The DOJ said that JBS’s acquisition of National Beef Packing would substantially restructure the beef packing industry, eliminating a competitively significant packer and placing more than 80 per cent of domestic fed cattle packing capacity in the hands of three firms: JBS, Tyson Foods and Cargill.
It said that, from a price perspective, the move would be bad for both consumers and cattle suppliers.
"The combination of JBS and National will likely lead to grocers, food service companies and ultimately American consumers paying higher prices for beef," said Thomas Barnett, Assistant Attorney General in charge of the Department’s Antitrust Division.
"It will also lessen the competition among packers in the purchase of cattle that has been critical to ensuring competitive prices to the nation’s thousands of producers, ranchers and feedlots," he added.
JBS, headquartered in Brazil, is in the process of acquiring Smithfield Beef Group from Smithfield Foods, a move that is not being challenged by the DOJ. In 2007, JBS purchased Colorado-based Swift Foods Company.
According to the DOJ, if not blocked, JBS’s acquisition of National would make it the largest US beef packer, with an ability to slaughter more than 40,000 head of cattle per day (or more than one third of US fed cattle packing capacity) and annual sales of more than $14bn (€10.6).
Industry members have also voiced opposition to the deal.
In a letter earlier this year to the DOJ, 72 animal producer associations and agricultural, consumer interest and religious groups outlined their concerns about JBS’s purchase of National as well as Smithfield Foods' beef operations.
The letter envisaged that the acquisitions, in reducing the number of major US meat packers from five to three, would damage other players in the industry.
It urged officials to scrutinise the mergers, issue a second request for more information from JBS and seriously consider blocking the deals
Adverse effect on innovation
The letter predicted that the acquisition would also harm "innovation and competition" in the beef industry and claims that it is "likely to have adverse effects on consumers".
The opposition group noted that that the JBS purchase would “increase vertical integration because [it] will now control Smithfield's substantial feeding operations" which are situated near the slaughter houses. "This will drive prices down for all feeders of cattle."
The communication stated that the effect of increased captive supply arrangements is that "there is lower trading volume and, price volatility increases because the open market cattle prices are buffeted by packer decision making on price, shift shut-downs, and mere market rumours."
The letter concluded that "no efficiencies or benefits will arise from this acquisition.”