Sysco files suit over rising tuna prices
The Houston-based food-distribution giant is trying to take a bite out of the nation’s three largest tuna processors — Bumble Bee, StarKist and Chicken of the Sea.
Sysco Corp., the big fish of food distributors, is trying to take a bite out of the nation’s three largest tuna processors.
The Houston-based supplier of food to school districts, hospitals and restaurants sued the owners of Bumble Bee, StarKist and Chicken of the Sea for allegedly coming up with a pricefixing scheme to boost prices despite a drop in demand for tuna sold in cans and pouches. The three brands supply 80 percent of the nation’s processed tuna, according to Sysco, which filed its lawsuit earlier this week in federal court in Houston.
Sysco alleged that the three companies secretly agreed to shrink the size of their tuna cans, raise prices and reduce production of the school lunch staple as a way to increase their profits. Sysco also charged that the tuna companies promised not to offer promotional prices to customers, according to the lawsuit.
StarKist would not comment on the lawsuit. Bumble Bee and Chicken of the Sea did not return calls for comment.
Sysco believes it has the processors on the hook because tuna companies and executives have pleaded guilty in federal court to fixing tuna prices between 2011 and 2013, including Bumble Bee and two of its former executives. Bumble Bee agreed to pay a criminal fine of $25 million. A former sales executive at StarKist also pleaded guilty to his role in the price-fixing scheme.
StarKist has cooperated and is continuing to cooperate with a Justice Department investigation into the packaged seafood industry, the company said in a statement.
Darren Bush, professor of law at the University of Houston Law Center who specializes in antitrust issues, said the guilty pleas make its pretty obvious something fishy is happening in
the industry. And with the guilty pleas in place, Bush said, it becomes more a matter of proving damages for Sysco than having to prove the underlying conspiracy.
“Sysco believes they were scaling back competition,” said Bush, who worked as a Justice Department lawyer investigating antitrust violations.
Cupboard staple
Canned tuna has been a staple of American cupboards for decades. It’s cheap, has a long shelf life, and to many, especially schoolchildren, it tastes good. Almost half of all households serve tuna each month, according to the National Fisheries Institute. And 52 percent of the time, it’s tuna sandwiches.
But one can of tuna appears to be pretty much like the next. Even though tuna producers have spent millions of dollars over the years trying to differentiate their flaky and chunky offerings through advertising campaigns like Charlie, StarKist’s cartoon mascot, there isn’t much difference in what comes out of the cans, especially to price-sensitive customers.
Commodity item
Sysco argued in the lawsuit that processed tuna is a commodity item, so if one brand increases prices, consumers will buy another. And any company that prices itself above its competitors typically loses market share, according to Sysco.
At the same time, canned tuna has lost favor. Tuna consumption peaked in the U.S. in 1990 at nearly 4 pounds per person, sliding to 2.5 pounds two decades later. Such market forces should have pressured processors to lower prices to gain market share, but the opposite happened, Sysco said in the lawsuit. As a result, Americans fished deeper in their pockets to buy tuna.
Sysco said it began to suspect price-fixing among tuna processors as early as 2004, although many of the other details of the case were blacked out in court papers available to the public.
Sysco isn’t dishing, either. A representative said Sysco would not comment.
Sysco is seeking unspecified damages. In the end, the company said in the lawsuit, it bought hundreds of millions of dollars of tuna at artificially inflated prices between 2004 and 2015. And that’s no fish story.