McDonalds alleges price fixing by US beef processors

McDonald’s corporation, one of the world’s largest beef buyers has filed a 100-page legal action against the top four beef processors in a US court last week.

They accuse Cargill, JBS USA, Tyson Foods, and National Beef of conspiring to “fix, raise, stabilise and/or maintain the price of beef” at “prices artificially higher than beef prices would have been in the absence of their conspiracy.” It is alleged that this has been going on since at least 1 January 2015 and continues to the present day.

The action alleges that the beef processors implemented their conspiracy by “coordinating, manipulating, or agreeing to pay less than competitive prices for the main or primary input in producing beef, namely, slaughter-ready cattle for the purpose and with the effect of fixing, increasing, stabilising or maintaining above competitive levels their margins on, and the price of beef sold to Plaintiff and others.”

It refers to “frequent meetings between each other’s executives and key employees”. Trade association conferences and other industry events offered convenient opportunities to exchange information, plans and strategies, and to build relationships.

As described throughout this Complaint, Operating Defendants seized these opportunities to advance their collusive supply restrictions.”

Basically, McDonald’s is alleging that the concentration of beef processing in the US (these companies control 80% of the industry) means that they can and do collaborate to control both beef buying and selling prices.

History of litigation in US

While involvement by McDonald’s gives this litigation a particular profile, it isn’t the first time that the spotlight has been put on beef factories in the US. Back in March 2020, then-Agriculture Secretary Sonny Perdue announced a USDA investigation into suspiciously high beef prices.

He referred to the “historically high” difference between cattle prices and wholesale beef prices.

In June 2021, 26 Senators sent a strongly worded letter to the Department of Justice requesting that “the government to determine whether the stranglehold large meatpackers have over the beef processing market violates our antitrust laws and principles of fair competition.”

They went on to claim that the power of the beef factories was such that it “allows them to seemingly control prices at their will.”

A group of ranchers took an anti-trust action against the big four beef processors but this was dismissed last year in a 31-page judgement because they did not establish anti-trust standing to pursue their case.

Previously JBS settled an action by a group of grocery stores for $23m and they paid $48.2m to settle a claim by a beef wholesaler the previous year but didn’t admit liability.

Government intervention

President Biden and Agriculture Secretary Tom Vilsack hosted an Agricultural summit at the start of 2022 where the large beef processors were referred to as a textbook example of using their power to increase consumer prices while squeezing out competitors and exploiting farmers and ranchers.

This followed the revelation of meat price inflation the previous November being double general food price inflation.

The Biden administration announced that it was making available a $1bn (€917m) fund for investment in independent meat processing outside the big players with the ambition of introducing more competition in the beef processing business.

What makes this litigation interesting is that it is a clash of the superpowers, in one corner are the four biggest beef processors in the US and they are faced by the world’s largest corporate beef buyer in the other corner.

It will be for the district court in the eastern district of New York to adjudicate on the merits of the action, but the 100-page document laying out the claim draws attention to major issues in the US beef processing industry including previous occasions when they have come before the courts and caused the White House to become involved to try to encourage processing competition.

Lots of data

Relative to Ireland, there is an exceptional amount of data available on the beef supply chain in the US and USDA has been looking to extend this further. This has met pushback from the Meat Institute, the trade association that represents US processors.

They refer to the multiple lines of daily and weekly reporting of prices and values and their president and CEO Julie Anna Potts said “Thanks to the transparency already required in these markets, we know that cattle producers have received record high prices for several years.”

Irrespective of what happened between 2015 and 2022 what is clear is that for much of the past year, the US farm gate price has been around the equivalent of €6/kg or more.

Large losses

At the same time, after a period of exceptional profits, the major meat processors that publish accounts all showed large losses on their beef operations in 2023 and into 2024.

Irish farmers will watch with interest the Goliath versus Goliath tussle in the US courts but can only wish that they had access to a similar level of data on what happens beyond the farm gate here.