3 poultry producers to pay $85M in fines
DOJ says companies conspired to keep workers’ wages low
U.S. poultry producers Cargill, Sanderson Farms and Wayne Farms agreed to pay $84.8 million restitution for conspiring to lower wages for workers at chicken slaughterhouses as part of a settlement with the Justice Department.
The U.S. producers also agreed to changes in how they pay poultry growers under the proposed agreement, which requires court approval to be finalized. Cargill, Sanderson and Wayne Farms would be barred from cutting farmer pay based on performance and be required to offer growers more information on how they calculate compensation, while also being prohibited from sharing competitively sensitive information about plant workers’ compensation.
The settlement is the latest action by federal antitrust enforcers in an effort to crack down on anti-competitive practices in the American meat industry. T
The suit comes as Cargill and Continental Grain, of which Wayne Farms is a subsidiary, formed a joint venture to acquire Sanderson Farms, paying $203 per share in cash for a company that last year processed more than 4.8 billion pounds of meat.
The companies plan to combine Sanderson Farms with Wayne Farms to form a new, privately held poultry business. Operations will include poultry processing plants and prepared foods plants across Alabama, Arkansas, Georgia, Louisiana, Mississippi, North Carolina, and Texas.
“The merits of this deal outweigh the potential costs of prolonged litigation and any further distraction to our collective efforts to feed communities across the U.S.,” Cargill spokesman Daniel Sullivan said Monday in an emailed statement. Cargill agreed to pay $15 million of the settlement, which includes $38.3 million for Sanderson and $31.5 million for Wayne Farms. Sanderson and Wayne Farms didn’t respond to requests for comment.
The settlement is designed to resolve a lawsuit filed by the Justice Department that accused the poultry producers of conspiring for at least two decades on collaborating and assisting competitors in making decisions about workers compensation, including wages and benefits, and exchanging information about current and future compensation plans.
The processors also engaged in “deceptive practices” under the so-called tournament system, where growers are penalized if they underperform, according to the complaint filed Monday with the federal court in Maryland.
The tournament system pits growers against each other and ranks them according to how much weight their bird gains per amount of feed used, with belowaverage producers getting reduced compensation and aboveaverage producers receiving more. Farmers have complained the rankings are often opaque, open to abuse, and subject to factors more in control of the processor than themselves, including the quality of feed and chicks they receive from the chicken companies.
The Biden administration has targeted the poultry industry’s tournament system as a first step in trying to level the playing field for farmers in a food sector dominated by large processing companies.
The Department of Agriculture proposed new rules in May that would require greater transparency from processors who use the system to compensate poultry growers, who typically receive chicks and feed from the processors.
Record-high prices for meat such as chicken breasts have contributed to the worst food inflation in four decades, stoking criticism by politicians in Washington that the concentrated meat sector harms both farmers and consumers.
Sen. Elizabeth Warren, a Massachusetts Democrat who had urged the Justice Department to block the Sanderson-Wayne merger, praised the settlement as “significant progress.”
Farm Action, which advocates to stop corporate monopolies in food, said that while it was disappointed in the merger, the Justice Department settlement would guarantee a base price for each chicken and implement bonuses.
“By negotiating a consent decree backed by the authority of a court-appointed antitrust monitor, the DOJ has taken critical steps for justice for farmers and workers,” the group said in a statement.