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Food distributor Sysco sues beef packers for alleged price fixing

Sysco, a Texas-based company that distributes food to restaurants, hotels and other facilities, has filed a lawsuit alleging violations of antitrust laws by Cargill, JBS, Tyson and National Beef.

The complaint claims the beef packers colluded since at least 2015 to reduce their purchases of cattle, thereby driving down livestock prices while increasing meat prices.

The plaintiff has asked for a jury trial and will be seeking an injunction against the alleged anti-competitive behavior as well as unspecified financial damages.

“The principal, but not exclusive, means Defendants have used to effectuate their conspiracy is a scheme to artificially constrain the supply of beef entering the domestic supply chain,” the complaint said. “Defendants’ collusive restriction of the beef supply has had the intended effect of artificially inflating beef prices.”

The case was filed in a Texas federal court and is set to proceed before a judge in Houston.

According to the lawsuit, a former quality assurance officer at a JBS facility “has confirmed the existence of a conspiracy” among the beef packers, which is corroborated by statistics that show “industry-wide slaughter and capacity reductions.”

The four meat packers collectively generate about 80% of the U.S. beef supply and control an even higher proportion of the domestic cattle market, as well as the associated “supply and distribution chain,” the complaint said.

By exploiting their market power, the companies have “created surpluses in the cattle market and shortages in the wholesale beef market,” artificially raising their profit margins higher than they can achieve under competitive conditions, the complaint s

“United by their conspiracy, Operating Defendants were confident that none of them would break ranks and disproportionately expand their beef production to satisfy unmet demand,” the plaintiff claims. “Armed with this assurance, Operating Defendants improved their meat margins by achieving and sustaining an unprecedented gap between cattle and beef prices.”

Production was decreased in “relative lockstep” at their domestic facilities despite ample cattle available and even though the demand for beef was surging, the complaint said.

“Operating Defendants did not do the things true competitors would do in a competitive market. They did not attempt to capture each other’s market share or lower prices as their costs declined,” according to the lawsuit.

Representatives of Cargill, JBS, Tyson and National Beef did not respond to requests for comment as of press time.

Last year, a federal judge in Minnesota refused to dismiss a similar price-fixing lawsuit originally filed against the beef packers in 2020 by groups representing ranchers, food companies and consumers.

Chief Judge John Tunheim of the U.S. District of Minnesota previously dismissed the case without prejudice, allowing the complaint to be refiled, because the plaintiffs haven’t plausibly alleged direct evidence of a conspiracy.

The plaintiffs amended their lawsuit to include testimony from two confidential witnesses who claim the beef packers purposely reduced slaughter to depress cattle prices. One of those witnesses is also cited in Sysco’s new lawsuit.

Last September, the judge determined this testimony represented “sufficiently detailed direct evidence” to proceed with the antitrust litigation and rejected the defendants request to dismiss the case.

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