US poultry processors look to settle claim with DOJ over alleged wage-fixing scheme

By Jane Byrne contact

- Last updated on GMT

© GettyImages/DNY59
© GettyImages/DNY59

Related tags: Cargill, Sanderson Farms, Wayne Farms, US Department of Justice

Cargill Inc, Sanderson Farms Inc and Wayne Farms LLC have agreed to settle a claim with the US Department of Justice (DOJ) over allegations they violated antitrust law by sharing data on wages and benefits.

The settlement, which is pending court approval, was filed on Monday in a US District Court in Maryland shortly after the lawsuits were filed, according to a Reuters story.

The poultry processors are set to pay collectively nearly US$85m in compensation to workers. 

Under the agreement, Cargill Meat Solutions is to pay US$15m, Sanderson will pay US$38.3m and Wayne US$31.5m, as reported by Reuters. 

The DOJ also sued and reached a settlement with a data consulting firm, Webber, Meng, Sahl and Co (WMS), and its president. WMS was named as the poultry processors’ information broker.

Cargill, Sanderson Farms, and Wayne Farms were accused of violating the Sherman Act. 

The lawsuit was part of a broader investigation into anticompetitive labor market abuses in the poultry processing industry, said the DOJ. It partnered with the US Department of Agriculture (USDA) on the action.

“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 the DOJ antitrust division’s principal deputy assistant attorney, General Doha Mekki.

Andy Green, USDA’s senior advisor for fair and competitive markets, said: “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.” 

Acquisition 

The settlement follows the closure by Cargill and Continental Grain Co. of the US$4.5bn purchase of Sanderson Farms. That deal had been delayed because of a DOJ anti-trust concerns, but was finally given the green light. 

As a part of the completion of that deal, Cargill and Continental Grain have combined Sanderson Farms with Wayne Farms, a subsidiary of Continental Grain, forming a new privately held poultry business. The new entity, named Wayne-Sanderson Farms, will be headquartered in Oakwood, Georgia.

If rubber-stamped by the court, the proposed consent decree with data consulting firm WMS would ban it from providing surveys or any other services that facilitate the sharing of competitively sensitive information in any industry. Jonathan Meng, WMS’s president, is also subject to the terms of the consent decree in his individual capacity, said the DOJ.

Compliance

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

The chicken firms would also be subject to a court-appointed compliance monitor who, for the next decade, will ensure their adherence to the terms of that decree as it links to their chicken processing facilities, workers at those plants, chicken growers, integrated poultry feed, hatcheries, transportation of poultry and poultry products, and the sale of poultry.

Sanderson and Wayne were allegedly in violation of the Packers and Stockyards Act, which prohibits deceptive practices in poultry markets, according to the complaint​.

As alleged in the complaint, poultry processors use a “tournament system”​ to adjust a chicken grower’s “base payment​” based on how well the grower performs relative to other growers. The poultry processors, however, control nearly all the key inputs, including the chicks delivered to the growers and their poultry feed, that often determine a grower’s success, it reads. “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.”

Company reaction 

In a statement emailed to us about the settlement and the allegations, Cargill said the merits of this deal outweigh the potential costs of prolonged litigation.

"We’ve agreed to a $15m settlement of a lawsuit which alleges wage suppression by US turkey and poultry producers to help facilitate its forward movement. Cargill conducts business in a legal, ethical and responsible manner. 

"We believe the alleged claims lack merit and do not show a conspiracy to fix wages, nor do they show any improper actions by Cargill or its employees. The settlement is not an admission of guilt and Cargill denies any wrongdoing. The company sets compensation independently to ensure that it pays fair and competitive wages to employees in each of our processing facilities."

A statement sent to us by a spokesperson for the newly formed Wayne-Sanderson Farms reads:

While we are pleased to have resolved this matter and put it behind us, both legacy companies are proud of their track record with their employees and growers and the agreement with DOJ evidences our commitment to continue to be an industry leader in those areas. As we proceed with the integration of Wayne-Sanderson Farms, we look forward to investing in our communities, employees and grower partners to ensure there continues to be a strong and competitive American food supply.”

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