By Robert B. Barnett Jr., J.D.
Allegations that the largest turkey producers agreed to share sensitive information to restrain trade, which resulted in higher turkey prices, was enough to survive the motion to dismiss.
A putative class of turkey purchasers has adequately stated a §1 claim under the Sherman Act against a collection of the U.S.’s largest turkey producers by alleging that the turkey producers entered into an agreement to share competitively sensitive information through Agri Stats, an information exchange in the turkey industry, and that turkey prices rose dramatically after the industry-sharing began that cannot be explained by increased costs, a federal district court in Chicago has ruled. Kraft, however, was dismissed without prejudice as a defendant because the allegations in the complaint did not address the part of the market in which Kraft operates, which is a seller of deli meat derived from turkeys purchased from third parties. Similar litigation, also involving Agri Stats with similar allegations, has already been filed against chicken producers (Olean Wholesale Grocery Cooperative, Inc. v. Agri Stats, Inc., October 19, 2020, Kendall, V.).
Background. The named plaintiff is Olean Wholesale Grocery Cooperative, Inc., which is a retailers’ cooperative for family-owned supermarkets in New York, Pennsylvania, and Ohio. Alleging a putative class action, Olean sued Agri Stats, Inc., and a collection of U.S. turkey sellers that control 80% of the U.S. turkey market, contending that they entered into an agreement to share information through Agri Stats that allowed them to share sales data and other sensitive information. Armed with that information, Olean asserted, turkey prices began rising, which could not be explained by any reason other than the information-sharing. The conspiracy was alleged to have existed between 2010 and 2017, which ended when the turkey producers learned of the suit filed against the chicken producers for an identical arrangement. The turkey producers filed a joint motion to dismiss. Three turkey defendants, Kraft, Farbest, and Cooper, filed separate motions to dismiss.
Sherman Act claim. To survive a motion to dismiss, the turkey purchaser was required under §1 of the Sherman Act to establish (1) a combination or conspiracy, (2) a restraint of trade, (3) a relevant market, and (4) injury.
Combination. The complaint alleged an agreement to regularly exchange detailed and sensitive information. Even though the Agri Stats reports did not label companies by name, the industry insiders could figure out relatively easily which sets of information applied to which companies. These allegations were sufficient to establish a hub-and-spoke conspiracy among the turkey producers and Agri Stats.
Restraint of trade. The complaint alleged that, as a result of the information sharing, turkey prices and turkey production began to separate "in a dramatic fashion." That is, prices increased even though supply remained the same. These increases occurred in a market where information exchange was likely to have anticompetitive effects because (1) the product was fungible, (2) demand was inelastic, and (3) relatively few sellers existed. The allegations sufficiently established the existence of all three conditions in the turkey market. The turkey producers’ alternative explanations for why prices might have increased may be relevant at some future point in the trial but they were irrelevant in the determination of whether the turkey purchaser pled an adequate Sherman Act claim.
Relevant market. The alleged market was the market for turkey meat for consumption in the U.S. The complaint alleged that a single market existed for disassembled turkey products. The turkey producers disagreed with that characterization but, once again, the merits of their argument were to be resolved at some later date. The court accepted the existence of a single turkey market as plausible. The turkey purchaser, therefore, satisfied its requirement for alleging a relevant market.
Statute of limitations. The turkey producer has a statute of limitations problem because the agreement was hatched more than four years prior to suit being filed. The turkey producer, however, has alleged fraudulent concealment. Those allegations were sufficient at this early date in the case to avoid the claim that suit was filed after the statute of limitations expired.
Per se violation. The complaint concluded with a claim that the allegations were sufficient to establish a per se violation of the Sherman Act. The court noted, however, that this antitrust claim would be decided under the rule of reason because information sharing is not automatically an antitrust violation. Thus, the court granted the motion to dismiss to the extent that the complaint referred to a per se violation. No per se violation occurred under these facts.
Kraft motion. Kraft urged dismissal of the claims against it on the ground that it was a turkey purchaser rather than a turkey producer. The court rejected that argument, however, on the ground that the alleged market was the turkey market as a whole, which included the sale of turkey deli meats. Thus, Kraft was part of the alleged market. Furthermore, the complaint alleged that Kraft participated in the agreement to share information. Having made that point, the court nevertheless agreed to dismiss Kraft because the price and cost data alleged in the complaint against Kraft were prices and costs associated with whole turkeys. "None of this data," the court said, "says anything about the portion of the turkey market in which Kraft competes." As a result, Kraft’s motion to dismiss was granted, but without prejudice.
Farbest. Farbest’s separate motion to dismiss asserted that Farbest had increased production during the period of the agreement and that it produced toms rather than hens (the pricing data only referred to hens). The court dismissed those arguments, noting that they were irrelevant at this early date for purposes of determining whether a valid claim had been asserted.
Cooper. Cooper’s separate motion sought dismissal on the ground that the complaint never made specific allegations against Cooper. The court rejected the argument, noting that the complaint alleged that Cooper participated in the agreement through Agri Stats, which was enough at this point to survive the motion to dismiss.
The court, therefore, denied the general motion to dismiss, other than to grant it as it applied to the per se allegation. The court granted Kraft’s motion to dismiss, but it denied both Farbest’s and Cooper’s motions to dismiss.
This case is No. 19 C 8318.
Attorneys: Brian David Clark (Lockridge Grindal Nauen P.L.L.P.) and Bobby Pouya (Pearson, Simon & Warshaw, LLP) for Olean Wholesale Grocery Cooperative and John Gross and Co., Inc. Jacob D. Koering (Miller, Canfield, Paddock and Stone, P.L.C.) and Justin Wade Bernick (Hogan Lovells US LLP) for Agri Stats, Inc. Christopher E. Ondeck (Proskauer Rose LLP) for Butterball LLC. Britt Marie Miller (Mayer Brown LLP) and Davida McGhee (Greene Espel PLLP) for Cargill, Inc. and Cargill Meat Solutions Corp.
Companies: Olean Wholesale Grocery Cooperative; John Gross and Co., Inc.; Agri Stats, Inc.; Butterball LLC; Cargill, Inc.; Cargill Meat Solutions Corp.
MainStory: TopStory Antitrust IllinoisNews GCNNews
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