Grocery chains are claiming that chickens aren't the only ones getting plucked by producers.
In a recent suit filed in U.S. District Court in Northern Illinois, supermarket chains Kroger Inc. (KR - Get Report) , Hy-Vee Inc. and Albertsons Companies Inc. claim chicken producers Tyson Foods Inc. (TSN - Get Report) , Pilgrim's Pride Corp. and others have overcharged them for broiler chickens for a decade.
The plaintiffs contend that producers conspired to systematically destroy chicken flocks and coordinated other actions to raise chicken prices over the last 10 years. Wholesale chicken prices rose nearly 50% during the time, while feed costs for corn and soybeans dropped as much as 23%, and producers enjoyed record profits, the suit claims. The plaintiffs are seeking treble any damages found at trial.
The latest legal action follows a series of suits dating back to 2016 against producers by food distributors and retailers. The cases have been consolidated and are currently in pre-trial discovery in U.S. District Court for the Northern District of Illinois, Tyson said in its latest quarterly filing with the SEC. Court rulings on class certifications and summary judgement motions in the case aren't expected before late 2020, according to the Tyson filing, which said it intends to "vigorously defend" itself against the claims.
The legal battles could prove to be a lose-lose situation, says one lawyer familiar with such cases. "Both [sides] have too much to lose for this is be an all-out fight," Randall Kessler, an Atlanta attorney told TheStreet on Tuesday, July 3. "If the plaintiffs win, it could encourage others to sue and a government investigation," he added. "If the defendants win, then Kroger is going to pay whatever Tyson charges."
Kessler added that Kroger's suit may be an attempt to control future behavior of the chicken producers, essentially curbing wholesale prices so the grocers may pass competitive pricing on to shoppers. He said it's likely that the plaintiffs will forego a trial jury in favor of mediation with a skilled negotiator well-versed in the industry.
Those most affected are members of the shopping public who are simply after lower prices to feed their families, Kessler said.
Emory University Law School professor Frank Vandall agreed that consumers are the losers because they are paying more for chicken, when some can scarcely afford it. "The winners are the different chicken producers who receive a higher price," he added.
Americans eat more chicken than anybody else in the world -- 92 pounds a year per capita in 2017, according to the National Chicken Council. Chicken surpasses other forms of protein, such as beef or pork, as the American favorite.
A broiler is a chicken bred and raised to produce meat as opposed to a broody or egg-laying hen that is bred and raised to produce eggs.
Neither Kroger nor Tyson responded immediately for a request for comment from TheStreet. Perdue responded saying it did not comment on litigation.