The United States Department of Justice (DOJ) filed a civil antitrust lawsuit against Cargill, Sanderson Farms and Wayne Farms, alleging the three companies took part in a long-running conspiracy to exchange information about wages and benefits for poultry processing plant workers and engaging in deceptive practices regarding the payment of contract farmers.
The lawsuit was filed in the U.S. District Court for the District of Maryland, just one business day after the three companies became affiliated. On July 22, a joint venture between Cargill and Continental Grain Company, the owner of Wayne Farms, finalized its acquisition of Sanderson Farms, merging Wayne Farms and Sanderson Farms into the combined company, Wayne-Sanderson Farms.
According to a press release from the DOJ, the lawsuit alleges that the poultry processors violated the Packers and Stockyards Act by engaging in deceptive practices associated with the tournament system for grower compensation. The DOJ also filed proposed consent decrees with the three defendants, as well as the consulting firm Webber, Meng, Sahl and Company (WMS), and the firm’s president, G. Jonathan Meng.
If approved by the court, the proposed consent decree with data consulting firm WMS would ban WMS from providing surveys or any other services that facilitate the sharing of competitively sensitive information in any industry. Jonathan Meng, WMS’s President, is also subject to the terms of the consent decree in his individual capacity.
The proposed consent decree with defendant poultry processors Cargill, Sanderson Farms and Wayne Farms would prohibit them from sharing competitively sensitive information about poultry processing plant workers’ compensation. It would also:
- Impose on the poultry processors a court-appointed compliance monitor who, for the next decade, will ensure their compliance with the terms of the proposed decree;
- Grant the court-appointed monitor broad authority to ensure their compliance with all federal antitrust laws as they relate to their poultry processing facilities, workers at their poultry processing plants, chicken growers, integrated poultry feed, hatcheries, transportation of poultry and poultry products, and the sale of poultry and submit regular reports on the processors’ antitrust compliance;
- Permit the Antitrust Division to inspect the processors’ facilities and interview their employees to ensure compliance with the consent decree; and
- Require the companies to commit to pay $84.8 million, collectively, in restitution for poultry processing plant workers who were harmed by the information exchange conspiracy.
These terms would expire 10 years after the consent decree is approved by the court.
Additionally, the proposed consent decree with Sanderson Farms and Wayne Farms would resolve alleged violations of the Packers and Stockyards Act, which prohibits, among other things, deceptive practices in poultry markets. As alleged in the complaint, poultry processors use a “tournament system” to adjust a chicken grower’s “base payment” based on how well the grower performs relative to other growers. The poultry processors, however, control nearly all the key inputs, including the chicks delivered to the growers and their poultry feed, that often determine a grower’s success. In allocating this financial risk to their chicken growers, Sanderson Farms and Wayne Farms failed to provide information that would have allowed their growers to evaluate and manage their financial risk, the DOJ alleges. The proposed consent decree would:
- Prevent Sanderson Farms and Wayne Farms from penalizing chicken growers by reducing their base payments as a result of relative performance, while still allowing for incentive, bonus and other types of payments to growers;
- Require expanded information disclosures in grower contracts, consistent with proposed transparency rules set out by the USDA; and
- Prohibit retaliation against growers who raise antitrust concerns with the court-appointed compliance monitor or the government.
The lawsuit is part of a broader investigation into possible anticompetitive labor market actions in the poultry industry.