Lawsuits Allege Price-Fixing by Beef Companies
Just a few months after news broke that U.S. Justice Department was investigating chicken companies for alleged antitrust violations, similar allegations are piling up against beef companies.
Consumers, ranchers, and a meat distributor have now filed lawsuits alleging that the country’s biggest beef companies have broken antitrust law by conspiring to raise the price of beef and lower the amount paid to producers.
The most recent was filed on October 16 by the California food distributor, Pacific Agri-Products Inc. The distributor alleges that since 2015, Tyson Foods, JBS, Cargill, and National Beef have coordinated to cut supplies and artificially raise the price of beef and consequently hike their profits.
Meanwhile, a suit brought in April by feedlot owners and ranchers alleges that during the same time period, the companies suppressed the price they paid producers for cattle. Ranchers say that as a result of the alleged collusion, the price of “fed cattle” — animals that are ready for slaughter — dropped by an average of 8%.
The four companies named in the lawsuit control over 80% of the country’s beef supply to the wholesale market, according to the distributor’s complaint. This dominant market share “allowed for the conspiracy to occur, continue, and prosper,” the complaint says.
Farmers, ranchers, and rural advocates have been concerned about consolidation in the meat industry for decades. Recently, it has also gotten the attention of the Justice Department. It is investigating the country’s biggest chicken companies after several lawsuits alleged anticompetitive practices in the poultry sector.
Dan Mogin, cocounsel on the Pacific Agri-Products lawsuit and managing partner at the antitrust law firm MoginRubin, says consolidation laid the groundwork for the alleged beef conspiracy. “What you’re seeing is part of a historical trend,” he says. “Just as night follows day, we see anticompetitive practices frequently follow consolidation and greater concentration.”
Asked about the distributor’s allegations, a Cargill spokesperson said that the “claims lack merit, and we are confident in our efforts to maintain market integrity and conduct ethical business.” A spokesperson from Tyson declined to comment. JBS and National Beef did not respond to a request for comment.
Pacific Agri-Products’ class-action case is the first brought against the beef companies on behalf of distributors who buy directly from the largest beef packers and resell the meat to retailers and others.
The distributor alleges that starting as early as 2015, the four beef packers conspired to “fix, maintain, and raise the price of beef” through “periodic and parallel slaughter reductions.” They allegedly coordinated these slaughter reductions through secret meetings at industry gatherings, such as the National Cattlemen’s Beef Association annual convention; public earnings calls where executives discussed curtailing supply; and other forms of “surreptitious communications.”
As evidence, the distributor points to several instances between 2013 and 2015 when the four packers reduced capacity or closed plants. In 2013, Cargill idled a beef processing plant in Texas with the capacity to slaughter nearly 5,000 cattle per day. In 2014, National Beef shuttered a California plant that could slaughter 1,000 cattle per day.
The companies cited dwindling cattle supply as the reason for halting their processing lines. Yet the distributor alleges that the closures were meant to hike beef prices.
Between 2015 and 2018, the distance between the cost of wholesale beef and the price paid to ranchers — known as the “spread” — increased over 60%, according to data from the USDA cited in the complaint.
By the end of the time period in question, business was booming for the top beef companies. JBS reported record profits in 2018. Tyson enjoyed a nearly 7% operating margin in 2018, almost twice as high as its operating margin in 2014, according to the complaint.
The distributor’s case is bolstered by testimony from a confidential witness who worked for 10 years as a quality assurance officer at one of the four beef packers. The witness says that he was told that the company had an “agreement” with other beef processors to cut back on slaughter numbers when prices for fed cattle rose above a certain threshold. By reducing demand, the prices paid by the beef packers for these cattle would be expected to decline.
Several class-action cases brought against the four beef packers were consolidated in July and will be overseen by a Minnesota magistrate judge. The consolidated suits involve the ranchers’ complaint, filed by the Ranchers-Cattlemen Action Legal Fund, a membership group that represents independent ranchers; a suit filed on behalf of consumers; and one filed by a live cattle futures trader.
The landscape of these suits mirrors ongoing antitrust litigation in the chicken sector. Chicken farmers, wholesalers, retailers, and consumers have alleged that the nation’s largest poultry companies — including beef giants Tyson and JBS (owner of Pilgrim’s Pride) — have colluded to hike the price of chicken and suppress wages to farmers.
In that litigation, a major focus is the secretive data company Agri Stats, which produces detailed industry reports on poultry production, farmer wages, and other business information. The plaintiffs allege that the poultry companies accomplished their collusion in part by utilizing the data provided by Agri Stats reports.
“For any number of years, there’s been this increasing discussion about lack of competition in agricultural markets generally,” Mogin says. “It’s important that people not view this series of beef lawsuits in isolation from the other big meat lawsuits that are going on right now.”
Similar price-fixing lawsuits have also been brought against the biggest pork companies, including Tyson, JBS, and Smithfield, yet those lawsuits were dismissed in August.
The consolidated complaint in Minnesota will receive a hearing in January 2020. There are no immediate next steps scheduled in the Pacific Agri-Products case, though Mogin says other distributors may file similar suits.