McDonald’s claimed major beef suppliers — including Tyson — fixed prices at artificially high levels in a conspiracy that violated federal antitrust laws, according to an explosive lawsuit.
The burger-and-fries giant claimed the beef suppliers agreed to manipulate and fix prices at “supracompetitive levels,” according to the suit filed on Friday in the US Eastern District of New York.
The nine food suppliers – including Tyson Foods, JBS and Cargill – have been conspiring since 2015 to fix beef prices, the suit claimed.
Collectively, the defendants dominate the beef market. In 2018, they sold about 80% of the more than 25 million pounds of beef sold to the US market, the suit claimed.
Their yearslong conspiracy restricted trade or commerce – making it a violation of the Sherman Antitrust Act, the suit said.
“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 in the suit.
The fast-food chain is seeking three times the damages it sustained as a result of the artificially inflated prices, reasonable attorneys’ fees and pre-judgement and post-judgement interest, the suit said.
McDonald’s is also seeking for the court to prohibit the suppliers from re-engaging in a price-fixing plot, according to the suit.
Tyson Foods, JBS and Cargill did not immediately respond to requests for comment.
In 2015, the suppliers began restricting their slaughter volumes – thus decreasing their beef output and raising prices – after they were hit with tightening profit margins, the suit claimed.
Some of the suppliers even closed plants during the conspiracy to further restrict their beef supply, McDonald’s alleged.
In 2020, the United States Department of Justice subpoenaed some of the suppliers and launched an investigation into their pricing practices.
A confidential witness from the DOJ’s investigation revealed the existence of a conspiracy among the suppliers, the suit claimed.
The suppliers “achieved unprecedented meat margins” thanks to their scheme, the suit said.
In 2021, Tyson Foods reported an 18% operating margin in its beef business – nearly nine times its operating margin in 2014, the suit said.
JBS USA reported net revenue of $27.2 billion at the same time, representing a 25.8% increase from its 2014 revenue.
The suppliers covered up their plot by misattributing their record profits to “their ability to accurately foresee the volume of cattle that would enter the beef supply chain in the upcoming years,” the suit said.
In a 2018 earnings call, for example, Tyson Foods attributed its unusually high operating margins to “those cattle on feed reports and knowing that the supplies in our region are exceptionally good,” according to the suit.
The suppliers also allegedly avoided written evidence by conspiring over the phone, the suit said.
