By Mike Callicrate | February 20, 2014
This week I’m taking a moment to observe the 10-year anniversary of the most important court case in the history of the U.S. cattle industry, while turning the last page on a powerful new book that tells in precise and riveting detail the sad story of why the lawsuit was so critically needed.
Christopher Leonard’s new book, The Meat Racket – The Secret Takeover of America’s Food Business, which hits book shelves this week, is a well-crafted and thoroughly reported piece of work. It is being endorsed by Eric Schlosser, author of Fast Food Nation, who writes, “Cruelty, greed, and monopoly power – that is what Christopher Leonard has found at the heart of America’s meat packing industry.”
It was a call from Attorney David Domina that brought memories of the cattlemen’s court case flooding back to me. It was the case that brought momentary hope to many cattlemen before hope faded to disbelief. Here’s a recap.
Ten years ago this week a Montgomery, Alabama jury awarded cattlemen $1.28 billion in their eight-year class action case against IBP (formerly Iowa Beef Processors), the world’s largest beef packer. It was a day to celebrate!
Pickett vs. IBP was originally filed in 1996. Cattleman Henry Pickett, from Alabama, was the named plaintiff in the case. Tyson Foods Inc. purchased IBP in 2002, two years before the trial. Knowing how Tyson had industrialized the poultry business and hearing about the pain the company had inflicted on poultry growers, cattlemen were right in fearing Tyson’s purchase of the nation’s largest beef packer. Many cattle producers knew what it meant to be “chickenized” – to be serfs under the boot of Tyson and big agribusiness!
Of course we were happy for the verdict, but the important decision hadn’t yet been made – the injunctive relief. The injunctive relief would redefine the rules of the game, forcing Tyson and the other big packers back into a competitive market for buying the millions of cattle they processed, putting an end to the ongoing extraction of wealth from the cattle industry. At that moment, we weren’t considering the possibility the day would never come.
The jury was happy about the result, too. They had dedicated six weeks out of their lives to hear this historic case – a case that would determine the fate of independent ranchers and cattlemen across the nation. Would the markets be fair, open and competitive or would a handful of big corporations take control of America’s meat supply?
Julia was on the jury. She was 65 years old, weighed maybe 100 pounds, looked frail, was hooked to an oxygen tank and appeared in generally poor health. She had recently given up her job as the research librarian for the University of Alabama’s public library system, generously making the position available for a young widow with three young children.
In the hallway leading out of the courthouse, Julia called out in her faint voice to our attorney David Domina, a tall, intelligent and athletic figure, who over the years had mostly dedicated his law practice to fighting abusive power on behalf of the powerless. The meat packers had met and lost to Domina before. The thirteen pudgy servile corporate lawyers representing Tyson in the courtroom had been no match for him. “Mr. Domina, Mr. Domina!” she called out, and when he turned toward her, she said,“I was prepared to stay here in this building until Christmas if I had to, to get this verdict for your people.”
The opening day of trial was sunny and cool, much more pleasant than the winter weather up north that most of the cattlemen had left behind, along with their cattle ranches and families. Kind neighbors were offering to help with chores to cover for them in their absence. Just outside the courtroom, I was interviewed by an AP reporter. In describing Tyson and the other big packers, I said, “These guys are nothing but old-time gangsters, thugs and thieves. They beat your brains in with their market power and take your money.” It made the national press. It would have been an understatement to say Judge Lyle B. Strom didn’t like it much. It would come back to haunt me later in the trial.
IBP President and CEO Bob Petersen warned cattlemen as far back as 1988 that if something wasn’t done to keep its competitors, Cargill and ConAgra, from feeding their own cattle, then IBP would have to do something similar. IBP had been a dependable cash buyer, participating weekly in the market for live cattle. IBP had become the biggest and best in the industry. But the market was changing and IBP felt disadvantaged. When cattle prices were high, Cargill and ConAgra could kill cattle from their own feedlots avoiding the more expensive cattle in the cash market. When cattle prices were low, they would buy less expensive cattle on the cash market. They could always keep their plants running at capacity from their own inventories of cattle if necessary. IBP had to keep their needs flowing from a less dependable and volatile cash market.
Meanwhile, it was known among meat packer execs and some cattle feeders that the four biggest packers had actually been cooperating since the late 1970s, dividing up the market,and lowering prices to producers. The original intent of the Packers and Stockyards Act of 1921, the antitrust law our case was based on, was to stop the anti-competitive practices of the big meat packers of that day and prevent those practices from occurring again. The law had never really been enforced. The big packers had claimed efficiency and economies of scale in justifying their size and power — cattle producers had lost 20% of their share of what consumers were spending for beef, more than $300 per head, while retail prices soared. Ranchers were leaving the land at the rate of 1,000 per month. Senator John B. Kendrick knew exactly what would happen when the big packers were left to cooperate rather than compete:
“It has been brought to such a high degree of concentration that it is dominated by few men. The big packers, so called, stand between hundreds of thousands of producers on one hand and millions of consumers on the other. They have their fingers on the pulse of both the producing and consuming markets and are in such a position of strategic advantage they have unrestrained power to manipulate both markets to their own advantage and to the disadvantage of over 99 percent of the people of the country. Such power is too great, Mr. President, to repose in the hands of any men.”
-These words were spoken on the floor of the U.S. Senate by Wyoming Senator John B. Kendrick in 1921
As promised earlier, IBP finally did something to change the way they procured cattle. They developed “the Formula,” a new form of captive supply. Captive supply was a term used to describe the inventories of livestock a packer controlled outside of the cash market. The other big packers used cattle they owned from their own feedlots and contracted cattle from cattle feeders, in addition to buying some cattle on the cash market to lock in their supply. I termed this new formula the “nuclear warhead of captive supplies.” IBP didn’t invest a single penny, or build a single fence, they didn’t have to feed an animal or worry if an animal got sick or died, yet they could gain complete control of an inventory of cattle just by giving preference to a few large cattle feeders who were having difficulty selling their cattle in a market that was becoming less accessible by the day. If the big packers were robbing the bank, it was the big cattle feeders who were driving the getaway car! It was brilliant! IBP got all the cattle they needed, when they wanted them. The big packers were now fully managing the market rather than competing in it – and posting record profits.
The evening before I was to testify I received a hand delivered letter by way of David Domina from Mr. Gill, one of Tyson’s local Alabama lawyers stating:
An Associated Press reporter, Kyle Wingfield, quoted you in the Wednesday, January14, 2004 Montgomery Advertiser, and probably other publications, as making the following statement concerning IBP/Tyson:
“These guys are nothing but old-time gangsters, thugs and thieves. They beat your brains in with their market power and take your money.”
As you are plainly aware, these statements are both false and defamatory. Pursuant to Alabama law, Tyson Foods, Inc. and Tyson Fresh Meats hereby demand that you publish a full and fair retraction of such remarks. This retraction must be published in an equally public and prominent place and manner as the original publication within five (5) days of your receipt of this letter.
David Domina and I spent the evening preparing our written response. We acknowledged that the quote was accurate as written in their letter. We defined each of the terms, “gangsters”, “thugs” and “thieves,”followed by examples of how Tyson and its fresh meat subsidiaries were, by definition, actually “gangsters,”“thugs” and “thieves.” We stated that we were not aware of a company with more felony-laden records and that the terms “gangsters, thugs and thieves” were a mild judgment. A person with a similar legal record would be known as a “habitual criminal” under the laws of many states. We never received a response.
During the trial, we typically walked over to Troy University for lunch. One day several politicians were seen entering the building, one of the luminaries being Senator Sam Brownback from my state of Kansas. I greeted Senator Brownback. He asked what I was doing in Montgomery. I told him I was there for one of the most important events in history. He said he was as well: a celebration in honor of civil rights hero Rosa Parks. I responded that the Rosa Parks event was certainly important, but the reason I was in town, along with many other cattlemen, was to try to save the U.S. cattle industry. I explained a little about the case and suggested he might sit in on the trial being held just across the street – he never showed up, probably confused about on which side of the courtroom he should sit.
Senator Brownback, now Governor of Kansas, along with Senator Pat Roberts and Congressman Jerry Moran (now Senator Moran) are faithful advocates for big agribusinesses like IBP and Tyson, always placing big corporate interests over farmers, ranchers and rural communities. I thought it was revealing that the court room was packed with cash strapped independent cattlemen, paying their own way, but none of the paid meat packer touts attended the trial. None of the, “We have the safest, highest quality, most abundant and affordable food supply in the world!” folks were in the room, including ag economists from both private firms and universities, nor the National Cattlemen’s Beef Association (NCBA) leadership, nor writers for any of the major industry publications. David Bowser, Attorney Offers Observations On IBP-Tyson Price-Fix Case, from the Texas Livestock Weekly was the only agriculture reporter there.
Bruce Bass, who was always dressed like a Wall Street banker, arrogantly confident, and feared by even the biggest and most important of cattle feeders, was IBP’s vice president in charge of procuring cattle. He testified that their captive supplies assured IBP of a steady flow of cattle to keep their plants running and that is why they used captive supplies. During questioning, Bass admitted the company would have to pay more if they bought the cattle on the cash market. He said that his bids for live cash cattle depended on his inventory of captive cattle, and that the more inventory he had under captive supply the lower his bid in the cash market. The jury knew that Bass had just admitted a violation of the Packers and Stockyards Act, which states that it is unlawful for a packer to “engage in any course of business or do any act for the purpose or with the effect of manipulating or controlling prices, or of creating a monopoly in the acquisition of, buying, selling, or dealing in, any article, or of restraining commerce.”
Judge Strom didn’t like the jury’s verdict. So he reversed it, using a rare procedure called “jury nullification.” He took away the $1.28 billion award and ordered the cattlemen to pay $80,000 for Tyson’s court costs.
As the Tyson case was working its way through the courts, D.C. attorney John Roberts had been representing USDA in a case concerning whether the beef check-off was constitutional. The case was before the U.S. Supreme Court, with cattlemen arguing that the big packers and their captive lobbying group, the National Cattlemen’s Beef Association, had high-jacked the approximately $80 million dollar per year check-off program. The money cattlemen were forced to pay on each head of livestock sold for beef “promotion and research” had been turned into an NCBA-meat packer private slush fund. Cattlemen argued they were being forced to pay for speech that was contrary to their views and interests. John Roberts won on behalf of the USDA. The court ruled the mandatory beef check-off was government speech, immune from First Amendment restrictions, essentially making the assessment on each head of cattle a tax. For cattlemen, it was a miscarriage of justice – taxation without representation.
After Roberts was newly seated as Chief Justice of the Supreme Court, he and the other eight justices would decide which cases they would hear. The Court receives approximately 10,000 petitions for a writ of certiorari each year, but only hears oral argument in about 75-80 cases. On March 24, 2006, the United States Supreme Court denied without comment Plaintiff’s Petition to rehear the case, which meant Judge Strom’s decision would stand without further review.
“The Courts have now rendered the Packer & Stockyards Act of 1921 (P&S Act) meaningless,” said Keith Mudd, a Missouri farmer and OCM president at the time. “The 11th Circuit Court of Appeals ruled previously that livestock producers can show billions of dollars of harm from price manipulation, but if the packer has the smallest business justification for its conduct, the packer wins.”
The cattlemen’s worst fear had become reality. They had just been put on the road to serfdom – either on their way out of the cattle business or on their way to being chickenized!
Today, ten years after a jury found Tyson guilty of violations of the Packers and Stockyards Act, the competitive marketplace for finished cattle is gone. Independent feeders, denied a fair market, are gone or going fast in the fool’s game of trying to compete against the big packers for calves and feeder cattle, while left with a rigged market to sell into. Cattle — receiving all the performance enhancing drugs technology can provide — are now concentrated into massive 100,000 head-plus, packer controlled, industrial feeding operations, producing the lowest quality beef in modern history. Rural communities, along with the trusted caretakers of our land and livestock, continue their decline as Americans depend more and more on imported meat from the same global companies that have preyed upon our domestic livestock producers. As the fourth largest packer, National Beef, closes their large Southern California packing plant, we are close to being left with only three big packers – JBS, Tyson and Cargill. The biggest beef packer, the biggest pork packer and the biggest chicken processor in America are no longer American. They are all foreign owned, by either the Brazilians or the Chinese.
As the consequence of an inept Congress and a failed justice system, never before has the money and power in our food system been so concentrated and consolidated at the top. Never before has so much of the food dollar gone to the big corporations that process and distribute, with so little going to those that invest the most capital, take the most risks, and do the most work. Today, every time a big packer has a food safety problem, the whole country is at risk. Never before have so many food workers been so abused and exploited. Never before have so many food animals been so mistreated. Who would have predicted this: 93 years after the passage of the Packers and Stockyards Act and 108 years after being warned of the dangers and abuses of big meat packing, we have made a full return to Upton Sinclair’s The Jungle.
Proving Anti-Competitive Conduct in the U.S. Courtroom: Economic Issues with the Courts’ Opinions in Pickett v. Tyson Fresh Meats, Inc
by Taylor C. Robert
Journal of Agricultural & Food Industrial Organization, 2006, vol. 4, issue 1, pages 1-29