Chick-fil-A Alleges Broiler Price Fix

OMAHA (DTN) -- Chick-fil-A alleges Tyson Foods Inc. and other poultry companies conspired to raise the price of chicken, causing damage to the restaurant's business, in a lawsuit filed in federal court on Friday.

Also named in the lawsuit is Pilgrim's Pride Corp., Sanderson Farms Inc. and Perdue Farms, among other poultry producers.

According to a grand jury indictment in June 2020 in Denver of several executives of various poultry companies, on or about Feb. 11, 2014, Chick-fil-A announced plans to serve antibiotic-free broiler chicken meat at its restaurants within the next five years.

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 filed in the U.S. District Court for the Northern District of Illinois in Rockford, said the company's announcement was followed by a number of alleged actions on the part of the defendants.

The new lawsuit said "a number of defendants communicated via phone and text message in order to share and coordinate confidential bidding and pricing information in connection" with Chick-fil-A's request for bids on serving antibiotic-free broiler chicken meat.

The lawsuit said Chick-fil-A has purchased billions of dollars of broiler chickens from the defendants, "throughout the relevant period at prices that were artificially inflated."

Chick-fil-A asked the court for a jury trial and is requesting the awarding of damages.

As a result of "anticompetitive conduct" Chick-fil-A was "damaged in its business or property by paying prices for chicken that were higher than they would have been but for defendants' unlawful conduct, which has resulted in an amount of ascertainable damages to be established at trial," according to the lawsuit.

When contacted by DTN, a spokesperson for Perdue Farms responded, "We believe these claims are unfounded and plan to contest the merits." A spokesperson for Sanderson Farms told DTN the company does not comment on pending litigation.

Tyson Foods and Pilgrim's Pride Corp. did not respond to DTN's request for comment.

In July 2020, Boston Market Corp. filed a federal lawsuit in the same court against the same group of poultry companies.

That lawsuit alleged the companies conspired to manipulate the price of broilers from 2008 to 2017, costing Boston Market Corp. hundreds of millions of dollars in overcharges.

In its complaint, Boston Market alleged 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."

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 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 referenced 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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