- Pilgrim’s Pride announced that it has agreed to a plea deal with the Department of Justice's antitrust division in the price-fixing investigation of the sale of broiler chicken products.
- The company agreed to pay a $110.5 million fine and said that it is specifically for "restraint of competition," which affected three contracts for one customer in the U.S. The company said the agreement means that the DOJ won’t bring any further charges against Pilgrim’s, and the department isn’t recommending any probationary period for the company.
- If the plea deal is approved by U.S. District Court of Colorado, Pilgrim's will be the first company to admit to wrongdoing in court to the allegations of price-fixing chicken products in this recent probe.
Pilgrim's Pride, the second-biggest chicken producer in the U.S., is accepting a plea deal in the price-fixing scandal that has embroiled the chicken industry for about seven years. The company has largely been in the center of the investigation into the collusion, but is quickly taking steps to wash its hands of the probe by cleaning house of executives involved and now admitting guilt.
In the last few months, Pilgrim's previous two CEOs were indicted on price-fixing charges. In June, Pilgrim's CEO at the time, Jayson Penn, along with other executives at Pilgrim's and Claxton Poultry Farms, were indicted for conspiracy to fix prices for chickens sold to grocers and restaurants from 2012 to 2017. Then earlier this month, Bill Lovette, Penn's predecessor as CEO of Pilgrim's, was also indicted along with other officials at various companies, bringing the total number of people charged in the probe to 10 and expanding the accusations to as recent as early last year. The indictment detailed messages between the executives to support the charges of corroborating on prices.
Penn, who has pleaded not guilty to the charges, took a paid leave of absence to focus on his defense after he was charged in June. Then last month, Pilgrim's Pride permanently replaced him with the company’s CFO Fabio Sandri. In the release announcing the executive change, the company's only mention of Penn was to say that he was "no longer with the company."
After agreeing to the plea deal, Sandri said in a statement that the company is "encouraged that today’s agreement concludes the Antitrust Division’s investigation into Pilgrim's, providing certainty regarding this matter."
The DOJ's investigation into the chicken industry was originally disclosed last year when it intervened in a price-fixing lawsuit filed in 2016 that accused chicken producers, including Pilgrim's, Perdue Farms, Tyson Foods and Sanderson Farms, of conspiring to inflate prices. The Wall Street Journal reported that the DOJ then subpoenaed Tyson, Pilgrim’s, Sanderson and other poultry producers. In June, Tyson, the largest chicken producer in the U.S., said it was cooperating with the investigation under the DOJ's Corporate Leniency Program, which allows a company that comes forward to avoid criminal charges.
Pilgrim's, which is majority owned by JBS, said in the release that it expects to record the fine as a miscellaneous expense in its financial statements in Q3 of 2020. A $110.5 million fine is a sizable hit to the company at a time when the coronavirus pandemic has hurt earnings for many meat companies, including Pilgrim's. Similar to other chicken and beef producers, Pilgrim's saw outbreaks at its facilities, prompting protests to close and now at least one family of an employee who died from coronavirus is suing the company.
According to court documents filed Tuesday, Pilgrim’s was charged with price fixing in federal court in Colorado. The company is expected to appear in court Thursday, The Wall Street Journal reported. This plea deal continues DOJ's crackdown on antitrust actions in the food industry. In a recent price-fixing probe into the tuna industry, both StarKist and Bumble Bee pleaded guilty, with Bumble Bee sentenced to pay a $25 million fine, while StarKist agreed to a $100 million fine.
Pilgrim's plea deal could be bad news for the executives indicted on these charges and the other companies who are being investigated. With Tyson cooperating and Pilgrim's plea deal, it may push others involved to do the same.
Disclosure: Former Pilgrim's Pride CEO Bill Lovette is now executive chairman of Sauer Brands, as well as an advisor at Falfurrias Capital Partners. Falfurrias, the majority owner of Food Dive's publisher, Industry Dive, is also invested in Sauer Brands. Falfurrias has no influence over Food Dive's coverage.