Chicken Trial Signals Antitrust Warning to US Protein Industry

A trial in a yearslong case accusing chicken producers of price-fixing sets the stage for a potential boost in antitrust compliance within the protein industry, particularly as the Biden administration focuses on reducing inflation.

Though the case was brought by buyers of chicken broilers, the issues reflect those raised by government enforcers eyeing anticompetitive conduct among food producers. The outcome of the trial that began this week in the buyers’ case against the lone remaining defendant, Sanderson Farms Inc., could prove critical for chicken producers looking to stay off regulators’ radar.

Poultry businesses have a “target on their back,” said Matthew DeFrancesco, partner with FisherBroyles, LLP in New York.

The trial comes seven years after plaintiffs sued the poultry companies. Other defendants have settled, including Tyson Foods Inc. for $221.5 million in 2011 and Pilgrim’s Pride Corp. for $75 million that same year.

The Sanderson case in the US District Court for the Northern District of Illinois may hinge on how well chicken buyers are able to prove circumstantial evidence of wrongdoing. They accused the poultry companies of conspiring with other chicken producers to limit supply and raise prices of chicken broilers using secret information from data-sharing service Agri Stats Inc. Broilers are chickens raised for meat consumption and slaughtered before the age of 13 weeks.

The trial comes at a time of enhanced government scrutiny in the food industry. The Department of Justice has taken legal action against several food producers in recent years. The former CEO of Bumble Bee Foods LLC, for example, was sent to prison as part of a federal antitrust investigation into the packaged seafood industry.

The Federal Trade Commission has also been keeping tabs on companies to ensure they aren’t using inflation as an excuse to raise prices. And the Biden administration has taken measures to combat rising food prices as part of broader efforts to crack down on “junk fees” charged by hotels and concert venues.

Yet inflation, a political liability for Biden ahead of an election year, inched up in August for food and several other categories.

“Antitrust is one of the tools they have to combat inflation, which is running rampant right now,” said DeFrancesco, also a professor at New York Law School. “Whenever you have clients sharing anything that is competitively sensitive or receiving it, you really need to have your radar up as a defense lawyer.”

Protein industry officials will also likely take a closer look at their information-sharing practices, particularly when it comes to relationships with third-party data providers such as Agri Stats, said Kathleen Bradish, acting president of the American Antitrust Institute.

“The fact that it’s gotten to this point with a case involving a third party like that could prompt folks to take a look at how the price-reporting in their own industry looks,” Bradish said. “How are their third parties doing their reporting? Are they being compliant?”

Trial Disputes

Brian Clark, attorney for the direct purchaser plaintiffs, told the jury Sept. 18 that Sanderson was a “ringleader” in a conspiracy to limit chicken supply during the 2008-2009 Great Recession, as well as from 2011 to 2012.

“Sanderson and its co-conspirators had an agreement or understanding to limit their chicken supply, and plaintiffs paid higher prices as a result,” said Clark, a partner with Lockridge Grindal Nauen PLLP.

Sanderson’s market share rose significantly from 2008 to 2012, he said.

“Sanderson Farms is going to point the finger elsewhere,” Clark said. “Much like those of us who have kids, when you get caught—a kid gets caught doing something, they’re going to say it was an accident because they didn’t mean to do that—because they know it was wrong.”

Chris Ondeck, attorney for Sanderson, disputed that argument, telling the jury that there was no such conspiracy and that the Mississippi-based chicken company has been falsely accused. “We’ll prove to you that Sanderson never agreed with anyone to produce less chicken,” stated Ondeck, a partner at Proskauer Rose LLP.

Chicken was the highest-consumed protein in the US as of last year, according to the National Chicken Council. There are about 30 federally inspected companies involved in raising, processing, and marketing chickens in the US, and each ensures “quality and consumer requirements at each step of the process,” the council said.

Fight to the End?

The case mirrors several criminal price-fixing cases brought against poultry companies that the Department of Defense ultimately lost because the agency failed to prove an agreement occurred between the producers.

Sanderson didn’t return inquiries for this story. But the company could be emboldened by those losses and feel it has enough of an argument to “fight to the end,” Bradish said.

Criminal cases, which can be brought only by the government, require that the crimes be proven “beyond a reasonable doubt,” with direct evidence of an agreement such as phone recordings of a call between two companies to fix prices.

Because criminal convictions often result in defendants going to jail, juries are very nervous and “don’t want to get it wrong,” Bradish said.

“The standard is extremely high,” DeFrancesco said. “The sentiment in the United States judicial system is that you never want to impose criminal penalties against someone who could possibly be innocent.”

Civil cases like the chicken broiler case, by contrast, require circumstantial evidence that a jury can infer or draw conclusions from. Juries tend to be less sympathetic when money—not jail time—is at stake, Bradish said.

Two other sets of plaintiffs who ‘indirectly’ purchased chicken broiler meat — either at a store or restaurant, or from a distributor — will kick off their trial in March 2024.

The case is In re Broiler Chicken Antitrust Litigation, N.D. Ill., No. 1:16-cv-08637.