UPDATE: Jan. 12, 2021: Tyson Foods separately struck an agreement to settle with the group of chicken buyers to settle price-fixing claims, but did not disclose the amount, The Wall Street Journal reported. Tyson reportedly did not admit wrongdoing in the settlement, which is still subject to court approval.
- Pilgrim’s Pride agreed to pay $75 million to chicken buyers to settle price-fixing claims, according to an 8-K filing with the U.S. Securities and Exchange Commission. The amount will be reflected in Pilgrim's upcoming Q4 earnings.
- The chicken company, which is majority owned by JBS SA, said in a release that Pilgrim’s does not admit any wrongdoing for the claims in the civil litigation, but "it believes a settlement was in the best interests of the Company and its shareholders."
- This settlement comes just months after Pilgrim's agreed to pay a $110.5 million fine as part of a plea deal with the U.S. Department of Justice's antitrust division in the price-fixing investigation.
Pilgrim's has found itself at the center of price-fixing accusations in the chicken industry for years, and now it is paying nearly $200 million in settlements and fines as a result. Although it still needs court approval, this $75 million civil settlement would be the largest so far in these accusations that have embroiled the entire industry, according to The Wall Street Journal.
Restaurant chains, including Chik-fil-A, as well as grocery stores, CPG companies and food distributors have filed civil suits making antitrust accusations against chicken processors in recent years. This case doesn't settle all complaints against Pilgrim's, since there are still pending lawsuits filed by supermarket and restaurant chains, according to the release. So although this agreement would settle the issue with some chicken buyers, there may be more to come. In previous settlements, The Journal reported, smaller chicken companies agreed to collectively pay about $13 million.
The industrywide price-fixing accusations were originally unveiled in 2019. The U.S. Justice Department disclosed its investigation when it intervened in a 2016 price-fixing lawsuit that accused chicken producers — including Pilgrim's, Perdue Farms, Tyson Foods and Sanderson Farms — of conspiring to inflate prices. The Journal reported the DOJ then subpoenaed Tyson, Pilgrim’s, Sanderson and other poultry producers. Tyson later said it was cooperating with the investigation under the DOJ's Corporate Leniency Program, which allowed it to come forward and avoid criminal charges.
Pilgrim's, the second-biggest chicken producer in the U.S., is working hard to move forward from these price-fixing accusations. It has consistently made headlines pertaining to the accusations during the last year.
The company's previous two CEOs were among 10 poultry producer officials indicted on price-fixing charges last year. Then-CEO Jayson Penn was indicted in June. He pleaded not guilty to the charges and took a paid leave of absence to focus on his defense. In September, Pilgrim's permanently replaced him with the company’s CFO Fabio Sandri.
At a time when the pandemic is already causing financial hardship among meat companies, which have spent hundreds of millions on precautions in plants and are facing lawsuits for wrongful deaths among its workers, hefty fines and settlements are not ideal. But paying settlements and fines to rid a company of a probe that has continued to haunt it could be a strategic move for the future without forcing anyone to admit wrongdoing.
Antitrust accusations in the food industry have escalated in recent years, and other chicken processors may be likely to offer settlements. But these accusations aren't just in the chicken industry. JBS also recently reached a settlement agreement in a lawsuit accusing the company of fixing pork prices for direct purchasers through conspiring with other meat processors.