Darden accuses chicken producers of overcharging
- Darden Restaurants sued 18 chicken producers in federal court, accusing them of selling products at artificially inflated prices to the company and its subsidiaries from 2008 through 2016. The 139-page complaint, filed Jan. 25 in Chicago, asks for a jury trial and maximum damages allowed under federal antitrust laws.
- Defendants include Tyson Foods, Pilgrim's Pride, Foster Farms, Perdue Farms, Koch Foods, JCG Foods, Sanderson Farms, House of Raeford Farms, Mar-Jac Poultry, Wayne Farms, Fieldale Farms, George's, Simmons Foods, O.K. Foods, Peco Foods, Harrison Poultry, Claxton Poultry Farms and Mountaire Farms. Agri Stats, an agricultural research company owned by Eli Lilly & Co., is also a named defendant.
- Based in Orlando, Florida, Darden operates more than 1,750 restaurants in the U.S. and Canada, including Olive Garden, LongHorn Steakhouse, The Capital Grille, Yard House, Seasons 52, Bahama Breeze, Eddie V’s Prime Seafood and Cheddar’s Scratch Kitchen.
Darden says the defendants systematically overcharged for chicken by manipulating and artificially inflating prices on the Georgia Dock, a formerly widely used weekly benchmark price index which was compiled and published by the Georgia Department of Agriculture.
The lawsuit states this benchmark price was self-reported by at least 10 chicken producers — Pilgrim’s Pride, Tyson, Fieldale Farms, Perdue, Sanderson Farms, Koch Foods, Claxton Poultry, Harrison Poultry, Mar-Jac and Wayne Farms. It also claims senior executives from eight of the 10 producers participating in the Georgia Dock "were members of a private sector 'Georgia Dock Advisory Board,' which played a role in the compilation and manipulation of the Georgia Dock benchmark price."
Due to questions about its validity, the Georgia Dock index was suspended in 2016 by the Georgia Department of Agriculture, but there's been ongoing litigation about it. Last year, Sysco and US Foods sued producers, and in November, Fieldale Farms settled to get out of the lawsuit.
Fieldale also agreed to settle in a previous case, in which foodservice distributor Maplevale Farms sued Tyson, Pilgrim's Pride, Sanderson and others for accusations of inflating the price of broiler chicken meat. Darden had been part of that class-action complaint, but decided to sue independently, spokesman Rich Jeffers told the Orlando Sentinel.
Tyson said it had not conspired with other companies to set chicken prices, the Florida newspaper reported.
"Follow-on complaints like these are common in antitrust litigation,” Tyson spokesman Gary Mickelson said. "Such complaints do not change our position that the claims are unfounded. We will continue to vigorously defend our company."
Darden's recent complaint echoes several others in which major food companies have sued industry producers. Besides Sysco and US Foods, plaintiffs include BJ’s Wholesale and Bi-Lo and Winn-Dixie. Similar price-fixing accusations have also been made against some big players in the pork industry.
Meanwhile, the Georgia Department of Agriculture introduced a Georgia Premium Poultry Price Index in January 2017 in order to "provide viable price discovery data for use by all parties involved in the production, processing, selling and purchasing of poultry products." The new system, while still voluntary, tracks and verifies price information differently than the previous index, and it "removes any independent discretion on the reported price for poultry," the agency said.
Whether these changes will restore confidence in poultry prices remains to be seen — as does whether Darden will succeed in proving its collusion charges in court. The company is not only accusing them of price-fixing, but also says the defendants purposely reduced their breeder flocks in 2008 and 2011 to limit the chicken supply. U.S. Department of Agriculture statistics indicate broiler chicken production fell by half between 2008 and 2009, according to the Orlando Sentinel.
But while it might be easy to build a case with data, proving collusion behind the scenes is another matter. A court victory for Darden could mean big changes and greater scrutiny for the poultry industry when it comes to pricing — for products, consumers, retailers and stocks.
Regardless of the outcome, the timing of this lawsuit is interesting. According to an antitrust lawyer who spoke with the Orlando newspaper, it's getting tougher to put together a complex class-action suit that could involve thousands of different companies — distributors, grocery chains, restaurants and independent outlets. Going it alone could prove to be a time-consuming and expensive challenge for Darden, but it's clearly one the company is willing to take on.