The proposed consent decrees were reached July 25, the same day the Department of Justice filed a civil antitrust complaint in the U.S. District Court for the District of Maryland against the three poultry producers, along with data consulting firm Webber, Meng, Sahl and Co. (WMS) and its President, Jonathan Meng for their participation in the ploy.
“Through a brazen scheme to exchange wage and benefit information, these poultry processors stifled competition and harmed a generation of plant workers who face demanding and sometimes dangerous conditions to earn a living,” said Principal Deputy Assistant Attorney General Doha Mekki of the Justice Department’s Antitrust Division.
The Justice Department’s complaint is part of a broader investigation into anticompetitive labor market abuses in the poultry processing industry. Mekki said the action puts companies and individuals on notice that the Antitrust Division “will use all of its available legal authorities to address anticompetitive conduct that harms consumers, workers, farmers, and other American producers.”
‘Tournament System’ Violations
The Justice Department’s complaint further alleged that two of the poultry producers—Sanderson Farms and Wayne Farms—violated the Packers and Stockyards Act by engaging in deceptive practices associated with the so-called “tournament system.”
Under the tournament system, poultry farmers, called “growers,” can be penalized if they underperform other farmers, “but poultry processors control the key inputs (like chicks and seed) that often determine a grower’s success,” the complaint stated. “Poultry processors often fail to disclose the information that growers would need to evaluate and manage their financial risk or compare offers from competing processors.”
Regarding this case, in particular, “because Sanderson and Wayne do not adequately disclose the risk inherent in their tournament systems to growers, growers cannot reasonably evaluate the range of potential financial outcomes, manage their risks, or compare competing poultry processors,” the complaint stated. The Justice Department said this failure to disclose is deceptive and, thus, violates the Section 202(a) of the Packers and Stockyards Act.
“This resolution yields significant reforms to the poultry ‘tournament system,’ including ending one of its most troubling aspects around deceptive base prices, and enhancing transparency in contracting, earnings, and inputs that will protect and benefit growers, as the USDA has proposed in our Packers & Stockyard Act rulemaking,” said Andy Green, USDA’s Senior Advisor for Fair and Competitive Markets.
Compliance Requirements
The proposed consent decrees with poultry processors Cargill, Sanderson Farms, and Wayne Farms would prohibit them from sharing competitively sensitive information about poultry processing plant workers’ compensation.
The consent decrees also would impose the following additional stringent terms that would expire 10 years after the court approves the consent decree:
- Impose on the poultry processors a court-appointed compliance monitor who, for the next decade, will ensure their compliance with the terms of the proposed decree;
- Grant the court-appointed monitor broad authority to ensure their compliance with all federal antitrust laws as they relate to their poultry processing facilities, workers at their poultry processing plants, chicken growers, integrated poultry feed, hatcheries, transportation of poultry and poultry products, and the sale of poultry and submit regular reports on the processors’ antitrust compliance;
- Permit the Antitrust Division to inspect the processors’ facilities and interview their employees to ensure compliance with the consent decree; and
- Require the companies to commit to pay $84.8 million, collectively, in restitution for poultry processing plant workers who were harmed by the information-exchange conspiracy.
Additionally, the proposed consent decrees with Sanderson Farms and Wayne Farms would prevent them from penalizing chicken growers by reducing their base payments as a result of relative performance, while still allowing for incentive, bonus, and other types of payments to growers.
The consent decrees would also require expanded information disclosures on grower contracts, consistent with proposed transparency rules set out by the USDA; and prohibit retaliation against growers who raise antitrust concerns with the court-appointed compliance monitor or the government.
Individual Liability
In addition to the proposed consent decrees against the poultry producers, the Justice Department complaint further alleged WMS and Meng participated in the anticompetitive activity as well. WMS’s and Meng’s services included collecting, compiling, and providing data on poultry processing worker compensation across the United States.
“By administering and supervising the surveys and meetings of the poultry processing defendants, Meng facilitated the processor conspirators’ sharing of confidential, competitively sensitive information about compensation for poultry processing plant workers,” the complaint stated. “Meng’s facilitation of this conspiracy artificially suppressed compensation for poultry processing plant workers.”
If approved by the court, the proposed consent decree with WMS would ban the firm from providing surveys or any other services that facilitate the sharing of competitively sensitive information in any industry. Meng is also subject to the terms of the consent decree in his individual capacity.
In addition to WMS and Meng, the consent decree lists 18 other co-conspirators whose names were not disclosed.
The proposed consent decrees must still be approved by the U.S. District Court for the District of Maryland before a final agreement is reached. 
Jaclyn Jaeger is a contributing editor at Compliance Chief 360° and a freelance business writer based in Manchester, New Hampshire.