Hormel, Smithfield, Tyson Face Suit Alleging Pork Cartel in U.S.

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By Eleanor Tyler

Hormel Foods Corp., Smithfield Foods Inc., and Tyson Foods Inc. are among the large U.S. pork producers alleged in a new lawsuit to have fixed pork prices to the detriment of consumers.

The class action filed June 28 in the U.S. District Court for the District of Minnesota is ostensibly on behalf of every consumer in the U.S. who bought pork in any form indirectly from the defendants since the start of 2009.

Because consumers would have bought pork through retail outlets rather than from big producers, the plaintiffs can’t seek treble damages under federal antitrust law. Instead, they seek injunctions under federal antitrust law and “treble damages under the antitrust laws, unfair competition laws, consumer protection laws, and unjust enrichment common laws of the several states,” according to the complaint.

“The pork industry rakes in $20 billion a year, and the companies involved in this investigation control the vast majority of the market,” plaintiffs firm Hagens Berman, which filed the action, said in a statement posted online about the complaint.

“The company is confident that any allegations are completely without merit,” Hormel told Bloomberg Law in a statement. “We intend to vigorously defend this lawsuit.”

The complaint alleges that the producers coordinated production and thereby pricing through an industry data company called Agri Stats Inc. Agri Stats collects and then disseminates to industry members disaggregated competitive information such as monthly operating profit, sales, production volumes, slaughter information, and other important information. The level of detail in pricing reports meant that “competitors could quickly decode the information of their erstwhile competitors,” which allowed coordination and helped police any cheating among cartel members, according to the complaint.

This is the same method that producers in the chicken broiler industry used to fix prices by stifling output, according to the complaint. In fact, the complaint alleges that Agri Stats marketed its services to the pork industry as a way to improve profitability through “benchmarking,” by which Agri Stats allegedly meant comparing production and financial information, citing increased profitability in broilers.

The key, the plaintiffs allege, is that Agri Stats services allowed big integrated pork producers to calculate each other’s future production in addition to current production. The plaintiffs allege that prices increased to consumers as a result of the alleged conspiracy.

The case is assigned to Judge Susan Richard Nelson.

The case is Duryea v. Agri Stats Inc. , D. Minn., No. 18-cv-01776, 6/28/18 .

To contact the reporter on this story: Eleanor Tyler in Washington at etyler@bloomberglaw.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com

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