Most antitrust cases are about attempts to raise prices or keep them high. This one is about depressing prices and keeping them low. The complaint alleges that meat packing companies colluded to collapse the price of fed cattle in the market for meat “through coordinated procurement practices and slaughter restraint.”
Two classes have been proposed for this action:
The Producer Class is all persons or entities in the US which sold directly to any of the defendants one or more fed cattle for slaughter, between January 1, 2015 and the present, other than on a cost-plus basis.
The Exchange Class is all persons who transacted in live cattle futures or options traded on the Chicago Mercantile Exchange or another US exchange, between January 1, 2015 and the present.
The defendants include a group of meat packers who together accounted for over 80% of fed cattle slaughter in the US. The complaint alleges that the companies both suppressed cattle prices and manipulated the live cattle market by transacting in cattle futures and options.
According to the complaint, the illegally coordinated activities began at least in January 2015 and have continued up to the present day.
The packing companies buy fed cattle for slaughter from beef producers. After slaughter, they process the carcasses into meat that the sell to other processors, wholesalers, and retailers. The packing companies’ profitability depends on the “meat margin,” or the spread between the price they pay for fed cattle and the price at which they can sell the beef.
Fed cattle take time to mature. However, once they are at that point, they are considered “perishable” and have no alternative uses. The price of fed cattle is therefore sensitive to changes in slaughter level. That is, if there is less demand for slaughtered cattle, prices will go down, as producers vie to sell off their cattle.
The prices of contracts for cattle are affected by “cash cattle” prices, which are just 20-25% of the market.
The price of fed cattle increased between 2009 and 2014, because there was a strong demand for beef as well as a shortage of fed cattle after a period of drought. Prices peaked in November 2014. The complaint says that at this point, the packing companies conspired to drive prices down by a number of means.
First, they periodically reduced their slaughter volumes. Second, during the same periods, they reduced their cash cattle purchases as well. Third, they coordinated with each other in their purchases of cash cattle. Fourth, they actually imported live foreign cattle at a loss, to further reduce demand in the US market. Finally, they coordinated to close or idle their own plants to help reduce purchase volume.
The complaint reproduces graphs that show the abrupt drop in fed cattle prices after the alleged conspiracy began and the increase in meat margin prices.
It brings suit under the Sherman Act, the Packers and Stockyards Act, and the Commodity Exchange Act, as well as for unjust enrichment.