Two chicken growers in Texas previously contracted with Pilgrim’s Pride Corp. (Nasdaq: PPC) have sued the Greeley company and several other large-scale chicken packers in the U.S., alleging that the industry has colluded to artificially keep compensation down.
In a complaint filed in the U.S. District of Colorado on Monday, Marc and Karen McEntire claim that Pilgrim’s and other major chicken packers such as Tyson Foods Inc. (NYSE: TSN), Sanderson Farms Inc. (Nasdaq: SAFM) and Perdue Farms Inc. have since 2008 been part of a “no-poach” scheme wherein they would not try to recruit small growers from one another and share compensation data.
The suit argues that the alleged scheme has put small growers in a position where they were effectively stuck with either taking non-competitive prices for their products or face financial ruin due to the high initial costs in setting up chicken grow-out homes to specifications set by the packers themselves.
The McEntires say they began growing chickens for Pilgrim’s in 2004 and took out $120,000 in debt to add improvements based on the company’s demands before quitting the industry a decade later.
They had to work full-time jobs while caring for the Pilgrim’s-bound broiler chickens because they “were barely able to make ends meet with the compensation provided by Pilgrim’s,” according to the suit.
The suit also includes broader price-fixing allegations echoed in previous antitrust lawsuits, such as the complaint filed two weeks ago by a subsidiary of Post Holdings Inc. (NYSE: POST).
The McEntires are asking the court to grant class-action status to growers across the country that have been compensated by Pilgrim’s and the other co-defendants since 2013, along with damages and penalties for the alleged anti-competitive behaviors as deemed appropriate at trial.
Pilgrim’s has been the target of several government-led legal queries over industry-level pricing practices as of late. It is among multiple chicken producers involved in an ongoing U.S. Department of Justice investigation that began last fall, and CEO Jayson Penn is on leave and currently awaiting trial after a grand jury indicted him on price-fixing charges last June.
A spokesperson for Pilgrim’s did not respond to a request for comment Monday afternoon.
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