McDonald’s lawsuit accuses beef suppliers of price fixing

McDonald’s is suing some of its suppliers over allegations they conspired to sell the fast-food chain beef at artificially inflated prices, in violation of federal antitrust laws, according to a new lawsuit Friday.

McDonald’s Corp. alleges the suppliers coordinated to fix, raise, stabilize, or maintain the price of beef at “supracompetitive levels.”

The nine suppliers, which include companies like Tyson Foods Inc., JBS SA, and Cargill Inc., violated the Sherman Act through their conduct, McDonald’s said in its complaint in the U.S. District Court for the Eastern District of New York.

“Defendants and their co-conspirators implemented their conspiracy by collusively reducing the slaughter-ready cattle and beef supply, which over time artificially elevated the price of beef that they sold to Plaintiff and others,” McDonald’s said.

McDonald’s wants a declaratory judgment affirming the conspiracy’s existence, damage awards three times the amount the damages it sustained, and pre-judgment and post-judgment interest, according to the complaint. They also ask the district court to enter a permanent injunction to indefinitely enjoin the defendants from continuing their conduct.

A representative with JBS SA declined to comment on the matter. None of the remaining defendants immediately responded to a Friday request for comment.

The fast-food giant says the conspiracy started in 2015 after some of the defendants were experiencing shrinking profit margins on their beef sales after years of drought, according to the complaint. The defendants responded by agreeing to collectively reduce and manage their slaughter volumes, which resulted in a reduction in the supply of beef.

By reducing their volumes and restraining the market, the defendants created artificially inflated beef prices to aid their profit margins, the complaint said. McDonald’s alleges that some defendants even intentionally closed production plants and refrained from expanding their process capacity during this period.

“Defendants’ ability to cut beef production while maintaining inflated beef prices during the conspiracy period provides compelling circumstantial evidence of their conspiracy,” McDonald’s said.

When comparing the slaughter capacity and output between non-conspiratorial beef producers and the defendants, the former were increasing in both categories during the same period, according to the complaint.

In 2020, Tyson Foods, JBS, and Cargill, were served subpoenas by the U.S. Department of Justice to investigate the purported price fixing, McDonald’s said. In the subsequent investigation, McDonald’s said unsealed filings revealed testimonies of cattle ranchers admitting to the existence of the alleged conspiracy.

During the conspiracy period, the defendants experienced record profits, with JBS USA reporting net revenue of $27.18 billion in 2021, which is a 25.8% increase from its profits in 2014, according to the complaint.

McDonald’s alleges the defendants concealed their behavior through a series of tactics, including: avoiding paper trails by communicating via phone; offering pretextual explanations for cattle prices and plant closures; and misrepresenting their compliance with antitrust laws, the complaint said.

Cadwalader Wickersham & Taft LLP represent McDonald’s.