On October 20, 2008, the Department of Justice (“DOJ”) filed a civil antitrust lawsuit to prevent JBS’s proposed acquisition of National Beef Packing Company LLC (“National”). JBS is the world’s largest beef packer and the third largest in the United States with annual sales in the United States exceeding $6 billion. National is the fourth largest beef packer in the United States with annual beef sales of about $5 billion.
The combination of JBS and National would make it the largest U.S. beef packer, giving it control over the slaughter of 40,000 heads of cattle per day increasing their annual sales to $14 billion. According to the DOJ, the proposed acquisition would lead to higher beef prices for consumers and lower prices paid to cattle supplies.
Furthermore, the acquisition will eliminate a significant competitor in National and placing 80% of the beef packing industry into the hands of three firms: JBS, Tyson Foods, and Cargill Inc. It will reduce competition in the production and sale by packers of beef in the United States. JBS is also currently in the process of acquiring Smithfield Beef Group Inc., from Smithfield Foods Inc. However, DOJ is not challenging this acquisition.
This is the DOJ’s second merger challenge since failing to block Oracle’s acquisition of Peoplesoft in 2004. According to the DOJ, grocery stores, food-service companies and, ultimately, consumers would have to pay higher prices for beef if JBS’s buyout of National were consummated. The combination would not only lead to higher retail prices for U.S. consumers but also lower wholesale prices for cattle producers, ranchers and feedlots.