Incidents of price fixing in the food industry aren’t new; but 2020 saw federal regulators move aggressively to build cases and prosecute perpetrators.
In June, a federal grand jury in the US District Court in Colorado indicted Jayson Penn, former chief executive officer of Pilgrim’s Pride Corp.; Roger Austin, vice president of fresh foodservice at Pilgrim’s; Mikell Fries, president of Claxton Poultry; and Scott Brady, vice president of national accounts at Claxton Poultry.
In a complaint filed by the US Department of Justice (DOJ) the four executives allegedly had a continuing agreement to “...rig bids and to fix, maintain, stabilize, and raise prices and other price-related terms for broiler chicken products sold in the United States,” from as early as 2012 until at least early 2017.
The court document contained excerpts of text messages between the co-conspirators and suppliers negotiating prices for dark meat.
Following the indictment, Pilgrim’s Pride announced Penn was taking a paid leave of absence and Fabio Sandri would serve as interim CEO while Penn mounted a legal defense.
“Pilgrim’s operates with the highest standards of integrity and is committed to free and open competition that benefits both customers and consumers,” said Gilberto Tomazoni, chairman of Pilgrim’s board of directors. “The board takes the recent allegations very seriously and believes it is in the best interests of both Jayson and the company that he is given the opportunity to focus on his legal defense during this time. Jayson has built a strong leadership team at Pilgrim’s. The board has complete confidence in the ability of Fabio and the team to continue to implement Pilgrim’s strategy and successfully run day-to-day operations.”
But by September, the company had promoted Sandri to CEO, and Penn was no longer with the company.
Defendants list grows
Less than five months later, a grand jury indicted six additional defendants as a result of the DOJ’s ongoing investigation:
- William Wade Lovette, former president and CEO of JBS S.A. unit Pilgrim’s Pride Corp., who was succeeded by Penn;
- Timothy R. Mulrenin, director of National Account Sales at Salisbury, Md.-based Perdue Farms and a former sales executive at Tyson Foods Inc.;
- William Vincent Kantola, vice president, foodservice at Koch Foods Inc.;
- Jimmie Lee Little, described in the complaint as “a sales director” at Pilgrim’s Pride, also was charged with “making false statements and obstruction of justice”;
- Gary Brian Roberts, vice president of sales and marketing at Case Farms and former vice president, National Accounts at Tyson Foods Inc. Roberts supervised Mulrenin, according to the complaint.; and
- Rickie Patterson Blake, described in the complaint as “a director and manager” at George’s Inc.
The previous indictment against Penn, Austin, Fries and Brady, pegged 2012 until at least 2017 as the timeframe of the conspiracy. The superseding indictment, which takes the place of the previous indictment, charges the 10 executives and employees for their participation in a conspiracy to fix prices and rig bids for broiler chicken products from at least 2012 until at least early 2019.
The superseding indictment also included additional allegations against Penn, Austin, Fries and Brady.
“The division will not tolerate collusion that inflates prices American shoppers and diners pay for food,” said Assistant Attorney General Makan Delrahim of the DOJ’s Antitrust Division. “Executives who choose collusion over competition will be held to account for schemes that cheat consumers and corrupt our competitive markets. The division will also continue to charge those who knowingly lie to our law enforcement partners and obstruct our investigations – such conduct undermines our criminal justice system and will be prosecuted to the fullest extent of the law.”
The DOJ’s strategy has been to hold individuals accountable for anticompetitive business practices. For example, Christopher Lischewski, the former CEO of Bumble Bee Foods LLC, was charged in May 2018 and found guilty of a single count of participating in a conspiracy to fix prices of canned tuna after a four-week trial. He was sentenced to 40 months in prison and fined $100,000 for his role in the scheme.
Federal prosecutors adopted a similar strategy in their investigation of price fixing in the poultry industry – pursuing individuals while the companies negotiated plea agreements.
In June, before news of the second indictment broke, Springdale, Ark.-based Tyson Foods Inc. announced the company’s cooperation with a DOJ investigation into price fixing under terms established by the Antitrust Division’s Leniency Program. Under the terms of the program the first corporation or individual to report their antitrust activity and cooperate in the agency’s investigation of the activity can avoid criminal conviction, fines, and prison sentences if program requirements are met.
“Tyson took appropriate actions to address the internal issues and has been fully cooperating with the DOJ as part of its application for leniency under the DOJ’s Corporate Leniency Program,” Tyson said. “A formal grant of leniency will mean that neither the company nor any of its employees will face criminal fines, jail time or prosecution.
“Our swift and decisive actions demonstrate our steadfast commitment to treating suppliers, customers and partners with integrity and to fostering a free and fair competitive environment that not only benefits consumers but makes Tyson Foods better,” the company said.
In October, Pilgrim’s Pride entered a plea agreement with the DOJ over charges the poultry processor engaged in a price fixing scheme and agreed to pay $110.5 million. The DOJ’s Antitrust Division agreed that no further charges would be brought in the case against Pilgrim’s. The United States District Court of Colorado must approve the agreement.
“Pilgrim’s is committed to fair and honest competition in compliance with US antitrust laws,” Sandri said. “We are encouraged that today’s agreement concludes the Antitrust Division’s investigation into Pilgrim’s, providing certainty regarding this matter to our team members, suppliers, customers and shareholders.”
No protein spared
The most dramatic developments have occurred in the poultry segment. But claims of price fixing have hit the beef, pork and turkey segments too.
For example, in June, 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 – sought class-action status for a lawsuit that claims four major meat packers conspired to manipulate beef prices paid by wholesale customers. Samuels filed the complaint in the US District Court for Minnesota. Defendants in the lawsuit are Cargill, JBS USA Food Co. Holdings, National Beef Packing Co. and Tyson Foods Inc. All four companies are under scrutiny by the DOJ.
Sarah Little, spokesperson for the North American Meat Institute (NAMI), said, “We continue to believe these lawsuits are unfounded and ignore the economics of the marketplace. The meat industry has been subject to careful scrutiny in the past, always with the conclusion there has been no evidence of collusion.”