One of the largest U.S. restaurant-chain owners, Darden Restaurants Inc., entered the fray of an ongoing price-fixing dispute last week, filing a complaint against the U.S. chicken industry.
Darden, the parent company of brands including Olive Garden and LongHorn Steakhouse, joined a growing group of food distributors, restaurants and grocers -- including Kroger Co., Sysco, Hooters and U.S. Foods Holdings -- in suing the poultry industry on the claim that it inflated the cost of chicken. Plaintiffs in various cases say they've been cheated out of large sums of money by the $30 billion broiler-chicken industry.
According to Darden's 143-page complaint, filed Friday in U.S. District Court in Illinois, poultry producers conspired to manipulate the nation's chicken supply using different tactics, including through data in the industry publication Agri Stats and through a now-defunct price index, the Georgia Dock.
"This is a case about how a group of America's chicken producers reached illegal agreements and restrained trade beginning at least as early as 2008," Darden's complaint says. "Through those illegal agreements, Defendants successfully implemented supracompetitive chicken prices to Darden's and other purchasers throughout the United States."
Darden, based in Orlando, Fla., owns and operates more than 1,700 restaurants and employs 180,000 people across its brands.
A company spokesman said there are 16 restaurants owned by Darden in Arkansas.
"We're doing what we feel is in the best interest of our company and our shareholders," Rich Jeffers, Darden's spokesman, said when asked about the filing.
Darden shares rose 94 cents Monday to close at $107.37 on the New York Stock Exchange.
Arkansas, one of the nation's leading poultry producers, is home to four of the listed defendants: Tyson Foods, Simmons Foods, George's Inc. and OK Foods. Each defendant relies on employees and contract poultry growers across the state. According to 2018 registration data, 3,111 farms grow poultry in approximately 12,603 houses across Arkansas. Benton and Washington counties have the most reported poultry farms.
Court documents alleged the defendants, which control about 90 percent of America's chicken, used Agri Stats to discern competitor information, including breeder flocks, capacities and cost data; the Georgia Dock, an index self-reported by a group of chicken companies; and other tactics to inflate prices and avoid the "boom and bust" cycle of the industry.
A common industry pattern, in response to rising prices, was to increase production, which would lead to an oversupply.
Production numbers remained unchanged from 2007 to 2008 after a spell of increasing prices, according to Darden's complaint. That was followed by another round from 2008 to 2009 and another from 2011 to 2012.
It was not until 2016 that concerns arose about possible price-fixing. A Wall Street Journal article published in January 2016 raised the possibility of industry collusion using the Georgia Dock. The federal lawsuit Maplevale Farms, Inc., v Koch Foods, Inc. et al., brought more attention to the issue in September 2016. Two months later, the U.S. Department of Agriculture discontinued its reliance on the Georgia Dock because its "input prices could not be verified."
After Judge Thomas Durkin refused to rescind the Maplevale case in federal court in Chicago, several companies filed similar price-fixing lawsuits independently or seeking class-action status. Darden decided to file independently.
Most meatpackers have denied the allegations.
"Follow-on complaints like these are common in antitrust litigation. Such complaints do not change our position that the claims are unfounded," a spokesman with Tyson said in an email Monday.
"We will continue to vigorously defend our company."
A spokesman with Simmons Foods declined to comment.
Business on 01/29/2019