In December 2008, Pilgrim's Pride Corp., the largest U.S. chicken producer, filed for Chapter 11 bankruptcy protection. In 2008 and 2009 Tyson Food, Inc. underwent a capital restructuring to secure more than $1.7 billion in liquidity, improve financial flexibility and address more than $1.8 billion in near-term debt maturities. Tyson is the nation's second largest broiler company. It became a major player in beef and pork processing when it acquired IBP.

Simply being industry giants does not automatically make them profitable industry giants.

In September, JBS Swift bought a 64% stake in Pilgrim's Pride. This makes JBS Swift a direct competitor to Tyson Foods in the three largest meat proteins — beef, chicken and pork. JBS Swift will be the second largest chicken producer, third largest beef producer and third largest pork producer in the U.S. Tyson would rank first in beef, first in chicken and second in pork.

"It is unclear what position the Department of Justice (DOJ) will take should the JBS Swift purchase of Pilgrim's Pride be completed," says Steve Meyer, Paragon Economics, Adel, Iowa. "The merger does not represent an increase in concentration in the poultry industry because JBS Swift did not participate in that market before buying Pilgrim's Pride. However, the move does represent further concentration in the meat industry as a whole by reducing the number of companies actively engaged in various segments of the U.S. meat market.

"Broiler producers will likely view this development with some worry," says Meyer. "The weak financial position of Pilgrim's Pride helped some competitors gain market share. If JBS enters the picture, competition for market share could again flare up, leading to supply hikes that would negatively impact not just chicken prices but beef and pork prices as well."

How antitrust officials handle this acquisition may foreshadow how DOJ scrutinizes other industries.

"Last year, the DOJ blocked JBS Swift's purchase of National Beef due primarily to regional concentration concerns in High Plains fed cattle markets," says Meyer. "So, it was monopsony (single buyer) power and not monopoly (single seller) power that concerned the feds in that case.

"Acquiring Pilgrim's Pride does not give Swift any more power in its existing markets," he adds. "But it does extend the company's scope into another protein. This horizontal merger would not have raised much concern in years past but things have changed in Washington."