The value of history is the lessons learned from it. In looking at the activities of beef industry today, one of the best history lesson comes from certain events around the turn of the last century. The Sherman Antitrust Act had been passed in 1890. In the following
decade it was mostly ignored by the Executive Branch of the federal government. In about 1885, prior to the passage of the Sherman Act, a pool had been established in which
various meatpackers agreed upon the division of the dressed meat market into which they sold their products. This provided a reduction of competition and allowed them to control the supply of meat in their own areas and thereby strongly influence the price to
their own benefit.
Through the time that followed the establishment of the pool, changes in membership and practice came about and by 1893, the pool was known as the Veeder Pool. It was named for attorney Henry Veeder, a lawyer for Swift and Company, in whose office the group met weekly. At first, the group continued the practice of dividing up the dressed meat market, but between 1902 and 1905 discontinued the practice due to an injunction filed against them by the Department of Justice and ultimately upheld by the Supreme Court.
Sometime in that period between 1902 and 1905, the makeup of the members of the Veeder Pool changed and it also changed its nature and became a pool dividing the livestock
market instead of the dressed meat market. It took well over a decade for much of the information to come to light, as regulators looked back on their success of bringing the dressed meat pool to an end, and failed to recognize that it had just morphed into
another form having the same effect on the market.
By 1919, Henry Veeder himself had testified to the existence of the pool and it was a well-known fact. Veeder willingly testified because the statute of limitations had run out on
his involvement. The division of the market continued, though, and the meatpackers point to irrefutable evidence of variation in the marketplace that proved the existence of competition.
In January of 1919, Mr. William B. Colver, chairman of the Federal Trade Commission, testified to a Senate Committee regarding the activities of what he called the “great packers”, referring to the Big Five meatpackers of the day. Using data from 1916, Mr. Colver threw down a convincing argument that the Big Five were indeed dividing the livestock market. In the face of the argument that the meatpackers proportional buying
still represented true competition, and was merely a representation of each one’s proportional “plant capacity”, Mr. Colver dissolved all doubt by presenting data to the contrary.
So, what is the valuable lesson from this history? Meatpackers have had a history of collusion. They have changed tactics and methods when they have been caught, and they have vocally denied anticompetitive behavior and provided statistics to show that competition existed while they colluded in the marketplace. There are some differences today.
Manipulation is more sophisticated and complicated. It takes more analysis to uncover.
Market division is not geographical, but based on categories of livestock. But also the collusion is not restricted to that of market division or of price setting. Much effort has, in more recent years, turned to organizational power used to influence the regulatory regimen that will be in place.
The modern version of collusive power is the big and influential organization that influences politicians and helps to make sure that the rules written for regulating
anticompetitive behavior don’t bother the members big and influential organizations.RS