• by Thom Forbes  @tforbes, June 4, 2020

The U.S. Justice Department yesterday charged two executives of Pilgrim Pride and two at Claxton Poultry Farms with conspiring to rig bids and fix prices on the price of broiler chickens raised for human consumption and sold to restaurants and grocery stores.

Pilgrim’s Pride CEO, Jayson Penn, and a former vice president, Roger Austin, were indicted by a federal grand jury in U.S. District Court in Denver, as were Claxton Poultry Farms president Mikell Fries and Scott Brady, who joined Claxton in 2012 from Pilgrim’s Pride.

“The indictment, filled with alleged instances of cozy discussions about pricing and text messages about holding the line on bids to customers, charged the executives with colluding to fix prices and rig bids from 2012 to 2017. The charges also referenced other unnamed executives and chicken suppliers and suggested the sharing of pricing information extended beyond the alleged discussions between Pilgrim’s and Claxton,” Brent Kendall and Jacob Bunge write  for The Wall Street Journal.

“Neither Pilgrim’s nor Messrs. Penn and Austin responded to requests for comment. A Claxton spokesman declined to comment. The companies have previously denied allegations of coordinating prices,” they add.

“In one text exchange, Brady allegedly told Fries on Nov. 13, 2012 that he had talked to Austin and found out that Pilgrim’s Pride was 3 cents higher on an eight-piece bone-in broiler chicken. Brady said Austin wanted Claxton to raise its prices,” report  the AP’s Dee-Ann Durbin and Colleen Slevin. 

“‘Tell him we are trying!’ Fries responded, according to the indictment.”

The criminal investigation into the industry, which was launched  in June, 2019, is ongoing. The charges carry a statutory maximum penalty of 10 years in prison and a $1 million fine. The maximum fine may be increased to twice the gain derived from the crime, or twice the loss suffered by victims, if either amount is greater than $1 million.

“Particularly in times of global crisis, the division remains committed to prosecuting crimes intended to raise the prices Americans pay for food,” stated  assistant attorney general Makan Delrahim of the Department of Justice’s antitrust division in a news release announcing the indictments. “Executives who cheat American consumers, restauranteurs and grocers, and compromise the integrity of our food supply, will be held responsible for their actions.”

Pilgrim’s Pride, which is based in Greeley, Colorado, is majority-owned by Brazilian meat giant JBS and is the second-largest U.S. chicken company behind Tyson. Claxton Poultry Farms is based in Claxton, Georgia.

“Wholesale chicken prices increased by 11% from 2012 through 2018 and fell by 27% from 2019 to 2020, according to Department of Agriculture data on national prices. Pilgrim’s Pride represents about 17% of the U.S. chicken market and produces about 13 billion pounds of chicken annually. Claxton Poultry Farms produces about 300 million pounds of chicken annually,” Alex Gangitano writes  for The Hill.

“Broiler chickens are a sizable part of Georgia’s economy. They are the state’s top agricultural commodity, valued at roughly $4.5 billion in 2020, according to the University of Georgia’s Center for Agribusiness and Economic Development. Georgia was the country’s top producer of such poultry in 2018, according to the National Agricultural Statistics Service,” Tamar Hallerman writes  for The Atlanta Journal-Constitution, pointing out that Pilgrim’s Pride also has several processing facilities in the state.

“Accusations of collusion have dogged the U.S. chicken industry since 2016, when Maplevale Farms, a food service firm in upstate New York, filed a lawsuit saying that Tyson Foods, Pilgrim’s Pride, Sanderson Farms, Perdue Farms and other companies had conspired to fix the price of broiler chickens,” Cade Metz writes  for The New York Times.

“Maplevale claimed that Tyson and Pilgrim’s, the country’s two largest producers, led these companies in a scheme to destroy hens that bred new chickens, causing a significant increase in prices. The suit asserts that from 2008 to 2016, the wholesale price of broiler chicken rose 50%, despite a reduction in some of the key costs of chicken breeding, including corn and soybeans,” Metz continues.

“Last year, Sysco and US Foods, two of the largest food distributors in the United States, also sued Tyson and other chicken producers, claiming they had conspired to fix prices across a $65 billion industry,” Metz adds.

Meanwhile, “last month, attorneys general for 11 Midwestern states urged the Justice Department to investigate potential price fixing by meatpackers. And in an April tweet, Agriculture secretary Sonny Perdue confirmed that the Department of Agriculture was investigating why ranchers are getting low prices for cattle while U.S. consumers are paying record prices for beef,” the AP’s Durbin and Slevin write.