El Pollo Loco files suit against chicken production companies for unfair prices

El Pollo Loco Inc. filed a lawsuit against 19 different chicken production companies, claiming they conspired to decrease the supply of chicken and inflate the Georgia Dock, a leading price index for wholesale chicken set by the Georgia Department of Agriculture. It claims they broke federal laws with an “illegal antitrust conspiracy” and increased the price of chicken in the United States between 2008 and 2016.

Among the companies sued are Tyson, Sanderson Farms, Wayne Farms, and Foster Farms. El Pollo Loco is represented by Cotsirilos, Tighe, Streicker, Poulos & Campbell. According to the complaint, the US Department of Justice launched an investigation into the companies in June 2019 which has not yet been resolved.

El Pollo Loco claims that the companies reduced the supply of broiler chickens, which comprises 98 percent of chicken meat sold in the United States, and participated in price index manipulation with wholesale chicken buyers like El Pollo Loco. “One aspect of Defendants’ scheme curtailed the supply of chickens in the market via unprecedented cuts at the top of the supply chain in the form of jointly and collusively reducing “breeder flocks” that produce chickens ultimately slaughtered for meat consumption,” the complaint states.

Typically chicken production increases three percent in a year, but in 2008 broiler chicken production remained unchanged and instead the prices rose. “Defendants collectively began cutting their ability to ramp up production by materially reducing their breeder flocks. While  in the past, Defendants undertook traditional, short-term production cuts, this was a significant shift in their behavior,” according to El Pollo Loco.

The alleged scheme was facilitated by Agri Stats which collects data from all of the defendants. The complaint claims Tyson became a subscriber of Agri Stats again in 2008, they had stopped using Agri Stats after they were convicted in 2004 of a conspiracy to manipulate cattle farmer pay. “Agri Stats, as detailed below, plays both a unique role in the chicken industry and an important role in the conspiracy alleged here, by willfully enabling Defendants to know what each of them were doing in furtherance of the concerted action among the producers,” the complaint alleges.

It claims the defendants self-reported false numbers to the Georgia Department of Agriculture, causing the price of chicken to rise. The Georgia Dock benchmark price stopped publishing the price in 2016 after the alleged manipulation was found, it began requiring an affidavit of accuracy from the companies with their reports and did not receive enough submissions under the new requirements.

According to the complaint, Seeking Alpha reported the result of the potential scandal was that “‘US consumers have been over-charged for chicken by more than $3 billion per year’ and that major chicken producers were ‘significantly over-earning as a result of what may be a manipulated price index.’” El Pollo Loco is seeking damages allowed under federal antitrust laws, litigation expenses, and post-judgement interest.