A group of small food distributors filed a new price-fixing lawsuit against 4 of America's largest meatpackers - Cargill, Tyson Foods, JBS USA, and National Beef Packing Co - claiming the packers have been conspiring to fix beef prices for years.
“Starting at least as early as January 1, 2015, Defendants exploited their market power in this highly concentrated market by conspiring to limit the supply of beef sold to purchasers in the U.S. wholesale market, including Plaintiffs, which resulted in higher prices paid by Plaintiffs,” the lawsuit read.
“As a result, the plaintiffs paid higher prices for beef than they otherwise would have paid in a competitive market,” the lawsuit says while seeking relief under the Sherman Act.
The lawsuit cited USDA data that showed the average farm-to-wholesale spread was about $34 from 2010-2014, but that trend increased 59% from 2015-2018 to $54.
The lawsuit points to the fact that in a normal, competitive beef market, "if a competitor reduced its purchase of cattle, other competitors would quickly increase their purchases to boost their sales and increase their market shares...Only colluding meatpackers could expect to benefit by reducing their purchases and slaughter of cattle, because as a result of their conspiracy, they knew that their nominal competitors would not increase their purchasing volumes as would be expected in a competitive market. By concertedly slashing their supply output, Defendants consistently expanded their profit margins, confident that none of them would grab volume from another Defendant."
“Defendants' strategy was immediately successful, with lower slaughter volumes and lower beef output resulting in artificially high beef prices, despite cash cattle prices falling. Defendants’ meat margins expanded rapidly as a result,” the complaint reads.
In summary, the meatpackers, "colluded to reduce beef supplies, thereby unlawfully raising and fixing beef prices at levels higher than prices would have been had the beef market been competitive" and the distributors paid inflated prices for the beef they purchased.
Recent Years
Congressional hearings have covered price gouging in the beef sector, and several of the companies named in the suit paid huge fines in recent years to settle price-fixing claims.
2021 - Tyson Foods paid $221.5 million to resolve a case accusing it of inflating the price of chicken
2022 - JBS paid $52.5 million to settle a case that alleged it inflated the price of its beef
Lawsuit Information:
The lawsuit was filed on October 9 in the U.S. District Court for the Northern District of Illinois. For more information on the lawsuit, click here.
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