United States District Court, D. Minnesota
IN RE PORK ANTITRUST LITIGATION This Document Relates To All Actions.
D. Clark and W. Joseph Bruckner, LOCKRIDGE GRINDAL NAUEN
PLLP, Bruce L. Simon, PEARSON SIMON & WARSHAW LLP, Bobby
Pouya and Michael H. Pearson, PEARSON SIMON & WARSHAW
LLP, Sherman Oaks, Melissa S. Weiner and Joseph C. Bourne,
PEARSON SIMON & WARSHAW LLP, for the Direct Purchaser
E. Gustafson, Daniel C. Hedlund, and Brittany N. Resch,
GUSTAFSON GLUEK PLLC, Shana E. Scarlett, HAGENS BERMAN SOBOL
SHAPIRO LLP, David M. Cialkowski, ZIMMERMAN REED, PLLP,
Breanna Van Engelen, HAGENS BERMAN SOBOL SHAPIRO LLP, for the
Consumer Indirect Purchaser Plaintiffs.
Blain Finley and Jonathan Watson Cuneo, CUNEO GILBERT &
LADUCA, LLP, Shawn M. Raiter, LARSON KING, LLP, for the
Commercial Indirect Purchaser Plaintiffs.
A. Scheiderer, HUSCH BLACKWELL, LLP, for Defendant Triumph
G. Heeman and Jessica J. Nelson, SPENCER FANE, Stephen R
Neuwirth and Sami H Rashid, QUINN EMANUEL URQUHART &
SULLIVAN, LLP, for Defendant JBS USA.
Cotter and John Anders Kvinge, LARKIN HOFFMAN DALY &
LINDGREN, LTD, Richard G. Parker, GIBSON, DUNN &
CRUTCHER, Brian Edward Robison, GIBSON, DUNN & CRUTCHER,
LLP, for Defendant Smithfield Foods, Inc.
Tiffany Rider Rohrbaugh and Rachel Johanna Adcox, AXINN,
VELTROP & HARKRIDER LLP, for Defendant Tyson Foods.
Christa C. Cottrell, KIRKLAND & ELLIS LLP, for Defendant
Clemens Food Group, LLC.
Richard A Duncan, FAEGRE BAKER DANIELS LLP, for Defendant
Stilson, DORSEY & WHITNEY LLP, Britt M. Miller, MAYER
BROWN LLP, William Stallings, MAYER BROWN LLP, for Defendant
Indiana Packers and Mitsubishi Corporation of America.
AMENDED MEMORANDUM OPINION AND ORDER GRANTING
DEFENDANTS' MOTIONS TO DISMISS PLAINTIFFS'
R. TUNHEIM CHIEF JUDGE
(separated into three putative classes) allege that
Defendants, some of the nation's leading pork producers
and integrators, conspired to limit the supply of pork in
order to fix prices in violation of state and federal
antitrust laws. Defendants now move to dismiss the claims
against them. Because Plaintiffs have not adequately pleaded
parallel conduct sufficient to support an inference of
conspiracy, the Court will grant Defendants' Motions and
dismiss Plaintiffs' Complaints without prejudice. The
Court will, however, grant Plaintiffs leave to amend their
class action embodies the consolidation of thirteen
separately filed actions. The Plaintiffs are grouped into
three different classes of pork purchasers: Direct Purchaser
Plaintiffs ("DPPs"), Consumer Indirect Purchaser
Plaintiffs ("IPPs"), and Commercial and
Institutional Indirect Purchaser Plaintiffs (CIPs").
Each group consists of individuals or companies who have
either directly or indirectly purchased pork products from
one of the Defendants.Each class has filed a separate,
consolidated complaint, alleging that the Defendants
conspired with one another to increase the price of pork
products. Because the factual allegations in each of
the three complaints are nearly identical, the Court will
consider them interchangeably.
Ability and Motivation to Collude
pork industry is "horizontally concentrated (only a few
companies buy, slaughter, and process the majority of hogs)
and vertically integrated." (Civ. No. 18-1803, DPP
Compl. ¶ 76, Aug. 17, 2018, Docket No. 83.) The top four
participants-Defendants Smithfield, Tyson, JBS USA, and
Hormel-control an almost 70 percent market share.
(Id. ¶ 77.) Smithfield and JBS USA each control
over 20 percent of the market, and Tyson controls 18 percent.
(Id. ¶ 80.) Taken together, the top eight
participants, all of whom are Defendants in this case,
control over 80 percent of the market. (Civ. No. 18-1776, IPP
Compl. ¶ 113, Aug. 17, 2018, Docket No. 74.) The top
eight participants have maintained their dominant position in
the market for most of the last twenty years. (Id.
sustained market concentration inherent in the pork industry
is due in part to the significant barriers to entry placed on
new competitors. For example, building a new facility can
cost hundreds of millions of dollars. (DPP Compl. ¶ 84.)
Accruing such capital can be difficult, which works to
dissuade potential competitors. (IPP Compl. ¶ 122.)
Another barrier to competitor entry is the unique nature of
the industry itself. Most of the largest pork integrators do
not produce their own pigs but instead enter into contracts
with independent farmers who raise the pigs until they are
ready to be slaughtered. (DPP Compl. ¶ 70.) Because
"[m]ost of the hogs produced in the U.S. are sold under
a multi-year contract," it is difficult for any
potential competitor to find pigs to purchase. (Id.
allege that this market concentration put the pork industry
in "an ideal zone for collusion," as
Defendants-through market domination and contractual
arrangements-were in a position to "manipulate price
through an agreement among the relatively few dominant
players." (Id. ¶ 82).
addition to being highly concentrated, the pork industry is
also relatively unique because pork is considered a
"commodity product." (Id. ¶ 133.)
This means that the pork products produced by the various
industry participants are largely indistinguishable from one
another. (Id.) Thus, price is the only means by
which most consumers distinguish the companies. (IPP Compl.
¶ 124.) Defendants are therefore discouraged from
raising their prices individually, because each of their
products are largely interchangeable. Pork is also subject to
a "highly inelastic" demand, meaning that demand
does not typically decrease when pork prices increase.
(Id. ¶ 123.)
Plaintiffs allege that not only were Defendants in a position
to collude, but also that this unique industry set-up,
wherein one company suffers if it unilaterally raises its
prices but no companies suffer if they all raise their
prices, made such an agreement possible-and necessary-if
Defendants wanted to increase prices.
Plaintiffs allege that Defendants were motivated to enter
into such an agreement, because pork product prices were flat
between 2000 and 2009, holding at less than $1.40 per pound.
(DPP Compl. ¶ 131.) Therefore, Plaintiffs claim that
Defendants had the ability to collude, the need to collude,
and the motivation to collude.
allege that, starting in 2009, Defendants began to discretely
conspire with one another to decrease pork production and/or
to limit production increases in an effort to raise the price
of pork. (Id. ¶ 2.) According to Plaintiffs,
Defendants carried out this alleged conspiracy in two
synchronized ways. First, Defendants aimed public statements
at one another emphasizing the need to cut production, which
also served to signal each Defendants' continued
adherence to the overall conspiracy. (Civ. No. 18-1891, CIP
Compl. ¶ 5, Aug. 17, 2018, Docket No. 63.) Second, as a
means of enforcement and oversight, "Defendants
exchanged detailed, competitively sensitive, and closely
guarded non-public information about prices, capacity, sales
volume, and demand through their co-conspirator, Defendant
Agri Stats." (Id. ¶ 2.)
in 2009, several of the Defendants openly acknowledged that
price-stagnation inherent in the pork industry was an issue
that required an industry wide solution-i.e. a reduction in
production. For example, Smithfield's CEO noted that
"overproduction and the oversuppl[y] of hogs . . .
[were] driving our hog market down." (DPP Compl. ¶
112.) He acknowledged that Smithfield, in response to that
overproduction, had started cutting back on its pig
operation, but noted that its production cuts were not enough
to "fix" the hog industry and stressed that
"somebody else has got to do something."
(Id. ¶ 114.) He also stated that Smithfield
"had done its 'fair share'" to cut supply,
that it had taken a leadership role in doing so, and that
further cuts "would probably be needed to 'put this
industry back in balance, '" specifically calling
for cuts in the Midwest. (Id. ¶ 118.)
CEO also acknowledged that, by September 2009, it had already
"had conversations with several sizable, more than
sizable large producers, in fact very large producers"
and that he was aware that they would be "doing some
liquidation." (Id. ¶ 117.) This statement
was corroborated by several industry participants within the
following year, as many Defendants made similar public
acknowledgments. Hormel stated that it was looking at cutting
pork supply and that it had noticed a contraction in the
market, (id. ¶ 111, 113), Tyson acknowledged
that it "expected to see . . . pork production decrease
into 2010 and beyond to improve producer profitability,"
(id. ¶ 115), and JBS confirmed that it expected
to see some shortage in the industry, (id. ¶
of this nature continued into the following years. In 2010
Smithfield once again publicly acknowledged that it would
continue cutting production. (Id. ¶ 119.)
Hormel stated that it believed industry production would not
increase. (Id. ¶ 122.) In 2012, Smithfield
argued that no one would be "real excited about adding
capacity," (id. ¶ 125), and JBS stated
that it was running on a sold-out position, (id.
¶ 126), and that "restrictions in supply"
contributed to "good margins," (id. ¶
128). In 2013, Smithfield noted that it had a limited ability
to move prices up on its own through supply and demand but
that "the consumer tends to be willing to pay
proportionately higher values for their pork meat when small
increments of supply are withdrawn from the
marketplace." (Id. ¶ 127.)
these public statements, Plaintiffs allege, Defendants were
able to "communicate their planned supply restrictions
to their competitors in furtherance of the conspiracy"