The four biggest meatpackers have been hit with more lawsuits accusing them of price fixing, this time championed by large-scale beef purchasers.
In the U.S. District Court for the Eastern District of New York, four lawsuits were filed against Tyson, Cargill, JBS and National Beef in late December. The suits were brought by Target, BJ’s Wholesale Club, Gordon Food Service and Jetro Holdings.
The beef purchasers allege that as early as 2015 and continuing through present time, the packers conspired to fix beef prices, violating the Sherman Act. The lawsuits contend that the packers coordinated, manipulated or agreed to pay less-than-competitive prices for fed cattle to increase or maintain their price margins.
“Defendants and their co-conspirators implemented their conspiracy by collusively reducing the slaughter-ready cattle and beef supply, which over time artificially elevated the price of beef that they sold to Plaintiff and others,” a suit alleged.
The lawsuit cited an earlier suit by cattle ranchers against the packers, which shared testimony from a confidential witness who was previously employed by Swift Beef. “Jason F.” confirmed a conspiracy among the operating defendants in which they agreed to reduce their cattle purchases and slaughter volumes to increase their margins.
“Defendants’ transactional data and slaughter volume records, information published by the USDA, and Defendants’ public calls for industry-wide slaughter and capacity reductions, corroborate Witness 1’s account,” the beef purchasers’ suits read.
Other structural characteristics of the domestic beef market, including high concentration in the wholesale beef industry, facilitated the packers’ conspiracy, the beef buyers claimed. The suits contend that the packers’ position at the top of the supply and distribution chain allowed them to exploit their role of buying cattle to control upstream cattle pricing and downstream beef pricing.
The suits named other market characteristics that supported the conspiracy, such as “producer concentration, high barriers to entry, inelastic demand, the commodity nature of beef, frequent opportunities to conspire, strong demand and/or market share stability.”
Conspiracy plans
The suits allege the packers began exploiting favorable market conditions by at least the beginning of 2015. More specifically, the suits noted the coordination between the packers on the prices they would pay for fed cattle, and their respective slaughter volumes.
“Thus, over time, the output of beef was reduced resulting in higher beef prices for purchasers like Plaintiff, during the Conspiracy Period,” the suits read.
The beef buyers cited USDA data that showed the average cattle and beef price spread substantially higher from January 2015 through 2021 compared to the preceding five years. From 2010-14, the average spread was about $34, but from 2015-21, the spread increased 143% to nearly $83, they cited.
“In a competitive beef market, if a competitor reduces its price paid for fed cattle, then other competitors would be expected to increase purchases, so they could boost output and increase their profit and market shares,” the plaintiffs explained.
Therefore, “Only colluding meatpackers would expect to benefit by reducing their prices and purchases of slaughtered cattle because they would know that their conspiracy would shield them from the dynamics of a competitive marketplace.”
As a result of the alleged conspiracy, the beef buyers suffered antitrust injury by paying illegally inflated prices for beef, the suits asserted.
Previous investigations
In 2020, it was reported that the Department of Justice (DOJ) subpoenaed Tyson Foods, JBS, Cargill and National Beef regarding information relating to their pricing practices dating back to early 2015. The DOJ investigation followed an earlier Senate hearing where former USDA Secretary Sonny Perdue announced USDA had begun an investigation into beef prices.
In 2021, a group of senators penned a letter to the DOJ, voicing concern with potential packer antitrust violations.
“From our perspective, the anticompetitive practices occurring in the industry today are unambiguous and either our antitrust laws are not being enforced or they are not capable of addressing the apparent oligopoly that so plainly exists,” the letter read.
The beef buyers demanded a trial by jury. — Anna Miller, WLJ managing editor
