Price-Fixing Indictments Handed Down in Food Industry

Price-Fixing Indictments Handed Down in Food Industry

( – If you’ve ever asked why chicken prices were so high at the grocery store, you may have your answer. On Wednesday, the Department of Justice (DOJ) announced grand jury indictments against current and former executives of two chicken producers for their roles in a price-fixing scheme. The indictment alleges that, between 2012 and 2017, executives at Pilgrim’s Pride and Claxton Poultry Farms fixed prices to boost profits.

The $65 billion US chicken industry has been plagued with allegations in the past. In late 2016, restaurant companies, grocery chains, and others sued major poultry producers. They accused Tyson Foods, Pilgrim’s Pride, Sanderson Farms, and Perdue Farms of illegally coordinating operations and inflating prices. In addition, large grocery sellers Walmart, Kroger, and Albertsons also filed price-fixing lawsuits.

Pilgrim’s Pride, located in Colorado, is the nation’s second-largest producer of food-grade chicken. Chief Executive Officer Jayson Penn is among those indicted. Assistant Attorney General Makan Delrahim said, “Executives who cheat American consumers, restaurateurs, and grocers, and compromise the integrity of our food supply, will be held responsible for their actions.”

If convicted, the charges carry a maximum penalty of 10 years in prison and a $1-million fine.

Chicken Prices Rise and Suddenly Collapse

After a decade of poultry producers merging together, the chicken industry is now dominated by just five companies. Since the mergers, prices went up rapidly until the lawsuits were filed and the DOJ got involved.

Together, the five companies control 61% of the production of US chicken. Pilgrim’s Pride produces approximately 13 billion pounds of chicken per year, followed by Claxton at 300 million pounds.

In mid-2012 through 2018, chicken prices jumped 11%. Compared to January 2019, prices have declined approximately 27% through February 2020. Chicken companies say they increased production and added new plants as trade tensions eased and chicken markets opened up internationally.

However, it’s not implausible that prices dropped after the DOJ intervened in lawsuits. As they began gathering evidence, the DOJ requested a pause on any more gathering of evidence as they impaneled a grand jury investigation. Not long after, in August 2019, subpoenas were issued to Tyson, Pilgrim’s, Sanderson, and other producers.

In the DOJ’s indictment, it alleges Pilgrim’s and Claxton rigged bids and fixed prices across the United States. The investigation is ongoing into other companies as well. To demonstrate how extensive the investigation is, the DOJ said other agencies involved included the Department of Commerce, FBI, and the Department of Agriculture.

The next time you’re at the grocery store and think chicken has gotten more expensive, don’t blame the grocery store — they’re getting soaked too.

~Here’s to Your Prosperity!

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