On Saturday, September 19, 2009, in St. Albans, Vermont, Senator Patrick Leahy, D-Vt, convened a field hearing of the Senate Judiciary Committee to examine the state of competition in the Northeast dairy industry. “Vermont dairy farmers are hurting,” Leahy explained in advance of the hearing, “and there may be anti-competitive forces that have contributed to the crisis.” Local farmers and economists testified, as did Christine Varney, head of the Justice Department’s Antitrust Division. Varney acknowledged that “there is unprecedented economic upheaval in the dairy industry, and that dairy farmers have been going out of business at a record rate.” “The co-ops are basically captive of one manufacturer,” she remarked at one point. “I want to understand how we got there.”
Varney also announced that the Antitrust Division, in partnership with the U.S. Department of Agriculture, intends to explore agriculture competition issues in a series of upcoming public workshops. Among other topics, the workshops will focus on two issues of particular concern to dairy farmers: (1) buyer (monopsony) power held by dominant processors and (2) recent vertical integration. Though dairy competition often occurs at the local level, Varney observed, there has been extensive consolidation in recent years, and that activity increases the potential for buyer (monopsony) power. She also noted that the increase in vertical relationships in the dairy industry might lead to less transparency of economic conduct. Urging openness, Varney quoted Justice Brandeis: “’Sunlight is said to be the best of disinfectants; electric light the most efficient policeman.’”
In the coming months the Antitrust Division hopes to receive input from a range of stakeholders---including farmers, economists, lawyers, consumer groups, and processors---to determine whether recent consolidation has created significant efficiencies or merely boosted monopoly or monopsony power.
Read the full text of Varney’s testimony here.
Read additional coverage of the hearing here.
