Sysco and US Foods allege chicken producers of price fixing
- The country's two largest food distributors filed separate lawsuits against powerhouse chicken companies Tyson Foods, Pilgrim's Pride Corp, and Sanderson Farms, among others, accusing them of price fixing, according to the Wall Street Journal.
- Sysco Corp. and US Foods represent 25% of the U.S. food distribution business. Both complaints were filed in Illinois on Tuesday, and accuse the big chicken processors of a years-long conspiracy to inflate prices.
- Representatives for Tyson and Sanderson denied the accusations, and Pilgrim's had no immediate comment.
The dust has hardly settled over the Georgia Dock price fixing scandal, but the accusations of manipulating wholesale chicken prices haven't stopped. These new lawsuits mean the poultry industry could be in for a long legal battle that could leave their brands and industry standing in tatters.
Sysco and US Foods are alleging that they overpaid for chicken for a minimum of eight years, starting in 2008. The lawsuits purports that these large chicken companies kept tabs on their rivals' supplies through an industry information service called Agri Stats Inc. By doing so, competitors could curb their own flocks of breeding birds, reducing output, and manipulating prices.
The lawsuits also allege that producers manipulated the Georgia Dock index, before it was terminated last year. They are the latest in a string of legal actions against U.S. chicken companies over the last year and a half. However, Sysco and US Foods are the biggest companies to take on these chicken producing behemoths to date.
Maplevale Farms filed suit against 14 poultry businesses — including Tyson, Perdue Farms, Foster Farms, Sanderson Farms and Koch Foods — in September 2016, accusing them of conspiring for years to artificially raise chicken prices by sharing supply information via the same data company mentioned Tuesday, Agri-Stats. Tyson was later cleared of wrong doing.
Now, these new accusations by the country's two largest food distributors, have the potential to decimate the images of the chicken producers accused in their lawsuits. Each company could be faced with spending millions to defend themselves in a public relations nightmare.
Even if the chicken companies come out on top, they're still losing financially. Legal fees could chip away at company profits. In addition, stock prices would inevitably take a hit, costing investors and shareholding a significant chunk of change. Even in early trading Wednesday, shares of Tyson were down 3.2%, Pilgrim's shares took a 2.9% hit, and Sanderson fell 3.4%.
This case may be a tough one to win. Sysco and US Foods will have to prove willful manipulation of prices, and this won't be the first time many of these companies will have to answer pointed questions about their use of Agri-Stats. That said, the food distributors wouldn't incur massive legal costs if they didn't think they had a case. In addition, they’ll have deep pockets to fund a potentially lengthy legal battle.
- The Wall Street Journal Food Distributors Sue Tyson, Pilgrim’s Pride and Others Alleging Collusion on Chicken Prices