Pilgrim’s Pride Pleads Guilty to Price-Fixing and Bid-Rigging Conspiracy and Agrees to Pay $107 Million Fine
The Justice Department’s criminal investigation of the chicken producing industry continues to gain momentum. Pilgrim’s Pride is the first company to plead guilty and cooperate in the ongoing criminal investigation of the broiler chicken industry. Pilgrim’s Pride is the second largest chicken producer in the United States.
Pilgrim’s Pride is the first company to plead guilty, although Tyson Foods (and possibly other companies) are cooperating under the Antitrust Division’s leniency program. Broiler chickens are raised for human consumption and sold to grocers and restaurants. The Justice Department already has indicted ten individuals, including four individuals from Pilgrim’s Pride.
As outlined in the plea agreement, from 2012 to 2017, Pilgrim’s Pride participated in a price-fixing and bid-rigging conspiracy involving Pilgrim’s contract for the supply to Kentucky Fried Chicken of dark meat and wings in 2013; Pilgrim’s contract for the supply to Kentucky Fried Chicken in 2014; Pilgrim’s contract for the supply to Kentucky Fried Chicken of 8-piece chicken on the bone in 2015 through 2017. The total commerce involved $361 million.
The ten charged defendants include Bill Lovette, the former Pilgrim CEO; Jason Penn, Pilgrim’s current CEO; Roger Austin, Pilgrim’s Vice President; Jimmy Little, a Pilgrim sales associate; Jimmy Little is also charged with making false statements to law enforcement agents and obstruction of justice.
The long-running conspiracy involved senior level executives at the major chicken producing companies who regularly shared pricing and bid information to agree on contracts submitted for chicken supply deals for major restaurants.
Tyson Foods was one of the earliest cooperators in the government investigation and reported the conspiracy after DOJ initiated an investigation in response to a then-pending civil proceeding. Tyson is cooperating under DOJ’s antitrust criminal leniency program.
DOJ’s criminal investigation began in 2019 after it intervened in a price-fixing lawsuit filed in 2016. The class action lawsuit accuses chicken producers, including Pilgrim’s Pride, Perdue Farms, Tyson Foods and Sanderson Farms, of engaging in conspiracy to fix and increase chicken prices.
If convicted, each defendant faces a maximum term of imprisonment of ten (10) years imprisonment and a fine of $1 million.
The charged conspiracy was carried out with emails, texts and telephone calls. A review of such information during the conspiracy would have revealed numerous communications among the suppliers and discussion of pricing, bids and other sensitive information.
The far-reaching criminal conspiracy was carried out primarily by executives at the respective companies. This is not surprising since antitrust conspiracies require senior level authority over important pricing decisions. Numerous FCPA and healthcare fraud cases have been carried out with the specific or implicit approval of senior executives. Antitrust risks, especially in concentrated markets, are significant and increase overall company risks. Moreover, given the significant market pressures in today’s difficult pandemic economy, this is even more important. The high-level misconduct among the companies reflects the absence of any meaningful commitment to ethics and compliance.
Many companies are implementing controls around high-risk activities such as discounts, bid tenders, marketing promotion allowances and other competitive information. In the chicken conspiracy, it appears that decisions surrounding these topics could be implemented on the fly and without any controls designed to ensure that pricing decisions were properly made in response to market conditions.
To discover a possible conspiracy, compliance programs have to incorporate monitoring of pricing activities, including bids, negotiations and ultimate prices. In many cases, patterns will emerge concerning market and pricing information. This will provide valuable leads to compliance officers who can then investigate company activity further and focus on individuals involved.