A mega-merger between two of the country’s largest poultry processing companies is underway even as the Biden administration attempts to clamp down on antitrust violations by big agriculture companies, including “big chicken.”
In the meantime, the USDA is considering a rule that would require chicken processors to provide farmers with more information so growers can advocate for themselves in sales negotiations. A second rule under review could change the way chicken packers compensate farmers who raise chickens for them. Comments on those proposed rules are due August 23 and September 6 respectively
Wayne Farms and Sanderson Farms will soon become Wayne-Sanderson Farms after the Department of Justice greenlit the acquisition of Sanderson Farms by Cargill and Continental Grain Company in late July. Cargill and Continental Grain Company already owned Wayne Farms and had announced plans to acquire Sanderson Farms and start the merger in August 2021.
Just days after the Sanderson Farms acquisition was finalized, the DOJ filed a lawsuit in the U.S. District Court for the District of Maryland on July 25 against Cargill, Sanderson Farms, and Wayne Farms, citing an information exchange conspiracy about poultry workers’ wages and benefits as a violation of the Sherman Act that outlaws “conspiracy in restraint of trade,” according to the Federal Trade Commission.
The lawsuit also alleges that the poultry companies pitted chicken growers against each other through deceptive practices via the poultry tournament system, which ranks chicken producers based on the speed or efficiency with which they raise chickens. Growers who can deliver more product in a shorter amount of time are paid more by poultry processing companies.
Experts say this system is a result of extreme vertical integration, which has enabled poultry processing companies like Wayne Farms and Sanderson Farms to own the entire chicken production process, from raising animals, slaughtering and packing them, and distributing finished meat to retailers.
“The industry has gotten more integrated over the past 30 years and more consolidated,” said Patti Anderson, senior program officer at the Johns Hopkins Center for a Livable Future. “It’s been sold as a way to increase efficiencies, but if you look at reports from the National Chicken Council, the average income for chicken growers when you account for inflation has gone down over the past 30 years.
“[The poultry industry] will tout the kind of efficiencies that they’ve gained, but growers are not better off for being part of this system,” Anderson said.
The three companies have agreed to pay an $84.8 million settlement written into the DOJ lawsuit that will be paid to workers harmed by the information exchange conspiracy. If the consent decree laid out in the lawsuit is approved by the court, the companies would be prohibited from sharing worker information with each other, among several other efforts to keep the companies in check (a full list can be viewed in this DOJ press release.)
One antitrust expert isn’t convinced the lawsuit does enough to prevent the new Wayne-Sanderson Farms merger from exercising undue control over the poultry industry.
“The American Antitrust Institute is concerned that any increases in concentration resulting from the [merger] may increase incentives for collusion in both input and output markets,” wrote Diana Moss, president of the American Antitrust Institute, in an email to the Daily Yonder.
The American Antitrust Institute is looking into whether the lawsuit settlement agreement adequately polices the enhanced market power the new Wayne-Sanderson Farms will have in the poultry industry.
The USDA has started a rulemaking process to revise regulations under the Packers and Stockyards Act to address concerns related to the tournament system and poultry grower contracts.
According to the Rural Advancement Foundation International-USA, USDA’s proposed rule would require live poultry dealers – the corporation that buys chickens from the growers – to more truthfully disclose the information chicken growers need to make informed decisions about their business. The rule would also require dealers to disclose more details about the settlement payments for chicken growers during the tournament system process.
The comment period for the proposed rule, titled Poultry Growing Tournament Systems: Fairness and Related Concerns, closes on September 6.
The USDA also released an Advanced Notice of Proposed Rulemaking (ANPRM) asking for feedback from the public on whether the tournament system, among other industry practices, should be considered unfair practice under the Packers and Stockyards Act. The comment period for the ANPRM closes on August 23.
In a comment received after deadline, a representative of Wayne Farms said the company is committed to a “strong and competitive American food supply.”
“We are pleased to have resolved [the merger] and put it behind us,” said Frank Singleton of Wayne Farms in an email. He said the agreement with the DOJ was evidence that the companies have a good track record with their employees and farmers.