Chicken Companies Agree to Pay $85 Million to Settle Antitrust Allegations
Cargill Inc. and the newly formed Wayne-Sanderson Farms have agreed to pay $85 million to settle claims they violated antitrust laws by sharing information about poultry workers’ wages.
The civil settlement between the companies and the government follows a lengthy review of the $4.5 billion sale of Sanderson Farms Inc.—the third-largest U.S. poultry company—to Cargill and agriculture investment firm Continental Grain Co. The settlement, which also addresses how chicken farmers are paid, came three days after the deal closed. The deal, which was first announced in August 2021, merged Sanderson’s chicken operations with those of Wayne Farms LLC, a smaller chicken company owned by Continental, to form a new privately held company based in Georgia.
The Justice Department on Monday alleged that Cargill, Sanderson Farms, a data consulting firm and Wayne Farms for decades shared information about wages and benefits in a way that held down the pay for processing plant workers.
The Justice Department also alleges that the chicken companies failed to give farmers enough information about the systems used to compensate them for raising birds for slaughter.
As part of Monday’s settlement with the government, farmers who would raise chickens for Wayne-Sanderson would no longer be paid through the tournament system, a payment structure in which chicken companies measure farmers’ performance against one another to determine how much they make. The tournament system is used by many large U.S. chicken companies to pay their growers. Farmers who perform well would still be offered bonuses.
The combined Wayne-Sanderson Farms represents roughly 15% of U.S. chicken production.
Tyson Foods Inc.
is the largest supplier of chicken in the U.S. with about one-fifth of the market, followed by
Pilgrim’s Pride Corp.
, with about 17%, according to data from meat-industry publication Watt Poultry USA.
A Cargill spokesman said the merits of the deal outweigh the potential costs of any prolonged litigation. He said that the Justice Department’s allegations lacked merit and that the company doesn’t admit any wrongdoing.
“Though we are disappointed with the assertions put forth by the Department of Justice and their approach to the review of our recent transaction, we have been cooperative throughout the process,” the spokesman said. “We are pleased to have the review behind us.”
A spokesman for Wayne-Sanderson said the company is pleased to have the matter resolved.
The combined Wayne-Sanderson Farms represents roughly 15% of U.S. chicken production. Tyson Foods supplies about one-fifth of the market and Pilgrim’s Pride about 17%.
Photo:
jason szenes/Shutterstock
As part of the settlement with the government, the companies will pay about $85 million in restitution to plant workers, of which Cargill will pay $15 million. The government would also impose a court-appointed compliance monitor to oversee processing facilities, farms and antitrust compliance for a decade, which the companies would have to fund.
The Justice Department’s complaint against the companies alleges they collaborated on compensation decisions by sharing information about wages directly and later through the data consultant’s survey. The companies met annually in person, stressing their gatherings were confidential, to swap data on annual plant worker pay at sites around the country, the Justice Department’s complaint said.
The companies engaged in “a brazen scheme to exchange wage and benefit information” that “harmed a generation of plant workers,” said Doha Mekki, the Justice Department’s second-ranking antitrust official.
The Biden administration, lawmakers and regulators have ramped up antitrust scrutiny of the U.S. meat and poultry industries over the past year, in which a handful of big companies supply the bulk of the beef, chicken and pork eaten by U.S. consumers. The White House has frequently accused the biggest U.S. meat companies of using their market power to increase prices for restaurants and supermarkets while underpaying farmers and plant workers.
Monday’s settlement with the government preventing Wayne-Sanderson Farms from using the tournament system is a major shake-up in how chicken companies have done business with farmers for decades. A shift away from the tournament model by one of the largest chicken companies could give rivals a competitive advantage or prompt a broader shift away from the model in the industry, poultry industry officials and analysts have said.
Wayne-Sanderson would still offer bonuses to farmers who perform well and include a base pay, assistance for accessing capital and a profit-sharing program for growers and employees, the Cargill spokesman said.
Chicken-company lobbyist groups have pushed back on criticism of the performance-based tournament structure, saying the competition rewards good chicken-farming practices.
Some farmer groups cheered the Justice Department’s settlement with the companies to end the payment system. Farm Action, a trade group for farmers and livestock growers, said in a statement Monday: “While we are disappointed that Justice Department did not block this merger, we applaud the agency for listening to the concerns of farmers.”
Write to Patrick Thomas at [email protected] and Dave Michaels at [email protected]
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
Cargill Inc. and the newly formed Wayne-Sanderson Farms have agreed to pay $85 million to settle claims they violated antitrust laws by sharing information about poultry workers’ wages.
The civil settlement between the companies and the government follows a lengthy review of the $4.5 billion sale of Sanderson Farms Inc.—the third-largest U.S. poultry company—to Cargill and agriculture investment firm Continental Grain Co. The settlement, which also addresses how chicken farmers are paid, came three days after the deal closed. The deal, which was first announced in August 2021, merged Sanderson’s chicken operations with those of Wayne Farms LLC, a smaller chicken company owned by Continental, to form a new privately held company based in Georgia.
The Justice Department on Monday alleged that Cargill, Sanderson Farms, a data consulting firm and Wayne Farms for decades shared information about wages and benefits in a way that held down the pay for processing plant workers.
The Justice Department also alleges that the chicken companies failed to give farmers enough information about the systems used to compensate them for raising birds for slaughter.
As part of Monday’s settlement with the government, farmers who would raise chickens for Wayne-Sanderson would no longer be paid through the tournament system, a payment structure in which chicken companies measure farmers’ performance against one another to determine how much they make. The tournament system is used by many large U.S. chicken companies to pay their growers. Farmers who perform well would still be offered bonuses.
The combined Wayne-Sanderson Farms represents roughly 15% of U.S. chicken production.
Tyson Foods Inc.
is the largest supplier of chicken in the U.S. with about one-fifth of the market, followed by
Pilgrim’s Pride Corp.
, with about 17%, according to data from meat-industry publication Watt Poultry USA.
A Cargill spokesman said the merits of the deal outweigh the potential costs of any prolonged litigation. He said that the Justice Department’s allegations lacked merit and that the company doesn’t admit any wrongdoing.
“Though we are disappointed with the assertions put forth by the Department of Justice and their approach to the review of our recent transaction, we have been cooperative throughout the process,” the spokesman said. “We are pleased to have the review behind us.”
A spokesman for Wayne-Sanderson said the company is pleased to have the matter resolved.
The combined Wayne-Sanderson Farms represents roughly 15% of U.S. chicken production. Tyson Foods supplies about one-fifth of the market and Pilgrim’s Pride about 17%.
Photo:
jason szenes/Shutterstock
As part of the settlement with the government, the companies will pay about $85 million in restitution to plant workers, of which Cargill will pay $15 million. The government would also impose a court-appointed compliance monitor to oversee processing facilities, farms and antitrust compliance for a decade, which the companies would have to fund.
The Justice Department’s complaint against the companies alleges they collaborated on compensation decisions by sharing information about wages directly and later through the data consultant’s survey. The companies met annually in person, stressing their gatherings were confidential, to swap data on annual plant worker pay at sites around the country, the Justice Department’s complaint said.
The companies engaged in “a brazen scheme to exchange wage and benefit information” that “harmed a generation of plant workers,” said Doha Mekki, the Justice Department’s second-ranking antitrust official.
The Biden administration, lawmakers and regulators have ramped up antitrust scrutiny of the U.S. meat and poultry industries over the past year, in which a handful of big companies supply the bulk of the beef, chicken and pork eaten by U.S. consumers. The White House has frequently accused the biggest U.S. meat companies of using their market power to increase prices for restaurants and supermarkets while underpaying farmers and plant workers.
Monday’s settlement with the government preventing Wayne-Sanderson Farms from using the tournament system is a major shake-up in how chicken companies have done business with farmers for decades. A shift away from the tournament model by one of the largest chicken companies could give rivals a competitive advantage or prompt a broader shift away from the model in the industry, poultry industry officials and analysts have said.
Wayne-Sanderson would still offer bonuses to farmers who perform well and include a base pay, assistance for accessing capital and a profit-sharing program for growers and employees, the Cargill spokesman said.
Chicken-company lobbyist groups have pushed back on criticism of the performance-based tournament structure, saying the competition rewards good chicken-farming practices.
Some farmer groups cheered the Justice Department’s settlement with the companies to end the payment system. Farm Action, a trade group for farmers and livestock growers, said in a statement Monday: “While we are disappointed that Justice Department did not block this merger, we applaud the agency for listening to the concerns of farmers.”
Write to Patrick Thomas at [email protected] and Dave Michaels at [email protected]
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
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