Hormel, Tyson and Smithfield among those accused in pork price-fixing scheme

Source: fooddive.com

Dive Brief:

  • Tyson Foods, JBS USA, Smithfield Foods, Hormel Foods and other pork processors were accused by food distributor Sysco in a “classic … price fixing scheme” when they shared sensitive data about their production levels in an effort to increase pork prices. The suit, which said the practice went back to at least 2009, included the exchange by the defendants of price, sales volume and demand information through a database known as Agri Stats.
  • Sysco said their actions lead to pork price competition that has been “restrained, suppressed, and/or eliminated in the United States” and caused the food distributor to pay more than it otherwise would have for the meat. The companies control over 80% of the U.S. wholesale pork market, the suit said.
  • The complaint mirrors a prior class-action suit filed by distributors and foodservice operators that accused pork producers of manipulating prices. In December, court documents revealed JBS will pay $24.5 million to compensate direct purchasers for damages in the price-fixing suit. JBS also will cooperate against other large pork processors, such as Tyson and Hormel.

Dive Insight:

Antitrust litigation in the food industry has escalated in recent years, prompting some executives to receive prison time after being found guilty of conspiring to fix prices. Companies also have incurred large fines

In recent years, the U.S. Department of Justice, the USDA and attorneys representing groups of consumers or business customers also have brought cases against beefdairytuna and chicken producers. In 2018, Sysco and fellow food distributor US Foods sued companies including Tyson Foods, Pilgrim’s Pride and Sanderson Farms for price-fixing poultry.

The Sysco pork lawsuit marks the latest step in a drawn out process the food producers no doubt are eager to put behind them. Tyson said it had “no comment to provide” on the Sysco suit while Hormel, JBS and Smithfield did not respond to a request for comment.

While JBS reached a settlement that has tentatively been approved, it is unlikely the last chapter in this saga. Bloomberg Law noted Seaboard also faces related allegations in Delaware, where an investor sued it this past December to find out more about its role in the price-fixing scheme.

Sysco’s suit will likely proceed and it’s possible other cases will be filed going forward. The food distributor noted in its suit that in 2016, for example, total pork sales in the U.S. totaled $18.9 billion. That same year, Smithfield had fresh and packaged pork sales of $8.7 billion, and Tyson recorded $4.9 billion in sales for the meat, the suit said. This enabled the companies to control a sizable portion of the market, giving them the ability to stabilize and raise margins, which had “an enormous impact on [their] profits” while resulting in “substantial damages” against Sysco and others.

For years, the meat and poultry industries, which are controlled by a few large players, have come under fire by critics for engaging in anticompetitive behavior. In 2020, the Justice Department subpoenaed major beef processors to seek information on their buying practices. Last month, Tyson and Pilgrim’s Pride separately reached deals with poultry buyers to settle price-fixing claims.

While it’s still early in some of these cases, it’s evident that meat and poultry companies are more likely to want to settle rather than deal with the expense and time of going through a trial.