A major grocery chain is the latest company to allege leading poultry producers manipulated chicken prices.

Bi-Lo Holdings LLC, which also operates Winn-Dixie Stores Inc., filed a complaint Jan. 12 in federal court in Chicago, alleging producers and related businesses “conspired and combined to fix, raise, maintain, and stabilize the price of” broiler chickens, which constitute roughly 98 percent of all chicken meat sold in the United States.

The named defendants — which the complaint said are the leading suppliers of broilers in a $30 million wholesale market — include Park Ridge-based Koch Foods, Arkansas-based Tyson Foods, Colorado-based Pilgrim’s Pride, Maryland-based Perdue Farms and Mississippi-based Sanderson Farms, as well as others. In all, 15 primary defendants are named, as well as numerous affiliated companies.

There are nearly 700 Bi-Lo and Winn-Dixie stores in the southeastern U.S. Bi-Lo bought Winn-Dixie for $530 million in 2012; the company is headquartered in Jacksonville, Fla.

The allegations reflect earlier complaints against most of the same defendants, notably those from New York-based Maplevale, a leading food service distributor. Broilers are raised to be slaughtered before reaching 13 weeks, and the defendants control about 90 percent of the market. Up until 2008, the complaint stated, broiler prices were “marked by boom and bust cycles” as producers responded to rising prices by increasing production. Eventually an oversupply led to price drops.

In 2007, the complaint alleged, Pilgrim’s and Tyson tried to cut production levels enough to drive up prices. Although they control 40 percent of the market, the other suppliers allegedly increased production and prices remained low. In January 2008, Pilgrim’s and Tyson “made clear to the broiler industry that neither would continue to cut production while their competitors used the opportunity to take away their market share.”

That, the grocers alleged, was the first step toward collusion. They say the defendants destroyed breeder hens, reducing the egg supply, then “made a second wave of coordinated production cuts in 2011 and 2012.” They also allegedly exported excess breeder flocks to Mexico. As a result, wholesale prices have jumped 50 percent since 2008, while production costs — primarily corn and soybeans — fell between 20 and 23 percent.

As with the Maplevale complaint, the grocers allege the poultry producers relied on a private publication known as Agri-Stats, available only to the producers and which regularly updates the conditions of the poultry market, to privately share information to artificially constrict supply. The grocers say broiler production “costs fell significantly” from late 2014 into 2016, and although “economic theory would indicate that in a competitive market, all else being equal, broiler prices similarly would fall,” the wholesale prices “remained artificially inflated.”

The complaint offered copious data on the structure and characteristics of the broiler market of past and present, showing its high concentration, significant consolidation and a history of government investigation and actions that rise to the level of collusion. It further detailed the ways in which the companies worked to suppress supply in an effort to preserve pricing levels, including through trade associations, investor conference calls and allowing each other to tour supposedly competing broiler plants.

“While such tours were often framed as ‘best practices’ information exchanges,” the complaint said, “they permitted the opportunity to conspire among senior executives.”

In addition to a jury trial, the grocers want a court to confirm the defendants violated the Sherman Anti-Trust Act and to award damages and legal fees. The grocers also explained why they feel their claims are not barred by statutory limitations, noting they were unaware of the alleged activity until Maplevale filed its direct purchaser class action in September 2016 and detailing steps producers took to conceal the alleged scheme. 

Representing Bi-Lo and Winn-Dixie in the matter is the Chicago firm of Ahern & Associates.

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