According to an explosive lawsuit, McDonald's alleged that major beef suppliers, including Tyson, conspired to fix prices at artificially high levels in violation of federal antitrust laws.
The burger and fries giant alleged its beef suppliers agreed to manipulate and fix prices at “hypercompetitive levels,” according to a lawsuit filed Friday in the Eastern District of New York.
Nine food suppliers, including Tyson Foods, JBS and Cargill, have conspired to fix beef prices since 2015, the lawsuit alleged.
Defendants control the beef market as a whole. In 2018, they sold about 80% of the more than 25 million pounds of beef sold to the U.S. market, the lawsuit claimed.
Their longstanding conspiracy restricts trade and commerce and violates the Sherman Antitrust Act, the lawsuit said.
“Defendants and their co-conspirators conspired to carry out a conspiracy by reducing the supply of slaughter-ready cattle and beef that would be sold to Plaintiffs over time,” McDonald's said in its complaint. “They have artificially increased the price of beef.”
According to the complaint, the fast food chain is seeking three times the damages it suffered as a result of artificially inflated prices, reasonable attorney's fees, and prejudgment and postjudgment interest.
McDonald's is also asking the court to prohibit its suppliers from engaging in the price-fixing scheme again, according to the complaint.
Tyson Foods, JBS and Cargill did not respond to requests for comment.
Suppliers experienced shrinking profit margins, so in 2015 they began limiting slaughter, reducing beef production and raising prices, the lawsuit claims.
McDonald's said some of its suppliers closed plants during the conspiracy to further limit beef supplies.
In 2020, the U.S. Department of Justice subpoenaed some suppliers and launched an investigation into their pricing practices.
The lawsuit claimed that confidential witnesses responding to the Justice Department investigation revealed the existence of a conspiracy among suppliers.
According to the lawsuit, suppliers “achieved unprecedented meat margins” thanks to the plan.
Tyson Foods reported operating margins for its beef business of 18% in 2021, nearly nine times its 2014 operating margins, according to the complaint.
JBS USA reported net revenue of $27.2 billion at the same time. This was a 25.8% increase from 2014 revenue.
The suppliers concealed their conspiracy by falsely attributing record profits to their “ability to accurately predict the amount of cattle that will enter the beef supply chain over the next several years,” the lawsuit said. .
Tyson Foods, for example, said in its 2018 financial report that its unusually high operating margins “know that the cattle are on the feed report and the supply in this area is very good,” according to the complaint. He said it was for the sake of it.
The suppliers also allegedly conspired over the phone to avoid written evidence, according to the complaint.
