The U.S. government has moved to intervene in a civil antitrust price-fixing case against the chicken industry, court documents show, a sign to legal experts that it is conducting its own investigation.
A motion by the Department of Justice requesting to intervene in the antitrust case, and a limited stay of discovery for six months, was filed Friday in the Northern District Court of Illinois. The Justice Department also sought an immediate stay of discovery while the motion is pending.
"It's a big move to intervene," said Robert Steinbuch, a law professor at the University of Arkansas at Little Rock. The motion signals a "legitimate likelihood that a criminal prosecution could be brought" against one, or more, of the defendants, he said.
The civil antitrust claim against the nation's biggest chicken companies was first brought by supplier Maplevale Farms Inc. in September 2016. In the suit, Maplevale claims a group of producers, including Tyson Foods, Pilgrim's Pride and Sanderson Farms, conspired to artificially inflate broiler chicken prices through tactical means that violated U.S. antitrust laws starting in 2008.
Since Maplevale's suit was filed, dozens of grocers, restaurants and others have sued in Illinois federal court, including Sysco, ConAgra and Walmart. Of the defendants listed in the complaints, four have headquarters in Arkansas, one of the leading U.S. broiler-producing states.
Court documents allege meatpackers fixed wholesale prices by cutting their production and supply, relying on proprietary data published in a trade publication, Agri Stats, and by manipulating a now-defunct chicken price index, the Georgia Dock.
"We are aware of the Department of Justice's request, which does not change our view that there is simply no merit to the allegations that Tyson Foods colluded with competitors," Tyson spokesman Gary Mickelson said in an email Tuesday. "We remain committed to vigorously defending ourselves against these baseless allegations."
A hint of the government's interest in the case was included in a routine Tyson filing with the U.S. Securities Exchange Commission in May. In it, Tyson said the company found out that on April 26 the Justice Department issued a grand jury subpoena requesting discovery produced by all parties in the chicken price-fixing case.
The government's Friday request to intervene was another sign that a criminal investigation is in the works. Nothing official has been announced.
"The government has a significant interest in ensuring the integrity of the grand jury's investigation and, if charges are filed, minimizing the extent to which civil discovery can be used to circumvent criminal discovery," the Justice Department said in Friday's court filing. "Indeed, the Antitrust Division often seeks to intervene in such situations where a criminal investigation is proceeding in parallel with a civil class action, and does so successfully."
The government's Friday motion is likely the step before an announcement of a government enforcement action, Steinbuch said.
One reason for the Justice Department intervening in the civil suit is so it can "pursue the criminal case ahead of the civil," Steinbuch said. "But it doesn't necessarily have to happen that way."
A federal judge on Monday imposed an immediate stay in the civil case until a ruling is issued on the rest of the motion. A ruling on the request is scheduled for Thursday.
A spokesman with the Justice Department said it "cannot confirm, deny, or otherwise comment on the existence or non-existence of an investigation," when asked for comment.
Tyson shares fell 85 cents, or 1 percent, to close Tuesday at $79.97. Pilgrim's pride fell .32 cent, or 1.3 percent, to $25.18. Shares of Sanderson Farms fell $2.97, or 2.2 percent, to $131.03.
Business on 06/26/2019