Price Manipulation Alleged

OMAHA (DTN) -- Boston Market Corp. has filed a federal lawsuit against a group of poultry companies, alleging the companies conspired to manipulate the price of broilers from 2008 to 2017, costing Boston Market Corp. hundreds of millions of dollars in overcharges.

The lawsuit in the U.S. District Court for the Northern District of Illinois in Rockford follows the June grand jury indictment in Denver of several executives of various poultry companies.

Those executives were charged with conspiring to fix prices and rig bids for broiler chickens. Broiler chickens are chickens raised for human consumption and sold to grocers and restaurants.

The new lawsuit alleges the conspiracy included plaintiffs Tyson Foods, Pilgrim's Pride, Perdue Farms, Koch Foods, Sanderson Farms, JCG Foods, Raeford Farms, Mar-Jac Poultry, Wayne Farms, Fieldale Farms, George's Farms, Simmons Foods, O.K. Foods, Peco Foods, Harrison Poultry, Foster Farms, Claxton Poultry, Mountaire Farms, Amick Farms, Case Farms and Agri Stats Inc.

"Tyson is committed to fostering a free and fair competitive environment and to maintaining strong relationships with our customers, suppliers and partners as we work to put affordable and nutritious food on family tables," said Worth Sparkman, director of external communications at Tyson.

"Follow-on individual complaints are common in antitrust litigation. This complaint joins other individual complaints that have already been filed in this action. We will respond to the allegations in the appropriate forum."

When contacted by DTN, Perdue Farms declined comment. The remaining plaintiffs in the case did not respond to DTN's request for comment.

The next hearing in the case is scheduled for Aug. 8. Boston Market has asked for a jury trial.

In its complaint, Boston Market alleges the companies conspired to "restrain production, manipulate price indices, fix prices and rig bids, the purpose and effect of which was to fix, raise, stabilize and maintain prices of chicken meat throughout the United States.

"Defendants purposefully destroyed breeder hens and eggs to achieve these artificial decreases in broiler supply. Defendants also manipulated the price index associated with wholesale broiler prices at the end of the distribution chain. Defendants' conduct ensured that buyers purchased broilers from defendants at inflated non-competitive prices."

Boston Market said it contracted directly with the companies to purchase broilers, submitting bid requests from them to supply its restaurants across the country.

"As a result of defendants' small bird price-fixing and bid-rigging conspiracy, defendants were able to exact significant price increases from Boston Market and other restaurants at the same time wholesale prices of small bird broilers were decreasing," the lawsuit alleges.

The purchase orders for broilers supplied to Boston Market restaurants were issued from locations in Arizona, California, District of Columbia, Florida, Illinois, Kansas, Michigan, Minnesota, Nebraska, Nevada, New Hampshire, New Mexico, New York, North Carolina, Rhode Island, South Carolina, Virginia and Wisconsin.

According to the U.S. Poultry and Egg Association, the value of wholesale U.S. broilers produced in 2014 was $32.7 billion, up 6% from 2013. The market value varied between $21.8 billion and $30.7 billion from 2008 to 2013.

About 50% to 70% of broilers are sold under contract with a customer, about 10% to 20% are sold on the spot market, and roughly 17% to 20% are exported.

Back in June, the grand jury indicted Jayson Penn, president and chief executive officer of Pilgrim's Pride, along with Roger Austin, a former vice president of Fresh Foodservice at Pilgrim's Pride Inc. Also indicted were executives for Claxton Poultry Farms in Georgia, including Mikell Fries, president of Claxton Poultry Farms and grandson of the company's founder, along with Scott Brady, vice president of national accounts for Claxton Poultry Farms.

The U.S. Department of Justice said in a news release multiple federal agencies continue to collaborate on an investigation into the industry.

The indictment alleged the price fixing goes back to at least 2012 and points to repeated text communications among Austin, Brady and Fries over bids and prices for poultry contracts or overall market prices. The texts also repeatedly reference communications back to Penn as well. Those communications for bids on prices continued repeatedly until at least 2017.

The indictment also cited conversations over how to treat competitors who are short on product for delivery and competitors selling chicken products for lower margins. Penn noted in a series of emails regarding one unnamed competitor, "So in essence they are cheap and to add insult to injury are short product."

The indictment stated the business practices of the four executives "substantially affected interstate trade and commerce."

The DOJ filed the indictment with an antitrust class-action civil case in federal court in Illinois that was initially filed in 2016.

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @toddneeleyDTN

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