Top Chicken Producers Must Face Price-Fixing Claims

CHICAGO (CN) – A federal judge declined Monday to dismiss an antitrust lawsuit against Koch Foods, Tyson, Perdue and others claiming the chicken producers have conspired for years to drive up the price of chicken nearly 50 percent.

Maplevale Farms, a food distributor, filed an antitrust class action last year claiming that Koch Foods, Tyson, Perdue and other chicken producers have worked together for eight years to reduce chicken production, pushing up the price of broiler chickens by nearly 50 percent while feed prices have simultaneously dropped more than 20 percent.

One of the primary forms of production cuts from 2008 to 2013 was to slaughter breeder flocks, a practice Maplevale calls “historically unprecedented.”

Historically, producers destroyed excess eggs when they wanted to limit supply, but from 2008 to 2013, the producers allegedly slaughtered 10 million breeder chickens, thereby permanently hampering their ability to quickly meet increased demand.

Broilers account for 98 percent of all chicken meat sold in the United States, and the defendant companies control 90 percent of the market, Maplevale says.

“[B]eginning at least as early as January 2008 defendants conspired and combined to fix, raise, maintain, and stabilize the price of broilers,” the 113-page lawsuit says. “The principal (but not exclusive) method by which defendants implemented and executed their conspiracy was by coordinating their output and limiting production with the intent and expected result of increasing prices of broilers in the United States.” (Parentheses in original.)

U.S. District Judge Thomas Durkin denied the chicken producers’ motion to dismiss the claims against them Monday.

“Both plaintiffs’ allegation of a conspiracy, and defendants’ innocent explanations, could be described as plausible,” Durkin wrote. “By asking the court to choose its innocent explanations over plaintiffs’ claims, defendants are asking the court to undertake a weighing of evidence that is not appropriate at the pleading stage, and must be rejected. Thus, defendants’ alternative explanations do not undermine the plausibility of plaintiffs’ conspiracy claims.”

The judge cited Maplevale’s evidence that Koch Foods, Tyson, Perdue and others engaged in production cuts at the same time, even if they were not absolutely uniform.

Further, data from the Department of Agriculture shows broiler production steadily increasing from 2000 until 2008, when production took a plunge. Production then remained steady until 2012, when it began to increase again.

“The fact that defendants are alleged to have taken unprecedented actions in order to cut production twice within a four year period, plausibly indicates that the conspiracy was continuing through 2012, and the momentary production increase was an agreed pause in the production cuts to take full advantage of higher prices,” Durkin said.

Poultry breeders faced a similar antitrust complaint in the 1970s, when major producers set production levels and prices for broilers in a weekly conference call.

But nowadays, modern technology makes price-fixing possible without phone calls, according to the complaint, which says that data sharing via Agri Stats allows the producers to share their confidential production and pricing information.

Durkin agreed with Maplevale that “the information provided by Agri Stats simply facilitated the conspiracy. It was a tool defendants used to help implement their conspiracy. Agri Stats does not have to be a co-conspirator or a secret to play this alleged role, [possibly] unwittingly.”

%d bloggers like this: