western part of his state. "I think the Microsoft decision has given the Justice Department the guts and the will to go forward."
Tyson public relations manager Ed Nicholson said the six meat producers will cooperate with the government. He said he is confident that the exchange will be allowed to go forward.
"We are not anticipating that they will find anything they will object to," Nicholson said.
However, Peterson and his supporters - farmers from rural Minnesota - have charged that the exchange will lead to price fixing and force farmers to sell to just one company.
Nicholson denied the charge.
"The site is going to be set up as a competitive site," Nicholson said. "All of the people in the business will be competing for customers."
Nicholson called Peterson's assertion that the exchange represented an "OPEC of meat" a "mischaracterization."
In addition, Nicholson said a number of organizations and mechanisms are already in place to protect the public from price fixing. He pointed to the Georgia Dock, which publishes poultry prices, and the Chicago Board of Trade as two prominent examples. Nicholson said the exchange is simply technology being superimposed on a structure to provide greater efficiency and economy.
However, Peterson said he is convinced it goes a lot further than that.
"There is a feeling among people that there is a real bigness to the Internet and people are getting lost within e-commerce," Peterson said. "There is this trend for vertical integration that cuts out the independent producer."
He alleged that exchanges will hurt consumers, saying that prices will become fixed because the exchanges represent "a concentration of raw power" in the hands of just a few companies and destroy competition.
"Everyone used to talk about Big Brother - this is the Big Company moving in, and they are finding every way to get your buying dollar. At some point, there has to be consumer choice," Peterson said. "It is pretty well a wash if we don't get a complete investigation of this. They might get too big for government to control, and then we're going to have some real problems in this country."
In addition to investigating this exchange, the government is looking at exchanges set up by the auto and airline industries. The U.S. Federal Trade Commission has scheduled a day-long workshop on the antitrust implications of exchanges for the end of the month.