Easterday: Tyson Violated Antitrust Law

LINCOLN, Neb. (DTN) -- A former Washington state cattle scammer alleges in a new lawsuit that Tyson Fresh Meats committed a number of antitrust violations and violated the Packers and Stockyards Act during the course of a 10-year business relationship.

Cody Allen Easterday is serving an 11-year prison sentence in Los Angeles on wire fraud, after pleading guilty to conducting a $233 million ghost-cattle scheme that included allegedly raising cattle for Tyson and billing the company for cattle that did not exist.

Easterday alleges in a lawsuit filed this week in the U.S. District Court for the District of Eastern Washington, that Tyson took advantage of Easterday Ranches' limitations as to where the company could sell its cattle.

"This is an antitrust and unfair competition case directed at the anti-competitive, unfair, abusive, unjustly discriminatory, and deceptive acts and practices, among others by defendant," Easterday said in the lawsuit.

"Through the wielding of immense market power, resulting from acquisition and consolidation, defendant has created a monopsony market in the Pacific Northwest region of the U.S. -- being Washington, Oregon, and Idaho -- whereby cattle feeders in that region have no reasonable choice but to contract with defendant despite the anti-competitive, unfair, abusive, unjustly discriminatory, and deceptive acts and practices of defendant, including as to pricing, contract terms, and contract performance."

Easterday alleges Tyson has "misused its economic power over cattle feeders and contracts," in violating the Packers and Stockyards Act of 1921, the Sherman Antitrust Act of 1890, and the Washington State Consumer Protection Act.

Tyson did not respond to DTN's request for comment.

In the months after pleading guilty to wire fraud, Easterday raised tens of millions of dollars through asset sales in an attempt to make restitution to Tyson. So far, Easterday has paid about $66 million in restitution.

Easterday also has a second lawsuit pending in the same court.

In recent months Easterday also sued Tyson for alleged breach of contract for money the company owed to him. Easterday alleges Tyson never paid for the use of his name and likeness as part of a joint venture that involved the marketing and selling of premium beef from his ranch.

ANTITRUST ALLEGATIONS

In the new lawsuit, Easterday alleges Tyson took advantage of what is a unique packing situation in the Pacific Northwest.

Tyson's packing plant in Pasco, Washington, is one of just two such companies within a 200-mile radius of where Easterday Ranches operated, according to the lawsuit.

In 2009, Tyson and Easterday discussed the possibility of increasing capacity at his feedlots.

"Mr. Easterday agreed under the presumption that the long-standing 50/50 arrangement would continue," the lawsuit said, which included an evenly split share of the costs for Easterday to raise and provide cattle for Tyson.

Easterday obtained a $6.3 million loan from Rabo Agrifinance to pay for a feedlot expansion.

It was that agreement to expand his operations, the lawsuit said, that was the beginning of a downfall in the relationship.

"Once Mr. Easterday and Easterday Ranches entered into the construction loan, Mr. Easterday had no practical choice but to complete the project in order to preserve his other business interests," the lawsuit said.

Around the spring 2010 after the feedlot expansion was complete, the lawsuit said a company representative "informed Mr. Easterday that Tyson wanted to change the terms of their longstanding arrangement and that Tyson no longer wanted to own and feed cattle under the existing 50/50 arrangement, which was the agreement Mr. Easterday relied upon in deciding to expand his feedlot capacity."

Easterday also was required to assume "all of the financial risk" of operation.

"Thus, as personal guarantor, Mr. Easterday was required to bear the financial risk if Easterday Ranches did not perform," the lawsuit said.

"Despite statutory requirement, even when Tyson did owe Easterday Ranches for a particular lot of cattle, as a matter of course, Tyson failed to timely pay Easterday Ranches within 48 hours of the sale."

EASTERDAY INFORMS COMPANY

On Nov. 30, 2020, Easterday informed the company about the cattle scheme he had been conducting since 2016.

"On Dec. 7, 2020, Tyson falsely represented to Mr. Easterday that it would not seek criminal charges, and Mr. Easterday agreed to execute an ownership agreement, without counsel present, whereby Mr. Easterday transferred ownership to Tyson of cattle owned by Easterday Ranches that had not been invoiced to Tyson," the lawsuit said.

Easterday alleges it was his understanding Tyson owned the cattle as part of an agreement.

"If Tyson owned the cattle during their time spent in the Easterday feedlot, this implies that Tyson was indirectly paying Mr. Easterday an anticompetitive suppressed price for feeding cattle for Tyson, and that price was anticompetitive due to Tyson's exertion of monopsony market power," the lawsuit said.

Monopsony is a market situation in which there is only one buyer. Easterday alleges Tyson "inconsistently reported" the ownership of the cattle to regulatory authorities.

There are just two packers of fed cattle in the Pacific Northwest -- Tyson and AgriBeef. AgriBeef is an independent packer and about 70% to 75% of AgriBeef's cattle supply come from its own feedlots.

In 2006, Tyson shuttered its packing plant in Boise, Idaho, leaving only one Tyson packing plant in the Pacific Northwest located in Pasco, Washington. Tyson accounted for about 80% to 85% of the fed cattle purchased in the Pacific Northwest from 2006 to 2020, the lawsuit said.

"Beginning in 2010, Tyson changed its business model in the Pacific Northwest to no longer explicitly 'own' the cattle," the lawsuit said.

"Rather, Tyson required cattle feeders to carry all the financial risk in feeding and caring for cattle until they reached market weight under their 'pioneer model' contracting arrangement. The pioneer model contract has been the subject of other litigation by another company. When Mr. Easterday attempted to seek a change to the terms of this arrangement and renegotiate their contracts, Tyson exercised its market power and threatened to shut down the Pasco packing plant."

MARKET CONTROL ALLEGED

Easterday alleges because Tyson controls the open cattle purchasing market and conducted "threatening behavior, and pressure to enter into contracts with anticompetitive terms for Tyson's benefit, Tyson exerted significant market power" over the supply side of the market for fed cattle in Pacific Northwest.

"Tyson was aware, or should have been aware, that the contract terms were unfair and deceptive, and that its control over the regional market left no viable alternatives for Mr. Easterday but to continue supplying Tyson with cattle," the lawsuit said.

Easterday alleges that by shutting down its Idaho meatpacking plant in 2006, Tyson "eliminated competition, creating a bottleneck of only one geographically feasible meatpacking plant for cattle feeders and ranchers located in the Pacific Northwest," the lawsuit said.

"This bottleneck, created by defendant, provides Tyson with significant market power, which it wielded in negotiation of pricing and other terms with feedlot operators."

Read more on DTN:

"Cattle Scammer: 'Tyson Owes Me Money,'" https://www.dtnpf.com/…

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

Follow him on Twitter @DTNeeley

(c) Copyright 2023 DTN, LLC. All rights reserved.