- A federal judge dismissed a class action lawsuit that accused several pork producers — including Hormel, JBS USA, Smithfield and Tyson, as well as agricultural research company Agri Stats — of working together to raise prices.
- In his opinion filed on Thursday, District Judge John Tunheim said the consumers who filed the suit provided insufficient evidence of collusion to limit the supply of pork starting in 2009. While supply decreased industry-wide and prices did go up, the evidence in the case does not clearly indicate the producers were working together. The judge wrote the evidence is "sparse and conclusory."
- The consumers who filed the lawsuit in Minnesota District Court in 2018 have three months to file an amended complaint to keep the litigation going.
If this opinion becomes the final word on this case, it represents a win for these top pork producers — as well as producers in the beef and chicken industries also facing similar price fixing litigation. While collusion may have happened, the evidence on its face does not prove it, the judge wrote.
In the initial lawsuit, the defendants say the price-fixing scheme began in 2009 when pork prices began to rise, increasing more than 50% between 2009 and 2015. The reason, they claimed, 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.
In the judge's opinion, he pointed out that Agri Stats published industry-wide data that was not specific to any producer. While these producers represent 80% of the industry, he wrote, there is no way to prove this data helped them take action together.
There also were not many direct statements about producers cutting pork production. According to the opinion, only Smithfield said it was reducing herds and said other companies should do the same. Other statements brought in as evidence indicated companies were looking for opportunities to cut the size of their herds, but were mostly noting that production on the whole was declining, the opinion states.
"While it is entirely possible that each of the accused Defendants engaged in production cuts as alleged, '[t]he plausibility standard... asks for more than a sheer possibility that a defendant has acted unlawfully,' " the opinion states, citing the case law. "... Without more specific facts, Plaintiffs’ allegations that the Defendants engaged in production cuts are nothing more than bare assertions."
Establishing a higher standard for collusion could end some of the other pending price fixing litigation, as well as serve as a protection against class action lawsuits in the future.
Similar price fixing lawsuits have been filed. Tyson, which also produces chicken, was targeted with price fixing litigation in 2016. That lawsuit claimed Tyson and 13 other poultry businesses conspired for years to raise prices by sharing data on Agri Stats. Tyson was investigated by the Securities and Exchanges Commission, which decided in 2017 not to take any action on the claims. In June, the U.S. Justice Department intervened in this case, and Tyson said this week it had been subpoenaed for additional information.
It will be interesting to see what happens next, since some of the facts of the pork and chicken cases are similar. However, the chicken litigation also brings in the now defunct Georgia Dock price index, which was developed by producers and criticized as a means to inflate prices — and retired amid protests.
However, the opinion makes one thing clear: Collusion and parallel conduct to fix prices must be clear cut. This may open the door to more backroom dealing, since there are no records of what happens behind closed doors. But it may also protect providers and give them the freedom to react to larger economic conditions by raising prices or culling supply without fear of litigation.