In June, the Department of Justice intervened in a lawsuit that claims that the major meatpacking companies producing 90 percent of the nation's chicken conspired to increase prices. The investigators asked the court to stop discovery in the case, a move that might signal future indictments for violations of federal antitrust law, as was first reported by the Food and Environment Reporting Network's Leah Douglas.
Maplevale Farms, which distributes food to restaurants, colleges, and other clients, claims the companies — Tyson Foods, Pilgrim's Pride, Sanderson Farms, Perdue Farms, and Koch Foods — conspired to increase prices from 2008 to 2012, and then continued to cut supply in order to maintain the inflated costs. At times, the lawsuit alleges, the companies even destroyed eggs, retired breeder hens prematurely, and killed newly hatched chicks in order to drive up prices. According to the plaintiffs, these actions resulted in a "nearly 50 percent increase in broiler wholesale prices since 2008," even though input costs like corn and soybeans, which feed chickens, fell dramatically during this time.
Representatives for Tyson, Pilgrim's Pride, and Sanderson Farms have denied the claims, according to The New York Times. But for many of the big companies, it's not their first time facing such allegations: Food-service distributors like Conagra, Sysco, and Walmart have also sued over similar violations in the past two years, FERN reports. And while the chicken suit is now especially heated, animal protein producers of almost every kind, and various vegetable producers, have been embroiled in price-fixing scandals this decade.
"Unfortunately, price-fixing has become too common in the modern food industry," Yuliya Bolotova, an assistant professor of agribusiness at Clemson University, writes in an email.
According to Bolotova, who has studied price-fixing in the food industry, the recent cases began because the chicken and pork industries were over-producing: The meat-processing companies weren't able to sell product at a cost that was profitable to them, so they "implemented a series of production cuts," writes Bolotova in a 2019 working paper presented to the Southern Agricultural Economics Association.
Recent years have ensnared producers in the potato, dairy, egg, and mushroom industries, and now meat processors. In July of 2018, plaintiffs in Minnesota sued major pork and meat packing companies (including Tyson) for price-fixing, claiming they used the subscription data service Agri Stats to exchange "detailed, competitively sensitive, and closely guarded non-public information about prices, capacity, sales volume, and demand."
Former executives of big tuna companies like StarKist have also pled guilty to price-fixing; and in May, a Florida cattle trader filed a lawsuit claiming meatpackers conspired to drive down prices, the industry news site DTN Progressive Farmer reports. In Canada, bread makers have also faced a class-action lawsuit.
A second chicken price-fixing suit, filed in 2018, by two of the largest food-service distributors in the country, alleges that Tyson Foods, Pilgrim's Pride, and other companies used Agri Stats to manipulate the Georgia Dock, a wholesale chicken price index. According to Justin Gardner, associate professor of agribusiness at Middle Tennessee State University, this index for chicken was ripe for exploitation, in a way those for other commodities were not; beef prices, for example, are set by a competitive trading mechanism at the Chicago Board of Trade. "There's not this reporting system with a lack of transparency and external verification," he says.
The Georgia Dock has since been retired. But, overall, agriculture data — like that collected by Agri Stats — is becoming more important to the industry. Producers collect data to optimize machinery, soil composition, fertilizer use, and more. And with big data comes big consequences. The agriculture lawyer Todd Janzen has written that, as more agriculture data becomes available, companies that exchange it could be tempted toward price-fixing.
This story originally appeared as How common is price-fixing in the food industry? on Pacific Standard, an editorial partner site. Subscribe to the magazine's newsletter and follow Pacific Standard on Twitter to support journalism in the public interest.