Judge Dismisses Antitrust Lawsuit Alleging Conspiracy to Affect Cattle Prices

Cattle Price Conspiracy Suit Dismissed

Judge Dismisses Antitrust Lawsuit Alleging Conspiracy to Affect Cattle Prices

9/29/2020 | 12:06 PM CDT

By DTN Staff Reporter

A federal judge found plaintiffs in a cattle price conspiracy case didn’t provide sufficient details to prove the case. (DTN file photo)

OMAHA (DTN) — A federal judge in Minnesota on Monday dismissed an antitrust class-action lawsuit alleging the nation’s largest meatpackers conspired to fix cattle prices.

In 2019, a number of lawsuits were brought by cattle interest groups and traders against Tyson Foods Inc., Tyson Fresh Meats Inc., JBS S.A., JBS USA Food Company, Swift Beef Company, JBS Packerland Inc., Cargill Inc., Cargill Meat Solutions Corp., Marfrig Global Foods S.A., and National Beef Packing Company LLC, alleging the companies conspired to bring down the price of fed cattle in 2015. By the end of 2015, the price fell from $170 per hundredweight (cwt) to $120 per cwt.

All of the cases were later consolidated into one antitrust case in the U.S. District Court of the District of Minnesota.

"Because plaintiffs have not pleaded their direct evidence with sufficient detail and because they have not pleaded parallel conduct sufficient to support an inference of a price-fixing conspiracy, the court will grant defendants’ motions to dismiss," Judge John R. Tunheim said in the order handed down on Monday.

The court granted the plaintiffs 90 days to file an amended complaint.

Plaintiffs alleged the companies engaged in fed-cattle price fixing; unjustly enriched their businesses; manipulated the prices of fed cattle and, as a result, the Chicago Mercantile Exchange live-cattle futures and options; and committed a number of violations of the Commodity Exchange Act, among other allegations.

The Ranchers-Cattlemen Action Legal Fund United Stockgrowers of America, or R-CALF USA, filed a lawsuit on behalf of four cattle-feeding ranchers in Iowa, Nebraska, Kansas and Wyoming. Several other lawsuits were filed by traders.

Plaintiffs had alleged that, starting on at least Jan. 1, 2015, and continuing to the present, the companies worked together to suppress cattle prices by shifting how purchases were made.

In 2005, nearly all fed-cattle purchases were cash sales. During the next decade, the number of cash purchases dropped by about 21%, according to the court’s order. By 2015, more than 60% of all fed-cattle purchases were made through so-called "formula contracts."

The plaintiffs offered the testimony of two confidential witnesses, including a quality-assurance officer at one of the company’s slaughter plants in the Texas Panhandle and western Kansas. The second witness was a feedlot manager.

The first witness claimed they had a discussion with a fabrication manager at a slaughter plant, alleging the companies had an agreement to reduce their cattle purchases and slaughter volumes in response to what the companies believed were high cattle prices.

The second witness described a so-called "queuing convention" in which the price for cash sales are set not by competitive bidding but instead by a "complicated system requiring producers to either agree to a bid or reject it but then requiring the producer to accept only a bid greater than the original price," the judge’s order said.

"If no buyer offers a higher price, the producer must return to the first bidder and offer a right-of-first refusal because that packer remains ‘on the cattle.’ Witness 2 described the negative consequences of a failure to adhere to this convention; producers could be blackballed or boycotted for breaking with it."

Tunheim said in his order the confidential witnesses and their claims were not sufficiently detailed.

"Because of the lack of detail regarding the firms by which the confidential witnesses were employed, plaintiffs do not adequately explain their jobs and how their interactions in those jobs would lead to them acquiring the knowledge they allegedly possess," the order said.

"In all, the lack of detail about the confidential witnesses, combined with the mismatched nature of what they allege, lead the court to conclude their claims are not sufficiently detailed to survive defendants’ motion to dismiss."

Collectively, the companies process more than 80% of fed cattle in the United States.

Fed-cattle prices increased steadily between 2009 and 2014, as a result of demand and a shortage in fed cattle following the droughts of 2011 through 2013.

Then, after prices peaked in November 2014, the cattle industry expected fed-cattle prices to stabilize in 2015 and continue around that level for a number of years. Instead, that did not occur.

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