Struthers Inc.,

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Reply To: None Sunday, 30 Jul 2000 at 3:37 AM EDT
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I know this is old news, but I, in my faulty DD, did not see it till early this am. via an email from GOOSE. Lloyd, glad I found you. I was getting worried. LOL. Please, do not disappear on me, again!

EXCELLENT READ IMO, PROVIDED TO ME IN AN EMAIL BY A YOUNG MAN WHO POSTS HERE AS GOOSE
Farmers Fear an 'OPEC of Meat'
by Joanna Glasner
3:00 a.m. Jul. 18, 2000 PDT
On the surface, the Internet and meat packing would seem to be two industries with very little in common.
Packing, after all, is a labor-intensive business that involves the dismantling of millions of pounds of animal matter and the production of millions of neatly cased products for grocery store shelves.
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Hear Joanna discuss this story in Audio Spin.


Internet firms, on the other hand, hardly ever produce tangible goods, banking their future on the digital flow of information.
Contrasts aside, however, antitrust regulators and farmers' advocates are finding great cause for concern in a plan from several of the largest U.S. packing firms to jointly build an online exchange for buying and selling their products.
The proposed exchange was first announced in April by packing firms IBP, Tyson Foods, Smithfield Foods, and Cargill. Their plan was to create an e-commerce company to manage marketing to large buyers, such as wholesalers and supermarket chains, over the Internet.
Thus far, the proposed venture still doesn't have a name or a website. Nonetheless, the firms' tentative plans have drawn scrutiny and criticism from the Department of Justice and farmers' advocates.
Among the most vocal critics is the Minnesota Right to Be Rural Coalition -- a Democratic group that earlier this year asked federal regulators to investigate whether participants in the proposed exchange could wield unfair advantage in setting prices for everything from livestock to lunch meat.
"If the meat companies are able to exercise complete control over the supply chain, they can decide who to buy from and who not to buy from," said Tom Smalec, Democratic press secretary for the Minnesota House of Representatives and a member of the coalition, who fears the proposed exchange will create "an OPEC of meat."
The proposed meat site isn't the only possible online exchange drawing the government's attention. The Justice Department is also investigating Covisint, the not-yet-operational site backed by General Motors, Ford, and DaimlerChrysler that critics contend will give dominant firms too much clout in setting supply prices for their products.
Regulators are also looking at online exchange plans proposed by a group of major U.S. airlines.
Such scrutiny, however, is largely at an early stage. Mozelle Thompson, a commissioner at the Federal Trade Commission, said regulators are trying to educate themselves about the competitive risks and benefits of so-called business-to-business -- or B2B -- online exchanges.
According to Robert Lande, a director at the American Antitrust Institute, the key question to ask is whether a venture will encourage competition or restrict it. On the pro-competitive side, online exchanges can help an industry function more efficiently by allowing businesses to complete transactions more quickly and offering buyers and sellers more information about product availability and prices.
On the con side, Lande points out that any time major players in an industry get together, there's a chance their proposed project is intended to benefit their interests more than those of the industry at large. Lande says the government would be remiss if it didn't investigate joint-venture announcements involving dominant players in a particular industry.
"One question you have to ask is, if all the sellers are getting together, are they going to use this as an opportunity to fix prices?" he said.
So far, regulators haven't levied any charges of unfair competition against companies planning online exchanges.
To ward off future charges, many planned sites are working to cultivate a pro-competitive image. The proposed meat exchange and auto suppliers websites, for example, both dub themselves neutral marketplaces, which will be open to any buyer and seller.
Also, the fact that many of these sites don't yet exist makes it more difficult for antitrust investigators to determine whether they might be harming competition.
The proposed meat site, for example, hasn't scared off other startups from entering the market. The packing firms involved in the venture say they're still committed to creating the exchange, but have made little public progress since announcing the project in April and are still in the process of hiring a chief executive.
In the meantime, plenty of other meat exchanges with operational websites have cropped up, including Sellmeat.com and Tradingmeat.com.
Still, at a recent FTC hearing on competition issues and B2B exchanges, a number of participants asked regulators to give greater scrutiny to exchanges being formed by powerful industry players. Federal guidelines could help prevent some well-backed exchanges from exercising too much control in their respective industries.
"I don't think anyone is saying people are setting up B2B sites for the purpose of colluding, but there's a concern that they're set up in a way that will facilitate collusion," said Roxann Henry, an attorney with Howrey, Simon, Arnold & White who specializes in antitrust.
At least that's the worst fear of Minnesota's Smalec, who says a gigantic meat exchange, if left unregulated, could squeeze out distributors and customers who don't go along with their plans:
"It's easy to envision them saying, 'If you want to buy pork chops from us, you don't buy them from Hormel.'"

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