The U.S. Department of Justice (DOJ) filed a civil lawsuit against Koch Foods, alleging that the company anticompetitively and unfairly required contract growers to pay a termination penalty if they would stop raising chickens for Koch Foods and switch to a rival poultry company.
At the same time, the DOJ filed a proposed consent decree that would prohibit the company from penalizing growers should they cease raising poultry for Koch Foods and enter into a contract with another company. The consent decree also calls for Koch Foods to return such certain expenses, fees and penalties earlier imposed on growers under such circumstances.
The DOJ alleged that Koch had deterred farmers from switching to other processors by requiring them to repay a substantial share of their income as a penalty if they terminated their contract. As alleged in the complaint, Koch’s termination penalty, which varies across chicken growers, amounted to more than half of most growers’ total annual take-home income and sometimes more than one year’s entire take-home earnings.
The DOJ further alleged that Koch Foods used the threat of the termination penalty to discourage growers from switching to Koch’s competitors and sued or threatened to sue more than a dozen family farmers who tried to switch to a Koch competitor.
Such alleged actions are in violation of Sherman Act and the Packers and Stockyards Act, the DOJ stated.
“The Packers and Stockyards Act stands for fairness, and that’s what this enforcement action today delivers,” said Senior Advisor for Fair and Competitive Markets Andy Green of the Department of Agriculture (USDA). “This action to protect growers’ right to compete signals the joint commitment of the USDA and Justice Department to open competitive markets.”
Headquartered in Park Ridge, Illinois, Koch Foods also has operations in Alabama, Georgia, Illinois, Mississippi, and Tennessee, according to the WATTPoultry.com Top Poultry Companies Database. Koch Foods operates eight slaughter plants, four further processing plants, seven hatcheries and six feed mills. During the past year, it processed 62.1 million pounds of ready-to-cook chicken on a weekly basis.
