Class Action Lawsuits Target Alleged Beef Price-Fixing Scheme

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Like fashion, cars, or technology, class action lawsuits change with the times — the types of cases often follow trends.

In the late 1990s, enormous class action lawsuits were settled over vitamins, diet drugs, and tobacco; the 2000s saw the rise of big computer class action lawsuits.

Now, the name of the game appears to be meat.

In the last few years, lawsuits over meat — lawsuits in which nearly every American consumer is a potential class member — have aimed at the country’s largest poultry and pork providers. The latest protein that multiple class action lawsuits have zeroed in on? Beef. More than 80% of the beef in the U.S. is slaughtered and processed by four large corporations: JBS, Tyson, National Beef, and Cargill. This type of oligopoly creates opportunities for price-fixing when competitors conspire to artificially raise their prices above an ostensibly free market’s price point. 

The cost of a ribeye steak has risen over the last five years. During the COVID-19 pandemic, the price of beef went up more than 12%. Observers from around the country also noticed this trend and suspected something unseemly going on.

“Think about it practically,” said Daniel Karon of Karon LLC, one of the lawyers involved in the class action lawsuits on the plaintiff’s end. “I’ve not been in the smoke-filled room, but I suspect it’s some degree of: ’Hey, we’re all in this room together. We’re already fixing prices on Product A, and we all make Product B too; why don’t we maximize efficiencies, and make as much money as we can while we’re sitting here, and knock out agreements on everything.’ To the extent that happened here, we’re not sure, but it wouldn’t surprise any of us.” 

The current slew of class action lawsuits against beef processors came from a confidential whistleblower on the supply side. The informant revealed that the meat processors were allegedly lowballing the cattle suppliers (farmers), a classic case of “buying low & selling high.” This resulted in a “historically high” discrepancy, as former Secretary of Agriculture Sonny Perdue has stated, between the price for live cattle and the price for processed beef. In 2019, cattle suppliers filed the first class action lawsuit against the four major beef producers.

“This case appears to be a classic case of a ‘cartel,’” David Sherman, lawyer & CEO of LegalAdvice.com said.

A cartel, in this sense, is a group of independent actors who join together to control the production or sale of a good or commodity in order to fix the price and restrict competition, Sherman said.

The Antitrust Division in the U.S. Department of Justice typically prosecutes cartel behavior via the Sherman Antitrust Act, the Clayton Act and the Federal Trade Commission Act, which were all passed in the early 20th Century to curtail such competition-stifling behavior, he said.

The activity alleged in the beef class action lawsuits, however, hasn’t been the subject of any federal prosecution as of now.

In May 2020, the DOJ’s Antitrust Division appeared to open an investigation into the four big meat processors; however, they’ve since been characteristically tight-lipped as to the results of the investigation, or if it’s even still ongoing. 

The beef class action lawsuits are somewhat unique, then; lawsuits of their kind usually follow governmental actions like indictments, amnesty agreements or guilty please, but the lawyers in these cases said they built their lawsuits from the ground up — undertaking their own independent analysis, conducting grueling, hours-long interviews with experts and paying for other work to determine if a price-fixing conspiracy was at play.

In June 2020, another class action lawsuit was filed on behalf of large grocers, wholesalers, and distributors who purchased beef from the processors. 

Jason Hartley of Hartley LLP is a plaintiffs’ lawyer in that case, representing Central Grocers Inc., which directly purchased beef from the defendants. Hartley said putting together the lawsuit was relatively straightforward.

“There’s so many things that you look at to decide whether you’re going to file a case when there’s no DOJ investigation or indictments or government action at that time,” he said. “Our investigation reflected all the green lights of a potentially manipulated market because pricing was going up, the input cost was going down, and that’s an inverse relationship from what you’d expect in a competitive market.”

As of right now, four class action lawsuits have been filed against the four major beef processors: JBS, Tyson, National Beef and Cargill. All the cases have been moved to the discovery phase by the judge — which means that a motion to dismiss was denied, and evidence is being gathered in anticipation of official class certification for the case.

“For the next year and a half, we’re working hard to get what we call ‘structured data’ from the defendants for our economic experts to calculate the impact and overcharge of the conspiracy,” Hartley said. “And we’ll be working to get ‘unstructured data’—depositions, documents, emails, those sorts of things.”

While the beef lawsuits are still pending, the chicken and pork class action lawsuits, some of which shared the same defendants — JBS was also named in a pork price-fixing conspiracy, and Tyson for chicken — have come to resolutions more recently. In July, JBS agreed to a $57 million settlement, and a chicken price-fixing class action lawsuit against Tyson was settled for $181 million in September.

“If the chicken is the World Series of the protein cases,” Karon said, “beef is the Super Bowl.”

Put another way, the ‘steaks’ have never been higher.

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