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Ralph Nader > In the Public Interest > Price Manipulation in the Meat Industry

George J. Schultz is a hard-working young San Diego lawyer who wants to drive your meat prices down.

He believes that bribery of meat inspectors, deliberate misgrading of meat and payoffs within the $38-billion meat industry are costing consumers and ranchers huge amounts of money every year. Prosecutions and admissions arising out of lawsuits and investigative reporting indicate only the tip of the iceberg has been revealed. Schultz presently is focusing on price manipulation of meat products nationwide as attorney for a California student group that has filed a suit to stop such consumer gouges. In recent testimony before the House Small Business Committee, Schultz accused large meat packers and supermarket chains of manipulating prices to the disadvantage of ranchers and consumers through the medium of a daily pricing service out of Chicago called the “Yellow Sheet.”

The U.S. Department of Agriculture, the Justice Department’s Antitrust Division and several class action lawsuits brought by cattlemen are pursuing the elusive trail of the meat price manipulators. The stakes are indeed high. An average 2-cent-a-pound beef price increase can cost consumers nearly a billion dollars a year.

The “Yellow Sheet” mystery is not your ordinary backroom price-fixing conspiracy (though some investigators also think that takes place). It is more complex. The charge is that the primary information source for establishing wholesale meat prices–namely the “Yellow Sheet”–is being manipulated to depress prices paid meat producers and to raise prices to consumers.

The manipulation works this way. Daily the “Yellow Sheet” (formerly known as the National Provisioner Daily Market and News Service) shows wholesale prices for beef carcasses, prime beef cuts, beef variety meats and fresh pork cuts. The daily prices are based on open market sales through telephone calls to meat industry middlemen.

Critics charge, and the “Yellow Sheet” staff acknowledges, that these price quotations are based on only about 5 percent of all daily wholesale meat transactions that are negotiated.

The critics further charge, and the “Yellow Sheet” vigorously denies, that large packers and food chains have learned how to manipulate prices within this small sector in order to have it reflected in the next day’s “Yellow Sheet” as the price for all meat. Alleged techniques include selective reporting of meat transactions or transactions entered into at artificial prices.

The dominance of the “Yellow Sheet” in reporting meat prices is part of the problem. Competitors have not very effectively challenged the half century hegemony which the “Yellow Sheet” has held in the meat industry. A four-year-old competitor, named the “Meat Sheet,” is struggling to have the federal government declare illegal what it calls this “single source of price information.”

No one has accused the “Yellow Sheet” of participating in price manipulation, but rather that this pricing service is being manipulated by the companies rigging prices.

In December of 1974 the Wall Street Journal sparked the growing scrutiny of the “Yellow Sheet” problem with publication of an investigative article that cited insiders who described various ways employed to manipulate price quotations.

It is permissible to wonder why neither the Agriculture Committees in Congress nor the U.S. Department of Agriculture (USDA) could not have informed the public about these abuses long before 1974.

A call to the USDA this week revealed the existence of a continuing inquiry under the office of Barbara Schlei, administrator of the Agricultural Marketing Service. The goal of this inquiry, according to C.B. Jennings of USDA’s Packers and Stockyards unit, is to “evaluate a range of alternatives which will assist in the maintenance and improvement of price competition in wholesale meat trading.”

While the long immobilized Packers and Stockyards Administration twiddles its thumbs, consumers pay and pay to make these crafty middlemen richer.

Some USDA officials think the answer to such price manipulation is to establish a federal price reporting system for all USDA graded meat. This idea would expand upon an existing USDA market reporting service published in a weekly publication, “Market News,” largely for cattle producers.

Clearly it is time for more forceful leadership by Agriculture Secretary Bob Bergland to shake up the department’s cushy relationship with the meat industry and inform millions of American consumers about what is going on.

George Schultz put it well in his testimony:

“Because of the sophisticated nature of this manipulation, its devastating impact is often hidden. All the consumer really knows is that he is paying too much for beef, and all the producer knows is that he is receiving too little. It is time they knew why.”

Interested readers may wish to write Secretary Bergland in Washington and urge him to tell the American people why. It is said, by the way, that the secretary welcomes letters from consumers.