Department of Justice files lawsuit against Sanderson Farms and others

It is alleged that two of the poultry processors engaged in deceptive practices known as the “tournament system” to adjust a chicken grower’s base payment based on how well the grower performs relative to other growers, which is a violation of the Packers and Stockyards Act.

In addition, the DOJ filed proposed consent decrees with Sanderson Farms, Webber, Meng, Sahl, and Company (WMS) and its President, G. Jonathan Meng, as well as Cargill Inc., Cargill Meat Solutions Corporation, and Wayne Farms LLC.

“Through a brazen scheme to exchange wage and benefit information, these poultry processors stifled competition and harmed a generation of plant workers who face demanding and sometimes dangerous conditions to earn a living,” said Principal Deputy Assistant Attorney General Doha Mekki of the Justice Department’s Antitrust Division. “Today’s action puts companies and individuals on notice: the Antitrust Division will use all of its available legal authorities to address anticompetitive conduct that harms consumers, workers, farmers, and other American producers.”

If the consent decree is approved by the court, WMS would be banned from providing surveys or other services that facilitate the sharing of competitively sensitive information in any industry. Jonathan Meng, WMS’s President, will also be held subject to the terms of the consent decree in his individual capacity.

The proposed consent decree with processors Cargill, Sanderson Farms, and Wayne Farms would prohibit them from sharing competitively sensitive information about poultry processing plant workers’ pay. It would also:

• Impose on the poultry processors a court-appointed compliance monitor who, for the next decade, will ensure their compliance with the terms of the proposed decree.
• Grant the court-appointed monitor broad authority to ensure their compliance with all federal antitrust laws as they relate to their poultry processing facilities, workers at their poultry processing plants, chicken growers, integrated poultry feed, hatcheries, transportation of poultry and poultry products, and the sale of poultry and submit regular reports on the processors’ antitrust compliance.
• Permit the Antitrust Division to inspect the processors’ facilities and interview their employees to ensure compliance with the consent decree.
• Require the companies to commit to pay $84.8 million, collectively, in restitution for poultry processing plant workers who were harmed by the information exchange conspiracy.

These terms would expire 10 years after the consent decree is approved by the court.

Further, the proposed consent decree with Sanderson Farms and Wayne Farms would resolve alleged violations of the Packers and Stockyards Act, which prohibits, among other things, deceptive practices in poultry markets. In allocating this financial risk to their chicken growers, Sanderson Farms and Wayne Farms failed to provide information that would have allowed their growers to evaluate and manage their financial risk. The proposed consent decree would:

• Prevent Sanderson Farms and Wayne Farms from penalizing chicken growers by reducing their base payments as a result of relative performance, while still allowing for incentives, bonuses, and other types of payments to growers.
• Require expanded information disclosures in grower contracts, consistent with proposed transparency rules set out by the USDA.
• Prohibit retaliation against growers who raise antitrust concerns with the court-appointed compliance monitor or the government.

“I’m so pleased to see the close partnership between the Department of Agriculture (USDA) and the Justice Department has led to enforcement that is good for farmers,” said USDA Senior Advisor for Fair and Competitive Markets Andy Green. “This resolution yields significant reforms to the poultry tournament system, including ending one of its most troubling aspects around deceptive base prices, and enhancing transparency in contracting, earnings, and inputs that will protect and benefit growers — as USDA has proposed in our Packers & Stockyard Act rule-making.”