I recently reported on the Justice Department’s lawsuit to undo the sale of a chicken processing plant in Virginia’s Shenandoah Valley — an exercise of private property rights that horrified Antitrust Division lawyers, who saw a conspiracy to undermine the right of farmers to receive higher prices for their poultry. Now, weeks before the case was set for trial, the DOJ declared the case over with a settlement. But unlike the typical antitrust “settlement,” it appears the DOJ failed to achieve its objective of forcing the resale of the chicken processing plant at issue. In fact, the DOJ’s order simply requires the plant’s owner to…make capital improvements that were delayed by the DOJ’s decision to bring an antitrust lawsuit in the first place.
In a June 23 press release, the DOJ’s Antitrust Division declared victory in its litigation against George’s Inc. Division chief Christine Varney took credit for preserving competition in the Harrisonburg area for chicken processing services:
The proposed settlement enhances the competitive viability and increases the production of the Harrisonburg poultry processing plant, which translates into more opportunities to grow and process poultry. This resolution not only benefits poultry growers, but also the Shenandoah Valley community. It also demonstrates our commitment to enforcing the antitrust laws to protect competition in important agricultural markets.
“This resolution,” however, did nothing more than accomplish what George’s intended to do all along. In court papers filed in May, George’s explained the negative impact of Varney’s decision to try and undo the Harrisonburg acquisition by force:
To avoid throwing “good money after bad,” George’s will therefore need to postpone capital improvements to the Harrisonburg complex during the pendency of the litigation. Those investments, all of which were intended to increase the productive capacity of the Harrisonburg complex, include: (a) The purchase and installation of an IF (individually frozen) freezer at Harrisonburg, which will allow George’s to add value to the birds processed at Harrisonburg and Edinburg; [and] (b) The purchase of both leg processing and whole leg deboning equipment to improve dark meat value.
And here’s what Varney’s press release said was the “resolution” to her antitrust concerns:
The settlement requires that George’s make capital improvements to the Harrisonburg chicken processing plant that will lead to a significant increase in the number of chickens that will be processed at the facility. The improvements include the installation of a special freezer and deboning equipment, which will allow George’s to produce a variety of highly valued products at both its Harrisonburg and Edinburg facilities in the Shenandoah Valley. As a result of these improvements, George’s will have the incentive and ability to increase local poultry production, thereby increasing the demand for grower services and averting the likely adverse competitive effects arising from the acquisition. In addition, the division will monitor George’s efforts to improve the plant until the new equipment is installed and operational. (Italics added)
In other words, the DOJ is now ordering George’s to make the exact capital improvements the company would have made months ago if not for Varney’s decision to bring a lawsuit — a lawsuit that was motivated primarily by Varney’s anger over George’s decision to close the Harrisonburg purchase without waiting for her to make up her mind about whether to challenge the deal.
Now Varney wants to rewrite history to make it look like she carefully considered the best alternatives: “Taking all of the facts and circumstances into consideration, including the likely benefits resulting from the required improvements, the [DOJ] determined that the proposed settlement is an effective remedy.” That reverses the position Varney took a month ago when she filed the lawsuit. It was George’s, not Varney, who made the court aware of the “facts and circumstances” of the situation — including the negative economic impact on the very farmers Varney claimed to be helping.
Varney’s incompetence led her into a bad decision, even by antitrust standards. She also faced resistance, not just from George’s, but according to one report, she ”heard from a number of growers and plant employees, as well as a number of local, state and federal officials — including Virginia’s governor and two U.S. senators — that [the lawsuit] threatened the economic viability of the complex and local and regional economies.”
Yet don’t expect any consequences for Varney and her department. The case was “settled,” not dismissed, so Varney can claim victory with a straight (if deluded) face. When the DOJ compiles their annual litigation statistics, this will go down as a win along with all of the routine settlements where the DOJ actually managed to violate some company’s property rights. And while the George’s deal allows the company to resume its previously planned capital improvements, the DOJ unfortunately will have the right, which may never be exercised, to rifle through the company’s records to ensure that new freezer and deboning equipment are actually installed.