FTC Focuses on M&A in the Agricultural and Food Industry

Federal antitrust enforcement in the agricultural industry had been little more than a whisper for decades. The Obama Administration announced it was making agricultural antitrust enforcement a priority and then held workshops on the topic. During the Trump Administration, there was some throat clearing, including notable antitrust enforcement activity in the cattle and poultry industries. But there can be no question that the federal government rediscovered its voice during the Biden Administration as exemplified by the Executive Order on Promoting Competition in the American Economy on July 9, 2021, proclaiming the administration's policy to "enforce the antitrust laws to combat the excessive concentration of industry, the abuses of market power, and the harmful effects of monopoly and monopsony – especially as these issues arise in [among other industries] agricultural markets."

In response to this broad directive, the Federal Trade Commission (FTC) and the Antitrust Division of the U.S. Department of Justice (DOJ) launched a series of programs, "Listening Forum on Firsthand Effect of Mergers and Acquisitions," aimed at obtaining feedback from stakeholders who have experienced the firsthand effects of mergers and acquisitions in the industries addressed by the July 2021 Executive Order. Each of the listening forums will cover concerns in a specific industry. The stated goal of these listening forums is to supplement the FTC's and DOJ's request for comments on merger enforcement guidelines.

Listening Forums

The first listening forum was held on March 28, 2022, and focused on the food and agriculture industry. FTC Chair Lina M. Khan led the discussion, which drew anecdotal commentary from farmers, independent grocers and other food and agricultural market participants. Kahn was joined by Assistant Attorney General of the DOJ Antitrust Division Jonathan Kanter. The thrust of the discussion came as no surprise: the participating constituents – mostly small producers and retailers – painted a picture of market pressure in sourcing products and materials, processing the commodities they produce, supplying their products to institutional markets, scalability and in-competing against significantly larger market participants. Complaints regarding mislabeling and false advertising also surfaced from some of the participants. Each of the participants attributed these challenges to a purported anticompetitive market driven in large part by a lack of enforcement.

Although Kahn made no prognostications on future enforcement action by the FTC, she reiterated commentary from the participants, including "how consolidation in any single market can have effect for direct participants in that market, but also can have cascading ramifications across the supply chain and across even seemingly unrelated markets," which she emphasized as something the FTC will keep in mind going forward. Kanter echoed Kahn's sentiments describing the participants' concerns as "the vicious cycle of consolidation." While the overall commentary was neither earthshattering in its novelty nor a clear harbinger of things to come, agency dialogues like these are often the precursor not only to increased enforcement actions – which are all but expected from this administration – but also increased private litigation.

Conclusion and Takeaways

The main takeaway from the first listening forum for organizations in the food and agriculture industry, and indeed any industry addressed by the July 2021 Executive Order, is that the Biden Administration intends to take action on its full-throated call for a revival of antitrust enforcement. If organizations with potential antitrust risk were not listening in July 2021, they should be listening now.

Listening attentively alone will not necessarily win the day. Organizations must be proactive to protect themselves in this environment of heightened scrutiny, starting with a multi-faceted antitrust risk assessment. This self-assessment should begin with evaluation of existing contractual relationships for antitrust risk, with specific attention given to supply and distribution agreements that might foreclose competition and joint venture agreements that might unnecessarily restrict competition between the participants (especially as to hiring practices, a focus of significant antitrust attention in the current environment). Organizations should also reevaluate practices of trade associations in which they are involved to ensure that all best practices are being followed. They should also enter discussions about any potential mergers or acquisitions with eyes open to the likelihood of close scrutiny, even if the transaction involves vertically aligned companies and not direct competitors.

Holland & Knight's Antitrust Team, which includes former leaders in the federal and state antitrust enforcement agencies, stands ready to assist clients as they navigate this new enforcement environment and consider steps that they can take to minimize potential risks this environment presents to their businesses. If you have any questions, please contact the authors of this alert or another member of the Antitrust Team.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.