The world’s largest fast-food chain is accusing the world’s largest beef companies, including Minnetonka-based Cargill, of illegally colluding to raise prices and boost their profits.
McDonald’s sues Cargill, other beef suppliers for alleged price-fixing
The fast food giant says the Big Four beef companies broke antitrust law and artificially raised prices.
The Minnesota Star Tribune
October 8, 2024 at 3:36PM
McDonald’s says Cargill, JBS, Tyson and National Beef secretly worked together over the past decade to limit supplies of cattle and fix prices, according to a federal lawsuit filed this month.
Those Big Four meatpackers collectively control 85% of the beef industry in the U.S.
Cargill is a major supplier for Chicago-based McDonald’s, and the companies have a close relationship. Now the Big Mac maker says its partner made “tainted profits” from “illegal behavior.”
“The goal of their conspiracy was to fix, raise, stabilize and/or maintain the price of beef sold to [McDonald’s] and others at supra-competitive levels — that is, prices artificially higher than beef prices would have been in the absence of their conspiracy,” the lawsuit says.
Cargill denies the accusations.
“The claims lack merit and we intend to vigorously defend our position,” Cargill said in a statement. “Cargill is confident in our efforts to maintain market integrity and conduct ethical business.”
The case revolves around the meatpackers’ agreement “to jointly manage and reduce their slaughter levels below a competitive level,” the lawsuit says. The coordinated production cuts, which allegedly happened over secret phone calls and meetings, led to higher prices paid for beef even as prices for cattle dropped, widening profit margins for the slaughterhouses.
Though the suit doesn’t call out the effect on consumers, McDonald’s and other fast-food chains are under intense consumer pressure after raising menu prices over the past several years and are looking to control costs wherever possible. McDonald’s profits remain robust, however.
“You actually look at [profit] margin in the 20 years pre-COVID, we’re actually at a high right now versus those 20 years,” McDonald’s USA President Joseph Erlinger told analysts this summer.
Several other companies, including Target, have sued the Big Four meatpackers with similar antitrust allegations in federal court in Minnesota. Both the Target and McDonald’s cases point to a widespread drop in production following a fire at a Tyson plant in 2019.
“The parallel and coordinated decrease in production in the face of a large supply restraint cannot be explained by legitimate reasons,” the lawsuits said.
A wider range of meat and poultry companies have settled antitrust litigation, including wage-fixing allegations, over the past several years to the tune of hundreds of millions of dollars. Some of those cases involve a data firm, Agri Stats, collecting and disseminating what the Department of Justice called “anti-competitive” information.
Minnesota-based Hormel Foods and Cargill both agreed to settle wage-fixing suits this summer.
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