Attorney General Eric Holder Chokes Tyson's Chicken!
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JUSTICE DEPARTMENT FILES ANTITRUST LAWSUIT CHALLENGING GEORGE’S INC.’S ACQUISITION OF TYSON FOODS INC.’S HARRISONBURG, VA., POULTRY PROCESSING COMPLEX
Lawsuit Seeks to Restore Competition for Chicken Growers in Virginia’s Shenandoah Valley
WASHINGTON
– The Department of Justice filed a civil antitrust lawsuit today
challenging George’s Inc.’s acquisition of Tyson Foods’ Harrisonburg,
Va., chicken processing complex. The department said that based on the
information gathered thus far, the acquisition eliminates substantial
competition between the two companies for the procurement of services of
chicken growers in the Shenandoah Valley area.
The
department’s lawsuit, filed in U.S. District Court in Harrisonburg
requests that the court declare the acquisition to be unlawful under the
antitrust laws and order appropriate equitable relief, such as
divestiture of the Harrisonburg complex.
“The
department’s lawsuit alleges that George’s acquisition of Tyson’s
Harrisonburg chicken processing facility would reduce growers’ ability
to receive competitive prices for their services,” said Christine
Varney, Assistant Attorney General in charge of the Department of
Justice’s Antitrust Division. “America’s farmers deserve competitive
prices and terms for the sale of their services, and the Antitrust
Division will vigorously pursue anticompetitive acquisitions that stand
in the way of achieving that goal.”
Chicken
processors, such as Tyson and George’s, are also referred to in the
industry as “integrators.” Integrators typically contract with farmers
to grow chickens that are then transported to plants for processing.
The processors provide the chicks and the feed, and the growers provide
the housing and labor. Feed is delivered on a regular basis and since
it is costly to transport grown chickens long distances, processors
typically contract with growers that are located close to the
processors’ plants and feed mills.
Prior
to the acquisition, three chicken processors – Tyson, George’s and
JBS/Pilgrim’s Pride – competed in Virginia’s Shenandoah Valley region
for the services of local chicken growers. By combining the Tyson plant
with George’s Edinburg, Va., operations, the sale decreased the number
of processors in the area to two, reducing competition for grower
services.
Tyson
and George’s publicly announced the acquisition on March 18, 2011.
Upon learning of the proposed acquisition, the department’s Antitrust
Division opened an investigation into the proposed deal. The department
sought information on the potential competitive effects of the
transaction, and George’s proposed business justifications for
purchasing the Edinburg plant. On Saturday, May 7, despite the parties’
awareness of the department’s serious antitrust concerns about the
transaction, and without providing a response to the information
requested by the department, George’s and Tyson entered into an asset
purchase agreement and simultaneously closed the transaction.
The
acquisition was not required to be reported under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, which requires companies to notify
and provide information to the department and the Federal Trade
Commission before consummating certain size acquisitions. The purchase
price of the transaction was less than the minimum reporting threshold.
George’s,
headquartered in Springdale, Ark., is the 15th largest chicken
processor in the United States, with output of more than 20 million
pounds of chicken per week. In addition to its Shenandoah Valley
operations, George’s processes chicken in Springdale, Ark., and
Cassville, Mo.
Tyson
Foods, headquartered in Springdale is the largest chicken processor in
the United States, with output of more than 205 million pounds of
chicken per week.
JBS/Pilgrim’s
Pride, headquartered in Greely, Colo., is the second largest chicken
processor in the United States, with output of more than 160 million
pounds of chicken per week.
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