A few courageous cattlemen, frustrated by USDA's failure to enforce the Packers & Stockyards Act,1 filed suit in 1996 against the nation's largest beef packer, IBP, now Tyson, alleging that the firm used captive supplies to manipulate the cash market for fed cattle, in violation of the P&S Act.
This historic lawsuit, known as Picket v. Tyson/IBP, reached trial on January 12, 2004 in United States District Court for the Middle District of Alabama. Senior Federal Judge Lyle Strom, from Nebraska, presided. After four weeks of testimony, the Court submitted the case to the Jury on February 10, 2004. Cattlemen and plaintiff were shocked that Judge Strom's instructions to the Jury were not based on the P&S Act, under which the lawsuit was filed and the case tried, but based on the more demanding standard of Sherman and Clayton Acts antitrust law. Even defense lawyers appeared surprised that Judge Strom instructions reflected the standards of antitrust law rather than the P&S Act. Nevertheless, after deliberating five days, the Jury found Tyson/IBP guilty on all counts and assessed actual damages of $1.28 billion over the Feb. 1994 through Oct. 2002 period.
Justice for independent cattlemen was short lived, as Judge Strom set aside the Jury's verdict two months later and entered summary judgment for Tyson. One year later the Court of Appeals for the Eleventh Circuit sided with Judge Strom.
Neither Judge Strom nor the Circuit Judges made a substantive challenge to the Jury's verdict that Tyson's use of captive supply had an anticompetitive effect on the cash market for fed cattle (Jury questions # 1, 2, 4, and 5). Rather, the Judges' "opinion" centered on the Jury verdict
"that the defendant lacked a legitimate business reason or competitive justification for using
captive supply (Jury question #3)." Judge Strom's instructions to the Jury and subsequent rulings related whether Tyson had a legitimate business reason for captive supply reflect an extremely
far-fetched view of what is known as the antitrust "rule of reason." The rule of reason emerged in a 1911 Supreme Court interpretation of the Sherman Antitrust Act. The common and long-standing interpretation of this rule is founded in economics: any pro-business benefits derived from an alleged anticompetitive practice should be weighed against harm to the market.
Judge Strom claimed – and the 11th Circuit endorsed – the notion that a practice (captive supply) was acceptable as long as there was any benefit to the defendant (Tyson), no matter what the harm to the market. Thus, Judge Strom and the 11th Circuit are of the opinion that pro-business benefits do not need to be weighed against harm to the market. This opinion is inconsistent with almost a century of "rule of reason" legal cases, inconsistent with basic economic reasoning, and inconsistent with common sense. In short, the Judges' rule of reason is profoundly unreasonable.
Although the Jury concluded that Tyson's claimed business justification for captive supply was pretext, or an excuse or effort to conceal something, Judge Strom claimed: "… the trial record is barren of any evidence which would permit the jury to conclude that defendant lacked a legitimate business reason for its use of captive supply. The evidence reveals that captive supply transactions permit defendant to achieve a reliable and consistent supply of fed cattle, allowing it to operate its plants in an efficient manner."
Fact #1: The Trial record includes testimony based on extensive statistical analyses of Tyson's weekly slaughter plant costs showing no significant efficiency gain from captive supply. But the Judge claims that the Trial record is "barren" or any evidence. Fact #2: Tyson's weekly captive supply was 2.8 times more variable than cash acquisitions, contrary to Judge Strom's claim that captive arrangements assured them of a stable supply. The Trial record also shows other substantive evidence that on which the Jury could base their verdict.
It is deeply troubling that the Judges got the facts wrong; it is equally troubling that they appointed themselves as fact finders. The 7th Amendment to the U.S. Constitution states "In Suits at common law … the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law." Thus, in Civil cases like Pickett, the Jury is to be the fact finder; in the American Court system Judges are to insure that trials are conducted properly and they are to rule on legal issues only. Yet, by anointing themselves fact-finders, the Judges overstepped their Constitutional authority.
Antitrust is not a trivial issue in our present economic setting. Connor2 identified "… hundreds of published studies of private, hard-core cartels that contained 674 observations of long-run overcharges. The primary finding is that the median cartel overcharge for all types of cartels over all time periods is 25%: 18% for domestic cartels, 32% for international cartels, and 28% for all successful cartels." Connor also found $9 billion in damages from global price-fixing of lysine, citric acid and bulk vitamins during the 1990s. alone Add to that $1.28 billion in Pickett, plus unknown damages that may have occurred from P&S cases that GIPSA did not investigate or did not prosecute, and the need for aggressive antitrust enforcement becomes obvious.
Current Status of Pickett: Petition was filed in Jan. 2006 for the U.S. Supreme Court to reconsider Pickett, particularly since the 11th Circuit is the lone outlier in the unreasonable interpretation of the antitrust rule of reason. If the Supreme Court does not override Judge Strom and the 11th Circuit, agricultural producers and food consumers will have little, if any, protection from the economic power of the few. The Sherman and Clayton Antitrust Acts, and the Packers & Stockyard Act are effectively gutted if the Judges' opinion becomes the new norm. If the Supreme Court does not restore sensibility to the Packers & Stockyards Act, the only long-term recourse is new antitrust legislation.
Randy Stevenson recently said, "They (packers and integrators) first made serfs out of poultry producers, then they made serfs out of hog producers; they knew better than to pick on a cowboy first as John Wayne just wouldn't stand for it without one helluva of a fight." Speaking of antitrust fights, Thurman Arnold, Assistant Attorney General in charge of the Antitrust Division in Franklin Delano Roosevelt's Department of Justice, said, "The competitive struggle without effective antitrust enforcement is like a fight without a referee." It sure looks like the cowboys are in a fight without referees; Judges are ignoring the plain language of the law and overstepping their authority, and GIPSA is not enforcing the Packers & Stockyards Act. Of course, the lack of referees never stopped cowboys like John Wayne from fighting – successfully fighting – for what is right! RT
lol: ) you would know that Creekstone is not the only company to send beef with bone chips--Now there has been two more....As it is virtually impossible to remove all bone chips under the current Packer slaughtering practices...