Michael Sykuta headshot

Associate Professor, Division of Applied Sciences
University of Missouri

Michael Sykuta is an economist and Associate Professor in the Division of Applied Social Sciences at the University of Missouri. He is Executive Director of the Financial Research Institute (FRI), whose programs focus on public utilities regulation and utility industry issues. He is also Co-founder and Director of the Contracting and Organizations Research Institute (CORI), an interdisciplinary research program focused on the economics and law of contracting, organization, and corporate governance.

Antitrust

Popular Media

DOJ Disconnect: Do we really need a roadshow?

And now for something completely different. Being the only non-lawyer economist in the group seems to warrant such a preface sometimes.

Earlier this semester I received a call from a reporter for a nearby small-town newspaper. The DOJ had just announced its intent to hold a series of workshops jointly with the USDA to “explore competition issues in the agriculture industry.”  (Read: antitrust snooping in response to the increased concentration at most all levels of the agricultural economy.) The reporter’s slant was pretty obvious, and he did his job in searching out enough economists (sadly, all within my department) to get the obligatory “on the other hand” (see here).

While I was not overly surprised by the DOJ’s announcement, I was dismayed to hear about it. Ending the interview with the reporter, I simply shook my head and put the whole issue on the back burner to await further details. Another shoe dropped a few weeks ago when the schedule for the workshops was announced, with a series of forums focusing on specific ag sectors or issues to be held throughout the first half of next year.

A week ago, I accidentally happened upon a GAO report from earlier this year that was requested by Senators Kohl and Grassley.  Kohl chairs the Subcommittee on Antitrust, Competition Policy and Consumer Rights.  The Senators requested the GAO:

to provide information on (1) trends in concentration for various levels of the food marketing chain in major agricultural sectors; (2) trends in retail food expenditures and prices; (3) trends in prices farmers received for major agricultural commodities; and (4) the views of experts on the potential effects of concentration on agricultural commodity and food prices.

The report, which was conveyed on June 30, 2009, concluded the following (specifically with respect to the issue of concentration):

The empirical economic literature has not established that concentration in the processing segment of the beef, pork, or dairy sectors or the retail sector overall has adversely affected commodity or food prices. Most of the studies that we reviewed either found no evidence of market power or found efficiency effects that were larger than the market power effects of concentration. While a few studies found some evidence of market power, it is unclear whether this market power was caused by concentration or some other factor.

I was glad to see the GAO agreed with the assessment I gave to the local reporter. Sometimes the truth prevails.

And sometimes not. The DOJ/USDA are holding a series of forums to ask questions that have already been answered by the GAO…and answered in a much more objective fashion than I expect the DOJ’s populist roadshow to approach.  Perhaps this present era of spendthrift federal intervention has taken yet a another turn.   It would, however, be nice if the DOJ would do their homework before stirring up (or pandering to) a populist tempest.

Posted in antitrust, markets, Sykuta