Wal-Mart Stores Inc. is the target of an unlikely alliance between a labor union and farmers and ranchers who say the world’s largest retailer is using its power to hold down prices in the agriculture industry.
The United Food and Commercial Workers International Union, which has tried unsuccessfully to unionize Wal-Mart’s employees, is urging the Obama administration to broaden its antitrust inquiry into meat, dairy and seed businesses to include the retailer. Wal-Mart’s defenders say its policies benefit consumers, ensuring them low prices.
The viewpoint of the union, the UFCW, is echoed by such groups as the National Farmers Union, a 190,000-member organization. Until recently, farmers and ranchers had mostly been directing their ire at meat producers such as Tyson Foods Inc. and Smithfield Foods Inc. Now some are saying Wal-Mart, whose motto is “Save money. Live better,” is unfairly cutting food costs at their expense.
“We’ve got to really join forces if we’re going to win against this abusive market power,” Mike Callicrate, a rancher based in Colorado Springs, Colorado, said in an interview.
Wal-Mart’s critics said they anticipate, after years of government reluctance to regulate farming, that President Barack Obama will inject more competition into the food-producing business. Those concerns were at the forefront of an Aug. 27 public meeting in Fort Collins, Colorado, with Attorney General Eric Holder and Agriculture Secretary Tom Vilsack.
The event was the latest in a series of workshops held by the administration to air competitive and regulatory issues in the agriculture industry. Grocers such as Wal-Mart will be a focus of the final workshop on Dec. 8 in Washington. A spokeswoman for Kroger Co., the largest U.S. grocery chain, declined to comment on its pricing or supplier policies.
Wal-Mart’s goal is to streamline its supply chain for customers’ benefit by working with, not undercutting, farmers, said Lorenzo Lopez, a spokesman for Bentonville, Arkansas-based Wal-Mart.
“We look at ways to develop efficiencies so we can offer affordable choices by building strong relationships” with local farmers and growers, he said in an interview.
The retailer’s actions are governed by market conditions, said Dave Warner, a spokesman for the National Pork Producers Council, an Urbandale, Iowa-based trade group.
Responding to Consumers
“Wal-Mart is responding to consumers,” Warner said in an interview. “They’re meeting the demand, and the demand is setting the price.”
Chris MacAvoy, a lawyer at Howrey LLP in Washington who represents food suppliers, distributors and retailers, agreed. “To the extent Wal-Mart, or any other so-called power buyer, is using its efficiency to get lower prices for consumers, that’s a good thing,” he said in an interview.
Antitrust investigators usually are concerned about rising, not falling prices, which are a cornerstone of Wal-Mart’s business strategy, said Andrew Gavil, a law professor at Howard University in Washington.
Wal-Mart’s detractors argue that the retailer’s power is so great it can underpay for goods, threatening suppliers. In the past, antitrust officials haven’t seen Wal-Mart’s actions as a problem, Gavil said.
“So much has been written about Wal-Mart and whether there is anything that they do in pressing for lower prices that is an antitrust violation,” Gavil said in an interview. “So far, the answer is no.”
While the administration hasn’t decided how it will proceed, there are no plans now to single out Wal-Mart, Vilsack said on Aug. 27.
“I don’t think it’s a matter of taking anybody on,” he told reporters during a break at the Fort Collins meeting. “It’s a matter of making sure that the marketplace is fair.”
The Justice Department is still listening to comments and isn’t going to “prejudge” what it should do, agency spokeswoman Alisa Finelli said in an interview.
Some rancher activists said proposed U.S. Department of Agriculture rules that would put limits on meatpackers signal the administration’s intent to rein in agricultural companies.
The proposed regulations, which are opposed by industry, would bar meatpackers from buying animals from each other and restrict the companies’ exclusive contracts with large livestock suppliers.
The administration must do more to combat the harm caused by big retailers, and Wal-Mart in particular, said Fred Stokes, executive director of the Organization for Competitive Markets. The Lincoln, Nebraska-based group favors more government action to stop anticompetitive efforts in the industry.
‘Buck Stops There’
Pressured by supermarkets like Wal-Mart to cut costs, the meat companies in turn force ranchers and farmers to sell their livestock at lower prices, said Bill Heffernan, professor emeritus of rural sociology at the University of Missouri.
“The processers and the packers still have enough power in the whole system to keep their revenues, so they push it all the way back to the farmer and the worker,” he said in an interview. “The buck stops there.”
In 2009, the grocery stores’ share of each dollar consumers spent on beef was 49 cents, while ranchers and farmers got 42.5 cents and meat packers 8.5 cents, according to the Department of Agriculture’s Economic Research Service.
That compared with 60 cents for ranchers and farmers in 1990, 32.5 cents for retailers and 7.5 cents for the meat companies.
In 29 U.S. markets, Wal-Mart controls more than half of the grocery market, according to a September report by the UFCW, which represents 1.3 million food-processing and retail workers. In some states, the retailer has more than 30 percent of the market in every major region, the UFCW said. Wal-Mart spokesman Lopez said the company didn’t participate in the research and declined to disclose its own market share figures.
Warner, the pork producers group’s spokesman, said the retailer is a victim of a campaign by a union trying to recruit its employees.
Wal-Mart’s opponents want “equal outcomes, not equal opportunities,” he said. “What you get out of that is mediocrity.”
Stokes said farmers are looking for a fair marketplace.
“Wake up, bubba,” he said. “They’ve been screwing you.”