Winter 2020

EVERYBODY’S BUSINESS - Attacking Price and Wage Manipulation

Written by Philip Mattera

Throughout Joe Biden’s time in office, critics have complained he has not done enough to address high grocery prices. Now that his replacement as the Democratic presidential nominee has come forth with a plan to deal with the problem, many of those same critics are accusing Kamala Harris of going too far.

A wide range of pundits are particularly scandalized at Harris’s critique of price-gouging. It is perfectly valid to question whether her policies, which as of this writing have not been spelled out in detail, would be effective. But many commentators are trotting out simplistic and outdated economic principles to claim that corporate price manipulation is non-existent.

These believers in the supremacy of market forces are apparently unaware that the food sector is a hotbed of anti-competitive practices. This is especially true in the meat industry, where a small number of dominant corporations have had to pay out hundreds of millions of dollars in fines and settlements to resolve allegations that they collude to keep prices high.

Take the case of JBS, the giant Brazilian corporation that owns U.S. companies such as the poultry producer Pilgrim’s Pride and the beef producer Swift. As shown in Violation Tracker, JBS and its subsidiaries have paid out over $200 million in class action antitrust lawsuits since 2021. Pilgrim’s Pride was also sentenced to pay $107 million in criminal penalties after pleading guilty to federal charges of participating in a conspiracy to fix prices of broiler chicken products.

Tyson Foods, another poultry goliath, has paid out over $120 million in class action settlements over the past three years, including one case in which it had to hand over $99 million. In the pork industry, Smithfield Foods, owned by the Chinese corporation WH Group, has paid around $200 million in price-fixing settlements.

Price-fixing conspiracies have also been alleged in the tuna industry, in which Star-Kist paid a criminal penalty of $100 million, as well as in several other food sectors. In 2020 the National Milk Producers Federation agreed to pay $220 million to settle litigation alleging it sought to boost prices through a program to reduce the number of dairy cows. There was even a $28 million settlement involving a mushroom marketing cooperative.

Aside from their illegal collusion on prices, food companies have been accused of entering into illegal agreements designed to suppress wages. In August, a federal court in Oklahoma gave preliminary approval to a settlement in which Pilgrim’s Pride will pay $100 million. Other poultry processors such as Tyson and Perdue previously agreed to pay a total of tens of millions of dollars more. Meat companies such as Hormel, Quality Pork Processors and National Beef Packing have also agreed to settlements to resolve allegations of wage-fixing.

The prevalence of price-fixing and wage-fixing shows that price manipulation is a serious problem in the food industry. Price-fixing is not exactly the same thing as price-gouging. The first involves illegal agreements among purported competitors to keep prices high, while the other may be committed by a powerful company acting on its own. Price-gouging can be illegal in certain circumstances under state law, especially if it happens during an emergency.

Yet it is not, alas, illegal for companies to jack up prices in most circumstances. That’s why all chief executives of food companies are not being led away in handcuffs.

This is all the more reason for the federal government to devise innovative ways to get corporations to bring down prices that escalated through market manipulation of one form or another.

Even if it proves difficult to directly drive down grocery prices through government action, even the attempt could have an impact. There are already signs that big supermarket chains are feeling the need to act. During the summer, in moves that were part marketing ploy and part attempt to tamp down talk of price controls, companies such as Walmart, Target and Aldi began publicizing price cuts on thousands of products.

The big chains also faced pressure linked to the start in late August of the Federal Trade Commission lawsuit seeking to block the giant merger of Kroger and Albertsons. The FTC’s allegations that the combination would raise grocery prices—and negatively impact the bargaining power of unionized grocery workers—helped to reinforce the idea that large companies have a lot of influence on what consumers pay at the checkout counter.

Whether directly or indirectly, the federal government should do more to attack price manipulation in the food industry.

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