By Patrick Woodall
Today marks the 100th anniversary of the passage of the Clayton Act, a key statute designed to prevent corporations from swelling in size and power though mergers and takeovers. The Clayton Act was one of a series of reforms from the Progressive Era designed to curb the power of corporations over the people. It supplemented the anti-monopoly 1890 Sherman Act, which had failed to stop a merger wave that created the corporate trusts that ran roughshod over consumers, farmers and workers at the turn of the 19th century.
But a merger wave beginning with the stock market boom in the Roaring 1920s through the consolidation during World War II encouraged Congress to strengthen the Clayton Act in 1950. The Senate legislation noted that the goal was “to limit future increases in the level of economic concentration resulting from corporate mergers and acquisitions.”
It is clearly time to dust off the Clayton Act, given the wave of mergers now sweeping the American economy. Between October 2012 and September 2013, companies announced 1,326 mergers worth $815 billion—nearly four mergers worth an average of $2.2 billion a day.
But the antitrust law enforcers at the Department of Justice and the Federal Trade Commission (FTC) investigated less than four percent of those mergers and challenged less than three percent. The DoJ and FTC initiated enforcement actions against 38 of the mergers, but 29 of them were ultimately approved (with some tinkering around the edges like in the big beer merger or the woefully inadequate US Airways-American Airlines merger settlement), seven of the mergers were abandoned and one case is still pending. Only one of the proposed mergers was blocked outright.
If the antitrust cops would investigate more mergers, they would probably find more problems. In 2013, the DoJ and FTC brought some sort of enforcement action against 81 percent of the mergers they investigated. Although many of the settlements have been disappointing, these merging firms have been forced to divest at least some assets, which makes the merged company slightly smaller.
But most proposed mergers receive almost no examination. Food industry analysts estimate there were more than 300 food and grocery mergers in 2013, but almost all of these got rubber stamped by regulators. Food & Water Watch highlighted a handful of big food deals that got short shrift from the antitrust cops including the ConAgra-Ralcorp food manufacturing merger and the takeover of Smithfield Foods by Shuanghui International, China’s largest meatpacker, which appeared to get no official investigation at all.
Just since January 1, 2014, DoJ and FTC have approved 360 mergers including at least eleven food company mergers that received no investigations, including:
- Grocery-brand food manufacturer Shearer’s Foods bought Snyder’s-Lance’s private label snack lines (Snyder’s-Lance makes Stella Doro, Snyder’s of Hanover pretzels, Cape Cod potato chips and more)
- Hillshire Brands purchase of Van’s Natural Foods, a “better-for-you” food company that makes crackers, chips and waffles
- Cereal manufacturer Post acquired Michael Foods, a dairy and egg firm
- Private label powerhouse TreeHouse Foods bought Protenergy Natural Foods, which makes private label soups
- Bakery behemoth Grupo Bimbo’s snatched Canada Bread from Maple Leaf Foods
- Japanese seafood concern Marubeni Corp. bought Eastern Fish Co., a major U.S. seafood importer
- The Japanese investment trust Kotobuki Realty Co. bought Beam, the American liquor distillery that makes Jim Beam, Maker’s Mark and Courvoisier
- Post Holdings bought Nestle’s sports nutrition brands like PowerBar
- Coca-Cola increased its stake in Green Mountain Coffee Roasters
- The nation’s biggest supermarket chain Kroger bought Harris Teeter, a regional chain in the Southeast
- The owner of Godiva Chocolate bought DeMet’s Candy Company, manufacturer of Turtles and Flipz chocolate pretzels
The Department of Justice recently approved a huge flour mill merger without requiring significant divestitures. Other larger mergers like the Albertsons-Safeway supermarket merger and the Sysco-US Foods foodservice distribution merger are currently under review at the FTC.
A century later, it is clear that the merger-maniacs are running the show and the antitrust regulators are barely making a dent in a wave of mergers that threatens to overwhelm the food and farm sectors of the economy. Consumers, farmers and workers need to band together to prevent a small handful of companies from having complete control of the food chain from seed to supermarket.