Tyson Foods, the largest meat producer in the country, announced record earnings on Monday, but it also told investors that it’s being investigated by the Securities and Exchange Commission for price fixing.
Kevin McCoy of USA Today had the news:
The Securities and Exchange Commission served the Springdale, Ark-based firm with a subpoena on Jan. 20 “in connection with an investigation related to the company,” Tyson said in a quarterly financial filing. The company said it believed the “early stage” investigation involved disclosures related to the allegations raised by the lawsuits.
Tyson, which sells a range of frozen and fresh chicken and other meat products including bacon, said it is cooperating with the SEC investigation. However, the filing also said Tyson has moved to dismiss the lawsuits, which accuse the company and more than 20 other chicken producers, including Koch Foods, Pilgrim’s Pride, Perdue Farms and Sanderson Farms of using market manipulation to keep prices artificially high.
Tyson’s disclosure represents the initial public indication that federal authorities are examining the allegations. The Securities and Exchange Commission declined to comment.
Maplevale Farms, a direct purchaser of chicken, filed the initial lawsuit in Illinois federal court on Sept. 2nd. The legal action, which seeks class-action status, alleges anti-competitive collusion since at least Jan. 2008 in sales of broiler chickens, which account for roughly 98% of the chicken meat sold in the U.S.
Tom Polansek and Sruthi Ramakrishnan of Reuters note that the company CEO wouldn’t discuss the investigation:
Tyson Chief Executive Tom Hayes declined to share details about its subpoena on a conference call with reporters after the company reported better-than-expected quarterly sales and profit. He said the company had not changed pricing practices.
Tyson received the subpoena from the SEC on Jan. 20 in connection with an investigation related to the company, according to regulatory documents.
The seller of Ball Park hot dogs said it had limited information and was cooperating with the probe, which is in an early stage.
Pilgrim’s Pride said it had not received a subpoena from the SEC. Sanderson Farms declined to comment.
Tyson’s stock ended down 3.5 percent at $63.13. Shares of Pilgrim’s Pride, mostly owned by meat packer JBS SA, lost 4 percent to $18.64. Sanderson Farms shares slid 1.9 percent to $89.50.
Shruti Date Singh of Bloomberg News reported broad changes in the chicken industry:
Over several decades, the U.S. chicken industry has transformed itself from being comprised mostly of family owned farms into a heavily consolidated sector controlled by several multibillion-dollar companies. Per-capita chicken consumption in the U.S. has more than doubled in 40 years. Consumers spent about $90 billion on chicken products last year.
As those companies’ market share and power has grown, they have drawn scrutiny for their production practices, such as their use of contract farming to raise birds for slaughter.
There have been some changes to the chicken industry amid the recent legal complaints. The Georgia Department of Agriculture, which gathered and disseminated the benchmark Georgia Dock prices that are the focus of some of those complaints, discontinued its widely used pricing index in December, citing the changes in the industry. Starting this month, the department began collecting data for a new index, although a lack of contributions has delayed the publication of the new measure.
Hayes said on a conference call with analysts that issues surrounding the Georgia Dock index a “tempest in a teapot” and said the company hasn’t changed its pricing practices.
