US food distributors join lawsuit against poultry suppliers

Top food distributors Sysco and US Foods Holding have joined other poultry buyers in separate legal complaints, blaming chicken processors for conspiring to inflate prices.

Seventeen chicken producers including Tyson Foods, Pilgrim’s Pride Corp, Sanderson Farms and Perdue Farms were accused of breaking anti-trust regulations over pricing, production, and compensation, an Illinois federal court heard on 30 January. The companies in question control around 90% of the US wholesale chicken market, with 40% controlled by Tyson and Pilgrim’s alone.

Large meat processors like Tyson have dominated the US chicken industry, and in recent years have come under increased scrutiny by farmers and customers over their alleged evasion of US competition laws.

“This is a case about how a group of America’s chicken producers reached illegal agreements and restrained trade,” the collective lawsuit read.

Both Tyson and Pilgrim’s Pride denied the allegations on Wednesday, while Sanderson said it is prepared to defend itself against the claims. Perdue Farms refused to comment on the matter.

Tyson spokesman Gary Mickelson said in response: “Follow-on complaints like these are common in antitrust litigation. Such complaints do not change our position that the claims are unfounded.”

Pilgrim’s Pride released a statement reading: “Pilgrim’s believes the case is completely without merit. We look forward to defending our interests through the appropriate legal process.”

According to the lawsuit, processors collectively limited the number of breeder birds that would create flocks for slaughter and consumption.

The lawsuit also accused data provider Agri Stats of conspiring with chicken processors by distributing private information that gave Tyson and others insider knowledge into each other’s supplies. Agri Stats also declined to comment at this time.

Mizuho Securities Investments analyst Jeremy Scott believes the legal complaint will fall through, in a note he commented that: “We expect the industry to fight the allegations and come out successful.”

As a result of the lawsuit, share prices for the meat processors involved decreased; Tyson by 3.6%, Sanderson by 3.8% and Pilgrim’s Pride  by 6% . Though seeing as the processors last year recorded some of the highest profits in over a decade due to a decrease in the global price of bird feed, they are unlikely to be in serious financial trouble at this time.

In 2016, poultry buyers accused Tyson and its competitors of colluding for the past eight years to restrict output and increase prices. Winn-Dixie sued other chicken processors in relation to price fixing earlier in January 2018.