Food industry antitrust update: tuna company ex-CEO sentenced to 40 months in prison for price-fixing
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Food industry antitrust update: tuna
company ex-CEO sentenced to 40 months in
prison for price-fixing
18 June 2020
On 16 June 2020, the former CEO of Bumble Bee Foods LLC was sentenced to 40 months in
prison and fined US$100,000 for his role in a tuna price-fixing conspiracy involving two
competitors.1 This sentence is one of the most significant penalties ever imposed on a corporate
executive in a criminal price-fixing case and highlights a significant increase in antitrust scrutiny
of the food industry that has resulted in both government enforcement and numerous civil
antitrust class actions against major food producers.
Many of these food industry antitrust cases revolve around trade association activity and third-
party information exchanges. While such activities are generally lawful and procompetitive,
certain factors may expose food companies to greater antitrust risk and leave them vulnerable to
civil and even criminal antitrust claims.
Criminal enforcement efforts and related civil class action cases
The recent antitrust focus on food goes back to at least 2010, when the Justice Department’s
Antitrust Division (DOJ) and Department of Agriculture sponsored several workshops on
competition in the dairy, livestock, and poultry industries. 2 The workshops served as a fact-
gathering exercise that then-Attorney General Eric Holder characterized as spearheading “an
historic era of enforcement.”3
Since then, the government’s increased focus on the food industry has led to a number of criminal
charges and fines against individuals and corporations. For example, major producers in the
tuna, chicken, pork, beef, turkey, salmon, mushroom, egg, chocolate, peanut, and milk industries
have faced criminal and/or civil allegations that they conspired with each other to fix prices and
reduce output. Below are some highlights of the significant cases to date:
1 U.S. Department of Justice, press release, Former Bumble Bee CEO sentenced to prison for fixing prices of canned tuna (16 Jun e
2020), av ailable at h ttps://www.justice.gov /opa/pr/former-bumble-bee-ceo-sentenced-prison-fixing-prices-canned-tuna.
2
U.S. Department of Justice, Com petition and agriculture: voi ces from the workshops on agriculture and antitrust en forcement in our
21 st cen tury econ omy and thoughts on the way forward (May 2012), available at
h ttps://www.justice.gov/sites/default/files/atr/legacy/2012/05/16/283291.pdf.
3 N eu man W. (2010, March 12). Justice Dept. Tells Farmers it Will Press Agriculture Industry on Antitrust. Th e New York Times
(av ailable at https://www.nytimes.com/2010/03/13/business/13seed.html).
Food industry antitrust update: tuna company ex-CEO sentenced to 40 months in prison for price-fixing 2
T una. The 2015 DOJ investigation of a proposed merger between two major tuna
companies led to both companies pleading guilty to criminal price-fixing charges and
paying fines of US$25 and US$100 million.4 On 3 December 2019 a jury found the former
CEO of Bumble Bee Foods LLC guilty of fixing tuna prices, resulting in the 40 month
prison sentence and US$100,000 fine announced on 16 June 2020, one of the most
significant penalties ever imposed on an individual executive in a price fixing case. A
related civil class action lawsuit in the Southern District of California alleges that three
tuna companies conspired to fix prices by, among other things, allegedly agreeing to
decrease the sizes of packaged tuna cans, coordinating list price increases, and limiting
promotional activities. 5 The district court certified classes of direct purchasers,
commercial food preparers, and end consumers in July 2019.
Chicken. Beginning in 2016, numerous individual and putative class actions were filed
alleging that chicken producers conspired to reduce chicken production. 6 In 2019 DOJ
subsequently opened a criminal investigation into the industry, and on 3 June 2020,
indicted four current and former senior executives at two chicken companies for allegedly
rigging bids.7 A week later, one of the defendants in the broiler chicken class action
announced its cooperation with the DOJ investigation in the poultry industry as part of
the agency’s corporate leniency program. 8 The case highlights the fact that civil class
actions may precede DOJ criminal enforcement.
Pork, beef, and turkey. Following on the heels of the chicken lawsuits, putative class
actions were filed against pork,9 turkey,1 0 and beef 1 1 producers in 2018 and 2019, alleging
that the companies reduced output and increased prices by exchanging information
among the producers. Cases also have been filed alleging antitrust conspiracies to
suppress chicken grower compensation and chicken processing employee compensation. 1 2
Moreover, in May 2020, following requests by U.S. senators 1 3 and state attorneys
general1 4, the DOJ began investigating the nation’s four largest meatpackers, coinciding
with a parallel investigation by the U.S. Department of Agriculture (USDA) into beef price
fluctuations.
Salmon. Investigations by European agencies have also triggered criminal investigations
and corresponding civil litigation in the United States. In April 2019, after the European
4 S e e U.S. Department of Ju stice, press release, Bumble Bee agrees to pl ead guilty to price fixing (8 May 2017), available at
h ttps://www.justice.gov/opa/pr/bumble-bee-agrees-plead-guilty-price-fixing; see also U.S. Department of Justice, press
rel ease, StarKist ordered to pay $100 million criminal fine for antitrust v iolation (11 September 2019), available at
h ttps://www.justice.gov/opa/pr/starkist-ordered-pay-100-million -criminal-fine-antitrust-violation.
5
I n re Packaged Seafood Products Antitrust Litigation, S.D. Ca., 3:15-md-02670.
6
I n re Broiler Chicken Antitrust Litigation, N.D. Il l., 1:16-cv-08637.
7 U.S. Department of Justice, press release, Senior executives at major chicken producers indicted on antitrust charges (3 June 2020),
av ailable at https://www.justice.gov/opa/pr/senior -executives-major-chicken-producers-indicted-antitrust-charges.
8 Th e DOJ A n titrust Di vision ’s Leniency Program provides that “the first corporate or individual conspirator to con fess to cooperation
i n an antitrust crime, fully cooperate with the [DOJ A ntitrust Di vision ] and m eet all other condition s that the Corporate
Len i ency Pol icy [] specifies receives leniency for the reported antitrust crime” and may avoi d criminal convictions and
resu lting fines and incarceration. See U.S. Department of Ju stice. (26 January 2017). Frequently Asked Questions About
th e A ntitrust Division’s Len iency Program and Model Len iency Letters. Available at
h ttps://www.justice.gov/atr/page/file/926521/download.
9
I n re Pork Antitrust Litigation, D. Mi n n., 0:18-cv-01776.
10
Ole an Whole sale Grocery Cooperative v. Agri Stats, Inc., N.D. Ill. 1:19-cv-08313.
11 I n re Cattle Antitrust Litigation, D. Mi n n., 0:19-cv-01222.
12 Jie n e t al v. Pe rdue Farms, Inc. et al, D. Md., 1:19-cv-2521.
13 Letter from US Senators Crapo, M., Fi scher, D., Daines, S., Jones, D., Rounds, M., Enzi, M., Hoev en, J., Smith, T ., Cramer, K., Hyde-
Sm i th, C., Barrasso, J., Risch, J., McSally, M., Sasse, B., Blackburn, M., Hawley, J., Ernst, J., Thune, J., Baldwin, T. to
A ttorney General William Barr (12 May 2020), available at https://www.jones.senate.gov/imo/media/doc/Jon es-
Letter%20to%20DOJ-Beef%20Packers.pdf.
14 Letter from State Attorneys Gen eral Stenehjem, W., Weiser, P., Schmitt, E., Fox, T., Brnovich, M., Wasden, L., Miller, T., Ellison , K.,
Peterson, D., Ravnsborg, J., Hi ll, B. to Attorney Gen eral William Barr (5 May 2020), available at
h ttps://www.iowaattorneygeneral.gov /media/cms/beef_antitrust_letter_20200505Barr__4D5075D98B205.pdf.Food industry antitrust update: tuna company ex-CEO sentenced to 40 months in prison for price-fixing 3
Commission announced an investigation of the farmed-salmon industry, 1 5 a putative class
of direct purchasers of Norwegian-farmed salmon filed an action in Florida alleging that
European salmon farmers engaged in a price-fixing conspiracy. 1 6 DOJ has also now issued
subpoenas to a number of salmon producers regarding the same activity.
Mushrooms. In 2005, the Eastern Mushroom Marketing Cooperative (EMMC) settled
antitrust claims with the DOJ by agreeing to void deed restrictions prohibiting the growth
of mushrooms that it had placed on farmland it had sold or transferred. 1 7 In 2015, a civil
antitrust case was filed by two grocery store chains alleging that defendant EMCC
conspired to fix mushroom prices.1 8 And in August 2019, a Pennsylvania federal court
approved a preliminary settlement totaling US$33.7 million to resolve price fixing
allegations brought against EMCC in 2006 by a plaintiff class consisting of direct
purchasers of mushrooms. 1 9
Eggs. For nearly a decade, various private plaintiffs pursued class actions against egg
producers alleging agreements to fix prices by reducing hen supplies. 20 Although some
defendants ultimately won a verdict at trial, others entered settlements totaling
approximately US$130 million. A second group of defendants won a jury verdict in
December 2019.
Chocolate. In 2015, the Third Circuit upheld summary judgment in favor of three
chocolate companies in class actions alleging that those companies conspired to raise
prices of chocolate. 21
Peanuts. In September 2019, a putative class of peanut farmers sued the nation’s two
largest peanut shellers, alleging that the defendants conspired to depress the prices of
peanuts that they purchased. In May 2020, the Eastern District of Virginia denied
Defendants’ motion to dismiss. 22
Milk. In December 2019, plaintiffs in a putative class action filed a proposed settlement
in a case alleging dairy producers conspired to remove milking cows from production and
thereby increase butter, cheese, and raw milk prices. 23 Under the settlement—which
comes after nearly seven years of litigation—the National Milk Producers Federation will
pay US$220 million into a fund for consumers and pay US$73.3 million in plaintiffs’
attorney fees.
While the specifics of these cases differ, what is consistent is that, over the past several years,
plaintiffs have been increasingly targeting conduct by food industry participants, even in the
absence of a criminal investigation or direct evidence of conspiratorial communications among
those companies.
15
Eu ropean Com mission, press release, Antitrust: Com mission confirms unannou nced inspections i n the farmed Atlantic salmon
sector (19 February 2010), available at https://ec.europa.eu/commission/presscorner/detail/en/STATEMENT_19_1310).
16 I n re : Farm-Raised Salmon and Salmon Products Litigation, S.D. Fl a., 1:19-cv-21551.
17 U.S . v. Easte rn Mushroom Marketing Cooperative, I nc., E.D. Pa., 2:04-cv-05829 (Final Judgment available at
h ttps://www.justice.gov/atr/case-document/final-judgment-75).
18 Winn-Dixie S tores, Inc. e t al. v. Eastern Mushroom Marketing Cooperative, I nc. et al, E.D. Pa., 5:15-cv-06480.
19
I n re : Mushroom Dire ct Purchaser Antitrust Litigation, E.D. Pa., 2:06-cv-00620.
20
I n re : Processed Egg Products Antitrust Litigation, E.D. Pa., 2:08-md-02002.
21 I n re : Chocolate Confectionary Antitrust Litigation, M.D. Pa., 1:08-mdl-01935.
22 D&M Farms v. Birdsong Corp., E.D. Va., 19-cv-463.
23 First I mpre ssions Salon, Inc. v. National Milk Producers Federation e t al. , S.D. Ill., 3:13-cv-00454.Food industry antitrust update: tuna company ex-CEO sentenced to 40 months in prison for price-fixing 4
Antitrust risk factors in the food industry
Several themes run through these various investigations and civil actions against food companies
and highlight certain risk factors.
Information exchanges
Various cases allege that information exchanges among competitors through intermediaries
facilitated a price-fixing or output-reduction agreement. Benchmarking through information
exchanges is a common practice in the food industry and is generally procompetitive; it can
improve efficiency and reduce consumer prices. However, such information exchanges are not
immune from the antitrust laws, and it is important to consult experienced antitrust counsel to
structure any information exchange in a way that minimizes antitrust risks.
Trade associations
Participation in food industry trade associations also is common and generally procompetitive –
both the FTC and DOJ recognize that most trade association activity is “procompetitive or
competitively neutral.” 24 Mere participation in such an association is not unlawful. However,
again, it is important to consult experienced antitrust counsel to ensure that particular trade
association activities comport with the antitrust laws.
Regulated and concentrated industries
Certain parts of the food industry are unique in that they are highly regulated and also may be
characterized by relatively few large companies. Such industries present potentially unique
antitrust risks, and evaluating and defending potential antitrust issues requires knowledge of how
the industry operates, including the unique market and regulatory forces that impact food output
and pricing.
Key takeaways
Companies operating in the food industry should be mindful of increased antitrust scrutiny,
particularly in light of the increase in antitrust class actions and government investigations and
significant settlements and criminal penalties that have been imposed. An ounce of prevention
may be worth a pound of cure: taking deliberate action can help mitigate antitrust risks before
they spawn an investigation or litigation. While certain steps – such as preventing direct
communications between competitors regarding pricing or other sensitive topics – may be
straightforward, the recent trend in enforcement shows that other areas, such as information
exchanges and trade association participation, may also require careful antitrust considerations.
These collaborations can be structured in ways that benefit consumers, competition, and the
companies themselves. Hogan Lovells has the extensive regulatory and antitrust experience
necessary to work collaboratively with food industry clients to achieve these benefits while
navigating potential antitrust landmines.
24 Federal Trade Com mission . Spotlight on Trade Associations. (available at https://www.ftc.gov/tips-advice/competition-
gu i dance/guide-antitrust-laws/dealings-competitors/spotlight-trade).Food industry antitrust update: tuna company ex-CEO sentenced to 40 months in prison for price-fixing 5
Contacts
Edith Ramirez
Chuck Loughlin Partner, Washington, D.C., Los Angeles
Partner, Washington, D.C. T +1 202 637 5509 (Washington, D.C.)
T +1 202 637 5661 T +1 310 785 4600 (Los Angeles)
chuck.loughlin@hoganlovells.com edith.ramirez@hoganlovells.com
Justin W. Bernick Benjamin F. Holt
Partner, Washington, D.C. Partner, Washington, D.C.
T +1 202 637 5485 T +1 202 637 8845
justin.bernick@hoganlovells.com benjamin.holt@hoganlovells.com
William L. Monts, III
Partner, Washington, D.C.
T +1 202 637 6440
william.monts@hoganlovells.com
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