The Front

Justice on the Range

In a major blow against the oligopoly that dominates the U.S. meat-packing business, independent ranchers in February won a landmark $1.3 billion verdict in an antitrust case.

A Montgomery, Alabama jury found Tyson/IBP (Tyson purchased IBP after the litigation began) to have engaged in anti-competitive practices over the last decade, and awarded $1.3 billion to a class of 30,000 cattlemen and women. Suits against the other leading packers are pending.

With a roughly 40 percent market share, Tyson/IBP is the largest meat packer in the United States.

The cattlemen and women's suit charged the company with violating the terms of the Packers and Stockyard Act, a venerable statute that protects competition in the cattle market.

"In the cattle market, cash on the spot market is the traditional way of buying and selling," explains Michael Stumo, general counsel for the Organization of Competitive Markets, and an attorney who assisted the law firm that handled the cattle producers' case. "The custom and practice is for packers to bid and get delivery within seven days. That stops packers from storing cattle and dropping the prices" they bid.

Relying on their market power, the cattle producers' suit charged, IBP and the other leading meat packers have largely abandoned this traditional way of doing business, instead relying on "captive supplies" of cattle. The giant firms "use contracting strategies to lock up cattle months beforehand" at pre-established prices, Stumo explains, so that they can reduce aggressive bidding on the open market, or stop bidding on the open market altogether.

As a result, independent cattle producers trying to sell on the open market find that prices are artificially low. Sometimes they have trouble finding buyers altogether.

The cattle producers find they have vastly diminished control of how they raise cattle, and they can't negotiate a fair price.

"In the event Plaintiffs and others similarly situated reject IBP's unfairly low price," the cattle producers contended in the complaint filed in the lawsuit, "IBP then slaughters the cattle from its captive supply leaving Plaintiffs and their class members without a fair price for their cattle. Plaintiffs must accept IBP's unfairly low price because they have no other viable market except the market controlled by IBP."

In short, Stumo says, what has happened is that the packers have leveraged their market power on the demand side into control of the market on the supply side.

The jury agreed with these claims. It concluded that Tyson/IBP's manipulation of the market drove down prices by 3 to 4 percent, a huge reduction in the very low-margin cattle-selling business.

Independent ranchers rejoiced at the verdict.

"Family farmers and ranchers across America celebrate today's verdict," said Mabel Dobbs, a rancher from Weiser, Idaho and chair of the Livestock Committee of the Western Organization of Resource Councils, a grassroots network in Western states. "Every cattle producer in this country owes a great debt to the cattlemen who filed this case and saw it through the last eight years, and to the attorneys who presented this complicated issue to the jury. We also owe thanks to the jury who listened to the testimony about IBP's market manipulation and said today, ëThis is just not right.'"

Immediately after the verdict, Tyson/IBP announced it would appeal.

"The verdict is a disappointment to our company and thousands of cattle producers who want to maintain the right to market cattle the way they want," said Tyson/IBP in its statement. "Fortunately, this is only a temporary legal setback. We will ask the judge to set aside the verdict. If he does not act, we intend to appeal and fully expect the jury's decision to be reversed by the 11th Circuit Court of Appeals."

"Our company can't demand that cattlemen sell to us," Tyson/IBP's statement contended.

"Anyone who raises or feeds cattle can sell to whomever they want. So we compete with other packers for available market-ready cattle. A majority of the cattle we buy are purchased on a daily cash market basis. Others are bought through various marketing arrangements that were initiated by cattle producers who came to us seeking a more efficient way of selling their livestock."

Tyson/IBP argued that it had valid business reasons for the contract arrangements that give it a captive supply, but Stumo says that evidence at the trial showed each of the company's alleged business justifications was phony. Tyson/IBP is able to obtain a consistent supply on the open market, product on the open market is actually of higher quality than that from Tyson/IBP's captive supply, and the transaction costs from buying on the open market are minimal, he says.

What is ultimately at stake in the Tyson/IBP and other pending suits is the packers' ability to control markets. The industry is actually considerably more consolidated now than it was in 1921, when the Packers and Stockyard Act was passed to head off what was viewed as dangerously high levels of centralization. At that time, the five biggest packers controlled 65 percent of the national market. Today, four companies -- Tyson/IBP, Cargill/Excel, Swift/ConAgra, and Farmland National Beef -- control roughly 80 percent of the meat packing market, more than double their market share in 1980.

Ranchers say the February jury finding of wrongdoing by the leading company in the industry highlights the need for federal legislation to proscribe specific contracting practices that enable the meatpackers to maintain captive supplies.

"The verdict adds urgency to Congressional efforts to restore competition in the cattle markets," says WORC's Mabel Dobbs. "We urge members of Congress to pay attention to this verdict, and to support Senator Mike Enzi's Captive Supply Reform Act."

The Wyoming senator's bill would prohibit cattle contracts that were not openly bid or that cover more than 40 cattle.

- Robert Weissman

Pakistan's Oil Spill Disaster

Karachi, Pakistan -- Pakistan witnessed its worst environmental disaster in its 56-year-old checkered history when a 24-year old, obsolete tanker Tasman Spirit carrying 67,535 tons of Iranian light crude oil, chartered by Pakistan National Shipping Corporation for Pakistan Refinery Limited went aground on July 27, 2003 in the channel of the port of Karachi amid rough weather.

Now an ongoing debate is emerging over who is to blame, the costs of the accident -- and how much the U.S.-based insurer of the ship will pay in compensation.

Although environmental organizations had warned Pakistan authorities several years ago that an oil spill at the port could be disastrous, Karachi Port Trust, which oversees the movement of ships, remained indifferent.

"The shipping lanes in the Arabian Sea are some of busiest in the world, and it is fortunate that Pakistan has not experienced a spill greater than that of the Akbar, an oil barge that sank and discharged 700 tons of crude in 1984," cautioned The Pakistan National Conservation Strategy, in a document prepared by the World Conservation Union based in Pakistan (IUCN-P) and the government of Pakistan several years ago. "Pakistan has no capacity to cope with an oil spill, minor or major, or with any other kind of shipping accident with environmental consequences."

Given this forewarning, it was perhaps not surprising that Karachi Port Trust adopted an ostrich-like position initially after the grounding of Tasman Spirit and vehemently denied media reports that oil was leaking from the obsolete tanker and would cause major environmental and health problems.

The Tasman Spirit split into two on the night of August 13, releasing huge quantities of crude and despoiling Pakistan Independence Day, which falls on August 14, for the residents of Karachi.

Approximately 30,000 tons of crude were released, harming mangroves, fisheries and humans residing in the posh Clifton, Seaview and Defense Housing Authority areas besides the low-income group that lives in Shireen Jinnah Colony. The livelihood of small fisherfolk who fish in shallow waters without nets at Clifton Beach, Seaview, Gizri and a portion of Mauripur areas was badly affected.

"The impacted area was estimated to be spread over about 160 square kilometers, which included about a 50 square kilometer area under mangrove forest cover, says Dr. Arshad Ali Beg, a scientist and former director general of Pakistan Council of Scientific and Industrial Research (PCSIR). "Much of the forest cover has been lost."

"The coastal environment in which the Tasman Spirit spill occurred is a rich and diverse tropical marine/estuarine ecosystem," notes a report compiled by a coalition of environmental organizations, including the Environmental Protection Agency. The mangrove forests contaminated by the spill support sea turtles, dolphins, porpoises and beaked whales, as well as about 200 species of fish, shrimp, crab and lobster, all important for commercial fisheries.

"About 6 to 7 tons a day equivalent of primary productivity of primary productivity has been lost over the affected area," says Dr. Arshad Ali Beg. "With natural forces alone it may take nearly six years to restore the productivity of the area."

The people residing in beach area report suffering from skin irritation, respiratory problems, nausea and eye ailments. Many of them have temporarily relocated.

The World Health Organization (WHO) has warned that long-term effects may be more serious. "Extensive cleaning of the area is highly warranted as crude oil contains several substances that are highly toxic and even cancer-producing carcinogens such as benzenes and hydrocarbons, which can manifest their adverse effects after even a decade or more with ghastly results," says an August 2003 report by WHO and Pakistan's Ministry of Health.

In view of colossal losses to mangroves that are nurseries for fish and prawn and the marine life and human beings, Karachi Port Trust, Pakistan National Shipping Corporation and Defense Housing Authority has made a claim to the tune of $7 billion against the insurer of the Tasman Spirit, the New York-based American Club, one of a network of Protection and Indemnity (P &I) Clubs that insure the vast majority of tanker ships. The crew of the ship though on bail is not allowed to leave Pakistan.

But the P & I Club disputes the government's claim.

Nicholas Brown, an employee of Maritime International Limited based in the United Kingdom, visited Pakistan in December 2003 on behalf of the American Club. He said the American Club was ready to support the establishment of a legal framework to ensure that compensation could be started to be paid as soon as possible, particularly to those who need it most, those whose livelihoods have been most affected by the spill such as fishermen and those who make their livelihood from Clifton Beach. However, he disputed the claims made by Pakistan authorities.

"The casualty is likely to have been caused by a number of factors, for instance ship handling/ pilotage, availability of tugs, dredging, vessel traffic management and weather conditions," he said. "In the case of Tasman Spirit it has yet to be determined where responsibility may ultimately lie and there is likely to be argument amongst the involved parties for years to come."

He said one option was that Pakistan adopt the Civil Liability Convention 1992 framework for oil pollution damages. The 1992 framework works to speed compensation for victims, but caps overall payout from insurers at levels far below what Pakistani authorities are seeking.

The alternative may be lengthy domestic litigation. "The country does not have its own relevant compensation legislation," notes Dr. Beg. "In view of these inadequacies, the only recourse would be to go for litigation which is sure to be lengthy and not likely to carry any guarantee that the compensation would be paid or those needing it would be adequately compensated."

The Greek master of the ship, Captain Karystinos Dimitios, who is under detention along with 7-member crew, appears to be an important point of leverage for Pakistan authorities.

During investigation, he and the Pakistani pilot have admitted that the "vessel entered the channel around 1.8 hours after the high water time, which was not unusual, considering the range of tide at that time. Both pilot and master, when questioned, confirmed that they were satisfied with this late entry for berthing considering that the available depth of water was sufficient for the vessel to safely navigate the channel to its destined birth," according to an inquiry report prepared by Mercantile Marine Department and released in February.

That would suggest the cause of the accident does not rest with inadequacies of the Pakistani port authorities.

- Shahid Husain is a senior reporter at Daily Times, in Karachi, Pakistan. He also freelances for The Guardian, based in the UK.