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Organic chicken purchase raises antitrust concerns

An organic industry watchdog is calling for an antitrust investigation of Tyson Foods’ purchase of Tecumseh Poultry, which owns the organic brand Smart Chicken.
Mateusz Perkowski

Capital Press

Published on June 27, 2018 8:42AM

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The recent purchase of an organic chicken producer by a major meat company has prompted an organic industry watchdog to complain of unlawfully reduced competition.

The Cornucopia Institute, an organic nonprofit, has asked the U.S. Department of Justice to investigate Tyson Foods’ acquisition of Tecumseh Poultry of Waverly, Neb., which owns the Smart Chicken organic brand.

Tyson, which is based in Springdale, Ark., already owns the organic chicken brands NatureRaised Farms and Aidells.

Buying Smart Chicken stamps out a major competitor and makes Tyson one of only three firms that dominate the organic chicken market along with Pilgrim’s Pride and Perdue Farms, according to Cornucopia’s complaint.

Organic poultry is a distinct and rapidly growing sector but the supremacy of major producers may “push out” smaller, independent companies from the market, the complaint said.

“There’s no law against being big, but there are laws against using your economic prowess to eliminate your competitors and dominate the market,” said Mark Kastel, Cornucopia’s senior farm policy analyst.

Worth Sparkman, senior public relations manager for Tyson, said the purchase closed after a review by major regulatory agencies and would not comment on the anti-competitive concerns.

Due to delayed USDA regulations for organic meat, the poultry sector was initially a “laggard” in the organic industry but is now quickly going from “zero to 60,” Kastel said.

However, investment in organics by major meat producers has mostly centered on exchanging organic feed for conventional feed and not using synthetic drugs, rather than providing chickens with meaningful outdoor access, he said.

“Most of these poultry companies are practicing what we call organic by substitution,” he said.

Smaller poultry producers will have difficulty competing with the “economy of scale” of the largery companies, such as their ability to buy massive quantities of feed and shelf space in grocery stores, Kastel said.

The control of major firms over organic meat is having spillover effects on organic grains, which are often imported from dubious sources in foreign countries, he said.

“There’s been nowhere near commensurate growth in domestic grain production” for the organic sector, he said.

The USDA has played “fast and loose” with enforcement of organic standards on these imports, hurting genuinely organic growers of grain crops, Kastel said.

The Corcucopia Institute is optimistic about getting a fair hearing from the DOJ’s antitrust division after playing “giant killer” in the proposed merger of Danone and Whitewave, two big players in the dairy industry, he said.

The combination raised concerns of diminished competition for organic milk but the government tried to mitigate the impact by requiring the sale of Stonyfield Farms, an organic brand.

In that case, though, Cornucopia was better able to cite market share statistics for the organic dairy sector than for the organic poultry sector, which isn’t as mature, Kastel said. “This is a much more quickly emerging industry.”

The complaint is likely correct that organic poultry is a distinct market sector, though the argument “would be stronger if they had a little more data,” Peter Carstensen, a law professor specializing in agricultural antitrust at the University of Wisconsin.

However, investigators from DOJ can seek that information on their own — for example, from major grocery retailers, he said.

Carstensen said he’d probably rephrase the argument to emphasize the major players are illegitimately foreclosing access to customers.

As it stands, the DOJ could interpret the complaint as calling for the protection of smaller, less-efficient producers, he said. “It could have been framed in a slightly more effective way.”


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