The Story On The Poultry Price Fixing Scandal And The Lawsuits That Followed

Matty-Sways

Civil lawsuits by 3 companies regarding price fixing have turned into criminal indictments and 13 million in settlements

Originally in 2016 Bob Evans, The Fresh Market and Wawa filed separate lawsuits accusing poultry suppliers Tyson, Pilgrim’s Pride and 17 others of fixing chicken prices in the U.S.

The businesses were seeking damages for chicken purchased between early 2008 and late 2017. The buyers alleged the poultry producers colluded to curtail supplies of broiler chickens, as well as to manipulate price and contract negotiations. The plaintiffs say broiler chickens make up about 98% of all chicken meat sold in the U.S., and the defendants are among the country’s leading suppliers, with more than $30 billion in annual revenue and control of about 90% of the wholesale chicken market.

The plaintiffs allege the defendants curtailed the chicken supply by making “unprecedented cuts at the top of the supply chain” by reducing breeder flocks that produce chickens to be slaughtered for meat.

“Historically, when faced with low market prices, Defendants relied primarily on mechanisms that temporarily reduced production – at the middle or end of the supply chain, such as reducing eggs placements, killing newly-hatched chicks, or idling processing plants – but which still allowed them to ramp up production within weeks if chicken prices increased,” the lawsuits say.

“The rise in chicken prices relative to input costs has led to record profits for Defendants,” the plaintiffs claim.

They believe the alleged conspiracy began around March 4, 2008, after senior executives from the defendant companies attended a meeting of the National Chicken Council’s Board of Directors.

They say shortly after that meeting took place, Pilgrim’s Pride put out “the call to cut overall industry supply, and proceeded with production cuts.” This move was followed by the company’s March 12, 2008, announcement that the company would close seven facilities “in order to reduce industry oversupply.”

A series of production cuts were announced by other defendants in April 2008.

Representatives from the companies allegedly continued to attend trade meetings over the next few years, and several similar changes were implemented along the way.

Many individual lawsuits followed. In 2018 a class action lawsuit was filed against Tyson and other poultry producers, when several grocers accused the companies of taking part in a price-fixing scheme to artificially inflate poultry prices.

Additionally, several class action lawsuits brought by consumers, chicken growers, and direct and indirect purchasers alleging that the companies secretly schemed to inflate the price of poultry, affecting consumers across the market. The class action as filed alleged that the some of the biggest poultry companies, such as Pilgrim’s Pride, Tyson Foods, Sanderson Farms and Perdue Farms, coordinated prices between 2008 and 2016, resulting in a 50% price hike for broiler chicken. The complaint further alleges that they took this action “despite input costs … falling roughly 20% to 23% over the same time period … .” According to the allegations, the poultry industry as it currently exists, is highly consolidated, with just two companies, Tyson and Pilgrim’s Pride, controlling about 40% of the market, and the top 10 poultry companies controlling nearly 80% of the market. Such market power, it is alleged, gives the Big Chicken industry enough power to manipulate pricing and supply.

One of alleged conspirators, Fieldale Farms, which is not named as a defendant in these cases, “has already agreed to pay $2.25 million to settle claims by a putative class of direct purchasers alleging that Fieldale Farms participated in this conspiracy.”

The Tyson chicken price-fixing lawsuit alleges that that industry has operated the scheme for nearly a decade.

“This is a case about how some of America’s chicken producers reached illegal agreements and restrained trade beginning at least as early as 2008 through at least as late as 2016,” alleges the Tyson chicken price-fixing lawsuit. “Through those unlawful agreements, Defendants successfully implemented supra-competitive chicken prices to Plaintiffs and other purchasers throughout the United States.”

Three settlements (“Settlements”) have been reached in a class action antitrust lawsuit filed on behalf of Direct Purchaser Plaintiffs (“Plaintiffs”) of Broiler chicken with the following defendants: Peco Foods, Inc. (“Peco”), George’s, Inc. and George’s Farms, Inc. (“George’s”), and Amick Farms, LLC (“Amick”) (collectively “Settling Defendants”).

The Court previously approved a settlement between the Direct Purchaser Plaintiffs and Fieldale Farms Corporation.  Direct Purchaser Plaintiffs now have reached three settlements with Peco, George’s and Amick.  The Direct Purchasers’ case is proceeding against all other Defendants who have not settled the case.  

In accordance with the Settlements, Settling Defendants must pay the following amounts: Peco will pay $4,964,600, George’s will pay $4,097,000, and Amick will pay $3,950,000.00. Collectively, the Settlements provide $13,011,600 to the Settlement Class Members.  Settlement Class Counsel do not intend to distribute any proceeds from the Settlements to qualifying Settlement Class Members at this time, but instead intend to combine any distribution of the Settlements’ proceeds with proceeds from future settlements or other recoveries in the litigation.   

In June, the DOJ intervened in a class action antitrust lawsuit, filed in the U.S. District Court for the Northern District of Illinois, and received a stay of discovery for three months while the Antitrust Division pursued potential criminal charges against key players in the chicken industry.

“The DOJ’s Investigation has resulted in an indictment being filed in the District of Colorado against individuals from Defendants, Pilgrim’s Pride and Claxton Poultry,” the lawsuits say. “Specifically, the Indictment charges Jayson Penn, President and CEO of Pilgrim’s Pride, Mikell Fries, President of Claxton, Scott Brady, Vice President of Claxton, and Roger Austin, Vice President of Pilgrim’s Pride,” with violating of the Sherman Act.

Court documents filed on showed former Pilgrim’s Pride CEO William Lovette has also been indicted. Also indicted was sales executive Timothy Mulrenin. Mulrenin, who was hired by Perdue Farms in 2018, worked at Tyson Foods at the time of the allegations outlined against him in court documents, according to the filing and his LinkedIn page.

“Executives who choose collusion over competition will be held to account for schemes that cheat consumers and corrupt our competitive markets,” Makan Delrahim, chief of the Justice Department’s Antitrust Division said.

Following the Indictments Pilgrim's Pride announced that it had entered into a plea agreement with the U.S. Department of Justice and would pay a fine of $110.5 million to settle federal charges that it had engaged in price fixing.

In a statement, the company said that it had agreed to the fine "for restraint of competition that affected three contracts for the sale of chicken products to one customer in the United States." The plea agreement will have to be approved by the U.S. District Court of Colorado and, if it's OKed, it will mean that the DOJ's Antitrust Division will not bring any additional charges against Pilgrim's Pride, nor will it have to pay restitution to the consumers, restaurants, or supermarkets who had to pay its artificially inflated prices.

“Pilgrim’s is committed to fair and honest competition in compliance with U.S. antitrust laws,” Fabio Sandri, Pilgrim’s recently appointed CEO said. “We are encouraged that today’s agreement concludes the Antitrust Division’s investigation into Pilgrim’s, providing certainty regarding this matter to our team members, suppliers, customers and shareholders."

Pilgrim's Pride is the first U.S. chicken processor to reach an agreement with the DOJ. The company is majority owned by a U.S. subsidiary of massive Brazilian meat processor JBS S.A. Food Dive reports that Pilgrim's produces around 13 billion pounds of poultry annually, which accounts for 17 percent of the total U.S. chicken market.

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