– Federal Approval of Tyson-Hillshire Mega-Meat-Merger Harms Consumers (EcoWatch, Aug 27, 2014):
Yesterday, the U.S. Justice Department approved the merger between Tyson Foods and Hillshire Brands, requiring an important divestiture, but nonetheless allowing one of the largest meat processing mergers in years.
The Justice Department forced Tyson to sell its sow-buying business that competed head-to-head with Hillshire’s sow slaughter business. The Justice Department should be commended for recognizing the buyer-power that pork processors and marketers have over hog farmers and taking a necessary step to protect farmers from increased consolidation in the pork packing industry. The pork packing industry remains overly concentrated, but at least the Justice Department prevented it from getting any worse.
Although this divestiture is vitally important for farmers, the merger approval leaves consumers vulnerable to higher prices from a more consolidated pork-processing sector. The Justice Department should not have approved this merger until its anticompetitive impacts on consumers could be fully assessed. One month is insufficient time to analyze a merger that joins the largest meat processing company with the eleventh largest firm and creates a vertically integrated pork powerhouse that can exert market power from squeal to sausage.
The merger disadvantages both consumers and rival manufacturers. Tyson has struggled for years to develop credible value-added pork product brands and by approving this merger Tyson seizes a leading position in the sausage, breakfast sandwich, hot dog and lunchmeat markets. Because Tyson can align its pork slaughter business with Hillshire’s branded processing business, Hillshire products will have a leg up on competitors, who will likely have to raise prices.
Consumers are especially vulnerable today, as pork prices are rising due to a widespread outbreak of a disease affecting piglets. A larger Tyson is unlikely to reduce pork prices as quickly or as fully when hog prices decline. The Justice Department should have investigated this merger more fully and divested more businesses before rapidly approving this mega-meat-merger.