A class-action lawsuit filed June 28 alleges that some of the largest U.S. pork producers, including Hormel Foods, Tyson Foods and Smithfield Foods, have colluded since 2009 to keep prices high for bacon, ham, hot dogs and other pork products. Seattle-based Hagens Berman Sobol Shapiro filed the suit in Minneapolis federal court on behalf of 12 grocery shoppers.
The 98-page lawsuit claims the pork producers conspired to fix, raise, maintain and stabilize the price of pork. They allegedly did this by coordinating output, limiting production and exchanging private information on price, capacity, sales volume and demand with the help of Agri Stats, Inc., an agricultural research company that produces customized data reports for clients.
In response, Hormel released a statement that it has a reputation as one of the most respected companies in the food industry. "We are confident that any allegations such as these are completely without merit. We intend to vigorously defend this lawsuit," the Austin, Minn.-based company said. A spokesman with Tyson Foods told Food Dive it hadn't received formal notice of the action and couldn't comment.
In addition to Tyson, Hormel, Smithfield and Agri Stats, defendants named in the lawsuit are Clemens Food Group, Indiana Packers Corp. JBS USA, Seaboard Foods and Triumph Foods. The suit claims these companies control about 80% of the $20 billion U.S. pork industry.
According to court documents, the price-fixing scheme began in 2009 when pork prices began to rise, increasing more than 50% between 2009 and 2015. The reason, according to the suit, is because Agri Stats was supplying weekly and monthly benchmarking reports to large pork producers — for millions in subscription fees — allowing them to find out how much their competitors were charging and how much they were making.
"This allowed the companies to monitor each other’s production and control supply and price," the law firm said. As a result, the producers were able to control most of the market and keep new competitors out, the firm added.
"Once Agri Stats got everyone in the pork industry to put their card on the table, there was no competition. When you’re aware of every move your competition is making, the only step left is to form an alliance, and that’s exactly what happened here," Steve Berman, the firm's managing partner, said in a release. “We believe this a class antitrust operation, with the sole purpose of increasing profits for these companies orchestrating the scheme.”
Allegations of price-fixing aren't uncommon in the food industry, and lawsuits have been filed over dairy and tuna prices, as well as pork and chicken. Tyson has been a defendant in two other price-fixing lawsuits, both involving chicken and both alleging participation by Agri Stats. One, filed in 2016 by Maplevale Farms, was dismissed last year. The other, filed in January by Sysco Corp. and US Foods, is still pending.
The chicken cases involved a method of calculating prices known as the Georgia Dock Index, which set benchmarks from producers' costs submitted without independent, third-party verification — reportedly resulting in prices 30% to 50% higher than other methods.
It's hard to tell what's going to happen next in the pork case. Some of the defendants have been through this before and no doubt are ready to defend their reputations. Hormel has retained a law firm to represent its interests in the case, so it's likely to fight the allegations as long as possible. The plaintiffs' firm seems ready to do extended battle with the pork industry and isn't reticent about discussing its rationale.
Regardless of the outcome, it doesn't help any business to keep being sued. And it can't help a company's reputation — or its bottom line — to have to explain what's happening and try to reassure shareholders and customers that it didn't do anything wrong. Even if the pork producers win this case, a bit of lingering doubt could remain about whether there was any merit to the allegations.