Poultry processors face lawsuits over scheme to overinflate product prices.
On October 19, Cracker Barrel Old Country Store filed a lawsuit in U.S. District Court of Northern Illinois against Tyson Foods Inc., Pilgrim’s Pride Corp. and other poultry companies. At the same time, White Castle and Golden Corral filed price-fixing lawsuits against the poultry providers on October 16. The chains are all seeking the return of overcharges paid on inflated poultry prices and allege the companies “engaged in bid-rigging targeted at foodservice operations and other businesses that purchased broiler chickens in large volumes.” What’s more, they contend, the providers “conspired to limit competition in the broiler chicken market by reducing and misrepresenting the supply of broilers and manipulating price indices associated with wholesale broiler prices.”
Cracker Barrel alleges it believes the scheme began as early as 2012 and lasted at least until 2019. The filing reads, in part, “Cracker Barrel, like many restaurants, contracted directly with defendants for the purchase of their chicken products. Defendants used their coordinated manipulation of the wholesale price indices and their coordinated actual and false supply reductions of broilers to enter into contracts to supply the Cracker Barrel system with broilers at artificially inflated prices. As a result of defendants’ price-fixing and bid-rigging conduct, defendants were able to exact significant price increases from Cracker Barrel and other restaurants. Defendants adhered to their collusive agreements and understandings throughout the conspiracy period. Defendants reaped the benefits of their illegal conduct through their production and sale — directly and through their wholly-owned or controlled subsidiaries and affiliates — of broilers at inflated non-competitive prices. Through their collusive, anticompetitive actions, defendants negated the economic benefits of increased competition. Defendants’ conduct resulted in their customers, including Cracker Barrel, paying millions of dollars in overcharges to defendants.”
In June, the U.S. Department of Justice (DOJ) indicted Pilgrim’s Pride’s former Chief Executive Jayson Penn and three others as part of a criminal investigation involving broiler birds. In early October, it indicted six more poultry executives over alleged price-fixing, including another Pilgrim’s Pride former CEO William Lovette. Penn took the reins from Lovette last year and has pleaded not guilty. The company announced Penn also later left the company and was replaced as CEO by Chief Financial Officer Fabio Sandri.
Sales executive Timothy Mulrenin was also indicted. He was hired by Perdue Farms in 2018 and was employed at Tyson Foods at the time of the allegations. Mulrenin, who was hired by Perdue Farms in 2018, worked at Tyson Foods at the time of the allegations, according to the filing.
“Executives who choose collusion over competition will be held to account for schemes that cheat consumers and corrupt our competitive markets,” Makan Delrahim, chief of the DOJ’s Antitrust Division, said.
Tyson in June reported it was cooperating with the Justice Department’s investigation under a corporate leniency program potentially allowing the company to avoid criminal charges. “The latest indictment does not affect Tyson’s status in its leniency application, spokesperson Gary Mickelson said of October’s follow-up.