We sent a letter to the DOJ – Now What?… What is DOJ looking for, exactly?

An update on NC’s call to DOJ to investigate beef market responses.

As the team at Nebraska Cattlemen continues to actively engage all avenues to meet the needs of our members, we expand our series regarding efforts to find solutions to market disparities. In the first part of our “We sent a letter to the DOJ – Now What? series we highlighted what we know – but maybe more importantly – what we may never know.

As a reminder – on Tuesday, April 16, 2020, the Nebraska Cattlemen Board of Directors approved a letter to the U.S. Department of Justice (DOJ) aggressively requesting they initiate an investigation into the beef cattle market responses triggered by two specific events – the fire at the beef processing plant in Holcomb, KS in August, 2019 and the current market response to COVID-19. Beyond ongoing communications to encourage these investigations, NC is asking members to provide specific examples of concern to pinpoint for DOJ.

What do we need from you? Specific examples that we can submit to support our letter!

If you or someone you know has directly experienced any of these activities detailed below, please contact the NC office right away. The more specific you can get, the better.

DOJ Antitrust Background:

DOJ is authorized to investigate and pursue legal action against any conduct that violates the Sherman Antitrust Act of 1890. The most common violations of the Sherman Act and the violations most likely to be prosecuted criminally are price fixing, bid rigging, and market allocation among competitors (commonly described as “horizontal agreements”).

DOJ has a primer on identifying Sherman Act violations, available at: https://www.justice.gov/atr/price-fixing-bid-rigging-and-market-allocation-schemes

Here are a few of the common Sherman Act violations:

Price-Fixing:

Price fixing is an agreement among competitors to raise, fix, or otherwise maintain the price at which their goods or services are sold. It is not necessary that the competitors agree to charge exactly the same price, or that every competitor in a given industry join the conspiracy. Price fixing can take many forms, and any agreement that restricts price competition violates the law. Other examples of price-fixing agreements include those to:

• Establish or adhere to price discounts
• Hold prices firm
• Eliminate or reduce discounts
• Adopt a standard formula for computing prices
• Maintain certain price differentials between different types, sizes, or quantities of products
• Adhere to a minimum fee or price schedule
• Fix credit terms
• Not advertise prices.

In many cases, participants in a price-fixing conspiracy also establish some type of policing mechanism to make sure that everyone adheres to the agreement.

Bid-Rigging

Bid rigging is the way that conspiring competitors effectively raise prices where purchasers — often federal, state, or local governments — acquire goods or services by soliciting competing bids.

Essentially, competitors agree in advance who will submit the winning bid on a contract being let through the competitive bidding process. As with price fixing, it is not necessary that all bidders participate in the conspiracy.

Bid rigging also takes many forms, but bid-rigging conspiracies usually fall into one or more of the following categories:

• Bid suppression
• Complementary bidding
• Bid rotation

Market Allocation Agreements:

Market division or allocation schemes are agreements in which competitors divide markets among themselves. In such schemes, competing firms allocate specific customers or types of customers, products, or territories among themselves. For example, one competitor will be allowed to sell to, or bid on contracts let by, certain customers or types of customers. In return, he or she will not sell to, or bid on contracts let by, customers allocated to the other competitors. In other schemes, competitors agree to sell only to customers in certain geographic areas and refuse to sell to, or quote intentionally high prices to, customers in geographic areas allocated to conspirator companies.

Bid rigging, price fixing, and other collusion can be very difficult to detect. Collusive agreements are usually reached in secret, with only the participants having knowledge of the scheme. However, suspicions may be aroused by unusual bidding or pricing patterns or something a vendor says or does.

Want to learn more?

Want to learn more about previous antitrust actions regarding the meat packing industry? NC hosted a webinar titled “Packers – Are they breaking the law?” with Peter C. Carstensen, professor of Law Emeritus at UW River Falls and Senior Fellow of the American Antitrust Institute. You can watch that webinar HERE.

Written by: Jessie Herrmann, NC Vice President of Legal & Government Affairs