Barbecue restaurants feel the pain of soaring meat prices

New York (CNN Business)Major US poultry processors engaged in a 20-year-long conspiracy to suppress worker pay, the Department of Justice alleged Monday.

The processors — Cargill, Wayne Farms and Sanderson Farms — allegedly worked with a data consulting firm to exchange information about pay, ultimately robbing workers of the opportunity to earn competitive wages, according to the civil antitrust suit filed by the Department of Justice.
The poultry companies agreed to a settlement of nearly $85 million overall in restitution to affected workers, which would be subject to a 60-day public comment period and a district court’s approval.

The companies’ alleged sharing of salary information through the data firm Webber, Meng, Sahl and Company (WMS), allowed the companies to pay below the free market rate for poultry processing, a dangerous job that became especially risky during the pandemic, the DOJ’s complaint alleges.

“This conspiracy distorted the normal bargaining and compensation-setting processes that would have existed in the relevant labor markets, and it harmed a generation of poultry processing plant workers by artificially suppressing their compensation,” according to the complaint.

The DOJ also alleged that the payment scheme used by Sanderson Farms and Wayne Farms in particular violates the Packers and Stockyard Act, which protects farmers against deceptive and unfair practices.
Sanderson and Wayne use a so-called “tournament system” to pay poultry farmers which established compensation based on how the farmers perform compared to their peers. Sanderson and Wayne, however, provide important supplies — including chicks — to these farmers, and allegedly obfuscated information about risk factors. This is an unfair system that lacks transparency, the complaint claims.

DOJ’s focus on the poultry industry

Monday’s lawsuit is part of a larger DOJ investigation into alleged price-fixing in the poultry industry.
The White House has been focusing on the practices of large meat packers and poultry processors as consumer prices soar but workers’ wages stagnate. The White House has pointed to high concentration in the industry as a bottleneck that is harmful to both farmers and consumers.
The poultry processors that the DOJ accused of anti-competitive behavior employ about 90% of workers in the industry, according to Monday’s suit. Recently, Cargill and Continental Grain completed the acquisition of Sanderson Farms, which is being combined with Wayne Farms, a subsidiary of Continental.
In addition to the suit, the Justice Department also filed consent decrees, or settlement agreements, from the companies on Monday.
The DOJ asked the poultry processors to pay $84.8 million in restitution to affected workers. The consent decree would also the processors from sharing certain information about pay and installs a compliance monitor for the next ten years, if approved by the district court.
For Wayne and Sanderson, the consent agreement requires that they not reduce the base pay to farmers because of relative performance, while allowing for bonus and other types of incentive pay. It also requires the processors to have more transparent grower contracts.
“We are pleased to have resolved this matter and put it behind us,” said Frank Singleton, spokesperson for Wayne-Sanderson Farms, noting that “both legacy companies are proud of their track record with their employees and growers.” Singleton said that “the agreement with DOJ evidences our commitment to continue to be an industry leader in those areas.”
Cargill agreed to pay its part of the settlement, which amounts to about $15 million, so that it can move forward with the Wayne-Sanderson deal without distractions or possible litigation costs, the company said.

“The settlement is not an admission of guilt and Cargill denies any wrongdoing,” the company added, saying it believes the claims “lack merit.”
Meanwhile, WMS’ consent decree would bar it from providing services that help processors share sensitive wage information with each other. WMS’s president was also personally named as a defendant in the suit. Cargill and representatives for WMS did not immediately respond to a request for comment.
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