Another chicken price-fixing lawsuit filed, now from CPG companies
- Kraft Heinz, Conagra Brands, Nestlé USA and Nestle Purina Petcare are the latest group of companies to sue poultry processors — including Tyson Foods and Pilgrim’s Pride — accusing them of inflating chicken prices, the Chicago Tribune reported.
- The federal lawsuit claims chicken suppliers destroyed breeder hens in an effort to reduce the chicken supply from 2008 until 2016. As a result, wholesale chicken prices rose by nearly 50%.
- In the last few years, poultry companies have faced multiple similar lawsuits, as well as an investigation by the U.S. Securities and Exchanges Commission and scrapping of the controversial Georgia Dock price index. According to the previous lawsuits, which come from restaurants and foodservice companies, producers manipulated prices through their control over the Georgia Dock index and their own flock sizes.
In a case that may seem a bit like déjà vu, packaged food companies are the latest set of businesses to denounce U.S. poultry producers for artificially inflating chicken prices.
Accusations of price-fixing aren't uncommon in the food industry, and lawsuits have also been filed about dairy and tuna prices, as well as pork and chicken. But price fixing can be difficult to prove. Justin G. Gardner, associate professor of agribusiness at Middle Tennessee State University, told Food Dive raising prices can be a complicit act of collusion that leaves no paper trail. However, conspiring to exterminate breeder hens likely would have resulted in some form of documentation, which may give the plaintiffs in this class-action lawsuit more firing power.
None of the lawsuits that have come against these chicken suppliers have finished. The first one, filed in 2016 by Maplevale Farms, is still pending, though Fiedale Farms has reached a $1.4 million settlement agreement. Lawsuits filed this year — one from Sysco Corp. and US Foods, and one from Darden Restaurant Group — are still pending.
In an email sent to Food Dive, Tyson spokesman Gary Mickelson denied wrongdoing.
"Follow-on complaints like these are common in antitrust litigation. Such complaints do not change our position that the claims are unfounded. We will continue to vigorously defend our company," he wrote.
How did it get to the point where the poultry industry is routinely fending off litigation related to price fixing? In part it has to do with chicken's popularity in the United States. Chicken surpassed beef as the most consumed meat in the nation in 1992, and demand for the fowl has only continued to grow. The U.S. Department of Agriculture estimates the average American consumed 92.1 pounds of chicken last year.
With such demand, it has become necessary for producers to pump out large quantities of chicken. Due to the nature of the commodity market, it can be difficult for producers to affect the selling price, so they work to lower cost and increase margins. Theoretically, if companies could work together to increase the overall price for chicken, it would lead to higher margins for producers across the board.
Those higher prices must be absorbed by CPG manufacturers purchasing chicken, and eventually the consumers themselves. If the claim of a 50% price increase is true, it would have caused a significant hit to food manufacturers' profit margins.
While there is a chance that this case may be dismissed, another lawsuit filed against the industry for the same complaint is not going to help the reputation — or the bottom line — of chicken producers. Eventually, these court cases may erode the confidence consumers and shareholders have in the poultry companies, which will pose a whole new set of problems, since winning a case in the court of public opinion is a whole different fight than winning one in the U.S. judiciary system.