Tyson Reaches Broiler Legal Settlement

Tyson Foods Announces Settlement in Broiler Antitrust Lawsuit

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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Tyson Foods announced a $221.5 million settlement in an ongoing class-action lawsuit that alleges chicken companies fixed broiler prices. (DTN file photo by Chris Clayton)

OMAHA (DTN) -- Tyson Foods announced a $221.5 million settlement in an ongoing class action antitrust lawsuit filed against chicken broiler companies, according to a filing with the U.S. Securities Exchange Commission on Tuesday.

It is the second announced settlement in a lawsuit filed by Maplevale Farms in 2016 in the U.S. District Court for the District of Northern Illinois. Pilgrim's Pride announced a $75 million settlement on Jan. 11.

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

"While the company does not admit any liability as part of the settlements, it believes that the settlements were in the best interests of the company and its shareholders in order to avoid the uncertainty, risk, expense and distraction of protracted litigation," Tyson said in its SEC filing.

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.

Read Tyson's SEC filing here: https://www.sec.gov/…

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

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Todd Neeley