Cargill, Sanderson and Wayne Farms to pay $85M to settle DOJ wage suit

Dive Brief:

• The Department of Justice filed an antitrust lawsuit against poultry processors Cargill, Sanderson Farms and Wayne Farms for engaging in a years-long conspiracy to exchange information about wages and benefits for workers at poultry processing plants, ultimately allowing them to suppress their pay.  
• The DOJ filed proposed consent decrees with the companies, which would bar them from sharing “competitively sensitive information” about their employees’ pay. These consent decrees, pending court approval, would also require the companies to pay a collective restitution fee of $84.8 million to poultry plant workers harmed by the conspiracy.
• The poultry processors had discussed making concessions on employee and farmer payment structures with the DOJ ahead of the close of Cargill and Continental Grain’s $4.5 billion purchase of Sanderson Farms, The Wall Street Journal previously reported. 

Dive Insight:

The announcement of antitrust action against the three poultry giants lets the DOJ make a statement about targeting anticompetitive behavior in the poultry space even as it allowed the merger of Continental Grain’s Wayne Farms and Sanderson to close.

In its announcement, the DOJ said the lawsuit is “part of a broader investigation into anticompetitive labor market abuses in the poultry processing industry.” The Wall Street Journal first reported on details of the civil probe in March.

By exchanging worker pay information, the department said, the poultry processors violated the Sherman Act, which Congress passed in 1890 in order to preserve “free and unfettered competition as the rule of trade.”

“Through a brazen scheme to exchange wage and benefit information, these poultry processors stifled competition and harmed a generation of plant workers who face demanding and sometimes dangerous conditions to earn a living,” said Doha Mekki, the principal deputy assistant attorney general in the DOJ’s antitrust division, in a statement.

Through the agreement, Sanderson Farms will pay $38.3 million in restitution, Wayne Farms $31.5 million and Cargill will pay $15 million.

The government also named data consulting firm Webber, Meng, Sahl and Co. as a defendant, accusing it of providing surveys to the meat processors that enabled them to share worker pay information.

Sanderson and Wayne Farms were also accused by the DOJ of violating the Packers and Stockyards Act by using a “tournament system” to determine a base pay for their chicken growers based on how they perform compared to other growers. However, the processors controlled all of the inputs, such as the chicks and poultry feed, which ultimately determined the growers’ success, the suit alleges. The companies did not share information to help the growers weigh their financial risk, the DOJ charged.

As part of the proposed consent decrees, Sanderson and Wayne would be required to disclose transparency rules to growers. The poultry processors would also be prohibited from reducing growers’ base payments based on relative performance, and retaliating against growers who report antitrust concerns to the government.

A court-appointed monitor would make sure the processors are sticking to the terms of the consent decrees.

According to John Lopatka, a professor of antitrust law at Penn State Law, while the consent decrees were an agreement made between the government and the meat processors to allow the merger to proceed, the DOJ still has an interest in challenging their practices.

“The consent decree is designed to address what DOJ believe to be anticompetitive practices uncovered during investigation of the proposed merger,” Lopatka said in an email. “The DOJ likely would have been concerned about the grower-compensation practices of these companies even if they had not planned to merge.”

In a statement, a spokesperson for the newly formed Wayne-Sanderson Farms said it is proud of its track record with its workers and growers, and that the agreement with the DOJ is evidence of its commitment to them.

“As we proceed with the integration of Wayne-Sanderson Farms, we look forward to investing in our communities, employees and grower partners to ensure there continues to be a strong and competitive American food supply,” Wayne-Sanderson said.

Cargill spokesperson Daniel Sullivan denied any wrongdoing on behalf of the company in a separate statement, saying that it has committed to supporting growers through funding enhancements to their operations and a profit-sharing program for growers and employees.

“The merits of this deal outweigh the potential costs of prolonged litigation and any further distraction to our collective efforts to feed communities across the U.S. which is why we’ve agreed to a $15 million settlement of a lawsuit which alleges wage suppression by U.S. turkey and poultry producers to help facilitate its forward movement,” Sullivan said.