BROOKLYN (CN) — Beef buyers slapped the world’s largest meat processing and packing companies — Tyson Fresh, Cargill Meat Solutions, JBS S.A. and National Beef — with four antitrust lawsuits accusing them of colluding to fix the price of beef to improve their profit margins.
In lawsuits filed in Brooklyn federal court, beef purchasers including Quality Supply Chain Co-Op, Target Corporation, Gordon Food Service, Glazier Foods Company and BJ’s Wholesale Club say the packing companies conspired to reduce cattle purchases and slaughter volumes to increase their profit margins.
“In a competitive beef market, if a competitor reduces its prices paid for fed cattle, then other competitors would be expected to increase purchases, so they could boost output and increase their profit and market shares,” the purchasers say in their complaints.
But in 2015, the buyers say, the packing companies began to coordinate the prices and purchases of slaughtered cattle which allowed them to impact the price of beef over time.
“By collusively underpaying suppliers for fed cattle, and over time reducing beef output, defendants have been able to increase their margins and profits, confident that none of them would take volume from each other,” the purchasers say in their complaint.
They add that as a result of shrinking profit margins in 2014, the defendants decided to collectively reduce and manage their respective slaughter volumes which resulted in a reduction of the supply of beef.
“The artificial beef shortages ushered in a new era of supracompetitive prices paid by plaintiff and other direct purchasers of beef,” the purchasers say.
They point to witness testimony from a former JBS Swift Beef Company employee, who is identified as Jason F. In conversations with James Hooker, head of fabrication at Swift’s Texas plant, Jason F. said he was told about the defendants’ plan to reduce fed cattle prices.
“Hooker specifically admitted that the defendants had an agreement to reduce their purchase and slaughter volumes in response to what they perceived to be high cattle prices,” the plaintiffs say, citing a conversation Jason F. had with Hooker in 2015.
The beef buyers say that by reducing slaughter volumes across the second and third financial quarters of most years since 2015, the packing companies were able to expand their margins across several months. They also accuse the packing companies of jointly managing their purchases of domestic fed cash cattle by continuing to charge purchasers high prices despite lower prices paid to cattle producers.
By the end of 2021, the packing companies reported record margins in their beef business, according to the plaintiffs. Tyson Foods reported its beef business’ operating margin was nearly 18%, close to nine times its 2014 operating margin of 2.1%. Similarly, in 2021 JBS USA reported a 25.8% increase in net revenue compared to 2014.
In a March 29, 2020, letter to the U.S. Department of Justice, U.S. Senators Mike Rounds of South Dakota, Kevin Cramer and John Hoeven of North Dakota, and Steve Daines of Montana urged an investigation into price-fixing in the cattle market.
In a conference call, Rounds said the request was for the feds to “definitively answer whether a packer oligarchy exists within the cattle market and inherently creates an anti-competitive marketplace that unfairly disadvantages the cattle producer and the consumer.”
More calls for an investigation into the cattle market have mounted, including an April 2020 letter to then-Attorney General William Barr signed by cattle production trade associations from 23 states and a May 2020 letter signed by 11 state attorneys general.
The beef buyers are represented by Philip Iovieno and a raft of other attorneys from Cadwalder, Wickersham & Taft in New York.
They want a federal judge to declare the Sherman Act has been violated and award them treble damages, and to permanently bar the meat packers from continuing the price-fixing conspiracy.
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