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Consumer News Release

For immediate release -- Thursday, May 17, 2001.
Contact Bob Brammer, 515-281-6699

Miller: Protect Farmers Threatened by Concentration in Agriculture

WASHINGTON, D.C.-- Iowa Attorney General Tom Miller today outlined steps that state and federal officials are taking and should take to protect farmers who are threatened by what he called "the rapid trend toward both horizontal and vertical consolidation in agriculture."

Miller testified Thursday before a U.S. Senate Agriculture Appropriations subcommittee hearing on agriculture market concentration [Miller's Testimony]. He leads a group of state attorneys general who are focusing on concentration and contracting issues.

"My worry is that the conglomeration of economic power may lead to anti-competitive practices that reduce the prices paid to farmers for their commodities and increase the price paid by consumers for food," he said. "It's a double-whammy that hits the nation's farmers and ranchers hardest, but it will affect everybody else, too."

Miller described four main areas for action:

  • Antitrust enforcement by the states and federal government. State and federal officials have worked closely to review several huge mergers and acquisitions in agriculture, Miller said, and states obtained a multimillion-dollar settlement with major chemical manufacturers for alleged anti-competition violations. But he said there are limits on the use of antitrust law, especially with restrictive court interpretations of recent decades. "Antitrust law is only one part of a possible solution to the problems farmers face," he said.
  • State action on contracting. Many state legislatures are considering various elements of a model "Producer Protection Act" prepared by a group of state attorneys general led by Miller. The rapid growth of contracting poses risk to producers such as unfair shifting of risk to producers, loss of "market transparency," and a greater and greater disparity between processors and farmers with respect to bargaining power and market information. "The goal of our model act is to provided protections needed by farmers without overburdening processors," Miller said.
  • Federal legislation on contracting. "I strongly support the concept of enacting federal protections that mirror the states' proposals," Miller told the Senators. He urged the Congress to establish producer protections such as banning confidentiality clauses in contracts, requiring written disclosure of risks in plain language, and making it an unfair practice for processors to retaliate against producers who are "whistleblowers" or join producer organizations.
  • Federal legislation strengthening the ability of producers to organize associations to bargain with processors, contractors and cooperatives. "There is no question that farmers and ranchers now more than ever need to join together to bargain for better contractual terms with large agribusinesses," Miller said. He backed federal legislation that has been introduced to establish a process for voluntary producer associations to receive USDA accreditation and authority to bargain with large processors, contractors and cooperatives - with mutual obligations to bargain in good faith imposed on all parties. "This law would give farmers and ranchers the power to band together and negotiate agreements to give them their fair share of the profits created in production agriculture," he said.

Any federal legislation should not preempt the States' power to act, Miller said. "We must be able to grant producers protection based on the specific needs in a state," he said.

Agricultural Contracting

"The use of production contracts and marketing contracts by firms with ever-growing market shares has dramatically increased vertical integration in American agriculture," Miller told the Senate committee. Sometimes producers are "contracting with near monopolists," Miller said, citing a phrase used by Dr. Neil Harl, the noted Iowa State University agricultural economist and attorney. "This is particularly true in some agricultural sectors where there is a high level of horizontal concentration combined with vertical linkages through contracts," Miller said. "It poses serious risks for producers and, ultimately, for consumers."

For example, Miller said, federal contracting legislation should prohibit confidentiality clauses in agricultural production and marketing contracts - an element of the states' model "Producer Protection Act" that already is in effect in Iowa. "Except in Iowa, ag contracts routinely contain strict confidentiality clauses, with some so restrictive that farmers are reluctant to consult with their lawyers and financial advisors," he said. "As a result, most agricultural contracting is conducted in virtual secrecy, which severely limits the ability of farmers to compare contracts and negotiate the best, or even a fair deal."

Using the protection of Iowa law, Miller said, his office's Farm Division has been able to post at its web site about 70 different types of contracts provided by producers, with producers' names deleted. (The web site is www.IowaAttorneyGeneral.org -- click on "farm advocacy.") "We have had thousands of hits on our web site," Miller said. "This is one of the few places in the nation where producers can obtain information they need to compare price and other terms and conditions of contracts. They need that kind of information to negotiate better deals. We would like to see this protection and other safeguards enacted in both state and federal law."

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