“The merits of this deal outweigh the potential costs of prolonged litigation and any further distraction to our collective efforts to feed communities across the U.S., which is why we’ve agreed to a $15 million settlement of a lawsuit which alleges wage suppression by U.S. turkey and poultry producers to help facilitate its forward movement.”
– Cargill spokesman Daniel Sullivan
It was supposed to be just another typical Big Ag mega-merger. Last August, Cargill and Continental Grain Company – owner of Wayne Farms – announced they had reached a joint venture agreement to buy Sanderson Farms for a cool $4.53 billion. The deal would give Cargill a beachhead into the chicken business in the United States by combining the nation’s third- and sixth-largest poultry producers.
But there was a problem. In deciding whether to approve the deal, the Department of Justice discovered the three companies were sharing information, which the DOJ Antitrust Division says allowed them to suppress worker wages and competition for worker services – a violation of the Sherman Antitrust Act.
And that, boys and girls, brought Cargill’s mega-merger to a grinding halt while the DOJ probed deeper into the wage-fixing shenanigans that had been going on for decades.
On July 25, the DOJ finally showed their hand in a sockdolager of a complaint USA v. Cargill Meat Solutions Corporation et al:
“Through emails, surveys, data compilations, and meetings, the Processor Conspirators assembled a ‘map’ of poultry processing plant worker compensation across the country.This ‘map’ was broad enough to show nationwide budgets and granular enough to show compensation at individual poultry processing plants.The exchanges allowed the poultry processors to learn not only the current state of compensation in their industry, but also, in some cases, plans for the next year’s compensation.The poultry processors exchanged information about nationwide, regional, and local wages and benefits.”
And for good measure, the DOJ lawsuit says that Webber, Meng, Sahl and Company (WMS) and its president, G. Jonathan Meng, were hired to facilitate data gathering and “to provide a veneer of legitimacy for their collaboration and information exchange.”
But leading up to the DOJ lawsuit and behind the curtain, the whole lot of ’em – Cargill, Sanderson Farms, Wayne Farms and WMS – were likely in talks with the DOJ about what it would take to settle out of court.
So along with the DOJ lawsuit is a proposed consent decree, which will require approval by the U.S. District Court for the District of Maryland. The decree would ban Cargill, Sanderson Farms, and Wayne Farms from future data sharing, require their agreement to compliance oversight and restitution of $84.8 million to workers whose wages were allegedly suppressed by the companies’ conduct.
WMS also received a proposed consent decree:
“Settling Defendants must not Communicate non-publicly, directly or indirectly (including through the use of a common consultant), with any Poultry Processor or any of its officers, consultants, attorneys, or other representatives. D. Settling Defendants must not knowingly accept from any Poultry Processor or any of its officers, employees, agents, consultants, attorneys or other representatives any Confidential Competitively Sensitive Information about Compensation or any other aspect of Poultry Processing…Subject to the full, truthful, and continuing cooperation of each Settling Defendant, as required in this Section VI, Settling Defendants are discharged from any civil or criminal claim by the United States arising from the sharing of Compensation information among Poultry Processors, when the sharing of Compensation information (1) occurred before the date of filing of the Complaint in this action, and (2) does not constitute or include an agreement to fix prices or divide markets.”
So here’s what we got. Proposed consent decrees filed on July 25. And on July 22, Cargill announced completion of its mega-merger with Sanderson Farms.
Yup. The new privately held poultry business will operate in Alabama, Arkansas, Texas, Mississippi, North Carolina, Louisiana and Georgia and if history is any indication will crank out close to 5 billion pounds of meat a year.
I think the consent decrees greased the wheels of the merger deal. What you are left with is the DOJ on one hand getting to look tough on Big Meat labor issues (which they should be doing … right?), while with the other hand approving the merger and then refusing to comment when asked about it.
The merger means that Tyson, JBS/Pilgrim’s Pride, Perdue, and newly minted Wayne-Sanderson Farms will control roughly 60 percent of the U.S. broiler chicken industry.
For its part, the White House says a lack of competition in Big Meat/Poultry is a problem “hurting consumers, producers, and our economy.”
But given a chance to do something about it, DOJ whiffed. Big Meat/Poultry consolidation is at the point where what producers receive is no longer tied to true supply and demand marketplace factors.
Yes, aggressive pursuit of antitrust violations to combat market power abuses and excessive concentration need to be applauded, but they won’t be enough to rein in Big Meat/Poultry’s need for greed.
Think about it. Cargill’s portion of that $84.8 million dollar fine was $15 million. Compare that to the $1.3 billion in revenue Sanderson Farms reported in its latest quarterly filing on May 27.
It’s become virtually impossible for the feds to break up the beef and now growing poultry monopolies. What’s needed is even more aggressive and politically fraught: a rewrite of portions of the Packers and Stockyards Act.
About Dave Dickey
Dickey spent nearly 30 years at University of Illinois at Urbana-Champaign’s NPR member station WILL-AM 580 where he won a dozen Associated Press awards for his reporting. For 13 years, he directed Illinois Public Media’s agriculture programming. His weekly column for Investigate Midwest covers agriculture and related issues including politics, government, environment and labor. His opinions are his own and do not reflect Investigate Midwest. Email him at email@example.com.