Justice Department Should Sink Titanic Flour Merger, Even with Rearranged Deck Chairs
Last week, ConAgra Foods, Inc. confessed to its shareholders that it had to delay its proposed wheat flour merger with Cargill because of the ongoing antitrust review by the U.S. Department of Justice. The proposed merger would create a dominant wheat flour milling company that would be twice the size of its next biggest rival, ADM, and more than five times bigger than the third and fourth largest flour milling firms.
The proposed merger (which would create a company called “Ardent Mills”) would have a near stranglehold on buying wheat from farmers and selling flour to bakeries and other food manufacturers. Because Ardent would be so large and have such a heavy footprint across the country, farmers would likely get paid less for their wheat while bakeries would probably pay more for flour, ultimately raising prices for consumers.
Cargill and ConAgra knew this mega-merger would raise eyebrows, so now the companies are talking about selling a few of the flour mills involved in the deal to help make it easier for the Justice Department to swallow a merger resulting in a company that is just too big. ConAgra told its shareholders that the merging companies were “prepared to divest” four flour mills (two in California and one each in Texas and Minnesota). That minor concession just puts lipstick on a pig of a market for wheat and flour that looks a lot like a monopoly in many parts of the country.
The proposed flour mill divestment leaves most of the country vulnerable to the Ardent flour monopoly and in some places getting rid of one flour mill does too little to protect farmers or consumers. A large portion of wheat from the Dakotas is milled in Minnesota, but even after selling one Minnesota mill, Ardent would still control half the flour mills in the state.
In other places, the meager divestiture offer would have no effect at all. For wheat farmers in western Kansas and Nebraska and the Colorado Front Range, Ardent would still own 6 of the 11 wheat mills between Omaha, Denver and Wichita. And it would still own 5 out of 8 mills between eastern Pennsylvania and New England with a near stranglehold on selling flour to bakeries, pizza parlors and other food manufacturers between Philadelphia, New York City, Albany and Boston (see map).
The Justice Department should reject this mega-flour merger because it will harm too many farmers and too many consumers. It is another in a series of eye-popping food company mega-mergers this year that Food & Water Watch has opposed (including Sysco-US Foods, Whitewave-Earthbound Farms, ConAgra-Ralcorp and the cross-border Shuanghui-Smithfield deal). The entire food chain is hyper-consolidated into a Foodopoly that lowers the earnings of farmers and increases the prices that consumers pay.
Today, Food & Water Watch and the American Antitrust Institute sent a letter to the Justice Department that dismissed the meager divestment offer and urged the federal antitrust authorities to oppose the proposed flour merger. It is long past time for the Justice Department to step up and reject these mega-mergers and the Cargill-ConAgra flour merger is a good place to start.