On July 25, 2022, the Antitrust Division of the U.S. Department of Justice (“DOJ”) filed a civil complaint in the U.S. District Court for the District of Maryland alleging that poultry processors, Cargill Inc. and Cargill Meat Solutions Corporation, Sanderson Farms Inc., and Wayne Farms LLC, engaged in a decades-long conspiracy to suppress compensation to poultry processing plant workers by exchanging competitively sensitive information about wages and benefits and collaborating on compensation policies. At the same time, the DOJ entered a proposed consent decree to settle the action with the defendants, in which the poultry processors commit to pay $84.8 million in restitution and the defendants are prohibited from engaging in certain conduct for 10 years. This settlement comes on the heels of several price fixing prosecutions in the poultry industry.^[1]  Although the settlement papers do not mention it explicitly, it seems likely that the conduct at issue in this matter came to light as part of one of the DOJ’s other investigations.

According to the DOJ’s complaint, the poultry processors conspired with each other and with co-defendant data consulting firm Webber, Meng, Sahl and Company, Inc. (“WMS”) for decades to exchange competitively sensitive information about poultry plant workers’ wages, with the majority of the information being current or future, disaggregated, or identifiable in nature. Examples of shared information included compensation for hourly and salaried poultry plant jobs and base wages for a variety of other poultry processing jobs. Following the information exchange, the poultry processors then collaborated with and sought assistance from each other in making compensation decisions. 

The DOJ alleged that Cargill, Sanderson Farms, and Wayne Farms are close competitors for labor services of poultry processing plant employment across the nation, and collectively possessed buyer market power (monopsony power) in that relevant nationwide labor market. The complaint alleged that the conspiracy and anticompetitive exchange of information distorted the competitive mechanism for wage-setting for poultry processing plant labor and suppressed wages paid to those employees in violation of Section 1 of the Sherman Act. The complaint also noted 18 additional co-conspirators who allegedly conspired with defendants but remained unnamed because of their inclusion in another ongoing DOJ investigation.

To resolve the DOJ’s allegations of competitive harm, the poultry processing defendants and WMS entered into a proposed consent decree imposing the following conditions for the next 10 years:

• Cargill, Sanderson Farms, and Wayne Farms are prohibited from sharing competitively sensitive information about poultry processing plant workers’ compensation.

• Cargill, Sanderson Farms, and Wayne Farms commit to collectively pay $84.8 million in restitution for poultry processing plant workers who were harmed by the conspiracy.

• WMS is prohibited from providing surveys or other services that facilitate the sharing of competitively sensitive information in any industry.  WMS President G. Jonathan Meng is also subject to the terms of this consent decree in his individual capacity.

The parties also agreed to the appointment of a court-appointed compliance monitor to ensure the poultry processing defendants’ compliance with the terms of the consent decree. The monitor will have broad authority to ensure compliance with all federal antitrust laws as they relate to defendants’ businesses, and defendants will submit regular reports on antitrust compliance. The DOJ will have broad authority to inspect the processors facilities and interview employees to ensure antitrust compliance. The consent decree with Sanderson Farms and Wayne Farms also imposes additional restrictions on deceptive practices in poultry markets, including using a “tournament system” to adjust poultry grower’s “base payment” in relation to how well the grower performed relative to other growers.

The DOJ’s complaint and settlement is important in several respects.

• It serves as another reminder that the antitrust enforcers are actively investigating and prosecuting anticompetitive conduct that affects the labor markets. We have noted this uptick in previous client alerts, highlighted by the DOJ’s first-of-its-kind criminal prosecutions of wage-fixing conspiracies. Despite suffering losses in two of those cases at trial, the DOJ appears committed to its campaign of investigating anticompetitive conduct that affects labor and employment markets. We expect to see the DOJ bring both civil and criminal cases in the future.

• The Sherman Act prohibits agreements in restraint of trade. Here, the agreement was to exchange information on wages, not a direct agreement on wages themselves. An agreement to suppress wages would likely be prosecuted criminally.

• There are not many cases on information exchanges so this matter sends an important message on how the DOJ views the legal elements of the claim: it is a rule of reason violation, requiring allegations and proof of relevant markets and anticompetitive effects.

• Restitution is an important part of the remedy here. To our knowledge, this is the first Antitrust Division civil case settlement that included restitution in addition to the more traditional equitable cease and desist remedy.

• Wage surveys and other information exchanges are common activities for trade associations, hospital groups, and other employers. Such activity can still be done in a compliant manner by following the DOJ and FTC guidance for the health care industry regarding similar conduct.^[2]  Absent extraordinary circumstances, since the issuance of formal guidance over 25 years ago, the federal government will not prosecute information exchanges on reimbursement for health care providers if the competitively sensitive information is held by a third party, any information shared among competitors is at least three months old, and there are at least five providers supplying the information and no one provider can account for more than 25% of the information in question, i.e., competitors cannot reverse engineer to figure out any one competitor’s information. It has been thought this health care guidance could be applied generally.^[3]

Going forward, companies should take a close look at their antitrust compliance policies relating to the exchange of potentially competitive sensitive information, particularly with respect to wages paid to employees. As we have seen from this case and others, any inappropriate exchange of information is not sanitized merely by the use or presence of a third-party consultant, who may themselves face antitrust liability for facilitating such an exchange. The DOJ’s complaint can be interpreted as alleging that the exchange information by itself could be a standalone violation of Section 1 of the Sherman Act—the DOJ’s Competitive Impact Statement, which has not yet been filed, might shed some light on this point. In any event, while that particular legal issue will not be addressed in this case, companies should keep apprised of judicial treatment in subsequent cases that may provide additional clarity on how such conduct would be analyzed by the courts.

FOOTNOTES

^[1] U.S. v. Penn et al., case no. 1:20-cr-00152 (D. Colo.)

^[2] Statements of Antitrust Enforcement Policy in Health Care, Statement 6, https://www.justice.gov/atr/page/file/1197731/download

^[3] Bloom, Michael. "Information Exchange: Be Reasonable," Bureau of Competition, Federal Trade Commission (December 11, 2014), https://www.ftc.gov/news-events/blogs/competition-matters/2014/12/information-exchange-be-reasonable