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Cargill, JBS, Top Meatpackers Accused of Driving Up Prices (1)

June 8, 2020, 6:15 PMUpdated: June 8, 2020, 7:14 PM

Cargill Inc., JBS USA, National Beef Packing Co., and Tyson Foods were accused in Minneapolis federal court of conspiring to inflate the price of beef through an industrywide scheme that’s coming to light thanks to federal investigations prompted in part by shortages during the coronavirus pandemic.

“While these investigations apparently were triggered most immediately by a spike in beef prices since the Covid-19 outbreak in the U.S., this spike is only one manifestation of defendants’ conspiracy,” the complaint says.

The antitrust suit is part of a wave of price-fixing cases involving livestock and protein—including chicken, pork, turkey, tuna, and salmon—amid calls from top Democrats to break up “big ag.”

It was filed by a defunct Chicago groceries co-op in the U.S. District Court for the District of Minnesota, two days after the Justice Department charged the CEO of JBS subsidiary Pilgrim’s Pride Corp. with conspiring to fix chicken prices.

The proposed class action accuses the four meatpacking giants, which together control more than 80% of the industry, of leveraging their “gatekeeping” role atop the concentrated, inelastic wholesale market “to collusively control both upstream and downstream beef pricing.”

Before 2015, cattle and beef prices “predictably moved in tandem,” given that “beef is simply processed cattle,” according to the complaint.

But the meatpackers allegedly conspired starting that year to widen the “meat margin"—the spread between what they paid for cattle and what they got for beef—to “unprecedented” levels by reducing purchases and running their plants at below capacity.

“These practices created surpluses in the cattle market and shortages in the wholesale beef market,” the suit says.

The fact that all four companies kept production low despite plunging cattle costs and skyrocketing beef prices strongly implies a conspiracy, according to the complaint.

“In a beef market free of collusion, if a competitor reduces its purchase of cattle, other competitors quickly pick up the slack” to “satisfy unmet demand,” the suit says.

Its claims echo an ongoing case focused mainly on the cost of cattle.

Cause of Action: Section 1 of the Sherman Act.

Relief: Class certification, an injunction, treble damages, costs, fees, and interest.

Potential Class Size: All direct purchasers since 2015.

Response: A Cargill spokesman characterized the suit as a tagalong Monday, but declined to comment further. JBS, National Beef, and Tyson didn’t immediately respond to requests for comment.

Attorneys: The plaintiff is represented by Heins, Mills & Olson LLP, Hartley LLP, Karon LLC, and Freed Kanner London & Millen LLC.

The case is Central Grocers Inc., D. Minn., No. 20-cv-1319, complaint filed 6/6/20.

(Updates 15th paragraph to add Cargill's response.)

To contact the reporter on this story: Mike Leonard in Washington at mleonard@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Patrick L. Gregory at pgregory@bloomberglaw.com

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