January 31, 2018 / 6:15 PM / 5 months ago

U.S. food distributors allege Tyson Foods, rivals fixed chicken prices

CHICAGO (Reuters) - Top U.S. food distributors Sysco Corp and US Foods Holding Corp have joined retailer Winn-Dixie Stores [BILODW.UL] and other poultry buyers suing the country’s biggest chicken processors for allegedly conspiring to inflate prices.

FILE PHOTO: Tyson Foods brand frozen chicken wings are pictured in a grocery store freezer in the Manhattan borough of New York City, U.S. May 11, 2017. REUTERS/Carlo Allegri/File Photo

The distributors sued companies including Tyson Foods Inc, Pilgrim’s Pride Corp, Sanderson Farms Inc and Perdue Farms in separate complaints filed in federal court in Illinois on Tuesday.

The U.S. chicken sector, which is dominated by these large meat processors, has come under increased scrutiny in recent years as customers and farmers have alleged antitrust violations relating to pricing, production and compensation.

“This is a case about how a group of America’s chicken producers reached illegal agreements and restrained trade,” the lawsuits from Sysco and US Foods said.

Tyson, the biggest U.S. chicken company, and Pilgrim’s Pride denied the allegations on Wednesday. Sanderson Farms said it will defend itself against the claims. Privately held Perdue declined to comment.

U.S. poultry buyers previously claimed in a 2016 lawsuit that Tyson and its competitors had colluded since 2008 to reduce output and manipulate prices. Winn-Dixie, which operates grocery stores throughout the southeastern United States, sued the chicken companies earlier this month.

“We expect the industry to fight the allegations and come out successful,” Mizuho analyst Jeremy Scott said.

Sysco and US Foods allege processors curbed the supply of chickens by colluding to limit breeder birds that produce flocks that are ultimately slaughtered for meat consumption.

Data provider Agri Stats participated in the conspiracy, according to the lawsuits, by distributing information about chicken production that gave processors insights into rivals’ supplies. Agri Stats, which the complaints say is a subsidiary of Eli Lilly & Co, did not immediately respond to a request for comment.

“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.”

Tyson shares were down 3.6 percent, and Sanderson Farms shares lost 3.8 percent. Shares of Pilgrim’s Pride, mostly owned by Brazilian meat packer JBS SA, were down 6 percent.

Last year, such processors earned some of their highest profit margins in more than a decade as prices for grains used to feed birds slumped due to a global glut.

The cases are Sysco Corporation v Tyson Foods Inc et al, U.S. District Court, Northern District of Illinois, No. 18-cv-00700 and US Foods Inc v Tyson Foods Inc et al, U.S. District Court, Northern District of Illinois, No. 18-cv-00702.

Reporting by Tom Polansek, editing by G Crosse and Chizu Nomiyama

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