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Cargill, Sanderson, Wayne to Pay $85 Million in DOJ Settlement (2)

July 25, 2022, 2:20 PMUpdated: July 25, 2022, 6:08 PM

Cargill Inc., Sanderson Farms Inc., and Wayne Farms LLC signed an agreement with the Justice Department to pay $84.8 million to resolve allegations that the chicken product makers violated antitrust law by improperly communicating about worker wages and benefits.

The proposed consent decrees, filed as part of a lawsuit Monday by the DOJ’s Antitrust Division in the US District Court for the District of Maryland, name data consulting firm Webber, Meng, Sahl and Company as the companies’ information broker. The company and its president Jonathan Meng are also named as defendants.

The settlement, pending court approval, is federal antitrust regulators’ latest action in their efforts to crack down on antitrust violations in the meat industry and expand labor-market antitrust enforcement. The DOJ collaborated with the Department of Agriculture on the action, illustrating the Biden administration’s whole-of-government approach to competition issues.

“Through a brazen scheme to exchange wage and benefit information, these poultry processors stifled competition and harmed a generation of plant workers who face demanding and sometimes dangerous conditions to earn a living,” the DOJ Antitrust Division’s Principal Deputy Assistant Attorney General Doha Mekki said in the statement.

The settlement comes days after Cargill and Continental Grain Co. closed their $4.5 billion acquisition of Sanderson Farms, without challenge from the DOJ. Continental owns Wayne Farms.

The acquisition, which combines the third and sixth-largest companies in the US in chicken production, will create a new corporate entity, Wayne-Sanderson Farms. The new company will be subject to the terms of the consent decree, a DOJ official said.

WMS is banned from providing surveys or other competitively sensitive information in any industry under the proposed settlement terms, the DOJ’s statement said.

Cargill, Sanderson Farms, and Wayne Farms, which are accused of violating the Sherman Act, are barred from sharing such data in future and required to work with a compliance monitor. Their payments will go toward restitution to the workers whose wages were allegedly suppressed by the companies’ conduct.

The companies’ information exchanges, which occurred “over decades,” allowed them to make informed decisions about worker pay, leading to suppressed wages and competition for plant workers, according to the complaint.

Sanderson and Wayne were allegedly in violation of the Packers and Stockyards Act, which prohibits deceptive practices in poultry markets, according to the complaint.

Poultry processors use a “tournament system” that adjusts growers’ payments based on how well they perform compared to their competitors. The defendants allegedly failed to provide vital information that would have allowed growers to better understand and handle their financial risk, the DOJ said.

The Justice Department declined to name 18 additional co-conspirators — who allegedly conspired with the defendants and exchanged compensation information — because they’re included in an ongoing investigation, according to the complaint.

The conspirators and defendants account for more than 90% of poultry processing plant jobs in the US, according to the complaint.

Wave of Litigation

A Cargill spokesperson said in a statement that the company agreed to pay $15 million for the settlement. The deal’s merits outweigh the costs associated with prolonged litigation, according to the statement.

“We believe the alleged claims lack merit and do not show a conspiracy to fix wages, nor do they show any improper actions by Cargill or its employees,” the statement said. “The settlement is not an admission of guilt and Cargill denies any wrongdoing. The company sets compensation independently to ensure that it pays fair and competitive wages to employees in each of our processing facilities.”

The agreement is evidence of the companies’ commitment to their employees and growers, a Wayne-Sanderson Farms spokesperson said in a statement.

Attorneys for WMS and Jonathan Meng didn’t immediately respond to a request for comment.

The DOJ and USDA previously collaborated on the online tool farmerfairness.gov, which allows farmers and ranchers to anonymously report unfair and anticompetitive practices in their industries.

The meat-processing industry has seen a wave of private and government lawsuits over alleged price-fixing and anticompetitive conduct in recent years. Tyson Foods Inc., Hormel Foods Corp. and other meat production companies also face complaints from consumers and distributors that they used an intermediary, Agri-Stats, to exchange nonpublic pricing and financial information.

The case is USA v. Cargill Meat Solutions Corporation et al, D. Md., no. 1:22-cv-01821, 7/25/22.

(Updated with additional reporting throughout. )

To contact the reporter on this story: Dan Papscun in Washington at dpapscun@bloombergindustry.com

To contact the editors responsible for this story: Michael Ferullo at mferullo@bloomberglaw.com; Roger Yu at ryu@bloomberglaw.com