The U.S. Justice Department is looking into the way poultry producers pay farmers who raise their chickens, according to an SEC filing this week from Pilgrim’s Pride.
The poultry giant said it learned of the government’s civil investigation earlier this month and that it will cooperate. Pilgrim’s Pride said there could be drawbacks to its operations as a result of the DOJ’s actions.
“The U.S. government’s recent focus and attention on market dynamics in the meat processing industry could expose [Pilgrim’s Pride] to additional costs and risks,” the company said in the filing.
The DOJ has informed other poultry companies about the probe, The Wall Street Journal reported.
Tyson Foods did not respond to a request for comment.
The government probe is the latest in a string of investigations by the White House focusing on industry concentration in the meat space, specifically on price fixing, wages and how small farmers are paid.
The Biden administration has targeted the payment structures of the largest poultry providers, which attracted additional attention following the closure of the Wayne-Sanderson Farms merger this summer.
Cargill, Wayne and Sanderson were charged with engaging in a years-long plot to exchange information about payment and benefits for their poultry plant workers, which the government said allowed the companies to suppress wages. The poultry giants were required to pay $84.8 million to workers impacted by the scheme.
This action was perceived by experts as a concession made to ensure the Wayne-Sanderson merger received regulatory approval following a lengthy delay.
In June, the USDA issued a proposal that would require poultry producers to disclose transparency rules to growers before entering into a contract. The purpose of the measure was to level the playing field and promote competition in the poultry space by preventing deception from large poultry providers, the USDA said.
Currently, major poultry providers determine grower payment based on a “tournament system” that sets pay based on how they perform relative to other growers. The DOJ argued this system violates the Packers and Stockyards Act of 1921, as poultry companies control access to feed and chicks, making it unfair to certain growers. Critics have argued this vertically integrated system puts contract poultry growers at a disadvantage.
Not all of the Biden administration’s attempts to hold poultry producers accountable have paid off. Five poultry executives, including three who previously worked at Pilgrim’s Pride, were found not guilty by a jury in Colorado in July after an unprecedented third trial as part of a lengthy investigation by the DOJ.
There is some precedent, however. In 2021, four Pilgrim’s Pride executives were charged with price-fixing by a federal grand jury.
