High food prices have been one of the most contentious issues of the past few years, causing many people to remain negative about the U.S. economy even as other indicators have improved. Grocery inflation has several cases, but one that does not receive enough attention is the ability of large corporations to set prices at will.
Price escalation is possible because of the enormous amount of concentration in the food sector. Not only can major producers hike up prices on their own, they conspire with their few competitors to do so in tandem. This is known as price-fixing, and since the passage of the Sherman Act of 1890 the practice has been illegal under federal law. States bring prosecutions as well.
One state that has been particularly aggressive in this arena is Washington. Its Attorney General, Bob Ferguson, has targeted the poultry industry, which is believed to be a hotbed of anti-competitive practices. In 2021 Ferguson’s office sued 19 companies said to account for 95 percent of the broiler chickens sold in the entire country, alleging they conspired to restrain production, manipulate price indices, rig bids and exchange proprietary information with one another. The defendants included familiar names such as Tyson Foods, Pilgrim’s Pride and Perdue Farms.
Over the past two years, Ferguson has racked up an impressive record. Last April, 14 of the corporate defendants agreed to pay settlements totaling $35 million. The largest shares came from Pilgrim’s Pride ($11 million), Tyson ($10.5 million) and Perdue ($6.5 million).
Since then, Ferguson has kept up the pressure on the other defendants. Most recently, House of Raeford Farms agreed to a $460,000 settlement. The two remaining holdouts, Foster Farms and Wayne-Sanderson Farms, are scheduled to go on trial later this year.
They may change their minds about going to court. All of the settling defendants have agreed to cooperate with Ferguson’s office in producing evidence that can be used in that trial. Those defendants have also signed consent decrees under which they commit to changing their practices and acknowledge that the AG can seek additional fines if they fail to do so.
Ferguson wants to have even stronger tools at his disposal. Recently, he joined with several state legislators to propose legislation that would increase the maximum penalty for price-fixing and other anti-competitive practices.
At the same time the big poultry companies work to keep prices high, they have been accused of conspiring to keep pay low. The U.S. Justice Department has been targeting the industry for the improper exchange of compensation date, a practice that amounts to wage-fixing. One company, George’s Inc. agreed last year to pay $5.8 million to DOJ. The feds are seeking other settlements.
There has also been private litigation on this issue, resulting in large settlements such as a $29 million payout by Pilgrim’s Pride and $12 million by Simmons Foods.
It remains to be seen whether the federal and state prosecutors, together with plaintiffs’ lawyers, can get the poultry industry to stop colluding on prices and wages. Yet these cases should serve as a reminder of the extent to which food inflation is the result of corporate power and greed.