Antitrust Lawyer Blog Commentary on Current Developments

Statement of the Department of Justice Antitrust Division on its Decision to Close Its Investigation of Smithfield Inc.’sAcquisition of Premium Standard Farms Inc.

On May 4, after an investigation, the Antitrust Division determined that Smithfield’s proposed acquisition of Premium Standard Farms was not likely to harm competition, consumers or farmers.

The Division’s investigation of the merger of these pork packers and processors focused on fresh and processed pork, the purchase of hogs from farmers, and the purchase of services from farmers who raise hogs owned by the merging parties.

Based on the evidence obtained during its extensive investigation, the Division found that the merged firm would continue to face significant competition in the sale of fresh and processed pork from its national competitors Tyson, Swift, Excel/Cargill, Hormel and Seaboard Foods. Additionally, farmers who sell hogs or hog-raising services to the merged firm would have competitive alternatives that would deter the merged firm from lowering prices paid to the farmers. Although the Antitrust Division did not take any action, the long investigation indicates that the Antitrust Division will spend time investigating these deals.

Smithfield Foods Inc., based in Smithfield, Virginia, is the largest hog producer and the largest pork packer and processor in the United States with annual revenues exceeding $11 billion. Smithfield has pork packing plants in Iowa, South Dakota, Nebraska, Illinois, North Carolina and Virginia. Premium Standard Farms Inc., based in Kansas City, Mo., is the second-largest hog producer after Smithfield and the sixth-largest pork packer and processor in the United States with annual revenues of about $900 million. Premium Standard Farms has pork packing plants in Missouri and North Carolina.

The Division researched the extent to which the merger could likely affect competition in the sale of fresh and processed pork. The Division found that there are a large number of pork packers-Tyson, Swift, Excel/Cargill, Hormel and Seaboard Foods-that compete on a national basis against Smithfield and Premium Standard Farms in the sale of fresh and processed pork. Furthermore, the Division found that a new competitor, Triumph Foods, recently entered the pork packing market.

The Division also considered the extent to how the prices paid to the farmers who sell hogs or hog-raising services would be lowered as a result of the merger. The Division found that, if the merged firm tried to lower prices, independent farmers in the area who grow their own hogs would give their services to other competitors and ship their hogs, or credibly threaten to ship, them to numerous packing plants other than those owned by the merging parties including to facilities owned by Cargill, Tyson and Hormel. Therefore, the Division concluded that the acquisition is not likely substantially to lessen competition.


Andre Barlow

(202) 589-1834
abarlow@dbmlawgroup.com