Recently, Maplevale Farms, one of America’s top food distributors, along with other food distributors filed a class-action, anti-trust lawsuit alleging that major chicken suppliers are in cahoots in a large-scale price-fixing scheme.
The suit alleges that chicken firms— to include the “Big Four,” Tyson Foods, Pilgrim’s Pride, Perdue, and Sanderson Farms— “conspired and combined to fix, raise, maintain, and stabilize the price of Broilers” (chicken raised just for eating). Broilers make up 98 percent of the chicken market.
A chicken’s Trust
The suit, officially named “in re Broiler Chicken Antitrust Litigation,” claims that the poultry producers manipulated the price of broiler chickens by coordinating and limiting production and exchanged pricing information, capacity and sales volume through a data compiler—Agri Stats Inc.—who was also named as a defendant in the suit.
AgriStats allows suppliers to submit detailed information from their plants and get back reports—which are supposed to be anonymous—on how their competitors are doing. However, companies have figured out how to reverse-engineer the data enabling them to determine exactly what each company, farm and factory is doing. This provides an avenue for company’s to work together to keep everyone in check.
In most markets, prices fluctuate in tandem with the supply and demand cycle. When gas inventory is high, you pay less at the pump. And vice versa. But imagine if gas was consistently $2 per gallon? That is what is happening in the chicken industry.
Playing Chicken
By sharing, on a weekly and/or monthly basis, confidential production and pricing information—including forward-looking production information—the defendants are allegedly controlling supply and sales volume. This allows them to stop the normal fluctuations that occur in response to the highs and lows of the supply and demand cycle and create a stable market that is consistently profitable.
The Mapleville suit claims that these companies have been rigging the chicken market for over a decade. And their practice of propping up poultry prices and manipulating the system has bankrupted a number of small family farms.
Chicken firms talk turkey
Earlier this month, Tom Hayes, Tyson CEO, bragged that this is Tyson’s “fifth straight year of record results,” and he stated that 2017 had started “with record earnings, record operating income and record cash flows.”
In a CNBC interview, the Tyson Executive stated that the company denies all accusations of collusion with other big poultry suppliers, calling the allegations “baseless” and “grasping at straws.” He said that he is “excited” to tell investors about the company’s “growth story.”
The suppliers’ named in the suit have filed a motion to dismiss and called the accusations of collusion a “conspiracy theory.” All of the companies have vowed to fight the allegations in court.
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