Farm and Food File: Big Agbiz’s big ‘price-fixing’ settlements need big fix
In a now too-common story in U.S agriculture, Archer Daniels Midland (ADM) last month agreed to pay farmers $45 million to settle what the March 13 Wall Street Journal described as “price-fixing allegations leveled at its peanut processing division.”
While $45 million is, indeed, peanuts to ADM — its estimated 2020 revenue will top $65 billion — this isn’t the first time the Chicago-based company has faced market manipulation charges. In the late 1990’s, ADM spent years and millions on criminal and civil price-fixing settlements.
But ADM isn’t the only ag master of the universe to settle recent civil lawsuits over alleged market irregularities. For example:
In Oct. 2020, Brazilian-owned Pilgrim’s Pride Corp., the nation’s second largest poultry processor, agreed to pay $110.5 million to settle U.S. Justice Department allegations of “price fixing in broiler chicken parts,” reported Agriculture.com.
In mid-Jan. 2021, Tyson Foods, Inc. “reached an agreement in the broiler chicken antitrust civil price fixing litigation brought against the company, as well as many other poultry processors, to pay $221.5 million,” according to Meat+Poultry.com.
One of those other processors was — again — Pilgrim’s Pride which — again — “agreed to pay $75 million on Jan. 11. Both companies did not admit liability as part of the settlements.”
And while all this lawyerly rock-picking with the chicken giants was occurring in 2020, “The Justice Department… deepen(ed) federal antitrust scrutiny of the $213 billion U.S meat industry, following complaints from farmers and meat buyers about industry pricing practices,” noted the Wall Street Journal last June 5.
Those being scrutinized were the red meat kings: “The Department recently issued civil subpoenas to… JBS USA Holding Inc. [the majority owner of Pilgrim’s Pride Corp., of course,] Tyson Foods. Inc., Cargill Inc., and National Beef Packing Co…”
Despite all this new movement on price fixing, there’s nothing new about price fixing. The roots of U.S. antitrust law, after all, reach back to the Sherman Antitrust Act of 1890 and the Clayton Antitrust Act of 1914.
What is new, however, is that cooperation and coordination is more commonplace among competitors that, counter intuitively, make it more difficult for the government to police.
Peter Carstensen, a professor emeritus at the University of Wisconsin law school and senior fellow at the American Antitrust Institute, examined the recent flood of ag class action settlements in a March 8 post for ProMarket, at the University of Chicago’s Booth School of Business.
What he found was a company “called AgriStats” that “about a decade ago” began to collect “detailed information” from almost every processor “about their ongoing business activities and then distributed that information to all the participating processors. Hence, everyone knew what everyone else was doing.”
Clearly, this was an “information exchange system [that] seriously harmed the competitive process,” right?
Yes, notes Carstensen, a leading scholar in ag antitrust, “But,” he adds, “antitrust law has failed to connect those dots doctrinally.” And, worse, “The current state of antitrust law makes direct challenges to information exchanges [like AgriStats] difficult.”
That is even more worrisome given Big Agbiz’s continued consolidation into critical aspects of almost every farm and food sector like hogs, poultry, beef, vegetables and, now, row crops.
That’s exactly what 12,000 peanut farmers asserted in the ADM case: that “ADM’s Golden Peanut division coordinated with two other processors to report faulty supply and pricing data, keeping prices for farmers low for the past six years,” reported the Journal.
It, and its two other competitors, denied any wrongdoing but all three — that handle virtually every peanut in the U.S. — paid to end the suits; ADM $45 million, the other two, Birdsong Peanuts and Olam International, paid a collective $58 million.
That, of course, is nothing to the peanut giants. In fact, when taken as part of the entire pay-without-admitting-guilt strategy used by Big Agbiz in 2020-21, “the settlements to date,” writes Carstensen, “represent barely one percent of a single year’s sales.”
Antitrust reform is in the air, however. More on that later.