Beak Capitalism, Part 3: Un-Clucking the System
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So why did the chicken join the revolutionary war?

I have no idea.

because I didn't want to be cooped up under .

british rule. Okay, but sitting the terrible plans wasn't IT really about taxes.

Why did the colonial chicken refused to pay british taxes? Because IT didn't want to put all its eggs and king George's .

basket shall keep going.

Good, good. okay. I to understand chicken and the current landscape of the U. S.

Economy and the companies in IT, IT helps to go back in time and revisit a few key moments in U. S. history.

Going back to the founding, americans were actually suspicious of the power of large corporations. And one reason for that is that they used to be that the government would grant or per charters. right? There is this history in the united states, before general and corporation statutes, that corporations are really creatures of the state. And so there was always the suspicion that if they grew to be too powerful, the kind of abuse that they could bring to bear on the lives of ordinary people was really extensive.

And so john mckee is the principal deputy assistant general in the anti trust division of the department of justice. That's a long title. IT means she's the second highest ranking official there today.

The U. S. Government has a whole consolation of laws, axent agencies, all aimed at ensuring that Megan's economy remains very competitive. One of the most important is where do how works?

The D O J, any trust division is one component of many sagest department. And our specific Mandate is to enforce the any trust laws and essentially to guarantee and indicate the economic liberty of all americans. And we do that by enforcing the federal anti trust laws, the best known of which are the sherman act and the plate act.

You've probably heard of these before. The sherman anti trust act of eighty eighty was famously deployed in the break up of statured oil back in one thousand nine eleven, which is still probably in the country's most well known anti trust case. And the clinton act arrived soon after that. But america's approached the anti trust has constantly changed over time.

And chicken, with all accusations of Price gouging and unfair labor practices, inductee corporate concentration seems to be a perfect poetry petry dish to experiment some new ways of looking at anti trust.

Welcome to part three of big capitalism are ongoing exploration of the U. S. Economy through the medium of chicken. In this episode, we are asking how we can solve some the problems that big chicken creates. Can we actually on click the system?

So a little bit of history .

that actually the relationship .

between agricultural and trust IT goes back to the beginning, a farmers where one of the big supporters of the sherman ACC, the first any trust state passed by congress.

Michael kors, is deputy assistance, a torney general for the anti trust division at the D. O J. He works alongside dohuk. A recently, he spent a lot of time focused on agriculture because IT turns out the D. O J has a long history with the food industry.

And early on, the department of justice brought a number of cases against meat packing ers. And along about nineteen fourteen, congress looked at the way the supreme court was handling that act and was not happy. So they passed the contact, which was supposed to broaden the enforcement powers of the division. They also created the federal trade commission .

and and the first thing the president asked the newly created federal trade commission to do was study of the meat packing industry.

Fast forward to one thousand and twenty, the F, T, C issues a three volume report documenting everything going wrong in meat packing markets, both collusion and deception. And at the same time, the justice department files in any trust case that breaks up the packing industry. And yet congress still wasn't happy.

So then in one thousand twenty one congress, wonder strong republican and a fairly conservative of congress passes the packing ers in stock yards, jack, which really said luck. We are concerned that the people who ranch and growing hogs are always going to be facing very large, powerful interest, and we want to give them extra protections. And so was the any trust laws focus solely on competition, the packers and stock karts act actually provided explicit protection for ranchers, hard growers, eventually chicken growers, from deception, unfairness, discrimination.

you're gonna wanna member, the packers and stockard ject. It's been deployed quite a bit lately in the name of anti trust enforcement in agriculture and chicken and especially.

but chicken also says something about fairness in business more generally.

There many lessons to be drawn from anti trust enforcement in the chicken industry that I think have made us Better enforces and that have really brought to focus the expensiveness of our mission again. And her trusted a big Mandate, IT rimes of a lot of core democratic values that all of us hold the citizens of this country.

And so to bring that down to the level of enforcement and interest enforcement at the market level, what we see in the chicken industry is that this outsourcing of risk is actually a business model that many kinds of companies employed. For example, a ride sharing company, right, that outsources investment and were hooks a lot of the profit for simply matching writers and passengers, for example. There are other examples in the real estate industry in banking. I get where you see this sort of outsourcing of risk and IT raises fundamental questions about how those markets are functioning, whether consumers are ultimately getting the kind of choices, good value, innovation and other things that we really leaning on the end he trust laws to deliver.

All of this raises the question of what exactly you mean by anti trust and what exactly is anticompetitive behavior?

Yeah, we should talk about that because for years, competition was judged on the basis of a consumer welfare standard. What that means was, for example, if two companies decided to merge and Prices for consumers ended up being lower as a result, then that was generally fine. The opi was only a really bad thing if IT LED to higher Prices, right?

Because pretty much everyone likes chip chicken. And at a minimum, you could argue that concentration in the poultry industry and industrializing of chicken and all the scale that comes with IT has created a lot more White meat to go around.

But in recent years, policymakers approached to anti competitive behavior has started to change a lot. Not only are they looking beyond simple chicken supply, but they're also arguing that it's not clear that all of this is leading to Better outcomes for consumers either.

One of the problems in any trust enforcement generally is people said, well, you know if if you have power on the fine side, that just will get pass down the line to the ultimate consumers. That's actually wrong, right? The concern here is if the middle person has the power, they're ginning extract taxes up and down the line.

And it's not the case that you would expect somebody, if there are forcing Prices down through any competitive means that are gonna, pass that along. And just as a sort of general example, think about IT this way. The way you you exert monopoly power on the by inside, which we call monopoles y power, right, is you actually buy less so you're reducing demand so that Prices go low.

Well, if they're buying less, they are seldom less. And so that can help consumers. Consumers want more supply, more competition. So either IT has sort of no effect down stream or or IT actually contributes to higher Prices. So when we go after monopsony power in the agricultural industry and are successful, IT benefits both the producer and often the .

consumer.

Joe ring them in IT comes up a lot nowadays. To put IT simply, it's basically a market structure where there's only one big buyer, whether that have labor, whatever.

So if you're a chicken farmer and road island, for instance, there might be just one pull try processor that you can sell your chickens too, and that company might be able to dictate its terms.

So where monopoly is all about a single seller, the controls, supply of a particular product or service, an option ony is about what's happening on the bay side.

Here's ha, this idea of deep power that is exercised on the bay side of the market. And this is actually very old economics. This is A A theory that was pioneer by john Robinson in the eighteen thirties. And so there's this idea that bio power might be harmless, but we've known for almost a century, empirically ally. If a buyer chooses an input along the light curve and then is able to exercise the power to drop the value of the input, maybe in the short run, you get lower Prices or expanded output.

But if you drop the value below a reservation wage, right, especially when you're talking about labor markets rich, a lot of producer and grow economies are basically labour markets that you will eventually destroy incentives to continue making that input. And so in the long run, you will actually get contraction in a market that is classical monopoly power, that is emphasized ally sound. And that has been, I think, upheld by a lot of economists for a very long time.

There is another flavor of an option y of course, which is just the abuse of bargaining leverage. If you fear termination of a contract that your buyer hasn't negotiated with you, if you fear this is the same thing with non compete, right, this is the same sort of economic idea that if you have lower bargaining leverage, you are likely to do everything you possibly can to be more compliant. What's the terms that are imposed by the purchaser of whatever product or service that you are selling? And so that just maps on almost perfectly with the chicken industry. And what is really, I think, most fascinating in the chicken industry and other types of labor markets is that you can actually exercise power and abuse bargaining leverage at much lower concentration. Thresh holds, which is a really interesting and fruitful area economic research that has been produced over the last five to ten years.

So armed with that wider definition of competitive pressures, the D O J has gone on the attack. For instance, they successfully blocked a merger of the publishers penguin random house and Simon intrusted by arguing that the deal would lead to lower earnings for authors.

But the deal jays results when IT comes to chicken have been more mixed despite the broader definition of anti trust in twenty twenty of the D O, G, and died executives from poultry processors, including cognos pride and collapsed and poetry farms for Price fixing, only to see them acquit by a jury.

They're been some winds to the D. O J. Got a eighty five million dollar settlement with a bunch of poetry processors over allegations that they conspired to share information on wages.

One of the cases we brought involved an inflammation sharing amongst chicken processors, and they were sharing incredibly detailed information about compensation. And not only were they sharing IT, they were like meeting every year and eventually bringing their data so that they could all be sure that they were sharing accurate data and then talking about compensation. So there's in the example of coordination amongst people who should be competing for workers, actually figuring out how not to compete with each other.

And last year, coke foods, a huge poultry processor, agreed that they would no longer charge penalty if contract growers choose to switch processors. After the D O J filed suit under sherman and our good friend, the hackers and stockard's.

another case we brought involved, again a specific chicken processor who was contracting with and that already relationship where the processor owns most of the bargaining power, but decided that was not enough their growth. If you want to switch to one of our competitors, we're onna, make you pay a penalty. So that is the the processor preventing competition unliterary by making IT harder for the growth to actually benefit from whatever competition exists in the market and is also just simply obviously unfair to these growers who don't have that much opportunity by denied them whatever limited opportunities exist.

It's a nice step for critics of the tournament system that we talked about an episode too, but there's also more that could be done.

The third case involved the chicken tournament system, right? So one of the things chicken farmers face growing chickens is every six weeks when their chickens are picked up by the processor, they are actually weight and measured against the other growers that are delivering chicks the same week. And it's almost you directly competing with your fellow chicken growers. And though some people get penalty, zed, and some people get to benefit, but given the risk these growers face, we brought a saying the penalty itself makes IT impossible for growers really understand the financial risk they're taking because there's a lot of arbitrariness in the tournament and it's not just your results don't just depend on how well you perform. And so waye sAnderson, who is the, I believe, the third largest chicken processor in the country, agreed that they would stop analyzing growers in their tournament system.

So another small Victory. Meanwhile, the U. S. Department of agriculture this year proposed more regulation of the tournament system under u. The packet ers and stockard's act. Joe, should we make packing ers .

and stockard's? Ch, yes, absolutely. Well maybe. But IT is kind of interesting to think about how two hundred and fifty years ago, americans are all worried about taxes under king George and the tyranny of the state. But today, maybe we should all be worrying about something else. What doha calls the turney of the intermedia.

Thinking about the chicken industry in particular, you see limits on the ability to sell your product or service to a small number of companies, and that is how you get this problem of the errani of the intermediary, right? It's the meat processor that sits in the middle right between the ultimate purchaser and the grower and can command a certain sum or lower the Price on one side of the market and really grow revenues and get father in the middle.

So anti trust has a long history with agriculture and the culture industry, although the way it's being viewed and enforced has been changing recently. But that's only one side of the story because even as anti trust involves the way companies run their businesses has evolved too a lot.

When the sherman act and the clan .

act and the packet ers and stockard exact were all created, the middleman of amErica were smaller and not is technically sophisticated. Obviously, if you're going to influence Prices, you are probably doing IT in the back room somewhere, smoking a cigar, probably playing poker.

But today, companies have a host of new data sources and tech power tools to run their businesses. And when IT comes to chicken and soup up data sources, we have to talk about at that.

I will say, generally speaking, it's often been referred to as the most important one of the most important companies.

You've never heard of that JoNathan counter, the assistant U. S. Attorney general for anti trust at the D.

O. J. He's the head hand show doha and Michael boss, basically. And together with lena con, the chair of the federal trade commission, he has been leading one of the most aggressive regulatory responses to anti trust in years, decades even.

And one of the more recent actions is against agresta. Now load listeners will actually have heard of this company before. We spoke about IT earlier this year with David dan, the executive editor of the american prospect. He did such a good job describing what aggregate does that we're just going to let them do IT again here.

And this company collects real time, a prieta data from all of the meat packing producers in a given market, whether it's poor girl, a poor girl poetry or chicken or turkey. And they put all this data in these giant books and they give them out to these various competitors, which now have basically a set up of everything that their competitors are doing, including their Price, including their supply, including every single thing part of their market. And now they can know that, oh, I can probably raise my Price because i'm under Price relative to my competitor, but I won't lose market chair because my competitor is is charging more for this product and IT has the tendency to ratchet Prices upward.

The deal j filed suit against agresta ts last year, arguing that IT was violating the sherman act by sharing competitive information. We reached out to aggress tes for comment. However, they didn't respond. The company publish a statement on its website shortly after the lawsuit was initially filed. They're denying the allegations .

currently the case still alive, which means JoNathan can't talk about IT in detail. But more generally, he argues that IT illustrates the dominance of intermediaries .

in the economy. So this is a case that we brought involving information exchanges, among other things, poultry processors. And the idea, and this is something that we're seeing in many aspects of our economy, is, is that when large companies share competitive ly since in formation, using often faceless intermediaries, that sharing of information can result in a higher Prices to consumers. But I could also result in depriving, in this instance, family farmers and others of fair return on investment.

So the way companies might share Price and market information has moved on from those secret deals in dark rooms of the past. Now they might do IT on a platform or through an algorithm. And anti trust enforcement has to adapt to this new world.

This is an issue that we are confronting throughout our economy. And so the concerns are on data sharing and and coordination are not new, right? DNA trust laws enacted initially and and eighty ninety have been dealing with this ever since. But what we are encounter now is almost a super charging of data sharing and and so the use of technology and inter media is has created the opportunity for companies to contribute information, for example, to a central database or service, and have that service essentially form the function of coordinating and using that data to help the companies extract higher Prices or offer lower returns to people who are selling their goods and services in the context of technology.

Now something that used to be difficult to do because IT required many envelopes of data and spread sheet and calculators, and a lot of manual labor is increasingly being outsource to technology algorithms that can take this information and essentially take on the pricing or take on competitive ly sensitive functions of a business. And the more that is outsource to these these technologies, these algorithms, the more the difficulties that used to somewhat restrict the ability of companies to engage in. And I compared nation, those frictions, those impediments are being lifted and eliminated, and it's going to make IT easier and more effective and anny real big concern of hours.

And so when we think about what is an agreement look like, what is information sharing, what does coordination look like in the year twenty twenty four, we have to look at what market realities present and market realities today present algorithms doing that work. And whether it's an algorithm taking me information, spitting IT back out in resulting in higher Prices or two individuals in a smoke filled room, as that might have been one hundred years ago, it's the same and a competitive and they're just doing that through different means. And so whether it's a handshake using the postal service in sending mail to ordinate, whether it's using email or text messages or chat or phone or in today's world sharing information through an algorithm and outsourcing IT to A I, it's still the same thing.

It's coordination. It's Price fixing, its market allocation. And the N. I. Trust laws apply just as much now, if not more, than they did when they were acted in nineteen ninety.

So the outcome of the agresta, you would be very interesting to watch.

But what about changes in the way we raise chickens too? Because even if chicken Prices come down and labor practices improve, there might still be some other poetry related problems.

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One of the most remarkable food miracles is the story of chicken, a triumph of research on the farm and in the marketing system.

Once .

something special for sunday dinner, chicken inspected and graded is now drifting every day. Yes, in one generation, people of this country have doubled their .

consumption of poking.

Farm research has LED to the control of disease, improving the breeds advancement of production. Marketing research has developed low cost methods of mass distribution in processing, storing, handling and packing.

And these boxes joined the .

never ending technological changes .

in the way we grow chickens was once pitched as a big win for consumers. We talked about IT in our earlier episode. The introduction of hormones, antibiotics and growth promoters all combined to create a more robust chicken.

But just as anti trust regulators have started to prepare some of the damage wrought by new technologies consumers have been pushing back to.

We spoke to marine mechano, the public health specialist, earlier in the series. And as he explained, IT people's attitudes towards, let's call them, augmented chickens to turn. Now the worry is that all that anti biotics, cus and birds might make IT more difficult to treat people. And that's LED to a big change.

We got really significant change in the united states about how antibiotics were allowed to be used in the raising of livestock, not legislation, because legislation had been tried on this issue back in the thousand nine hundred and seventies and foiled by some congressman with big agricultural interest behind them. What the obama administration did, and pretty much their last days in office, was instead to change some regulations.

They are technically called guidances at the fda that affected how antibiotics were allowed to be labelled. And since the label has the force of law and how an antibiotic can be used, that actually created significant change. And what IT basically did was outlaw growth promotion. Now the reason why this happened was, first because the obama administration took IT on as a cause, and second because one of the most powerful chicken companies in the united states produce foods got behind the change. In fact, you could argue LED the change in some ways, but also there was a consumer movement.

And it's kind of remarkable to me that given the the size of the economic forces that we're talking about, this incredibly large trade and livestock, that consumer voices were heard, but sets of very large buyers, for instance, university medical centres and very large public school systems, both of which are feeding like vulnerable children or feeding vulnerable patients, said to essentially the whole sailors, we don't want anymore to buy chicken that was raised with routine use, several biotics, because if there is resistant bacteria on this meat, IT is going to endanger people who we're feeding. And that LED both the companies and the regulators to understand that if they stepped out and made these changes, there was an audience and a market waiting for them, and someone to everyone shocked. The change actually happened. So in the last days of the obama administration, IT became no longer possible to use growth promoters in the united states because.

of course, chicken isn't just about Prices and wages. It's about lives too. We eat a lot of chicken meat, and we wanted to be good for us. Meanwhile, the use of antibiotic ics has gone hand in hand with crowded chicken houses and factory farming is .

miron mentioned purdue, the fourth largest poultry company in the U. S, got on board with the change. Even eight years later, he says, is still committed to quote, no antibiotics ever in its flocks. Some other companies in backtrack though type, for instance, has dropped its no antibiotics label, though he says it's only using drugs that are aren't important to human .

health in twenty twenty four, however, there is something else to worry about when IT comes to chickens. Collective impact on human health, bird flu.

Bird flu has been coming back to the united states and being found not just in migrating wild birds and wrappers, for instance, but also in domesticated birds. And when avian flu, which is incredibly pathogenic, two birds gets into a very large scale chicken Operation, whether that's turkeys or billers meat chickens or laying hands egg chicken s, the results are incredibly dramatic.

Entire farms can be wiped out and those farms may be very large. eg. Farms can have more than a million chickens on them easily. And so it's a significant concern that this flu keeps on sort of like knocking at the window of our agriculture and finding ways inside.

You may remember this virus from such inflationary events as the twenty twenty three egg Price Spike, which was caused in part by the calling of millions of hands because of bird flu, as we discussed in the first part of the series.

So over the past couple of years, it's become very clear out in the wild world that this avian straight of flu, avian flu, h five and one also can affect IT had a really profound effect on several collections of meals living by ocean sides like sea lions, for instance, in south america. But I think IT was kind of a shock for people to realize that somehow this flu had made a sufficient adaptation that IT could affect cows.

Did you hear that bird flu is now found in cows? That's your chicken sandwich and your milkshake.

And now avian flu, h five and one has been found in primarily in dairy farms up and down the U. S. IT may well be in other types of cattle raising as well. IT happens that on dairy farms, first, workers are pretty face to face with the cows fairly often. And second, they interact with the cows fairly often because the cows have to be milk regular. And so that flu can second cows and can cross from cows to humans, has become visible on dairy farms in a way that I think no one really expected in that has taken us by surprise at the .

time we're recording this. The safer disease control and prevention is confirmed that health care workers in missouri got sick of their nursing, a patient who is infected with bird flu. It's not a clear how they got IT, but IT is a reminder of that the chicken might end up being grown zero for another pandemic too.

It's Price search to say that the U. S. Economy, whether it's inflation, wages, quality of life, is at a rests how we grow, treat and solid chicken. But like there's a lot there. IT contains multitudes.

Chicken does contain multitudes. When demand goes up and supply chains and labor markets get up ended, whether it's from disease or climate disaster, chicken Prices go up to adding to overall inflation, and companies might push Price in that scenario to make up for lost volume, which also adds to inflation.

And chicken and the late birds are raised could be the source of another major pandemic that could cause a lot of disruption yet again.

And the tournament system that has a lot to say about the baLance of power between big companies and platforms and the people who rely on them, plus chicken ization, is on the march more broadly, making its way into pig farming and other parts of american agriculture.

In the meantime, the intense concentration in the poetry industry is captured the attention of regulators and prompted some action on things like pressuring, but with mixed results so far for them.

Chicken is really important because it's not just about lost or lower earnings for farmers. It's also about what happens after that. Here's john athan counter from the D. O. J. Again.

if you look at the aggregate data, our country has lost more than one hundred thousand farms between twenty eleven and twenty eighteen. This farmer share of the retail food dollar used to hover around forty percent. Now it's down about fourteen.

We've got four companies that control eighty five percent of the corn seats market. We have three manufacturer that control ninety five percent of equipment production and maintenance. We have four companies that control over eighty percent of beef packing, and we have a small number of significant packagers that control poultry, including chicken.

The changes that have occurred in our economy around these industries and the consolidation, the concentration, are alarming and often are one of the reasons why IT is important that we remain vigilant and focus on forcing the law when the facts and the law demanded. But IT affects the local community. IT affects the ability of people to contain their way of life.

IT affects the bookstore and affects the independent pharmacy. IT affects the survival of the local hospital. IT affects the local bank, which is important to providing capital to local businesses who want to build. These are pillars of our royal communities, which are in turn, you know, the lifeblood of our economy.

And if we're not investing in preserving a competitive economy that provides opportunity for our family farmers to thrive and build and maintain and sustain those small businesses, hand them down from generation to one another, we are not only doing a disservice to our family farmers, but we're doing a disservice to our rural communities at large. And that is a significant problem. And that is why these cases are so important.

So there you have a chicken can be an engine for economic growth, too. And when farmers can't make enough money producing IT, whole communities might suffer. Chicken can influence entire towns, countys states and economies.

So the next time you eat a delicious chicken sandwiches, a hardware egg or even a nugget, we hope you'll think about the bigger economic picture of the chicken represents.

Beat capitalism is britain by Tracy elway, common Rodriguez and joe White fall.

This short series was produced and edited by caron with the help of kill broke in dash .

o benet is also fact checked by dashing .

kill lake maples, chicken ized, our od lodged theme and mix this episode too.

rendon num. Is our executive producer and sage bowman is blue work's header podcast. You enjoying the three part deep dive into the chicken industry, please consider leaving a positive review on your favorite podcast platform. Thanks for listening.

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I think a lot of people think that you're supposed to be going to therapy once you're like having panic attacks every day. But before you get to that point, I think once you start even noticing that you feel a little bit of and you can't maintain this harmony that you once had in relationships, that could be a sign that maybe you want to go talk to somebody, there is always a benefit and talking to someone, because we can all benefit from improved insight about ourselves and who we are and how we behave with other people. So if you're human, that's like a good indicated that you could benefit from talking to somebody.

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