Chicken Farmers Fail to Show Competitive Injury

(CN) - Chicken farmers can't sue a producer under the Packers and Stockyard Act, unless they can prove that an allegedly biased contract with another grower stifled competition, the full 5th Circuit ruled in a 10-6 decision.

The ruling stems from a case in which three farmers who raise chicks for poultry producer Pilgrim's Pride sued the company under the Act. They essentially lease the chicks, feed and supplies from Pilgrim's Pride until the chickens are mature. Their pay is determined by a system that compares their production with the output of other growers in the same "tournament" system.

The growers claimed that at least one other grower operates on a different system, where he buys the chicks, feed and supplies from the processor and then sells them back to Pilgrim's Pride, resulting in higher profits.

The growers said this violated the Act, because the rival's contract is preferential, deceptive and unfair.

Pilgrim's Pride asked the court to dismiss the case, saying the growers had to show proof of competitive injury to establish standing.

The district court allowed the case to continue, but asked the 5th Circuit in New Orleans to decide "whether a plaintiff must prove an adverse effect on competition in order to prevail" under the Act.

A three-judge panel ruled that such a showing was not necessary, a decision that the court agreed to rehear en banc.

The majority reversed, emphasizing that the Act had been passed in 1921 to keep the meatpacking industry from being dominated by five companies. Based on this antitrust history, "only those practices that will likely affect competition adversely violate the Act," Judge Thomas Reavley held.

"[We] find too that a failure to include the likelihood of an anticompetitive effect as a factor actually goes against the meaning of the statute," he added.

In a concurring opinion, Chief Judge Edith Jones agreed that "the immediate purpose of the [Act] was to prevent the abuse of monopoly and restraint of trade by the 'Big Five' meatpackers."

Judge Emilio Garza dissented, saying the language in the Act does not clearly require a showing of competitive injury.

Judges E. Grady Jolly, Rhesa Barksdale, James Dennis, Edward Prado, Jennifer Walker Elrod and Catharina Haynes joined the dissenting opinion.

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