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Feds seek $84 million in restitution from Big Poultry

A handful of leading U.S. poultry companies face antitrust charges, with the government saying that their anticompetitive practices put chicken plant workers at a disadvantage when it comes to negotiating pay. 

WASHINGTON (CN) — Flagging what it calls at least 20 years of competition-stifling practices that harmed American poultry processing plant workers, the Justice Department slapped several leading U.S. chicken producers with an antitrust suit Monday.

Cargill, Sanderson Farms and Wayne Farms are named as defendants to the 79-page federal suit filed in Baltimore, as is the data consulting firm Weber, Meng, Sahl and Co. Prosecutors say the parties conspired to set base wages and benefit levels for workers for decades. 

Such action has “harmed a generation of plant workers who face demanding and sometimes dangerous conditions to earn a living," Principal Deputy Assistant Attorney General Doha Mekki of the Justice Department’s Antitrust Division said in a press release announcing the suit Monday.

A spokesperson for Cargill said Monday that the company is disappointed with the assertions filed Monday but that they agreed to the $15 million settlement after being cooperative throughout the investigation process and.

“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, ”the spokesperson said, maintaining that Cargill conducts business in a 'legal, ethical and responsible manner.”

“We believe the alleged claims lack merit and do not show a conspiracy to fix wages, nor do they show any improper actions by Cargill or its employees,” the emailed statement continued. “The settlement is not an admission of guilt and Cargill denies any wrongdoing. The company sets compensation independently to ensure that it pays fair and competitive wages to employees in each of our processing facilities.”

The spokesperson added Monday that the creation of Wayne-Sanderson Farms will benefit growers and employees as it has committed to increasing production capacity and providing more. “It has also committed to stronger grower support including longer contracts, true base pay, assisting with access to capital to enhance their operations, and a profit-sharing program for growers and employees,” the spokesperson added.

Poultry processing plant workers are involved in the catching, slaughtering, gutting, cleaning, deboning, sectioning, and packing of chickens and turkeys — America’s top-selling meat — before they reach store shelves.

“Today’s action puts companies and individuals on notice: the Antitrust Division will use all of its available legal authorities to address anticompetitive conduct that harms consumers, workers, farmers and other American producers,” Mekki said.

Emphasizing that poultry processing can be physically and mentally draining, the suit notes that a "live hanger" in a poultry processing plant “grabs, lifts, and hangs for slaughter about 30 living birds per minute, as each bird claws, bites, and flaps its wings,” risking injuries from exhaustion to mutilation for a paycheck.

The companies involved in the suit, Wayne Farms and Sanderson farms, are both subsidiaries of Cargill and Continental Grain. Cargill finalized its acquisition of Sanderson Farms only days earlier for $203 per share and plans to combine the company’s operations with Wayne Farms’ — their combined processing plants span Alabama, Arkansas, Georgia, Louisiana, Mississippi, North Carolina and Texas.

“Their choice to collaborate on compensation decisions and to exchange information, even though they had buyer market power, disrupted the competitive mechanism for negotiating and setting wages and benefits for poultry processing plant workers and harmed the competitive process,” the complaint states.

The companies’ information exchanges took place over decades “in large groups, small groups, and one-to-one,” according to the suit, which notes that the three poultry processors involved employ more than 90% of all chicken processing plant workers in the country.

Sanderson and are accused of deceptive practices under the “tournament system,” which allows chicken processors to punish growers if they don’t perform at the same level as their peers, although the processors contractually provide the chicks and poultry feed that determines the growers’ success.

“In allocating this financial risk to their chicken growers, Sanderson Farms and Wayne Farms failed to provide information that would have allowed their growers to evaluate and manage their financial risk,” the Justice Department explained Monday.

Alongside the lawsuit, the Justice Department filed a proposed consent decree that demands a cumulative $84.8 million in restitution for the harmed workers from the poultry processing companies. The proposition asks $15 million from Cargill Meat Solutions, $38.3 million from Sanderson Farms and $31.5 million from Wayne Farms. It would also lay ground rules to prevent the companies from sharing sensitive information in the future and impose upon them a court-appointed compliance monitor for the next decade to ensure they follow all antitrust laws. 

The Justice Department’s Antitrust Division would also be able “to inspect the processors’ facilities and interview their employees to ensure compliance with the consent decree” under the agreement.

Sanderson Farms and Wayne Farms would be blocked as part of the settlement from using the tournament system to penalize chicken growers for relative performance, instead allowing them to offer growers bonuses and incentives. What’s more, it would increase transparency in growers' contracts and prevent processors from retaliating against growers who raise antitrust concerns.

Prosecutors reached a separate consent decree Monday with the data firm Weber, Meng, Sahl and Co., which has been requested to cease sharing competitively sensitive information among poultry packaging companies, collected via surveys the company sent out. 

“From at least 2000 to 2020, a group of poultry processors, including all processor conspirators, agreed to participate in an exchange of compensation information facilitated by defendant WMS,” the complaint says, which also named one of the proprietors, Jonathan Meng, individually for willingly participating in the companies’ antitrust violations.

“Meng personally administered and supervised WMS’s surveys, which disseminated the Processor Conspirators’ current and future, disaggregated, and identifiable information about compensation for poultry processing plant workers,” the complaint states.

Cargill, Sanderson, and Wayne are noted to have participated in the illegal surveying from 2000-2011 while Cargill and Wayne participated from 2012 to 2019, according to the suit.

Per the consent decree, the firm would also be subject to various business records inspections by the Justice Department for 10 years.

The proposed consent decrees will be published in the federal register and subject to a 60-day review period. 

This suit is part of a broader effort, accord to the government of cracking down on anticompetitive efforts in the poultry industry.

The companies named did not immediately respond to a request for comment Monday.

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