August 26, 2002

Meat packers should be permitted to use the same types of vertical integration and strategic alliances as other American industries, the American Meat Institute told a congressional field hearing in South Dakota. The U.S. Senate Judiciary Committee convened the hearing to discuss the structure of the meat industry and a ban on packer ownership of livestock, advocated by some lawmakers.

Testifying on the institute's behalf, AMI Senior Vice President of Legislative and Public Affairs Sara Lilygren told the committee AMI would fight any effort to ban packer's ability to own and control livestock or limit captive supply. A Senate-passed amendment to the Farm Bill would have banned packer ownership and control of livestock more than 14 days prior to slaughter but was not included in the final version.

"To my knowledge, there is no other sector of the U.S. manufacturing or service economy in which the federal government plays such a watchdog role with respect to raw materials," Lilygren said. "Yet, ironically, as the meat and poultry industry operates with this additional, daily government oversight of our business transactions with livestock producers, we are here today to discuss whether meat packers should receive additional scrutiny, enforcement or business restrictions in order to protect or benefit livestock producers."

Lilygren noted that the business practices of meat packers are subject to Sherman Act, the Clayton Act, the Robinson-Patman Act and the Uniform Commercial Code, but also by the Packers and Stockyards Act, a statute that is unique to the meat industry and prohibits packers from engaging in unfair or deceptive business practices that disadvantage their livestock suppliers.

Critics of the Act, though, have called it ineffective. Meat industry critics, including some producers, say they worry about the increasing amount of livestock marketed through forward contracts rather than through traditional public markets - a trend they say calls into question how accurate the current price discovery system can be. Some legislators, including Sen. Charles Grassley (R-IA), have called for laws aimed at limiting how much meat could be sourced through these newer arrangements.

To view AMI's testimony, visit c.