Americans pay 50% more for chicken and, yes, that is because of a conspiracy

Reuters/Rodolfo Buhrer

❝ What do you call it when would-be competitors embark on a unified strategy to limit supply, drive up prices, and bilk customers of their hard-earned cash? An antitrust conspiracy, of course. But what do you call it when producers of chickens, a staple of the American diet…allegedly go so far as killing their birds early, shipping more eggs, and buying one another’s products to keep public supply low?

According to food distributors suing the industry, it’s called “capacity discipline.”

The $29 billion industry that churns out 90 percent of America’s chickens has engaged in a price-fixing scheme for years, according to the first of a half-dozen lawsuits filed in Chicago federal court this month. And that artificial premium has been passed on to consumers: You’ve been paying 50 percent more for that supermarket rotisserie bird, the lawsuits claim. While producers have been accused of rigging the market before, this litigation may be the largest effort yet to bring such practices to light…

❝ The court complaint traces the alleged collusion back to 2008, when—thanks to high feed prices, debt, and an oversupplied chicken market — Pilgrim’s Pride, one of the country’s largest poultry companies, was facing serious financial difficulties. It brought in consultants from Bain & Co. to help find a solution, the lawyers contend. This wasn’t enough: In December, Pilgrim’s filed for bankruptcy and eventually became part of meat conglomerate JBS USA Holdings, a unit of São Paulo-based JBS SA. But those consultants did, according to the complaint, offer some sage advice: Pilgrim’s Pride needed to cut supply so prices would rise. (Bain didn’t respond to requests for comment.)

There was a catch, though. Chickens are a commodity: Tyson’s chicken is indistinguishable from Pilgrim’s, which is indistinguishable from that of other defendants, such as Perdue Farms Inc., so this plan would work only if the whole industry participated.

That’s what began to happen in 2007, according to the lawsuit, when Tyson’s, Pilgrim’s, and a few smaller producers reduced their output. At first, others didn’t play ball. But the next year, the plaintiffs said, the industry began to take a more coordinated tack, with a joint effort to cut supply across the board. “We see an uncanny amount of coordination and communication between supposed competitors,” Bruckner argued…

❝ The lawyers say that Tyson, for example, was so committed to this strategy that it began buying competitors’ chickens instead of growing its own, which would have been cheaper, under what was dubbed a “buy vs. grow” strategy. The defendants also exported eggs to Mexico, rather than build up their U.S. flocks…

RTFA for much of the dirty dealing. If and when this all gets to a trial court, no doubt there will be more.

2 thoughts on “Americans pay 50% more for chicken and, yes, that is because of a conspiracy

  1. List of X says:

    I think that the worst case scenario for the chicken producers will be that they settle for a few million dollars each, and as always, without accepting they did anything illegal.

  2. Update says:

    The US government, as part of an investigation into the chicken industry, is trying to intervene in a price-fixing lawsuit brought against the country’s biggest poultry producers.
    The Justice Department had notified Tyson (TSN) in April that it convened a grand jury and subpoenaed the company to provide evidence. On Friday, department lawyers asked a judge to halt evidence collection in the lawsuit for six months to ensure the integrity of the grand jury’s investigation. The Justice Department, in its court filing on Friday, said it’s pursuing a probe similar to the civil complaint. Tyson, Pilgrim’s Pride (PPC), Sanderson (SAFM) and Perdue collectively control 51% of the chicken industry, according to Watt Poultry USA, a poultry industry business publication.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.