Hormel Foods, Smithfield Foods and Tyson Foods are three of the defendants in a class-action lawsuit filed June 28. The lawsuit claims that since 2009 these companies have conspired to keep ham, bacon, hot dog and other pork product prices high.
Hagen Berman Sobol Shapiro, a Seattle-based law firm, filed the lawsuit in the Minneapolis federal court on behalf of 12 grocery shoppers. The lawsuit alleges the producers had conspired to fix, raise and stabilize the price of pork. The 98-page suit also involves Indiana Packers Corp., Seaboard Foods, Clemens Food Group, and Triumph Foods. Combined, the pork producers are believed to control 80 percent of the $20 billion US pork company.
While most of the companies have yet to release a response to the allegations – including Tyson Foods who told Food Dive that it couldn’t comment because the company hadn’t received a formal notice of the lawsuit – Hormel has released a statement.
“We are confident that any allegations such as these are completely without merit. We intend to vigorously defend this lawsuit,” Hormel said in their statement.
The documents state the scheme began in 2009, and this is when pork prices rose over 50 percent from 2009 to 2015. According to the lawsuit, this price fixing was able to happen because of Agri Stats. Agri Stats had been supplying benchmarking reports on a weekly and monthly basis to the pork producers, in exchange for subscription fees worth millions of dollars. This gave the companies an advantage because it allowed them to see how much their competitors were making and charging for their pork products.
“Once Agri Stats got everyone in the pork industry to put their card on the table, there was no competition. When you’re aware of every move your competition is making, the only step left is to form an alliance, and that’s exactly what happened here. We believe this is a class antitrust operation, with the sole purpose of increasing profits for these companies orchestrating the scheme,” the law firm’s managing partner said in a release.
This whole ordeal could be considered shocking, but price-fixing allegations aren’t new to the food industry. Lawsuits have previously been filed over tuna and dairy prices. This lawsuit is especially familiar to Tyson Foods who has been a defendant in two other price-fixing lawsuits involving chicken. In 2016, one of them was filed by Maplevale Farms but was dismissed last year. The second one is still pending after being filed in January by Sysco Corp. and US Foods.
When it comes to this case, the outcome is very unpredictable. Since some defendants have already been involved in a lawsuit, they might be more prepared to defend themselves. Hormel is ready to fight this case as long as they need to and the opposition is prepared to extend the battle. However, being involved in a lawsuit at all is bad news for business in general. The food companies might have to win back consumer trust regardless of the outcome of the price fixing lawsuit.