McDonald’s Sues Beef Giants, Accusing Them of Price-Fixing Conspiracy

McDonald’s has filed a lawsuit against several major beef suppliers, including industry giants Tyson Foods, JBS and Cargill, accusing them of conspiring to fix beef prices at artificially high levels. According to Politico, the lawsuit claims the suppliers colluded to inflate prices in a manner that violates federal antitrust laws, specifically targeting the Sherman Antitrust Act.

The suit, filed in the U.S. Eastern District of New York, alleges that the beef suppliers have been engaged in a price-fixing scheme since 2015, manipulating the market by reducing the supply of slaughter-ready cattle. This, in turn, artificially raised beef prices, harming McDonald’s and other buyers. According to McDonald’s, the companies’ actions resulted in “supracompetitive” price levels that substantially impacted the fast-food chain’s costs.

Per Politico, the defendants named in the suit account for around 80% of the U.S. beef market, selling more than 25 million pounds of beef in 2018. The complaint contends that their coordinated efforts to reduce beef supply, through tactics like plant closures and reduced slaughter volumes, forced prices higher, despite market conditions that would have otherwise led to lower costs.

This alleged scheme also allowed the companies to maintain exceptionally high profit margins, further raising suspicion. For instance, Tyson Foods reported an 18% operating margin in its beef business in 2021, nearly nine times what it had reported in 2014, according to the complaint. JBS USA also saw a significant jump, with net revenues climbing to $27.2 billion in 2021, a 25.8% increase from its 2014 figures.

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In its filing, McDonald’s is seeking triple the damages it sustained as a result of these inflated prices, along with attorneys’ fees and interest. The fast-food giant also wants the court to issue an injunction preventing the suppliers from engaging in similar price-fixing schemes in the future.

The legal battle stems from a broader investigation into the meat industry’s pricing practices. According to the lawsuit, the U.S. Department of Justice (DOJ) subpoenaed some of these suppliers in 2020 as part of an inquiry into price manipulation in the beef market. A confidential witness from that investigation provided crucial information, revealing details of the alleged conspiracy among suppliers. Per the lawsuit, the companies allegedly communicated through phone calls to avoid leaving written evidence of their price-fixing activities.

McDonald’s claims the suppliers concealed their scheme by attributing their rising profits to their ability to predict cattle supplies. For instance, in a 2018 earnings call, Tyson Foods attributed its abnormally high operating margins to the company’s understanding of cattle availability, per the lawsuit.

Source: Politico