After more than a decade of compliance, Tyson Foods is in hot water and the company could be facing fines upwards of $6.5 billion dollars. The largest fine ever issued by the Justice Department to a corporate entity was after Sony orchestrated price fixing conspiracies with other companies such as Microsoft and DirecTV.
Tyson Foods is in hot water after being found guilty of price-fixing. Tyson has been ordered to pay $6.5 million in damages to the US Department of Justice and over $300,000 in fines.
Tyson Foods has never had a saintly image, but that hasn’t prevented it from becoming America’s biggest meat producer and a poultry powerhouse. Tyson Foods had $41 billion in sales in 2015.
However, numerous significant scandals, a flurry of class action lawsuits, one devastating Pivotal Research study, and another by Oxfam have scattered investors.
Since September 22, Tyson’s stock has declined from $76.76 to $70.67 (as of this writing), with lows of $67.75, the lowest in six years. Meanwhile, the Supreme Court and a federal district court in Iowa recently affirmed a $6 million judgment for Tyson workers who were underpaid.
Those financial losses might be only the beginning if the latest antitrust claims are upheld.
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Cahoots Among Chicken Producers?
Maplevale Farms of New York filed an antitrust action in Illinois on September 2, 2016, saying that the $30 billion poultry business devised a system in 2007 to raise and fix chicken prices. That class action prompted five more, which will most certainly be merged into a multi-district litigation (MDL) later this year.
Of course, if the Justice Department determines that this is a valid antitrust complaint, they might take over the matter.
Bloomberg is the source of this information.
Tyson, Perdue Farms, Pilgrim’s Pride, Sanderson Farms, and Simmons Foods are among the 14 defendants. Big Chicken allegedly colluded to curtail output (in some instances by just killing the hens early) and hike chicken costs, according to the complaint.
According to the lawsuit, this was a concerted, industry-wide effort aided in part by Agri Stats, a data service that enables various firms to monitor one other’s proprietary information.
Chicken prices have been continuously rising since 2007, despite the fact that they have traditionally fluctuated.
“It makes sense to cut down production if, and only if, your rivals cut back as well,” Peter Carstensen, a former antitrust lawyer for the Justice Department, told Bloomberg.
“You’re asking the court to infer cooperation,” Mr. Carstensen says of the antitrust action. With Agri Stats, those meetings, and if you can line up the behaviour to demonstrate acceptable consistency, that should be enough.”
Wall Street is reverberating with the news of a pivotal report.
Tim Ramey, a stock analyst at Pivotal Research Group, agrees with Peter Carstensen that “the narrative of this litigation matches the fact-pattern of chicken pricing and margins over the last seven years.”
“Over the last seven years, the fact-pattern of chicken prices and margins has suited the story of this lawsuit.”
Mr. Ramey recommended investors to sell their Tyson shares on October 7. He also slashed the company’s target share price by 60%, from $100 to only $40. Investors took notice, and Tyson’s stock dropped almost 10% the next day.
“If [the claims are] accurate, it explains a lot,” Mr. Ramey wrote, describing the cases as “powerfully persuasive.” It explains why Tyson can provide EPS recommendations with such accuracy, claiming record margins long into the future.”
Unfortunately for Tyson, these antitrust cases aren’t the only class action lawsuits looming over its operations.
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The $6 million verdict is upheld by the courts.
The Supreme Court decided 6-2 in March to maintain a $5.8 million judgment for Tyson employees in Storm Lake, Iowa, who were not compensated for time spent at work wearing and removing protective gear, a clear violation of the Fair Labor Standards Act (FLSA).
Tyson requested that the lawsuit be dismissed, saying that there was insufficient evidence to establish the amount of damages due to each worker. The corporation, according to Mother Jones, also sought to
the court to give a wide order essentially shielding it from future wage and hour class actions, making it considerably more difficult for employees elsewhere to band together to pursue such claims. Tyson might have it both ways if it wins this case: it could continue to violate the FLSA while avoiding legal punishment.
The Supreme Court, thankfully, did not allow this to happen. Tyson didn’t stop there: in June, the business requested a retrial in the United States District Court in Sioux City, Iowa. That appeal was dismissed by Judge John Jarvey.
Tyson seems to just have to pay its employees what they’re due, which is the least it can do considering how the firm is said to treat its employees.
Employees at Tyson use diapers at work.
Employees at Tyson have already spoken out about being abused. Oxfam America published a study called “No Relief” in May that revealed a slew of human rights breaches committed by Tyson Foods, Pilgrim’s, Perdue, and Sanderson Farms.
Workers in the chicken industry “receive poor salaries, experience high rates of injury and sickness, toil in tough circumstances, and have no say in the workplace,” according to the research.
Surprisingly, Oxfam also claims that, owing to long hours and insufficient restroom breaks,
Workers pee and defecate while standing in the line; they wear diapers to work; they limit beverage and fluid intake to dangerously low levels; and they suffer agony and discomfort while worrying about their health and job security. They’re also at risk of developing significant health issues.
According to the research, “the great majority of employees cite a lack of appropriate restroom breaks.”
The National Chicken Council questioned the authenticity of Oxfam’s assertions, citing the employees’ anonymity as a factor.
However, if the “No Relief” allegation is accurate, Tyson might be facing yet another class action lawsuit shortly.
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