United States District Court For The Northern District Of Illinois Denies Motion To Dismiss Antitrust Claims Brought Against Nation’s Largest Industrial Poultry Producers
12/05/2017On November 20, 2017, Judge Thomas M. Durkin of the United States District Court for the Northern District of Illinois denied a motion to dismiss antitrust claims filed against the nation’s largest industrial poultry producers. In re Broiler Chicken Antitrust Litig., No. 1:16-cv-08637 (N.D. Ill. Nov. 20, 2017). In a lengthy opinion, Judge Durkin concluded that the totality of plaintiffs’ allegations of competitor communications, changes from historical practice, and arguably parallel restrictions in output, as well as the nature and operation of the commodity market at issue, were sufficient to raise a plausible inference of a conspiracy to restrict output and artificially inflate raise prices, and therefore to survive a motion to dismiss.
Plaintiffs, purporting to represent classes of direct and indirect chicken purchasers, alleged that seventeen defendants, who together account for almost 90% of broiler chicken production, conspired to fix the prices of broiler chickens sold for meat consumption in the United States by coordinating supply reductions in violation of Sherman Act § 1 and state law. Broiler chickens, which are raised for meat consumption and are slaughtered before they are 13 weeks old, constitute approximately 98% of chicken meat sold in the United States. Broilers are considered a commodity product.
Although the complaint was detailed and lengthy, the Court focused primarily on the following allegations as sufficient, taken together, to support a plausible inference of conspiracy: The broiler chicken market is a concentrated market with high barriers to entry, and historically had been characterized by annual increases in broiler production. Starting in 2008, however, the executives of several of the defendants made a series of statements, at trade shows and elsewhere, about the need for the industry to reduce production, as well as their firms’ intent to do so. Over time, various defendants took various steps to restrict their respective firm’s output, including reducing capacity, cancelling planned new facilities, and slaughtering or exporting breeder flocks. Some of these statements suggested that they had the agreement of other broiler producers. According to the plaintiffs’ complaint, various other strategies adopted by the defendants, such as buying supply from competitors, assisted in allowing defendants to cut industry-wide output and signal production intentions to their competitors, and were further evidence of the existence of a conspiracy. At the same time, defendants exchanged detailed and confidential competitively sensitive information, including pricing, capacity, and costs, through Agri Stats, a data collection entity that collected information from defendants and produced reports about the broiler industry. As a result of this and other alleged conduct, defendants were able to restrict output in the broiler market and increase prices. In response, defendants raised various arguments, including that their alleged conduct was not parallel because it took place over many years and was varied in method, and that the nature of the market makes conspiracy implausible.
The Court concluded that plaintiffs plausibly alleged parallel conduct that was the product of conspiracy. Judge Durkin considered and addressed each of plaintiffs’ allegations, including the specific allegations described above, concluding that dismissal of plaintiffs’ antitrust claims would be inappropriate because he found “simply too much unusual market movement, unusual public statements, unusual information sharing through Agri Stats, and a coincidence of business strategies.” Further, the Court concluded that some of the alleged conduct would not make economic sense for an individual defendant to undertake in the absence of a conspiracy. The Court rejected defendants’ arguments that plaintiffs did not allege true parallel conduct, noting—for instance—that neither simultaneous action nor uniformity of method are required to demonstrate parallel conduct. In response to defendants’ alternative, non-conspiratorial explanations for the alleged conduct, the Court stated that many of these explanations were plausible but, where both plaintiffs’ and defendants’ explanations are plausible, it is impermissible to weigh them on motion to dismiss. Thus, after a lengthy analysis, the Court denied defendants’ motion to dismiss the Sherman Act claims. The Court also denied defendants’ motion to dismiss most of the indirect purchasers’ claims under state law.