The Justice Department may have something to say about how major food companies can use data supplied by a subsidiary of Eli Lilly.
The department’s chicken pricing investigation became a matter of public record through a Securities and Exchange Commission filing by Tyson Foods, Inc. on the company’s financial performance during its second quarter ended March 30.
Under the contingencies section of that filing, Tyson said the United States District Court for the Northern District of Illinois has, for pre-trial purposes, consolidated some similar class-action lawsuits as Broiler Chicken Antitrust Litigation, beginning with a Sept. 2, 2016 complaint, Maplevale Farms, Inc. v. Koch Foods Inc., et al.
“The currently operative complaints allege, among other things, that beginning in January 2008 the defendants conspired and combined to fix, raise, maintain, and stabilize the price of broiler chickens in violation of United States antitrust laws,” the Tyson earnings report said.
It quoted plaintiffs as saying in the suit’s defendants “manipulated and artificially inflated a widely used broiler price index, the Georgia Dock.”
Because Tyson was among the defendants, it said in the report “we believe we have substantial defenses to the claims made and intend to vigorously defend these matters.”
Agri Stats, the Fort Wayne company mentioned in the case, was not listed among its defendants, which in addition to Tyson and Koch included big names such as Pilgrim’s Pride Corp.; Perdue Farms, Inc.; and Sanderson Farms, Inc.
But under factual allegations, the complaint said “defendants relied upon co-conspirator Agri Stats to facilitate communications among defendants and to provide data and analysis critical to the monitoring and enforcement of defendants’ conspiracy.”
According to the complaint, Agri Stats generates broiler industry data that gets considerably more detailed than information made available by the U.S. Department of Agriculture.
The USDA and other entities publish aggregated broiler supply and pricing information on a weekly, monthly and annual basis, it said.
“But only Agri Stats provides defendants and other producers information with sufficient detail for an informed subscriber to determine with reasonable accuracy producer-specific production, cost, and general efficiency data,” it said.
“Agri Stats also collects from and reports back to defendants detailed statistics on almost every conceivable operating metric within the industry.”
Broilers are chickens raised for meat rather than egg production. They typically are slaughtered within 13 weeks and sold whole or in parts, fresh or frozen.
Broilers generated more than $30 billion in annual wholesale revenue and constituted 98% of the chicken meat sold domestically at the time the lawsuit was filed.
In the past the industry has been marked by boom and bust cycles because producers historically increased production when prices rose, then a resulting oversupply of chicken meat would bring its price back down.
But the complaint said customers could use Agri Stats data to influence what would happen with the broiler supply instead of just reacting to significant supply changes after the fact.
“The nature of broiler breeder flocks is that they predict future broiler supply, so by sharing such information in a way that permits company-by-company identification, defendants are in fact sharing future anticipated production information with one another, which clearly suggests high antitrust concern,” it said.
“Agri Stats purports to maintain the confidentiality and anonymity of individual companies’ data by providing each company a report identifying only that company’s specific broiler complexes by name, but not identifying by name other broiler producers’ complexes described in the report,” the complaint said.
However, “the specific type or size of a broiler house, breed of chick, average bird size, and production levels listed in Agri Stats data for complexes allows an industry insider to identify each defendant’s individual broiler complexes,” it said.
The complaint accused the defendants of unparalleled destruction of broiler breeder flocks in 2008, followed by a second wave of coordinated production cuts in 2011 and 2012 involving further broiler breeder flock destruction.
Cutting the broiler supply that way boosted wholesale broiler prices nearly 50% since 2008 despite 20% reductions in corn and soybean feed costs, it said.
The plaintiff class for the case includes customers who bought broilers from the defendants or their subsidiaries or affiliates, and the class action suit is seeking treble damages under U.S. antitrust laws.
Agri Stats did not respond to Business Weekly calls seeking comment on the class action lawsuit or the Justice Department investigation.