MINNEAPOLIS – The trustee for a bankrupt grocery co-op is seeking class-action status for a lawsuit that claims four major meat packers conspired to manipulate beef prices paid by wholesale customers. The plaintiff seeks treble damages and injunctive relief and demanded a jury trial.

Howard B. Samuels, Chapter 7 trustee for the bankruptcy estates of Central Grocers Inc., Strack and Van Til Super Market Inc. and SVT LLC — collectively known as Central Grocers — filed the complaint on June 6 in US District Court for Minnesota. The defendants in the lawsuit are Cargill, JBS USA Food Co. Holdings, National Beef Packing Co. and Tyson Foods Inc. All four companies currently are under investigation by the US Department of Justice.

The complaint alleges that the four processors conspired to artificially inflate domestic beef prices paid by direct purchasers such as Central Grocers and other potential class members. The principal means by which the companies fixed prices for beef was to artificially restrict the supply of beef entering the supply chain, the complaint alleges. The plaintiffs claim to have direct evidence of this practice which started in 2015 and continues today.

The complaint cites a witness (Witness 1) who says the companies periodically agreed to reduce beef cattle slaughter volumes which resulted in wholesale prices above competitive levels.

“Witness 1 is a former employee of one of the defendants (Defendant 1). He worked for this defendant as quality assurance officer (QA) at its slaughter plants in the Texas Panhandle/Western Kansas region for over 10 years until his employment ended in 2018.

“During the Class Period, Witness 1 acted as a head QA with primary responsibility for plant kill floor, hotboxes, and coolers.”

The court document states that Witness 1 learned of the companies’ agreement to reduce cattle slaughter from a fabrication manager at the plant where he worked.

The companies employed other practices to constrain the supply of cattle heading to slaughter, the court document states.

“…tactics including purchasing fewer cattle than a competitive market would otherwise demand and running their processing plants at less than available capacity. These practices created surpluses in the cattle market and shortages in the wholesale beef market. These artificial conditions, in turn, drove down the prices Defendants pay for cattle and boosted the prices Defendants command for beef. The result intended and achieved by defendants has been higher profit margins (or “meat margins”).

Furthermore, executives and other employees routinely exchanged supply, pricing and other competitively sensitive information by selling beef to each other, the complaint states.

“In these buyer-seller relationships, defendants were each other’s competitors and customers, thus allowing defendants to share information that competitive businesses would conceal from each other,” the complaint said.

Meetings between executives and key employees also facilitated the collusion, according to the complaint.

“Trade association conferences and other industry events offer convenient opportunities to exchange information, plans and strategies, and build relationships. As described throughout this complaint, defendants seized these opportunities to further their collusive supply restrictions.”

Cargill, JBS USA Food Company Holdings, National Beef Packing Company and Tyson Foods Inc. declined to comment on the DOJ investigation, but the lawsuit characterized the federal probe as only one instance of the alleged price-fixing scheme.

“Both the US Department of Justice (DOJ) and the US Department of Agriculture (USDA) recently launched investigations into whether defendants unlawfully fixed beef prices in the United States,” the complaint said. “Although the DOJ has not yet publicly confirmed its investigation, news sources reported on June 4, 2020, that the Department’s Antitrust Division sent a civil investigative demand to each of the Defendants seeking information about their pricing practices.

“While these investigations apparently were triggered most immediately by a spike in beef prices since the COVID-19 outbreak in the US, this spike is only one manifestation of defendants’ conspiracy.”

Central Grocers, Joliet, Ill., filed for Chapter 11 bankruptcy in 2017 after 100 years in business. The grocery cooperative served as a wholesale service for hundreds of independent grocers in the Chicago area.

In November of 2019, Samuels filed a lawsuit against former directors and officers of Central Grocers seeking more than $80 million in damages.