Step aside, Big Tech. The federal government might have a new antitrust target in its sights — Big Chicken.
The Justice Department on Friday intervened in a class-action lawsuit that claims some of the biggest American poultry companies, including Tyson Foods and Pilgrim’s Pride, conspired to manipulate chicken prices. In a court filing, the Justice Department asked the United States District Court for the Northern District of Illinois to halt the discovery process for six months as it pursues a criminal investigation.
Price-fixing claims against the chicken producers have been floating around for years, in suits like the one in Illinois, but the government’s involvement is a potentially significant escalation because it means criminal charges could follow.
The filing itself does not guarantee that the government is going to bring charges, but it does suggest that the government is strongly considering them, said Peter C. Carstensen, an antitrust expert at the University of Wisconsin-Madison’s Law School.
“The Justice Department wants to make sure they get first crack at all the possible evidence,” Mr. Carstensen said. “Within six months, either they’ll present the case to the grand jury or they’ll decide there’s not enough there to qualify for proof of liability beyond a reasonable doubt.”
A government spokesman said the Justice Department does not confirm or deny the existence of investigations.
Here’s what you need to know about the claims being made against the chicken producers.
The companies controlled prices by destroying flocks
Maplevale Farms, a food service firm in upstate New York, filed the lawsuit in Illinois in 2016, claiming that Tyson Foods, Pilgrim’s Pride, Sanderson Farms, Perdue Farms and other companies had colluded to “fix, raise, maintain, and stabilize” the price of broiler chickens, which account for 98 percent of all the chicken meat sold in the United States.
Maplevale claims that the chicken production companies, led by Tyson and Pilgrim’s, made coordinated production cuts in 2008, 2010 and 2011, destroying flocks of breeder hens responsible for producing eggs and causing the price of broiler chickens to significantly increase.
They used a data service to communicate
Much of the lawsuit revolves around Agri Stats, a subscription service that documented production practices across the chicken industry.
According to the suit, the chicken companies shared unusually detailed information with Agri Stats, on everything from the age of breeder flocks to monthly operating profits. The data was technically anonymous, but the specificity of the numbers allowed industry leaders to deduce how many birds their competitors were hatching and reduce their own production rates accordingly, the lawsuit says.
Sharing that kind of information was “extraordinarily beyond what any rational business would do,” Mr. Carstensen said.
The Maplevale Farms lawsuit is not the only allegation of price-fixing leveled against the poultry industry. Last year, two of the largest food distributors in the United States, Sysco and US Foods, sued Tyson and other American chicken producers for conspiring to inflate prices.
Prices for chicken rose, while costs were falling
From 2008 to 2016, the wholesale price of broiler chicken increased by 50 percent, even as the key costs of chicken breeding — corn and soybeans — fell significantly, according to the suit. That meant higher prices for chicken at grocery stores, at a time when beef and pork prices were going down.
The defendants “knew and intended that their coordinated limitation and reduction in Broiler supply would artificially increase all Broiler prices,” the suit states.
The chicken producers say the claims are baseless
In a statement, Gary Mickelson, a spokesman for Tyson, said that the Justice Department’s latest move “does not change our view that there is simply no merit to the allegations that Tyson Foods colluded with competitors.”
“We remain committed to vigorously defending ourselves against these baseless allegations,” he added.
A Pilgrim’s Pride spokesman said the company “strongly denies any allegations of anti-competitive conduct.” Sanderson Farms said the lawsuit’s claims were “wholly without merit,” and Perdue Farms declined to comment.
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