Pilgrim's Pride Reaches Settlement

OMAHA (DTN) -- Pilgrim's Pride Corp. has reached a $75 million settlement with a number of plaintiffs in an ongoing antitrust class-action lawsuit filed in 2016.

The company made the announcement in a filing to the U.S. Securities Exchange Commission on Monday.

"Pursuant to the agreement, Pilgrim's has agreed to pay the DPP Class $75 million, which will be reflected in Pilgrim's fourth quarter 2020 financial statements," the company reported to the SEC.

"The agreement is subject to court approval and does not settle claims made by plaintiffs outside of the DPP class in the Broiler Antitrust Civil Litigation. While Pilgrim's does not admit any liability for the claims alleged in the Broiler Antitrust Civil Litigation, it believes a settlement was in the best interests of the company and its shareholders."

The lawsuit, filed by Maplevale Farms Inc. in 2016, alleged a number of large chicken-producing companies, including Pilgrim's Pride, Tyson Foods Inc., Koch Foods Inc. and others, beginning at least as early as January 2008, "conspired and combined to fix, raise, maintain, and stabilize the price of broilers."

The proposed settlement addresses the Maplevale Farms case. However, Pilgrim's Pride and other companies have been sued by several other companies, including Boston Market Corp.

The lawsuits were filed in the U.S. District Court for the Northern District of Illinois in Rockford.

The Maplevale Farms lawsuit alleged chicken companies cut production in order drive up broiler prices.

"The consequence of defendants' cuts in 2008 and 2011 to 2012 have been a nearly 50% increase in broiler wholesale prices since 2008, despite input costs (primarily corn and soybeans) falling roughly 20% to 23% over the same time period. The rise in broiler prices relative to input costs has led to record profits for defendants."

Chicken company 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.

Back in June 2020, a grand jury indicted Jayson Penn, president and CEO 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 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.

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.

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

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