CASE 0:18-cv-01776-JRT-HB Doc. 421-1 Filed 12/13/19 Page 1 of 261
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`UNITED STATES DISTRICT COURT
`DISTRICT OF MINNESOTA
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`IN RE PORK ANTITRUST LITIGATION
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`Civil No. 18-cv-1776 (JRT/HB)
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`CONSUMER INDIRECT
`PURCHASER PLAINTIFFS’
`SECOND AMENDED
`CONSOLIDATED CLASS ACTION
`COMPLAINT
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`DEMAND FOR JURY TRIAL
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`(REDACTED VERSION)
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`This Document Relates to:
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`All Consumer Indirect Purchaser Actions
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`I. 
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`II. 
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`TABLE OF CONTENTS
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`Page
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`NATURE OF ACTION ............................................................................................ 1 
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`SUMMARY OF PARTIES ...................................................................................... 7 
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`III. 
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`FACTUAL ALLEGATIONS ................................................................................... 8 
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`Agri Stats enabled competitors to directly exchange, and restrain,
`supply and cost. ............................................................................................. 8 
`1. 
`Agri Stats’ detailed pricing reports provide competitors
`with a view of the entire market, removing all question of
`competition on price. .......................................................................... 9 
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`2. 
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`3. 
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`4. 
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`5. 
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`Beyond the pricing reports themselves, Agri Stats allowed
`the pork processors to directly access sales data through a
`“sales data miner” tool. .................................................................... 21 
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`Just in case weekly sales reports and data mining were not
`enough to ensure the lack of pricing competition, Agri
`Stats also provided colorful graphs to highlight any
`differences in competitors’ prices. ................................................... 26 
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`The Operations Profit Report provided competitors with
`information on the profitability of their competitors –
`allowing a further means to detect any cheating on the
`cartel. ................................................................................................ 30 
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`The Agri Stats Swine Processing Report provided detailed
`information regarding costs of the competitors. .............................. 34 
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`Agri Stats’ collection and standardization process provided pork
`processors the unparalleled ability to monitor, or discipline co-
`conspirators for not complying with their collusive agreement. ................. 39 
`1. 
`Agri Stats audited the data to ensure co-conspirators could
`not cheat on the agreement. .............................................................. 40 
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`2. 
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`3. 
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`Agri Stats guaranteed to the co-conspirators that its
`competitors were equally participating in the scheme. .................... 43 
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`Agri Stats acted as a gatekeeper, preventing public access
`to the reports, ensuring that the conspiracy went
`undetected. ........................................................................................ 46 
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`Agri Stats reports were easily deanonymized by the pork
`processors. ................................................................................................... 47 
`Agri Stats succeeded in orchestrating the pork conspiracy
`because it leveraged its success in the chicken industry, and
`because both industries are controlled by the same companies. ................. 50 
`1. 
`Agri Stats is a repeat offender, playing a crucial role in a
`similar price-fixing and supply constraint conspiracy in
`the sale of chickens. ......................................................................... 50 
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`2. 
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`The same companies own both chickens and pigs. .......................... 52 
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`Defendants’ conspiracy had its intended effect, with pork
`processors lowering supply during the class period both in the
`aggregate, and individually. ........................................................................ 53 
`Defendants’ conspiracy had the intended effect of raising prices
`of pork during the class period. ................................................................... 61 
`1. 
`The average hog wholesale price experienced an
`unprecedented increase beginning in 2009. ..................................... 62 
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`2. 
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`3. 
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`4. 
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`5. 
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`The pork cut-out composite price experienced a dramatic
`increase beginning in 2009 and continuing throughout the
`class period. ...................................................................................... 63 
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`Pork processors’ margin increased beginning in 2009
`showing a statistically significant break from the pre-class
`period. ............................................................................................... 63 
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`Defendants’ revenues increased beginning in 2009, even
`taking into account defendant-specific costs. ................................... 65 
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`Overcharges due to the cartel were passed through to the
`indirect purchaser class. ................................................................... 67 
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`The structure of the pork processing industry allowed the
`conspiracy to succeed. ................................................................................. 69 
`1. 
`The pork industry is nearly fully vertically integrated,
`which allowed the scheme to succeed. ............................................. 70 
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`2. 
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`The level of concentration in the pork industry was
`optimal for the alleged collusive scheme. ........................................ 72 
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`3. 
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`Barriers to entry helped to keep competitors out of the
`pork integration market and ensure the success of the
`conspiracy. ........................................................................................ 77 
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`Defendants actively concealed the conspiracy and plaintiffs did
`not and could not have discovered defendants’ anticompetitive
`conduct. ....................................................................................................... 77 
`PLAINTIFFS ALLEGE VIOLATIONS UNDER BOTH THE PER SE
`AND RULE OF REASON STANDARDS OF THE SHERMAN ACT ............... 81 
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`IV. 
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`1. 
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`2. 
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`The Unlawful Agreements ............................................................... 82 
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`Defendants’ information exchanges had the likely effect
`of harming competition. ................................................................... 84 
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`a. 
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`b. 
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`c. 
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`Defendants have market power in the market for
`pork. ...................................................................................... 84 
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`There are high barriers to entry in the market for
`pork for meat consumption. .................................................. 84 
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`The defendants have market power in the market
`for pork for meat consumption. ............................................. 84 
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`3. 
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`The market for pork is the type of market where the
`information exchanges orchestrated by Agri Stats are
`likely to harm competition. .............................................................. 85 
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`a. 
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`b. 
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`c. 
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`d. 
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`e. 
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`The pork market features few sellers .................................... 85 
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`Pork is a fungible market ...................................................... 86 
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`The pork market features price-based competition ............... 86 
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`Demand for pork is relatively inelastic ................................. 87 
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`The pork market features a trend towards price
`uniformity. ............................................................................. 87 
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`4. 
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`Defendants’ information exchanges corrupted the
`competitive process. ......................................................................... 88 
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`V. 
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`VI. 
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`JURISDICTION AND VENUE ............................................................................. 90 
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`PARTIES ................................................................................................................ 91 
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`Plaintiffs ...................................................................................................... 91 
`Defendants ................................................................................................... 99 
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`VII.  CLASS ACTION ALLEGATIONS ..................................................................... 102 
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`VIII.  ANTITRUST INJURY ......................................................................................... 108 
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`IX.  CAUSES OF ACTION......................................................................................... 110 
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`REQUEST FOR RELIEF ..................................................................................... 167 
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`JURY TRIAL DEMANDED ............................................................................... 168 
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`X. 
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`XI. 
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`Plaintiffs bring this action for injunctive relief under Section 1 of the Sherman
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`Act, and for treble damages under the antitrust laws, unfair competition laws, consumer
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`protection laws, and unjust enrichment common laws of the several states against
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`Defendants. Plaintiffs demand a trial by jury.
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`I.
`Few things have impacted the life of the average American as dramatically
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`NATURE OF ACTION
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`1.
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`as the arrival of the internet. While the internet has brought enormous benefits –
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`increased ease of access to information – this benefit comes with a darker side. Just as
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`consumers are able to access information with more ease, so are companies able to
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`collect and transfer enormous amounts of data. The true cost of the availability of this
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`large amount of data is still hidden to most. But here, it became a central part of the
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`defendants’ collusion stabilizing the price and supply of pork being sold to consumers on
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`a daily basis. Access to and exchange of competitively sensitive data gave the defendants
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`– pork processors – the ability to restrict and stabilize the supply and price of pork in a
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`way that was unimaginable twenty years ago.
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`2.
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`Key to this conspiracy was Agri Stats. Agri Stats is a small company,
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`headquartered in Fort Wayne, Indiana. To the outside world, the role of Agri Stats is
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`almost invisible. Paradoxically, Agri Stats has an almost minimal internet presence. Its
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`current home page transmits little more than a bucolic rural scene:
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`3.
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`No uninitiated visitor to this website would realize the profound and
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`anticompetitive impact Agri Stats has had on the supply and pricing of meat in this
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`country.
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`4.
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`Agri Stats’ refusal to advertise is intentional because Agri Stats’ services
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`are not for the public. Agri Stats refuses to sell its information and reports to just any
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`customers. Instead it focuses on its core business – collecting vast amounts of
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`information from protein companies, standardizing that data, and returning it to them in
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`detailed weekly and monthly reports. For the pork processors, Agri Stats provides current
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`and forward-looking sensitive information (such as profits, costs, sale prices and
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`slaughter information), as well as, the key to deciphering which data belongs to which
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`producers.
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`5.
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`The type of information available in these reports is not the type of
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`information that competitors would provide each other in a normal, competitive market.
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`In a competitive market – each competitor would act independently, making supply
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`decisions unilaterally and pricings its goods to market. Instead, Agri Stats’ provision of
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`detailed and sensitive information acted as the proverbial smoke-filled room of the cartels
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`of yesteryear. Rather than meeting in a room with pen and paper, Agri Stats collected the
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`pork processors’ competitively-sensitive supply and pricing data and intentionally shared
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`that information through detailed reports to market participants.
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`6.
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`Starting in at least 2009 and continuing to the present, defendants
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`coordinated to fix, raise, maintain and stabilize pork prices. To effectuate and ensure the
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`stability of their price-fixing agreement, defendants relied on Agri Stats as a means to
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`obtain and monitor critical and competitively-sensitive business information regarding
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`each other’s production metrics, thereby serving as a central and critical part of
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`defendants’ price-fixing scheme, resulting in a remarkably stable and successful
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`anticompetitive cartel.
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`7.
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`The data exchanged through Agri Stats bears all the hallmarks of the
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`enforcement mechanism of a price-fixing scheme. First, the data is current and forward-
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`looking – which courts consistently hold has “the greatest potential for generating
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`anticompetitive effects.”1 Second, information contained in Agri Stats reports is specific
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`1 Todd v. Exxon Corp., 275 F.3d 191, 2011 (2d Cir. 2001) (Sotomayor, J.) (quoting
`United States v. Gypsum Co., 438 U.S. 422, 441 n.16 (1978)).
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`to the pork producers, including information on profits, prices, costs, and production
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`levels. “Courts prefer that information be aggregated in the form of industry averages,
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`thus avoiding transactional specificity.”2 Third, none of the Agri Stats information was
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`publicly available. Agri Stats is a subscription service, which required the co-conspirators
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`to pay millions of dollars over the class period – far in excess of any other pricing and
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`production indices. Indeed, Agri Stats only allowed co-conspirators to receive data if they
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`themselves shared data. “Public dissemination is a primary way for data exchange to
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`realize its pro-competitive potential.”3 Agri Stats ensured that its detailed, sensitive
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`business information was available only to the co-conspirators and not to any buyers in
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`the market.
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`8.
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`The pork processors admitted in public calls that they had discussed
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`production cuts at least once, and publicly signaled to each other that no supply increases
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`would happen.
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`9.
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`An economic analysis of the prices of pork during the class period show an
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`abnormal shift, supporting the inference of collusion. Beginning in 2009, pork wholesale
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`prices increased and remained at a higher level compared to the years prior to 2009.
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`Another measurement of price, the pork cut-out composite price increased 18 percent
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`during the class period (and at one point in 2014 had increased 56 percent from the start
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`of the class period). In addition to price, the pork processors’ margin also increased – that
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`2 Id. at 212.
`3 Id. at 213.
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`is the amount of money retained by the pork producer defendants (versus what was paid
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`to farmers). And when tested, there was a statistically significant increase in the average
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`hog-composite spread before the class period, when compared to during the class period.
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`Moreover, when tested against two of the largest defendants, Tyson and Smithfield,
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`plaintiffs analyzed their revenue and costs, which also show a dramatic increase in
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`defendants’ revenues during the class period. These dramatic shifts in prices and
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`revenues further support the inference of a conspiracy during the class period.
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`10. Numerous “plus factors” exist in the pork industry during the class period,
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`including but not limited to multiple industry characteristics which facilitate collusion,
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`such as a high level of vertical integration, high pork industry consolidation and
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`concentration, barriers to entry preventing competitors from coming into the market,
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`inelastic demand for pork, and homogeneity of pork as a product.4 These plus factors add
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`plausibility to plaintiffs’ allegations of a price-fixing scheme.
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`11. Moreover, the information exchange between processor defendants through
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`Agri Stats was itself anticompetitive under a rule of reason analysis. The information
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`exchanged was highly granular data on defendants’ pricing, costs, and supply. The
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`information exchange had anticompetitive effects. For example, in both sales reports and
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`meetings with defendants, Agri Stats specifically identified “opportunities” for
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`defendants to raise prices on specific products that were priced lower than that of their
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`4 Pork is homogenous within cut type – i.e., a pork belly from Tyson and Smithfield
`are virtually indistinguishable.
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`competitors. The information was current. Starting no later than early 2009, Agri Stats
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`began distributing weekly sales reports to defendants that contained pricing information
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`that was less than a month old. And all of this information was intentionally shielded
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`from both the public and other industry participants, such as food retailers. This
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`information exchange was particularly likely to have anticompetitive effects because the
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`pork market is characterized by few sellers, a fungible product, a tendency towards
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`uniform pricing, and inelastic demand.
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`12. Defendants’ restriction of pork supply and information exchange through
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`Agri Stats had the intended purpose and effect of increasing pork prices to plaintiffs and
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`class members. Beginning in 2009, the earnings of the processors began to increase, as
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`they took an increasing amount of the profits available in the pork industry. As a result of
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`defendants’ unlawful conduct, plaintiffs and the classes paid artificially inflated prices for
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`pork during the class period. Such prices exceeded the amount they would have paid if
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`the price for pork had been determined by a competitive market. Thus, plaintiffs and class
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`members were injured by defendants’ conduct.
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`13.
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`Plaintiffs bring this complaint, alleging violations under both a per se or, in
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`the alternative, rule of reason standard under the federal and state antitrust and consumer
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`protection laws.
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`II.
`Plaintiffs are consumers who have purchased pork as the end-consumers in
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`SUMMARY OF PARTIES
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`14.
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`the food distribution chain.5 See section VI.A, infra (detailed allegations regarding each
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`plaintiff). Plaintiffs bring this action on behalf of themselves individually and on behalf
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`of various state classes consisting of all persons and entities who purchased pork
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`indirectly from a defendant or co-conspirator for personal use in the United States from at
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`least January 1, 2009 until the present (Class Period). See section VII, infra.
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`15.
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`The defendant pork processors are each of the major meat companies who,
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`collectively, control over 80 percent of the pig slaughtering facilities in the United States.
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`The pork processor defendants are Clemens Food Group, LLC, the Clemens Family
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`Corporation, Hatfield Quality Meats (collectively, Clemens), Hormel Foods Corporation
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`(Hormel), Indiana Packers Corporation (Indiana Packers), JBS USA Food Company (JBS
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`USA), Seaboard Foods LLC (Seaboard), Smithfield Foods, Inc. (Smithfield), Triumph
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`Foods, LLC (Triumph), and Tyson Foods, Inc., Tyson Fresh Meats, Inc. and Tyson
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`Prepared Foods, Inc. (together and separately, Tyson). See section VI.B, infra.
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`16. Defendant Agri Stats is the center of this conspiracy. Through Agri Stats,
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`defendants were able to have access to standardized data (cost, price and supply
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`information) from their erstwhile competitors which they used to extract the maximum
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`amount of profits from the American consumer. See section VIII, infra.
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`5 For purposes of this complaint, pork includes pig meat purchased fresh or frozen,
`smoked ham, sausage and bacon.
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`III. FACTUAL ALLEGATIONS
`Agri Stats enabled competitors to directly exchange, and restrain, supply and
`cost.
`17.
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`The depth and breadth of Agri Stats reports make them difficult to describe
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`through words alone. Prior to this litigation, Agri Stats reports were not publicly
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`available. During the course of discovery in this case, plaintiffs obtained a small number
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`of Agri Stats reports relating to the Pork industry from a production of documents made
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`by Agri Stats to the DOJ nearly a decade ago. Plaintiffs attach the following examples of
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`reports as exhibits:
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` Exhibit A: An Agri Stats March 2009 weekly sales report;
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` Exhibit B: An Agri Stats April 2008 Economic Impact Sales Report;
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` Exhibit C: An Agri Stats August 2009 report for Tyson’s Storm Lake facility;
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` Exhibit D: An Agri Stats September 2009 report entitled “Bacon Demo,”;
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` Exhibit E: A June 2010 Agri Stats presentation to Hormel soliciting Hormel’s
`participation in additional Agri Stats reporting services;
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` Exhibit F: An Agri Stats May 2008 presentation entitled, “Hatfield Quality Meats
`Pork Kill & Cut Phone Review;” and
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` Exhibit G: An Agri Stats February 2010 “Demo” Swine Processing report.
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`18. All programs at Agri Stats are done on a monthly basis, with the exception
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`of sales which are done weekly and monthly. Plaintiffs describe below the content and
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`import of each of these reports, as well as the process by which Agri Stats collects and
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`disseminates the data.
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`1.
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`Agri Stats’ detailed pricing reports provide competitors with a view of
`the entire market, removing all question of competition on price.
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`19.
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`Perhaps Agri Stats’ most egregious service is its sales reports. These
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`reports, on a weekly and monthly basis, contain not only current pricing information (to
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`within a few weeks), but also calculate for competitors exactly how far they could raise
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`prices to match their competitors on a per item basis. In others words, not only does Agri
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`Stats provide Defendants with their competitors’ pricing, they take it a step further –
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`ensuring that consumers feel the brunt of Agri Stats’ data collection operations, by
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`performing the mathematic calculations that identify for its co-conspirators the price-
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`raising opportunities that they can cash in on at the expense of the consumers.
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`20.
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`In early 2009, at the beginning of the conspiracy period, Agri Stats
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`introduced new sales report formats containing weekly and monthly data. The new sales
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`reports were designed to specifically allow a defendant to compare its prices with that of
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`its competitors. Brian Snyder, an Agri Stats employee, explained in an e-mail to Seaboard
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`employees on March 5, 2009 that:
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`Agri Stats is rolling out a new weekly and monthly sales report.
`I have attached week 8 for your review in the new format. This
`report is a dramatic improvement to the legacy platform in
`evaluating sales. It compares a company’s price and sales mix
`versus the national price with the company mix. I would like
`to set up a 30 minute web review of the new weekly report to
`answer any questions. The new platform also allows us more
`audit tools regarding the data. All price variances 30% from
`the average will be kicked out to an exception report and
`investigated. This was a manual audit in the legacy system.
`With this new procedure automated, it should streamline and
`improve the audit of the sales number and identify the outliers.
`It will automatically generate the exceptions and let us
`investigate to make sure that we have all items coded correctly,
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`and to have an understanding of items that deviate by more
`than 30%. (emphasis added).
`The weekly sales report that Brian Snyder included is attached as Exhibit A. The weekly
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`report included sales data that was only weeks old – the e-mail sent on March 5, 2009,
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`covers data for the week ending on February 21, 2009. Furthermore, the report contained
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`detailed data comparing the prices of defendants’ products with their competitors. The
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`report would identify a specific type of product, such as a type of cut of pork sparerib,
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`and then compare the company’s prices with the national average price and the national
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`top 25% price.
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`21. An excerpt of this weekly sales report follows:
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`22.
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`The sales reports allowed defendants to compare their prices for individual
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`products against the national average net price, and the national top 25 percent average
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`price. For each product, Agri Stats specifically broke out the variance between the
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`company’s price and the national average price, as well as the economic impact of the
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`variance. This allowed co-conspirators to see how much more they could charge if they
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`charged either the national average or the average of the Top 25%. Notably, Agri Stats
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`identified opportunities for Defendants to raise prices; Agri Stats did not make any
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`attempt to identify products for which Defendants should cut prices in an attempt to gain
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`additional sales.
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`23. Agri Stats clearly identified for defendants which companies and plants
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`were providing information for the various reports. For example, Agri Stats’ “Swine
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`Sales Analysis – General Run” report is a monthly report which first indicates to
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`competitors whose information is contained in the report. In one example, Exhibit B, a
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`“demo” report for April 2008, Agri Stats listed the following as the “Economic Impact
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`Section Participants”:
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`24. Although this report lists eleven facilities – there are only nine competitors
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`actually contained in this report. Both Smithfield and Cargill have two plants listed,
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`meaning that only nine companies contribute information. (And of course, Smithfield and
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`Cargill would be able to immediately know where each of their plants fell within this
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`report.)
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`25. Because there are only nine companies listed in this report, providing the
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`number for the Top 25% of sales, gives competitors the pricing of approximately the top
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`two competitors. This level of disaggregated information has no pro-competitive purpose,
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`other than to allow the pork processors to extract the maximum amount of profits from
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`their customers.
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`26. As a specific example, Exhibit B, the April 2008 Economic Impact Sales
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`Report, Agri Stats specifically identified that the company’s price of $58.29 for bone-in
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`hams was below the national net price of $62.50 and the national top 25% net price of
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`$73.40. Agri Stats further explained for the company’s financial benefit that the company
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`had a negative economic impact of $17,838 as compared to the Top 25% price because
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`its prices were lower than its competitors. An excerpt of this Agri Stats sales report
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`(containing 253 pages) is as follows:
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`27.
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`The above report was published in April 2008 (although circulated in June
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`2010 as a demo report), and contained information through April 26, 2008 – making the
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`information in the report current at the time it was published.6 The purpose of these
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`reports was not to provide better prices to consumers or to lower the costs of production.
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`Instead, the clear purpose was to improve the profitability of the co-conspirators by
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`encouraging them to collectively raise prices.
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`28. A second example of an Agri Stats sales report containing sales data that is
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`only weeks old is an August 2009 report for Tyson’s Storm Lake facility that shows a
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`similar pattern. Exhibit C. The report was published on October 13, 2009 and contains
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`“Unit Price Variance by Company” through August 29, 2009 – which makes the pricing
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`information only six weeks old. The first page of the report lists the pricing variance
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`against the national average for the thirteen plants in the report:
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`6 This report was subsequently circulated as a demo report in June 2010, indicating
`that Agri Stats considered this material sufficiently non-confidential to disclose to non-
`customers from whom it was circulating business.
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`29.
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`The next page of the report lists the economic impact of sales for the Tyson
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`Storm Lake facility, showing by product, how much more could be charged to meet the
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`national average, and the average Top 25% of sales. Conservatively assuming that there
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`were 13 companies in this report (and not simply 13 plants, owned by fewer than 13
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`companies), this Top 25% sales average informs competitors of what the top three plants
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`are charging for each of these products.
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`30. A third example of a sales report is the Bacon Report, Exhibit D. This is a
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`demonstration report that Agri Stats prepared as part of a project to begin offering a
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`bacon-focused report in 2010. The Bacon Report shows how Agri Stats facilitated the
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`exchange of sensitive information regarding costs, prices and profits between
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`competitors. On information and belief, the Bacon Report was an actual report
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`disseminated to the co-conspirators.7 For example, the attached slide compares a
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`participant company’s profits, cost, margin, and sales price with the average, the top
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`25%, and the top five of competitors:
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`31.
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`In pitching its services to defendants, Agri Stats made sure to detail exactly
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`which competitors were participating in the various Agri Stats report services. For
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`example, Agri Stats gave a presentation to Hormel on June 25, 2010 regarding Hormel
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`participating in additional Agri Stats reporting services. Exhibit E, part of the proposal
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`presentation, shows Agri Stats identifying each of the co-conspirators, including their
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`facilities that were participating in the various Agri Stats reports.
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`7 Agri Stats in its Responses and Objections to Plaintiffs’ First Set of Requests for
`Production stated that it would produce “bacon reports sent by Agri Stats to subscribing
`Defendant Pork Integrators.”
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`Sharing the information in these various sales reports – detailed cost and
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`32.
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`sales data – between competitors was unnecessary to achieve any benefits for consumers.
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`Should a competitor want to lower its costs – it is free to negotiate with vendors, labor
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`groups, or reduce costs without reference to what a competitor is doing. Exchanging
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`individual company data (particularly current data on prices and costs), is not required to
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`achieve major efficiencies.
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`2.
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`Beyond the pricing reports themselves, Agri Stats allowed the pork
`processors to directly access sales data through a “sales data miner”
`tool.
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`33.
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`In addition to these highly detailed and anti-competitive sales reports, Agri
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`Stats also provided defendants with a “sales data miner” tool