Two of the nation's largest food distributors joined the list of plaintiffs suing the chicken industry on allegations of manipulating U.S. broiler chicken prices.
Sysco Corp. and U.S. Foods Holding Corp., which supply food to restaurants, hotels and other establishments across the country, filed separate complaints against Tyson Foods, Pilgrim's Pride and other leading chicken producers late Tuesday afternoon in federal court in Illinois.
They join a growing group of plaintiffs that claim the roughly $30 billion broiler industry has been rigged for years by food producers that control approximately 90 percent of the wholesale chicken market.
Both Sysco and U.S. Foods accused 17 chicken producers of colluding to fix the prices of U.S. broilers by curbing domestic supply from as early as 2008 to as late as 2016.
Proprietary data from Agri Stats, a broiler chicken database, and the Georgia Dock price index, a benchmark for chicken producers by chicken producers, were tools used by the defendants in the industrywide conspiracy, the lawsuit said.
The distributors claim that these producers used tactics like "reducing egg placements, killing newly-hatched chicks, or idling processing plants" to lower domestic supply and push prices higher, the lawsuit said.
Historically, the chicken industry has seen a boom-and-bust cycle. Producers tend to increase production as prices rise, leading to an oversupply and a price drop. The lawsuits filed Tuesday say that cycle changed in 2008. The lawsuit claims that chicken producers found a way to eliminate the boom-bust cycle.
The lawsuits are part of a string of complaints filed against chicken companies including Tyson Foods, Simmons Foods, OK Foods, and George's Inc. Sysco and U.S. Foods both made separate filings in the U.S. District Court for the Northern District of Illinois, after two similar complaints seeking class-action status.
Winn-Dixie stores and its sister grocery, Bi-Lo Holdings, filed a complaint last month, after a federal judge's refusal several months ago to dismiss a 2016 class-action lawsuit filed against key companies and claiming they inflated U.S. broiler chicken prices.
The 2016 lawsuit Maplevale Farms v. Koch Foods Inc., et al, accused 14 poultry processors of sharing confidential information that allowed broiler prices to nearly double over the previous eight years as feed prices -- like corn and soybeans -- declined 23 percent. A defendant in the case, Fieldale Farms Corp., agreed last year to pay $2.25 million to be removed from the class-action suit.
Spokesmen for Sysco Corp. and U.S. Foods declined to comment.
Together Sysco and U.S. Foods represent almost 25 percent of the nation's food distribution, The Wall Street Journal reported, generating about $78 billion in revenue annually.
Representatives from OK Foods and George's Inc. did not respond to a request for interview on Wednesday. A Simmons Foods spokesman said these "opt-out lawsuits are not unusual in antitrust litigation" and said the company will continue to defend itself against "unsubstantiated claims."
A Tyson Foods spokesman said the addition of Sysco and U.S. Foods to the growing number of complaints does not change Tyson's stance.
"We will continue to vigorously defend our company," Tyson spokesman Gary Mickelson said in an email Wednesday.
Arkansas is the second-largest producer of broiler chickens in the nation, yielding about 5.7 billion pounds annually, according to the Arkansas Farm Bureau.
Springdale-based Tyson Foods produced 21 percent of the nation's chicken supply in 2016, company data show.
Shares of Tyson Foods dropped $2.78, or 3.5 percent, to close Wednesday at $76.11. Pilgrim's Pride shares fell $1.85, or 6.3 percent, to $27.77 and Sanderson Farms fell $5.48, or 4.1 percent, to $126.90.
Business on 02/01/2018