Several broiler chicken growers recently filed a class action lawsuit in the U.S. District Court for the Eastern District of Oklahoma against five of the largest U.S. chicken processing companies, alleging that they unlawfully conspired by sharing data on compensation paid to broiler farmers with the intention and result of suppressing the farmers' compensation below competitive levels.
The complaint also alleges that defendants Tyson Foods, Perdue Farms, Sanderson Farms, Pilgrim's Pride and Koch Foods — labeled as the "cartel" in the lawsuit — unlawfully conspired to not solicit or hire the broiler farmers who were providing services to other defendants. The farmers are seeking treble damages, costs and attorneys' fees.
"The cartel illegally agreed to share detailed data on grower compensation with one another, with the purpose and effect of depressing grower compensation below competitive levels," the lawsuit states. "By disclosing their highly sensitive and confidential compensation rates to each other, they eliminated competition and drove down farmer compensation."
The lawsuit also claims that by sharing this information on a frequent and contemporaneous basis, "the cartel" was able to keep farmer compensation lower than it would have been in a competitive market while the companies kept the increased profits for themselves. "This illegal information exchange drove down base farmer compensation nationwide," the suit added.
In addition, a "no poach" agreement between each of the processors "inoculated the cartel against potential cheating by its members," the lawsuit claims.
Sanderson Farms announced in a recent U.S. Securities & Exchange Commission (SEC) filing that it had been named in the lawsuit and that the suit is in its early stages. Additionally, the company said it intends to "defend it vigorously."
A Tyson Foods spokesperson told Feedstuffs, "We want our contract farmers to succeed and don't consult competitors about how our farmers are paid. These are false claims."
The spokesperson said an average contract farmer with Tyson has been raising chickens for the company for 15 years.
"The compensation we provide is set out clearly in contracts the farmers voluntarily enter into," he said, adding that the company's contracts with farmers are typically three to seven years long or more. "The farmers are free to discuss the terms of their contracts with whomever they want, including other farmers, and are also free to switch to other chicken processors who operate in their area."
Research has shown that contract chicken farmers have been paid more for their efforts over time, the spokesperson pointed out, explaining: "According to a 2015 study by Dr. Thomas Elam, average farmer payments per pound of chicken have increased almost 53% since 1990."
Company officials disclosed during their Feb. 6 earnings call that Tyson Foods was subpoenaed by SEC on Jan. 20 in connection with the lawsuit.