Big Food Accuses Big Chicken of Collusion and Price Fixing

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Big Food Accuses Big Chicken of Collusion and Price Fixing

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Suits have been filed against a host of poultry suppliers, accused of collusion to manipulate wholesale chicken prices. Two separate suits were initiated by U.S. Foods and Sysco, the two largest food suppliers to U.S. restaurants, against chicken suppliers including Tyson Foods, Perdue, Pilgrim’s Pride, Foster Farms, and Sanderson Farms.

The suits allege that these suppliers have inflated chicken prices by artificially limiting broiler chicken supplies. This, the suits allege, was accomplished via numerous methods including closing processing plants, breaking unhatched eggs, and slaughtering laying hens and young chickens.

The suits allege that this collusion dates back to 2008. Between 2008 and 2009, the Washington Post reports, the number of broiler chickens produced in the U.S. fell by nearly half a billion; the supply has never again reached the 2008 high.

U.S. Foods argues that the conspiracy was helped by certain characteristics of the American poultry industry, including vertically-integrated producers and “regularly scheduled trade association meetings,” which give producers ample time and opportunity to conspire.

In addition, the suits note, the chicken companies were able to manipulate two data services showing production numbers and prices of various chicken producers. One of these data services, the Georgia Dock index, was suspended in 2016 after employees became worried that firms were inflating their reported prices.

US Foods also notes that the companies named in the suit control 90 percent of the wholesale chicken market in the U.S.

“Indeed, the chicken industry has the hallmarks of an industry susceptible to collusion, including high consolidation, predictable demand in a commodity market, and routine, public display of prices to deter cheating,” court documents state.

The accused companies deny all accusations.

"Complaints like these are common in antitrust litigation," Tyson spokesman Gary Mickelson said in a statement. "Such complaints do not change our position that the claims are unfounded. We will continue to vigorously defend our company."

A Forbes op-ed by Jeffrey Dorfman, a professor of economics at The University of Georgia, claims that these accusations of collusion are “unlikely,” noting that “chicken producers appear to be guilty of little more than managing their business in order to turn a profit.”

Pointing to evidence that profit margins remain quite low for chicken producers and that reducing output is a natural response to the huge losses poultry producers suffered between 2010 and 2013, Dorfman writes, “If they are colluding, they don’t seem to be very good at it.”

This is the third suit in less than two years to allege collusion by Big Chicken, reports the Washington Post; the first suit was filed in September 2016 by Maplevale Farms and the second by grocery chains Bi-Lo Holdings and Winn-Dixie Stores in January.

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