Major Meat Corporations Pay Millions to Settle Price-Fixing Suits | Civil Eats

Major Meat Corporations Pay Millions to Settle Price-Fixing Suits

a tyson poultry truck delivers birds on the highway. Photo CC-licensed by Ed Kohler

This article originally appeared in Food & Power, and is reprinted with permission

Late last month, Tyson Foods agreed to pay $221.5 million to settle several private lawsuits brought by poultry buyers who accused the corporation of colluding with competitors to raise chicken prices. Tyson joins other dominant poultry and pork corporations in settling private price-fixing suits after Pilgrim’s Pride pled guilty to similar charges brought by the Justice Department this fall.

These settlements mark the end of a four-year legal battle in which grocery shoppers, restaurant chains, and supermarkets accused major meat corporations of conspiring to raise pork and poultry prices. While these payouts are not an admission of guilt, the size and timing of the settlements make some antitrust experts suspect foul play.

“When you see a settlement like this what it tells you is that the defendants have made the assessment that there’s a substantial likelihood that they will lose and they will lose big,” says emeritus law professor and former federal antitrust attorney Peter Carstensen. “That is, the jury will not only find that they colluded but that the collusion resulted in significant damages.”

While hundreds of millions for cheated customers is nothing to sneeze at, it is not clear if these payments will discourage future collusion. One study found that most corporations that settle out of court end up paying less in penalties than they made off the conspiracy (and that’s only the unlucky few who get caught). To deter price-fixing, antitrust experts want to see criminal charges for executives, new restrictions on information sharing between competitors, and broader efforts to address the industry consolidation that makes price-fixing easier to begin with.

Tyson recently settled three class-action lawsuits brought by wholesale buyers (think: supermarkets and distributors), indirect purchasers (think: restaurant chains), and direct consumers (you and me). These cases all accused Tyson and some 13 other poultry corporations of conspiring together to rig a poultry price index and coordinate production cuts in order to raise the price of chicken for wholesalers, who had to pass costs on to consumers and restaurants.

Poultry processors allegedly used a data-sharing service, AgriStats, to monitor one another and identify deviants in the conspiracy. And the allegations extended beyond chicken. Numerous private suits have accused pork and turkey processors of conspiring together to raise prices with the help of AgriStats. Other suits claim chicken processors used AgriStats to hold down wages for workers and prices paid to farmers.

The recent rush to settle by both poultry and pork companies suggest these claims were credible. In addition to Tyson, Pilgrim’s Pride reached a $75 million settlement and several smaller chicken companies will pay a collective $13 million to settle their charges. In December, the owner of Pilgrim’s Pride, JBS, also reached a $24.5 million settlement with pork buyers and agreed to cooperate with ongoing litigation against co-conspirators, such as Hormel.

Notably, these settlements come after Pilgrim’s Pride pled guilty in October to similar, but far more specific, bid-rigging charges brought by the Justice Department. As a part of their antitrust probe, the DOJ indicted 10 poultry executives who still face charges.

We’ll bring the news to you.

Get the weekly Civil Eats newsletter, delivered to your inbox.

Chicken companies maintain that this federal probe and the private suits are unrelated and continue to deny broader price-fixing allegations, even in settling. Tyson told the Wall Street Journal that “the settlements were in the best interests of the company and its shareholders in order to avoid the uncertainty, risk, expense and distraction of protracted litigation.” Tyson and others claim higher grain costs and new demand drove up chicken prices, not collusion.

However, Carstensen doubts that Tyson and others would pay such large settlements without some guilt. “When you tell me you are paying $200 million to avoid trial, but you were going to win at trial, there is a down home farm expression—bullshit—that comes to mind,” he says. “No, you realize[d] that there was a very substantial probability that you would lose.”

While $221 million may seem like a steep penalty, it likely dwarfs what the corporation made in illicit profits. One study by antitrust scholars found that in approximately 80 percent of private price-fixing settlements the plaintiffs did not take back the full value of overcharges.

By these odds, the risk of a fine alone may not outweigh the benefits of price-fixing for corporations, especially since scholars believe most cartels are never even discovered. To that end, Carstensen would like to see more behavioral remedies or conditions, that force corporations to change their business practices—such as reasonable restrictions on information sharing through third-parties like AgriStats. Carstensen and other scholars also believe criminal charges for executives are a much stronger deterrent for corporate decision-makers.

Carstensen also notes that decades of lax merger enforcement simply makes collusion easier. “More markets are sufficiently concentrated [with] few enough competitors that collusion of one kind or another becomes much more feasible,” he says. “There’s a professor at the Wharton school who has been saying, ‘look if companies can’t avoid price fixing, why not just break ‘em up, make the market more workably competitive?’ That’s an extreme possibility, but very unlikely.”

Thank you for being a loyal reader.

We rely on you. Become a member today to read unlimited stories.

Claire Kelloway is the primary reporter for Food and PowerFood & Power and a senior food and farming researcher at the Open Markets Institute, an anti-monopoly think tank based in Washington, D.C. Read more >

Like the story?
Join the conversation.

More from

Animal Ag

Featured

A tractor in california is kicking up dust working in the fields, adding particulate matter to the air and lowering air quality

California Farm Counties Are Not Even Close to Meeting the EPA’s New Clean Air Quality Standard

The nation’s largest agriculture region has never been able to meet the EPA’s standard for pollution from particulate matter. Health and environmental justice groups are hoping the new rules will spur urgent action.

Popular

A Circular Economy for Fish? These Icelandic Companies Have a Plan.

From Civil Rights to Food Justice, Jim Embry Reflects on a Life of Creative Resistance

What the Latest Farm Census Says About the Changing Ag Landscape

Dairy farmer Lisa Kaiman walks with a herd of heifers on her 33 acre farm March 27, 2007 in Chester, Vermont. (Photo by Spencer Platt/Getty Images)

The Last Front in the Battle to Save the ‘Most Important Fish’ in the Atlantic

Photo credit: Chesapeake Bay Program/Flickr