Pilgrim’s Pride Corp, controlled by JBS SA, has reached an agreement with the U.S. Department of Justice, Antitrust Division with respect to allegations of collusion to manipulate prices of products. In a company statement Pilgrim’s Pride noted that the fine was “for restraint of competition that affected three contracts for the sale of chicken products to one customer in the United States.” The agreement apparently ends the criminal investigation by the DOJ into Pilgrim’s Pride. The company will not function under monitoring or be subject to a probationary period, providing there is compliance with the terms and provisions of the agreement yet to be publicized.
Fabio Sandri, newly appointed CEO of Pilgrim’s Pride, stated, “Pilgrim’s is committed to fair and honest competition in compliance with U.S. Antitrust laws.” He added, “We are encouraged that today’s agreement concludes the Antitrust Division’s investigation into Pilgrim’s and provides certainty regarding this matter to our team members, suppliers, customers, and shareholders.”
The plea agreement effectively limits the options to indicted previous CEOs Bill Lovette and Jayson Penn. The action by the Company obviously undercuts any viable defense to be mounted by Claxton Poultry, its president and marketing personnel.
In commenting on the plea agreement, analyst Ben Bienvenu of Stephens Inc. cited, “This largely puts the controversy in the company’s rear-view mirror.” For his information Pilgrim's Pride is still at jeopardy from civil lawsuits initiated in 2016 but suspended as a result of the DOJ investigation. The civil case, certainly against Pilgrim’s Pride, is now res ipsa and it is doubtful how the company can mount any convincing defense. If Pilgrim’s Pride does not settle with plaintiffs, it is possible that a trial jury will award both direct and punitive damages that would be extremely costly.
Apart from the financial impact of the settlement, certainly Pilgrim's Pride has undergone reputational damage that ultimately may affect not only share price, but also customer goodwill and the intended IPO of JBS subsidiaries in the U.S. With respect to other companies under investigation, Tyson Foods, through its admissions to the DOJ, will probably escape fines but obviously documentation has been made available that may be used in prosecution of possible related crimes under investigation.
An aspect of the class action suit was that all major U.S. broiler integrators participated in indirect collusion through their subscription to the Agristats™ benchmarking system. This aspect has yet to be considered in a trial. If the Pilgrim’s Pride plea agreement is entered into evidence, the Defendants in the civil case may be well advised to settle and not risk a jury trial with the possibility of punitive damages.
The statement by Assistant Attorney General for the Antitrust Division, Makan Delrahim, and the sentence handed down to Christopher Lischewski, CEO of Bumblebee Seafoods, who received 40 months in federal prison and a substantial fine are now a matter of record. This suggests that indicted chicken company executives previously at Pilgrim’s Pride, those at Claxton Poultry, and sales personnel previously employed by Tyson Foods may receive sentences that would serve as a disincentive to engage in restraint of trade.
The decision by Pilgrim’s Pride to enter into a plea deal with U.S. Department of Justice will expedite the end to this sorry episode that does not appear to be representative of the entire broiler industry. Prompt resolution will limit further degradation of image.