Whether or not there’s been “collusion” in the White House, a Walmart law suit contends there certainly has been amongst a sizable number of chicken producers in America.
America’s largest retail grocer has filed an antitrust suit in federal court against various U.S. poultry companies alleging a conspiracy to inflate chicken prices, Dairy Herd Management has reported.
Filed in the U.S. District Court for the Western District of Arkansas, the suit alleges that more than a dozen major chicken companies “reached illegal agreements and restrained trade.”
The suit alleges that as early as 2008 through at least 2016, “Defendants’ restraint of trade was implemented primarily through two mechanisms. The first focused on coordinating their output and reducing the supply of broiler chickens into the market. The second focused on (among other things) manipulating price indices with respect to wholesale chicken prices.”
Companies named as defendants include: Pilgrim’s Pride, Koch Foods, JCG Foods, Koch Meat Co., various Sanderson Farms units, House of Raeford Farms, MAR- JAC Poultry, Perdue Farms and Perdue Foods, Wayne Farms, various O.K. Foods units, Peco Foods, Harrison Poultry, Foster Farms, Claxton Poultry Farms, various Mountaire Farms units Amick Farms, various Case Foods units and Agri Stats Inc.
Noticeable by their absence in the suit are Tyson Foods, Inc., George’s Inc., and Simmons Foods, Inc. All three companies were named as defendants in similar price fixing cases in Illinois.
An annual SEC filing from November 2018 indicates 17.3% of Tyson’s consolidated sales in 2018 were to Walmart.
Walmart’s lawsuit alleges, “the broiler producers’ coordinated output restriction scheme was successfully facilitated by, monitored and policed using reports purchased, at significant cost, from Defendant Agri Stats, Inc. Agri Stats collects detailed, proprietary data from all Defendants and others, including housing used, breed of chicks, average size, production, and breeder flock levels.”
Several lawsuits have been filed since 2016 alleging price-fixing by poultry companies. One defendant to an earlier lawsuit, Fieldale Farms, “agreed to pay $2.25 million to settle claims by a putative class of direct purchasers alleging that it participated in this conspiracy.” As a result, claims against Fieldale Farms were released.
So far, none of these lawsuits have been resolved, making it difficult to know what impact they may have on the industry. Conspiratorial activity and price fixing can be incredibly difficult to prove, and in today’s digital age, companies can communicate without a paper trail or sufficient evidence that they agreed to adjust their supplies.
While some food retailers are duking it out in the courtroom, Costco has taken matters into its own hands, GroceryDive reports. That retailer is building its own chicken supply chain, “which will provide it complete control and the ability to provide consumers with a high level of transparency in its production practices,” the website says.
The challenge with bringing poultry production in-house, however, means Costco must now run an entire agribusiness within its retail business.
Their new supply system is projected to save Costco 35 cents per bird, which adds up to $25 million annually. Considering that U.S. consumers are scarfing down nearly twice as much chicken as beef and pork, saving excess costs on poultry is a top priority for retailers.
While hardly novel, this kind of industry collusion is, well, despicable. It’s not as if any stage of the chicken production process – and various steps are involved – isn’t turning a reasonable profit.
In Virginia – as no doubt is the case elsewhere – Perdue uses small, family-operated farms for hen-raising. Some of those farmers are Amish or Mennonite, operating in fairly remote rural areas where property prices are, pardon the pun, dirt cheap.
So, in at least a few known instances, are their power costs: Perdue farmers in some southern Virginia counties are serviced by an electric cooperative run, with prices approved, by its members.
That entity’s overheads are, like other utility’s, proportionate to its customer base – meaning, in this instance, ‘modest’ compared to its larger supplier cousins.
Over the years, a few, scattered industry reports have noted that farmer contracts such as Perdue – a quite large corporation – are quick to squeeze their farmers and slow to share with them if profits turn up.
Walmart, in going after Perdue and its giant compatriots, is looking out for the little guy: In part due to increasing price pressure from the Aldis and Lidls of this world, Walmart is very consciously curbing price increases and cutting consumer costs as often as it can.
Its attack on ‘Big Chicken’ (don’t you love that epithet!!) is a big ‘peck’ in that direction!