CASE 0:20-cv-01602 Document 1 Filed 07/17/20 Page 1 of 73
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`UNITED STATES DISTRICT COURT
`DISTRICT OF MINNESOTA
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`
`
`Case No.
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`CLASS ACTION COMPLAINT
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`DEMAND FOR JURY TRIAL
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`OLEAN WHOLESALE GROCERY
`COOPERATIVE, INC.,
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`
`
`
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`CARGILL, INC., CARGILL MEAT
`SOLUTIONS CORPORATION, JBS
`USA FOOD COMPANY HOLDINGS,
`J.B.S. S.A., JBS PACKERLAND, INC.,
`NATIONAL BEEF PACKING
`COMPANY, TYSON FOODS, INC., and
`TYSON FRESH MEATS, INC.,
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`
`
`
`
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`Defendants.
`
`v.
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`
`
`Plaintiff,
`
`
`
`
`
`UNITED STATES DISTRICT COURT
`DISTRICT OF MINNESOTA
`
`
`
`Case No.
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`CLASS ACTION COMPLAINT
`
`DEMAND FOR JURY TRIAL
`
`OLEAN WHOLESALE GROCERY
`COOPERATIVE, INC.,
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`
`
`
`
`CARGILL, INC., CARGILL MEAT
`SOLUTIONS CORPORATION, JBS
`USA FOOD COMPANY HOLDINGS,
`J.B.S. S.A., JBS PACKERLAND, INC.,
`NATIONAL BEEF PACKING
`COMPANY, TYSON FOODS, INC., and
`TYSON FRESH MEATS, INC.,
`
`
`
`
`
`
`Defendants.
`
`v.
`
`
`
`Plaintiff,
`
`
`
`
`
`CASE 0:20-cv-01602 Document 1 Filed 07/17/20 Page 2 of 73
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`Olean Wholesale Grocery Cooperative, Inc. (“Olean” or “Plaintiff”) hereby brings
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`this antitrust class action lawsuit, on behalf of itself and all persons and entities similarly
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`situated, against Defendants Cargill, Inc. and Cargill Meat Solutions Corporations (a/k/a/
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`Cargill Protein), JBS S.A., JBS USA Food Company Holdings, JBS Packerland, Inc.,
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`National Beef Packing Company, Swift Beef Company, Tyson Foods, Inc., Tyson Fresh
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`Meats, Inc., and unnamed co-conspirators, alleging as follows:
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`I.
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`NATURE OF THE ACTION
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`1.
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`This action is brought on behalf of Olean and all persons and entities who
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`purchased beef in the United States directly from one or more Defendants from at least
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`January 1, 2015, until the present (the putative “DPP Class” or “Class”). Olean alleges
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`that Defendants violated Section 1 of the Sherman Act by conspiring to constrain beef
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`supplies in the United States and thereby artificially inflate domestic beef prices to direct
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`purchasers. As a direct result of Defendants’ unlawful conduct, Olean and the other
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`members of the DPP Class suffered antitrust injury, for which the Plaintiff seeks treble
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`damages, injunctive relief, and demands a trial by jury of the claims asserted in this
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`Complaint.
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`2.
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`Defendants are the world’s largest meat processing and packing companies.
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`Together they sold approximately 80% of the more than 25 million pounds of fresh and
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`frozen “boxed” and “case-ready” beef (collectively, “beef”) supplied to the United States
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`beef market in 2018.
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`3.
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`Since at least the start of 2015, Defendants have exploited their market
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`power in this highly concentrated market by operating an illegal conspiracy to limit the
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`supply of, and fix the price of, beef sold to Olean and others in the U.S. wholesale market
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`(the “Conspiracy”). The principal, but not exclusive, means Defendants use to effectuate
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`the Conspiracy is a concerted scheme to artificially constrain the supply of beef entering
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`the domestic supply chain. Defendants’ collusive restriction of beef supply has had the
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`intended effect of artificially inflating beef prices to supra-competitive levels. As a result,
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`Olean and others who purchase beef directly from Defendants have paid higher prices
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`than they would have paid in a competitive market.
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`4.
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`The existence of the Defendants’ conspiracy is confirmed by at least one
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`confidential witness account. A confidential witness previously employed by a Packing
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`Defendant (“Witness 1”), has confirmed that each of the Defendants expressly agreed to
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`reduce their respective purchase and slaughter volumes, which would have the effect of
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`artificially raising the price of Beef sold to direct purchasers. Witness 1’s account is
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`corroborated by transactional data and slaughter volume records reported by Defendants
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`and published by the United States Department of Agriculture (“USDA”), as well as
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`Defendants’ public calls for industry-wide slaughter and capacity reductions.
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`5.
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`In addition to the high concentration in the wholesale beef market and the
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`confidential witness statements concerning Defendants’ coordination, the structure of the
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`beef industry also facilitates the Conspiracy. Defendants sit atop the supply and
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`distribution chain that ultimately delivers beef to the market. Their vital role is to purchase
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`cattle (known in the industry as “fed cattle”) from the nation’s farmers and ranchers,
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`process and pack it into edible beef, and sell the beef to Olean and other direct purchasers.
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`Defendants’ gatekeeping role has enabled them to collusively control both upstream and
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`downstream pricing throughout the Class Period.
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`6.
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`Capitalizing on the fundamental market mechanism of supply and demand,
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`Defendants have collaborated to reduce beef supplies by tactics including, but not limited
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`to, purchasing fewer cattle than a competitive market would otherwise demand or running
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`their processing plants at less than available capacity. These practices have the
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`concomitant effects of surpluses in the cattle market and shortages in the wholesale beef
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`market. These artificially created conditions, in turn, both drive down the prices
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`Defendants pay for cattle and boost the prices they command for beef. The result is to
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`swell Defendants’ profit margin (or “meat margin”).
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`7.
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`This growth of Defendants’ margins is aided by the particular way supply and
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`demand operate in the beef industry. The supply of cattle is insensitive to short-term price
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`changes because of the long-life cycle of livestock, their perishable nature, and the
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`lack of any alternative use. In turn, beef demand is also relatively insensitive to price
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`fluctuations. As a result, Defendants’ margins are very responsive to changes in the
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`aggregate volume of cattle slaughter.
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`8.
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`Other market characteristics in the sale of beef serve as “plus factors”
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`supporting the inference of collusion among Defendants during the Class Period. These
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`plus factors include the extreme market concentration already discussed, high barriers to
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`entry, inelastic demand, and the commodity nature of beef. Collectively, these
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`economic factors encouraged the formation of the Conspiracy and continue to foster
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`its successful operation.
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`9.
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`Another form of interaction conducive to Defendants’ collusion are frequent
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`meetings between each other’s executives and other key employees. Trade association
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`conferences and other industry events offer convenient opportunities to exchange
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`information, plans and strategies, and build relationships. As described in more detail
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`throughout this Complaint, Defendants took advantage of these opportunities to further
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`their collusive supply restrictions.
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`10. Defendants began exploiting these favorable market conditions to launch the
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`Conspiracy by the start of 2015. At that time, they undertook a campaign of throttling the
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`beef supply that has endured to the present. Defendants’ abrupt transition from
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`competition to collusion is vividly documented by publicly available industry data.
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`11. One source of evidence is the beef sales volume of Defendants. An example
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`is data comparing the average annual beef cattle slaughter by each Defendant before the
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`Class Period (from 2007 through 2014) to the same average during the first three years of
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`the Class Period (from 2015 through 2017). The data shows that all Defendants curtailed
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`their annual slaughter volumes during the Class Period, while smaller beef, non-defendant,
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`processors increased their slaughter volumes during the same period.
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`12. As an immediate consequence of this reduced supply, the beef market
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`experienced a dramatic change of price behavior, another symptom of the Conspiracy.
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`Before 2015, the prices of cattle and beef predictably moved in tandem. That
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`correlation reflects the natural economic relationship in a competitive market because
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`beef is simply the product of cattle.
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`13. At the start of the Class Period, when Defendants collusively cut production,
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`however, this fundamental economic relationship between cattle and Beef prices was
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`altered. Suddenly, the degree of correlation of cattle and Beef prices diverged to the
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`benefit of the Defendants, and without credible explanation. The relevant supply and
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`demand factors in the industry no longer explained the prices being seen by direct
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`purchasers. Instead, wholesale Beef prices showed unusual trends starting in 2015. The
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`per pound price of cattle had historically stayed within 20 to 40 cents of the per pound
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`wholesale price of Beef on average, but in 2015, the spread between those prices increased
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`dramatically, as seen on the chart below.
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`14. Defendants’ ability to cut beef production while maintaining beef prices
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`at an inflated level during the Class Period is strong circumstantial evidence of the
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`Conspiracy. In a market free of collusion, when a competitor reduces its purchase of
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`cattle, other competitors quickly pick up the slack to boost their sales and increase
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`their market shares. In that environment, then, competitors do not cut their purchases
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`with any hope of gaining sales volume or increasing profit margin. Only colluding
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`beef processors would expect to benefit by reducing their purchases and slaughter of
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`cattle. By coordinating their supply output, Defendants have been able to expand their
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`profit margins, confident that none of them would grab volume surrendered by
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`another.
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`15. United by the Conspiracy, each Defendant was confident that the others
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`would not break rank by expanding their beef production to satisfy unmet demand.
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`Armed with that assurance, Defendants steadfastly improved their profitability by
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`achieving and sustaining an unprecedented gap between wholesale beef prices and fed
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`cattle prices.
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`16. The Conspiracy, aided by Defendants’ market power in both the upstream
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`and downstream markets, allowed Defendants to steadily enlarge their operating margins.
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`By the end of 2018, the two publicly traded Defendants, Tyson and JBS, were reporting
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`record margins in their beef business. Tyson reported an operating margin of nearly 7%,
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`almost double its 2014 operating margin; JBS reported beef business margins of 10.2%.
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`Given these swollen margins, it is no surprise that a leading industry reporter remarked that
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`Defendants “no longer compete against each other,” enabling them to reap “gangbuster
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`profits.”1
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`1 Cassandra Fish, “Whatever Happened to a Fair Fight,” The beef (Nov. 10,
`2015), https://www.thebeefread.com/2015/11/10/whatever-happened-to-a-
`fair-fight/
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`17.
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`In summary, Defendants have illegally colluded during the Class Period to
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`raise and fix beef prices at levels higher than those that would have prevailed in a
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`competitive market. As a direct result, Olean and the other members of the Class have
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`suffered antitrust injury by paying artificially inflated prices for beef they purchased from
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`Defendants.
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`II.
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`JURISDICTION AND VENUE
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`18. Olean brings this action on behalf of itself and all similarly situated persons
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`and entities under Section 16 of the Clayton Act (15 U.S.C. § 26) to secure injunctive
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`relief and damages in excess of $5,000,000 for Defendants’ violations of Section 1 of the
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`Sherman Act (15 U.S.C. § 1).
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`19. This Court has subject matter jurisdiction over this proceeding pursuant to
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`28 U.S.C. §§ 1331, 1337, and Sections 4 and 16 of the Clayton Act, 15 U.S.C. §§ 15(a)
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`and 26.
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`20. Venue is proper in this District pursuant to 28 U.S.C. §§ 1408 and 1409(a).
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`21. Venue is also appropriate in this District under Sections 4, 12, and 16 of the
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`Clayton Act, 15 U.S.C. §§15, 22 and 26 and 28 U.S.C. § 1391(b), (c) and (d), because one
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`or more Defendants reside in, are found in, or have an agent or transacted business in this
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`District, and because a substantial portion of the affected interstate commerce was carried
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`out in this District.
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`22. This Court has personal jurisdiction over each Defendant because, among
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`other reasons, each Defendant has (a) transacted business throughout the United States,
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`including in this District; (b) manufactured, sold, shipped, and/or delivered substantial
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`quantities of beef throughout the United States, including in this District; (c) had
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`substantial contacts with the United States, including in this District; and/or (d) engaged in
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`an antitrust conspiracy that was directed at and had a direct, foreseeable, and intended
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`effect of causing injury to the business or property of persons residing in, located in, or
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`doing business throughout the United States, including in this District.
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`23. The activities of Defendants and all co-conspirators alleged in this
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`Complaint were within the flow of, were intended to, and had direct, substantial, and
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`reasonably foreseeable effects on, the foreign and interstate commerce of the United
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`States.
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`III. PARTIES
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`A.
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`Plaintiff
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`24. Olean Wholesale Grocery Cooperative, Inc. is a New York domestic
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`cooperative corporation with its principal place of business at 1587 Haskell Road, Olean,
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`New York, 14760. Olean directly purchased beef that was processed and sold at
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`artificially inflated prices by one or more Defendants or their co-conspirators during the
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`Class Period. Olean has therefore suffered antitrust injury as a direct result of the antitrust
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`violations alleged in this Complaint.
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`B.
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`Defendants
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`The Cargill Defendants
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`25. Cargill, Incorporated (“Cargill”) is a privately held Delaware corporation
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`with its principal place of business at 15407 McGinty Road, Wayzata, Minnesota 55391.
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`During the Class Period, Cargill and/or its predecessors, wholly owned or controlled
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`subsidiaries, or affiliates sold beef in interstate commerce, directly or through its wholly
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`owned or controlled affiliates, to purchasers in the United States. Cargill, Incorporated is
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`the parent company of the Cargill group.
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`26. Defendant Cargill Meat Solutions Corporation (a/k/a Cargill Protein)
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`(“Cargill Meat”), a subsidiary of Cargill, is a Delaware corporation with its principal place
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`of business at 825 East Douglas Avenue, Wichita, Kansas 67202. Cargill Meat is the
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`principal operating entity within Cargill’s U.S. cattle and beef business and a wholly
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`owned subsidiary of Cargill. On information and belief, Cargill Meat owns directly, or
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`indirectly through its subsidiaries, Cargill’s U.S. fed cattle slaughter plants, and contracts
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`for the purchase of cattle slaughtered there.
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`27. During the Class Period, the Cargill Defendants shared a unity of corporate
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`interest and operated as part of a single enterprise in furtherance of the Conspiracy that
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`purposefully directed conduct causing injury to and derived direct benefit from members
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`of the Class in the United States and in this District.
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`28. Defendants Cargill and Cargill Meat are referred to collectively as “Cargill.”
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`The JBS Defendants
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`29. Defendant JBS S.A. is a Brazilian corporation with its principal place of
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`business located at Av. Marginal Direta do Tiete, 500 Bloco 3-30 andar, Vila Jaguara, Sao
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`Paulo 05.118-100, Brazil. JBS S.A. is the parent company of the JBS group.
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`30.
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`JBS USA Food Company Holdings (“JBS USA”) is a Delaware corporation
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`with its principal place of business located at 1770 Promontory Circle, Greeley, Colorado
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`80634. JBS USA is the principal operating entity of JBS’s U.S. cattle/beef business. On
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`information and belief, it is the principal operating entity within JBS’s U.S. cattle and beef
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`business, and the contracting entity for certain of JBS’s purchases of fed cattle in the
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`USA.
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`31. Defendant Swift Beef Company (“Swift”) is a Delaware corporation with its
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`principal place of business located at 1770 Promontory Circle, Greeley, Colorado 80634.
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`Swift owns directly, or indirectly through its subsidiaries, certain of JBS’s U.S. fed cattle
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`slaughter plants including the Cactus, Texas; Greeley, Colorado; Grand Island, Nebraska;
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`and Hyrum, Utah plants.
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`32. Defendant JBS Packerland, Inc. (“JBS Packerland”) is a Delaware
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`corporation with its principal place of business located at 1770 Promontory Circle,
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`Greeley, Colorado 80634. On information and belief JBS Packerland owns directly, or
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`indirectly through its subsidiaries, certain of JBS’s U.S. fed and dairy cattle slaughter
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`plants, including the Packerland packing plants in Green Bay, Wisconsin and Plainwell,
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`Michigan; the Sun Land beef plant in Tolleson, Arizona; and the Moyer Packing plant in
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`Souderton, Pennsylvania.
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`33. Defendants JBS USA, Swift, and JBS Packerland were, throughout the Class
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`Period, wholly owned, direct or indirect subsidiaries of JBS S.A.
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`34. Defendants JBS S.A., JBS USA, Swift, and JBS Packerland are referred to
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`collectively herein as “JBS.”
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`35. During the Class Period, JBS and/or its predecessors, wholly owned or
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`controlled subsidiaries, or affiliates sold beef in interstate commerce, directly or through
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`its wholly owned or controlled affiliates, to purchasers in the United States.
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`36. During the Class Period, the JBS Defendants shared a unity of corporate
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`interest and operated as part of a single enterprise in furtherance of the Conspiracy that
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`purposefully directed conduct causing injury to and derived direct benefit from members
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`of the Class in the United States and in this District.
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`The Tyson Defendants
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`37. Tyson Foods, Inc. is a publicly traded Delaware corporation headquartered
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`in Springdale, Arkansas. During the Class Period, Tyson and/or its predecessors, wholly
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`owned or controlled subsidiaries, or affiliates sold beef in interstate commerce, directly or
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`through its wholly owned or controlled affiliates, to purchasers in the United States.
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`38. Defendant Tyson Fresh Meats, Inc. (“Tyson Fresh Meats”) is a wholly
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`owned subsidiary of Tyson Foods. Tyson Fresh Meats is a Delaware corporation with its
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`principal place of business located at 800 Stevens Port Drive, Dakota Dunes, South
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`Dakota 57049. Tyson Fresh Meats is the principal operating entity within Tyson’s U.S.
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`cattle and beef business. On information and belief, Tyson Fresh Meats owns directly, or
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`indirectly through its subsidiaries, Tyson’s U.S. fed cattle slaughter plants and contracts
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`for the purchase of cattle slaughtered there.
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`39. During the Class Period, the Tyson Defendants shared a unity of corporate
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`40.
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`interest and operated as part of a single enterprise in furtherance of the
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`Conspiracy that purposefully directed conduct causing injury to and derived direct benefit
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`from members of the Class in the United States and in this District.
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`41. Defendants Tyson Foods and Tyson Fresh Meats are referred to collectively
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`herein as “Tyson.”
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`The National Beef Defendants
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`42. National Beef Packing Company (“National Beef’) is a privately-owned
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`Delaware limited liability company with its principal place of business located at 12200
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`North Ambassador Drive, Suite 500, Kansas City, Missouri 64163. National Beef and/or
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`its predecessors, wholly owned or controlled subsidiaries, or affiliates sold beef in
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`interstate commerce, directly or through its wholly owned or controlled affiliates, to
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`purchasers in the United States. On information and belief, National Beef owns directly,
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`or indirectly through its subsidiaries, National Beef’s U.S. fed cattle slaughter plants, and
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`contracts for the purchase of cattle slaughtered there.
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`43.
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` “Defendant” or “Defendants” includes all of the named Defendants’
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`predecessors, including beef meatpackers merged with or acquired by any Defendant and
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`each named Defendant’s wholly owned or controlled subsidiaries or affiliates that sold
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`beef in interstate commerce directly to purchasers in the United States during the Class
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`Period.
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`44. Defendants sold or distributed beef to direct purchasers or played a material
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`role in the coordinated and collusive behavior alleged. All such entities were active,
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`knowing participants in the Conspiracy alleged, and their conduct was known to and
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`approved by their respective corporate parent named as a Defendant.
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`C. Co-Conspirators
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`45. Various other unknown persons, firms and corporations, not named as
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`Defendants, have participated as co-conspirators with Defendants and have performed acts
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`and made statements in furtherance of the Conspiracy. The Defendants are jointly and
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`severally liable for the acts of their co-conspirators, whether named as Defendants or not.
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`D. Reciprocal Agency of Defendants and Co-Conspirators
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`46. Each Defendant and co-conspirator acted by or through its officers,
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`directors, agents, employees or representatives while they were actively engaged in the
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`management, direction, control or transaction of the corporation’s business or affairs.
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`47. Each Defendant and co-conspirator acted as the agent or joint-venturer of
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`the other Defendants and co-conspirators with respect to the acts, violations and common
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`course of conduct alleged by Plaintiff.
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`E.
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`Common Corporate Interest of Each Defendant’s Related Entities.
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`The Cargill Defendants
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`48. Cargill does not own and operate subsidiaries to diversify risk and earn
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`profits by investing in them. Instead, Cargill has formed subsidiaries to conduct business
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`that Cargill otherwise would have conducted on its own. In particular, Cargill created
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`Cargill Meat to conduct business in the meat industry that Cargill previously operated
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`itself.
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`49. Cargill presents itself and its subsidiaries to the public as a single unified
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`enterprise. On its website, for example, Cargill reports that it currently employs 143,000
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`workers operating in 67 countries. Plaintiff is informed and believes that these numbers
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`include the employees and operations of Cargill Meat. Cargill has also publicly announced
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`consolidated revenues, earnings and cash flow that Plaintiff is informed and believes
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`include performance results from Cargill Meat’s beef operations.
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`50.
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`Further evidencing the symbiotic relationship of Cargill and Cargill Meat is
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`the unified system that processes purchase orders for both companies. Similarly, Cargill
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`operates other business services, including information technology, human resources,
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`finance, transportation and logistics, and procurement, with and for Cargill Meat.
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`51. Cargill plays an active role in managing Cargill Meat’s business operations.
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`As one example, Cargill’s website has reported that its Chairman and CEO, David
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`MacLennan, “supervised several businesses in Cargill Protein,” which, on information and
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`belief, subsumes Cargill Meat. As another, Cargill has described the responsibilities of a
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`fellow member of its executive team, Brian Sikes, to include “leading Cargill’s global
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`protein and salt businesses,” overseeing “Cargill’s protein business in North America and
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`Europe” and leading “the transformation of the North American protein business.” Again,
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`Plaintiff is informed and believes that Cargill’s protein business includes the operations of
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`Cargill Meat.
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`52. This extensive involvement in Cargill Meat’s management and operations
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`demonstrate that Cargill does far more than provide long-term strategy guidance to Cargill
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`Meat. To the contrary, Cargill Meat was created as an instrumentality of Cargill with the
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`sole purpose of executing Cargill’s directives. Throughout the Class Period, Cargill has
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`exerted, and has had the right to exert, control over Cargill Meat.
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`The JBS Defendants
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`53.
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`JBS S.A. established subsidiaries, including JBS USA, Swift, and JBS
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`Packerland, to conduct its business, including the purchase and processing of cattle, and
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`the sale of beef. Had JBS S.A. not created or acquired these subsidiaries, it would have
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`performed these functions itself. JBS S.A. is not merely a holding company whose
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`business is restricted to investments in operating subsidiaries.
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`54.
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`JBS presents itself as a unified enterprise and conducts consolidated
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`earnings calls on which JBS’s corporate representatives discuss the operations and profits
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`of JBS S.A., including JBS USA. On these calls, JBS S.A. executives have described the
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`beef business it conducts through JBS USA, which it refers to as “JBS beef,” as a
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`“division” or “business unit.” In addition, JBS S.A. commonly refers to JBS USA as its
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`“JBS USA beef business[.]”
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`55.
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`JBS S.A. appointed JBS USA’s current CEO, Andre Nogueira, who
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`“report[s] directly” to JBS Global Operations’ CEO. In his online “Welcome” message,
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`Mr. Noguiera explains that JBS USA operates “[i]n partnership with JBS S.A.”
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`56. Defendants Swift and JBS Packerland have been fully integrated into the
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`JBS USA enterprise, resting under the complete control of JBS USA, and in turn, JBS
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`S.A. JBS USA directs and oversees all of JBS’s U.S. cattle procurement, beef processing
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`and sales operations, with ultimate direction from JBS S.A.
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`57. As these facts demonstrate, JBS S.A does more than provide long-term
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`strategy guidance to JBS USA, Swift, and JBS Packerland. The entire purpose of these
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`subsidiaries is to serve as instrumentalities by executing JBS S.A.’s directives within the
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`greater JBS enterprise. JBS USA, Swift, and JBS Packerland operate independently only
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`to the extent that JBS S.A. permits. Throughout the Class Period, JBS S.A. has exerted,
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`and has had the right to exert, total control over JBS USA, Swift, and JBS Packerland.
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`16
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`CASE 0:20-cv-01602 Document 1 Filed 07/17/20 Page 18 of 73
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`The Tyson Defendants
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`58. Tyson Foods is not a mere holding company whose business is restricted to
`
`investments in operating subsidiaries. Instead, Tyson Foods formed subsidiaries to act as
`
`its agents and representatives to conduct business activities that Tyson Foods would
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`otherwise conduct. In particular, with respect to Tyson Foods’ Tyson Fresh Meats
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`subsidiary, those activities include purchasing and processing cattle, and selling beef.
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`59. Tyson Foods holds itself out to the public as a single unified enterprise,
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`describing the beef business it conducts through Tyson Fresh Meats as a mere “business
`
`unit.” Tyson Foods has also represented that its current CEO, Noel White, has previously
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`worked for the company, even though he was previously employed only as one of Tyson
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`Fresh Meats’ senior group vice presidents.
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`60. On its quarterly earnings calls, Tyson Foods’ corporate representatives
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`include Tyson Fresh Meats in discussing the company’s financial performance. On these
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`calls, Tyson Foods has announced operating income and returns on sales from its beef
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`segment business, which Tyson Fresh Meats operates. More specifically, on these calls
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`Tyson Foods has attributed improved returns to actions taken at plants that Tyson Fresh
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`Meats purportedly owns and operates.
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`61.
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`In particular, Tyson Foods has described, on other earnings calls, actions
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`taken by Tyson Fresh Meats to further the Conspiracy. For example, on its August 3, 2015
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`earnings call, Tyson Foods explained its strategy for cattle purchasing, implemented by
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`Tyson Fresh Meats, in these words: “we run for margin and not for market share, we’re
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`not willing to overpay for cattle and we’ve had to cut back on our hours at our plants
`17
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`CASE 0:20-cv-01602 Document 1 Filed 07/17/20 Page 19 of 73
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`resulting in inefficiencies and added costs.” Similarly, on its May 7, 2018 earnings call,
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`Tyson Foods told investors this about beef production plants owned and operated by
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`Tyson Fresh Meats: “we have to stop production, we have closed plants, several times in
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`the quarter, not every plant, but several plants in the quarter.”
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`62.
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`Further manifesting their close relationship, Tyson Foods and Tyson Fresh
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`Meats guarantee each other’s debts. Tyson Fresh Meats has issued multiple debt securities
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`guaranteed by Tyson Foods. In a registration statement filed with the SEC in 2009, Tyson
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`Foods notified investors that Tyson Fresh Meats pledged not only its own assets to
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`guarantee debt instruments but also those of Tyson Foods and certain “other domestic
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`operation subsidiaries of Tyson [Foods].”
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`63.
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`Similarly, in a prospectus filed with the SEC in 2014, Tyson Foods stated
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`that Tyson Fresh Meats would act as a guarantor to Tyson Foods’ debt securities,
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`including debentures, notes, and all other types of debt. Tyson Foods has issued multiple
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`Senior Notes pursuant to this arrangement, many of which do not mature until 2034 and
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`some of which do not mature until 2044. Some of these debt instruments have been called
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`before their maturity date.
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`64.
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`Furthermore, in their registrations with the USDA’s Food Safety Inspection
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`Service, Tyson Fresh Meats’ slaughter plants in Dakota City, Nebraska, Lexington,
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`Nebraska, Amarillo, Texas, and Wallula, Washington have each identified Tyson Foods,
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`Inc. as a dba.
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`65. As a result, Tyson Foods does not merely provide long-term strategy
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`guidance to Tyson Fresh Meats. Instead, Tyson Fresh Meats’ entire purpose is to execute
`18
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`CASE 0:20-cv-01602 Document 1 Filed 07/17/20 Page 20 of 73
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`Tyson Foods’s directives within the greater Tyson enterprise and to serve as an
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`instrumentality of Tyson Foods. Tyson Fresh Meats is only “independent” to the extent
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`Tyson Foods permits. Tyson Foods has exerted, and has had the right to exert, control
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`over Tyson Fresh Meats during the Class Period.
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`IV. THE STRUCTURE OF THE BEEF INDUSTRY IS HIGHLY CONDUCIVE
`TO COLLUSION.
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`A.
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`The Journey of Beef to Consumers.
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`Figure 1
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`19
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`CASE 0:20-cv-01602 Document 1 Filed 07/17/20 Page 21 of 73
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`66.
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`Production of cattle for beef takes considerable time and investment. The
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`life cycle of cattle raised for beef is longer than that of any other animal commonly raised
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`for meat. As illustrated in Figure 1 above, the beef value chain comprises several stages.
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`First, calves are raised by their mothers for six to ten months. When they weigh about 500
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`pounds, the calves are weaned and sold to the stocker-yearling sector, where they are fed a
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`diet of forage, wheat pasture and sileage. When a steer or heifer reaches 600-800 pounds,
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`it is sold to a feedlot, where it is fed corn and protein supplements in addition to roughage.
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`67. Once cattle reach 950-1300 pounds, they are sold as “fed” cattle to
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`companies such as Defendants in the beef packing stage. There, Defendants and other beef
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`producers slaughter and process the animals for sale to an array of wholesalers, retailers,
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`food service companies, or other further processors either as commodity “boxed” beef or
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`as smaller “case-ready” consumer cuts. A steer weighing 1,000 pounds typically yields
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`about 450 pounds of edible beef.
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`68. Before an industry-wide realignment and consolidation of the beef packing
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`industry over the past several decades, most fed cattle transactions were conducted
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`through direct negotiations and auctions, at prices determined by the market and
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`consistently informed and rationalized by the participation of all the players in the
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`industry.
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`69.
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`Post-consolidation, fed cattle are sold to beef processors through two
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`channels. About 70% of fed cattle is sold through supply contracts, known in the industry
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`as captive cattle agreements, with feedlots or, to a lesser extent, ranching operations. The
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`remainder is sold on the spot market, which typically serves as the benchmark for prices
`20
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`CASE 0:20-cv-01602 Document 1 Filed 07/17/20 Page 22 of 73
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`under the captive cattle agreements. Because Defendants and other beef producers can
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`ordinarily secure a steady supply of cattle through these agreements, they are not forced to
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`buy in the spot market. This affords them market power that enables them to suppress the
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`price of both cash cattle and captive c
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