Price-Fixing Scandal Rocks Chicken Industry (Part III)

This is the last of our three-part series on poultry processors being accused of colluding to raise prices in the market. The story is originally posted in motherjones.com.

Farmers have fought for years to reform contract poultry farming. More than 95 percent of chicken production in the United States is done under contract. Contract poultry farmers are paid in an opaque “tournament system,” which pits farmer against farmer in a zero-sum pay structure. Many farmers allege that poultry companies use the tournament system to suppress farmers’ wages and restrict farmers’ abilities to move among processors.

Farmers succeeded in getting the Obama administration’s Department of Agriculture to take on rule making that would have addressed some of their concerns. But the resulting efforts—known as the “GIPSA rules” for the agency within the USDA that oversees competition issues in the livestock sector—were killed by the Trump administration last October.

Because these lawsuits are private litigation, they will likely not result in structural reform to the poultry sector, says Peter Carstensen, a law professor at the University of Wisconsin-Madison who researches competition and regulation in the meat sector. And, he says, the lawsuits probably won’t have “much effect” on the “very serious problem” of how processors “exploit the farmers who raise their chickens.”

But “the first step in reform in terms of their collective seller power is to significantly change the kind of information that Agri Stats can provide to chicken processors,” he says. And these lawsuits may set off a sea change in how seriously the public, and regulators, take allegations of ongoing collusion in the poultry processing sector.

Leave a Reply

Your email address will not be published. Required fields are marked *