Conservationists Design a Fair, Safe, Sustainable System. Investors Promptly Seize It.

The state of the universe.
May 2 2014 8:08 AM

The Big Fish Win Again

Investors gobble up rights intended to help the small fry.

Clam chowder.
When you eat a bowl of clam chowder in the U.S., you’re probably padding profits for British investors.

Courtesy of Jen/Flickr

What does it take to buy a share of the American ocean?

For Lion Capital, a British private equity firm, the price is less than $980 million. That’s what the firm paid three years ago when it bought Bumble Bee Foods, the giant producer of shelf-stable seafood such as canned tuna. The purchase included the Bumble Bee subsidiary Snow’s Inc., best known for its creamy white clam chowder. Snow’s came with another perk: It owns the exclusive rights to 23 percent of the clams that dominate America’s canned clam industry, almost a quarter of the national supply for clam sauce, clam juice, clam soup, anything with clams.

Now, every time you sit down to a bowl of clam chowder in the United States, you’re probably padding profits for British investors.

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It’s a scenario that has advocacy groups worried. “We shouldn’t be issuing control of our fisheries and access to our fisheries away from communities and to multinational corporations. It’s a no-brainer,” says Linda Behnken, the vice chair of the Alaska Sustainable Fisheries Trust, which works to strengthen fishing communities.

Increasingly, as the Snow’s deal illustrates, equity groups and corporations are poised to rule the seas through their investments. And if you eat seafood, then it ought to matter to you.

Over the long term, it means that costs will rise. Fishermen will earn less, their profits halved and quartered by the rental payments they’ll have to make to people in suits just to go fishing. Yet consumers will pay more. Investors will be getting rich off of resources that used to belong to you.

Here's how it happens: catch shares. They are a type of fishing management system that became national policy in the United States in 2010 to encourage sustainable fishing. Catch shares accomplish this by capping the amount of fish that can be caught and doling out the rights to fishermen, and sometimes seafood processors and co-ops, to fish them.

Catch shares have some perks. A lot of them, really. They limit the amount of fish that can be caught, allowing depleted populations make a comeback. They reduce the number of boats pillaging the seas and make fishing safer just by thinning competition. Catch shares mean nobody rushes to the sea in a hurricane to get an edge on the next guy. Not only is that good for the ocean, it saves lives. It’s also intended to boost values for seafood, a potential windfall for fishermen.

But looked at another way, catch shares basically amount to a privatization scheme. And it’s hard to know who’s really making bank. Once rights to fish are given away, those rights can be traded like any other commodity. 

Catch shares have opened up markets for the sale and lease of access rights to fishing like nothing we have ever seen. The hope from the environmental camp was that these rights would live with fishermen and be passed from one generation to the next, giving them a greater stake in the health of the ocean and making them better stewards. It was a noble and worthwhile vision. It just isn’t what’s happened, at least not very much. In reality, these rights are worth so much money that rich investors snap them up at top prices, making it tough for people who actually fish to acquire them. Consider the present cost of halibut rights, which in prime fishing areas fetch upward of $40 a pound. That’s about six times the best dock price a fishermen can earn for delivering the same fish.  

Proponents of this type of management are just beginning to concede the level of consolidation that’s really occurring. And they haven’t acknowledged the degree of investment speculation that’s really going on. They helped create one of the coolest vehicles environmental policy has seen in decades. But it could be driven straight off a cliff.

Policymakers assured the nation that fishing rights would never migrate out of U.S. control through catch shares or end up as properties of investment firms. Environmental groups have similarly touted catch shares as a tool for communities and fishermen and overlooked the role investors can and do play. As the Snow’s deal now makes clear, those pacifications are baloney. Federal law does prohibit ownership of fish access for investment purposes. But it’s like a prohibition on jaywalking: quaint and rarely enforced. The same goes for foreign acquisition of U.S. fishing rights, which is similarly banned by federal law. But there’s a loophole: Firms can acquire American-owned corporations or hang a shingle on American soil and qualify for ownership as long as the CEO of the U.S. corporation is an American, along with most of its board. Such is the case at Snow’s, where a majority of the company’s board and its CEO are U.S. citizens, even though the company is owned by a British private equity firm.

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