MEDFORD, Ore. (CN) – For 27 years, Frank Dulcich and his Pacific Seafood Group have hurt independent fishermen to the tune of hundreds of millions of dollars by using aggressive tactics to eliminate competition in the four most lucrative West Coast seafood markets: Dungeness crab, groundfish, Pacific whiting and Pacific coldwater shrimp, according to a federal antitrust class action.
Pacific Seafood and its “54-entity network of commercial enterprises” have amassed a 50 to 70 percent market share in each of the four seafood markets, from Washington to California, according to named plaintiffs Lloyd Whaley and his son, Todd.
The Whaleys say Pacific Seafood dominates the Oregon seafood market, which is restricted by limited supply, intensive regulation, a finite number of suitable waterfront locations, the huge upfront investment needed to enter the seafood processing industry, and Pacific Seafood’s exclusionary behavior.
The Whaleys say Pacific Seafood aggressively bought up competitors to create a vertically integrated operation, narrowing the seafood processing market from 50 Oregon plants to 32 and forcing fishermen to accept its dominance.
In many cases, Pacific Seafood bought the plants at below market value by making loans to seafood processors with the requirement that the processor deliver all of its product to Pacific Seafood for resale, according to the complaint. Then Pacific Seafood Group allegedly “trump(s) up a quality claim, imposes(s) severe financial hardship on the processor, and then negotiate(s) to acquire it at a discounted price.”
For those fishermen it does not control, Pacific Seafood has conspired to fix prices by meeting with competitors about pricing before the legally authorized meeting to establish a season starting price, the Whaleys say.
They claim the defendants hold down prices by falsely telling independent fishermen that its own fleet uses the same pricing, though it actually “uses a combination of preferential quotas, delivery dates, benefits and a year-end profit sharing contribution” to pay higher per-pound prices to its own crews.
Fishermen in its own fleet who complain have been told to “keep fishing cheap. We’ll make it up to you at the end of the year in profit sharing,” according to the complaint.
Fishermen who refuse to go along with prices dictated by Pacific Seafood often become the target of a campaign of harassment, the complaint states.
Pacific Seafood “dumps product at below cost prices into sales channels known to be important to the deviating competitor,” while Dulcich leaves “expletive-filled messages” with competitors, protesting their higher prices and threatening to “put you out of business in a heartbeat,” Whaley says.
After fixing the prices per pound, Pacific Seafood manipulates the scales at its processing plants, cheating fishermen who have nowhere else to go because of Pacific Seafood’s market dominance, the lawsuit states. This behavior earned Pacific Seafood entity Pacific Surimi an $800,000 fine after it pleaded no-contest to first degree theft in 2002, according to the complaint.
Pacific Seafood also destroyed the market power of the Fishermen’s Marketing Association, the Whaleys say. Pacific Seafood allegedly “provoked a strike” by dropping the price on petrale sole “without notice and while the fleet was at sea” and refused to negotiate a fair price for groundfish before the 2007 season began.
When the association went on strike, Pacific Seafood used its own fleet until six weeks of no income forced the association to give up, according to the complaint, then Pacific Seafood announced that it would no longer honor market agreements with the association.
The lawsuit claims that Pacific Seafood uses a variety of other “miscellaneous dirty tricks.”
The Whaleys seek an injunction for violations of the Sherman Act, and treble damages they estimate at $394 million to $520 million.
They are represented by Michael Haglund with Haglund Kelley Horngren of Portland.