Foul Play: DOJ Files Lawsuit and Proposed Consent Decrees with Poultry Processors over Wage Suppression Conspiracy

 

Joseph Miller, Bruce Sokler and Tinny Song, Mintz

via JD Supra - August 3, 2022

 

On July 25, 2022, the Antitrust Division of the U.S. Department of Justice (“DOJ”) filed a civil complaint in the U.S. District Court for the District of Maryland alleging that poultry processors, Cargill Inc. and Cargill Meat Solutions Corporation, Sanderson Farms Inc., and Wayne Farms LLC, engaged in a decades-long conspiracy to suppress compensation to poultry processing plant workers by exchanging competitively sensitive information about wages and benefits and collaborating on compensation policies. At the same time, the DOJ entered a proposed consent decree to settle the action with the defendants, in which the poultry processors commit to pay $84.8 million in restitution and the defendants are prohibited from engaging in certain conduct for 10 years. This settlement comes on the heels of several price fixing prosecutions in the poultry industry.[1] Although the settlement papers do not mention it explicitly, it seems likely that the conduct at issue in this matter came to light as part of one of the DOJ’s other investigations.

 

According to the DOJ’s complaint, the poultry processors conspired with each other and with co-defendant data consulting firm Webber, Meng, Sahl and Company, Inc. (“WMS”) for decades to exchange competitively sensitive information about poultry plant workers’ wages, with the majority of the information being current or future, disaggregated, or identifiable in nature. Examples of shared information included compensation for hourly and salaried poultry plant jobs and base wages for a variety of other poultry processing jobs. Following the information exchange, the poultry processors then collaborated with and sought assistance from each other in making compensation decisions.

 

The DOJ alleged that Cargill, Sanderson Farms, and Wayne Farms are close competitors for labor services of poultry processing plant employment across the nation, and collectively possessed buyer market power (monopsony power) in that relevant nationwide labor market. The complaint alleged that the conspiracy and anticompetitive exchange of information distorted the competitive mechanism for wage-setting for poultry processing plant labor and suppressed wages paid to those employees in violation of Section 1 of the Sherman Act. The complaint also noted 18 additional co-conspirators who allegedly conspired with defendants but remained unnamed because of their inclusion in another ongoing DOJ investigation.

 

To resolve the DOJ’s allegations of competitive harm, the poultry processing defendants and WMS entered into a proposed consent decree imposing the following conditions for the next 10 years:

 

·         Cargill, Sanderson Farms, and Wayne Farms are prohibited from sharing competitively sensitive information about poultry processing plant workers’ compensation.

·         Cargill, Sanderson Farms, and Wayne Farms commit to collectively pay $84.8 million in restitution for poultry processing plant workers who were harmed by the conspiracy.

·         WMS is prohibited from providing surveys or other services that facilitate the sharing of competitively sensitive information in any industry. WMS President G. Jonathan Meng is also subject to the terms of this consent decree in his individual capacity.

 

The parties also agreed to the appointment of a court-appointed compliance monitor to ensure the poultry processing defendants’ compliance with the terms of the consent decree. The monitor will have broad authority to ensure compliance with all federal antitrust laws as they relate to defendants’ businesses, and defendants will submit regular reports on antitrust compliance. The DOJ will have broad authority to inspect the processors facilities and interview employees to ensure antitrust compliance. The consent decree with Sanderson Farms and Wayne Farms also imposes additional restrictions on deceptive practices in poultry markets, including using a “tournament system” to adjust poultry grower’s “base payment” in relation to how well the grower performed relative to other growers.

 

The DOJ’s complaint and settlement is important in several respects...

 

more, including links

https://www.jdsupra.com/legalnews/foul-play-doj-files-lawsuit-and-2492892/