Lawsuit: The Chicken Industry Created a Secret Cartel to Suppress Wages

Food processing plant ICE raid
ICE, Public Domain
Neil Munro

The nation’s chicken-processing companies created a covert cartel to suppress wages paid to many Americans and immigrants, according to a lawsuit by the Handley Farah & Anderson law firm in Washington D.C.

“For more than a decade, Defendants have conspired and combined to fix and depress the compensation paid to non-supervisory production and maintenance employees at chicken processing plants in violation of Section 1 of the Sherman [antitrust] Act,” says the lawsuit, which was filed August 30 in a Baltimore court.

“Defendants formed and implemented the conspiracy to reduce labor costs and maximize profits,” and should be required to pay damage to their “hundreds of thousands” of swindled employees, including many uneducated legal and illegal immigrants, the lawsuit says.

The lawsuit is aided by at least two unidentified witnesses from the industry, which includes Sanderson Farms, Koch Foods, Tysons Foods, Perdue, and some of the Georgia companies that were visited by federal law enforcement officials in early August. The 18 firms and their 200 processing plants deliver 90 percent of the chicken sold in the United States and employ 250,000 people, said the lawsuit.

The lawsuit echoes the salary-fixing lawsuit in Silicon Valley where Apple, Google, and other high-tech firms settled after being accused of conspiring to suppress wages for American computer graduates. The 64,000 victims only got $415 million in September 2015 for lost wages from 2004 to 2009. That payout was only $5,800 per victim.

The chicken lawsuit says:

Since January 1, 2009, Defendants have conspired to fix and depress the hourly wages and benefits paid to Class Members. Defendants have engaged in this unlawful conspiracy to maximize their profits by reducing labor costs, which have comprised a substantial share of each Defendant Processor’s total operating costs.

Defendants formed, implemented, monitored and enforced the conspiracy in three ways. First, senior executives of the Defendant Processors, including human resources executives and directors of compensation, held recurring “off the books” in-person meetings at the Hilton Sandestin Resort Hotel & Spa in Destin, Florida, during which they exchanged information about, discussed, agreed upon and ultimately fixed the wages and benefits of Class Members at artificially depressed levels …

Second, on a highly frequent basis, Defendant Processors exchanged detailed, current and non-public wage and benefits information through surveys conducted by Agri Stats and WMS. Each Defendant Processor subscribed to and partnered with Agri Stats to exchange and receive—on a monthly basis—effective hourly wage rates regarding categories of chicken processing plant workers from each Defendant Processor’s plants …

Third, managers located at Defendant Processors’ chicken processing plants engaged in bilateral and regional exchanges of wage and benefits information.

…

Multiple former human resources employees of the Defendant Processors have explained that senior executives at corporate headquarters exclusively set the wages and benefits of processing plant workers in a centralized fashion.

The companies’ collective efforts to  suppress wages boosted their profitability and stock values, according to the lawsuit:

On February 15, 2017, in an article titled “Is the Chicken Industry Rigged?,” Bloomberg Businessweek reported, “Armed with Agri Stats data, the biggest chicken producers have been enjoying an unprecedented era of stability and profitability. At Tyson, operating margins in the chicken division have risen sharply since 2009, when they were 1.6 percent, according to SEC filings. The next year they were up to 5.2 percent. After a brief dip, they climbed to 7.9 percent in 2014, an astounding 12 percent in 2015, and 11.9 percent in 2016. A similar trend has been under way at Pilgrim’s Pride, where operating margins went from 3.08 percent in 2012 to 14.02 percent in 2014 and 12.77 percent in 2015, according to data compiled by Bloomberg.[“]

…

A 2015 report published by Oxfam America about chicken processing plant workers titled “Lives on the Line” states, “Over the last 30 years or so, the real value of wages has declined dramatically—almost 40 percent since the 1980s. Meanwhile, compensation for poultry … executives is soaring: In just the last four years, compensation for Tyson’s chairman rose 260 percent to $8.8 million; compensation for Pilgrim’s president and chief executive officer rose 290 percent to $9.3 million.”

The conspiracy was helped by the companies’ ability to hire and fire many legal and illegal migrants, the lawsuit says:

Many of the workers recruited and hired by Defendant Processors are migrant workers, refugees, asylum-seekers, immigrants employed under EB3 visas, prison laborers, and participants in court-ordered substance abuse programs. In a 2015 report, Oxfam America wrote, “The poultry industry has a complicated history of tapping marginalized populations for its workforce. … Of the roughly 250,000 poultry workers in the US, most are minorities, immigrants, or refugees, and a significant percentage is female.”

The lawsuit follows a June 2019 lawsuit that charges the industry of conspiring to create monopoly prices:

The DOJ is currently investigating the chicken industry for engaging in anticompetitive conduct. In June 2019, the DOJ disclosed that the agency had launched a criminal investigation into whether chicken processors have violated the antitrust laws. Specifically, on June 21, 2019, the DOJ filed a motion requesting that the U.S. District Court for the Northern District of Illinois stay discovery in a civil class action alleging price-fixing by many of the Defendant Processers and other chicken processors. The DOJ explained that the stay was necessary “to protect the grand jury investigation” into anticompetitive conduct in the chicken industry.

Bloomberg reported that many companies in the lawsuit declined to comment. “We do not believe this suit has any merit,” Andrea Staub, a Perdue spokeswoman, told Bloomberg. “Our compensation philosophy is to pay fair and in some cases above average wages.”

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