Is Big Chicken Cooked? DOJ Intervenes in Price-Fixing Investigation

Pork is the other white meat, beef is what’s for dinner, and chicken is now under investigation by the Department of Justice for possible antitrust violations. Looks like the DOJ is back in the criminal cartel investigation business.

In June, the DOJ intervened in a class action antitrust lawsuit, filed in the U.S. District Court for the Northern District of Illinois, asking the court to stay discovery for six months while the Antitrust Division pursued potential criminal charges against key players in the chicken industry. Just recently the district court granted the stay, but reduced the request to three months as opposed to six. The class action as filed alleged that the some of the biggest poultry companies, such as Pilgrim’s Pride, Tyson Foods, Sanderson Farms and Perdue Farms, coordinated prices between 2008 and 2016, resulting in a 50% price hike for broiler chicken. The complaint further alleges that they took this action “despite input costs … falling roughly 20% to 23% over the same time period … .” According to the allegations, the poultry industry as it currently exists, is highly consolidated, with just two companies, Tyson and Pilgrim’s Pride, controlling about 40% of the market, and the top 10 poultry companies controlling nearly 80% of the market. Such market power, it is alleged, gives the Big Chicken industry enough power to manipulate pricing and supply.

The major allegation lodged at the defendants in the current lawsuit revolves around a company called Agri Stats, a subscription service that documents production practices across the chicken industry. According to the complaint, it is alleged that chicken companies used the platform to share detailed marketing and supply information, thereby allowing competitors to potentially discover how many chickens its rivals were hatching and then reduce their own production as a result. The lawsuit specifically alleges that “the principal … method by which defendants implemented and executed their conspiracy was by coordinating output and limiting production with the intent and expected result of increasing prices of broilers in the United States. In furtherance of their conspiracy, defendants exchanged detailed, competitively sensitive and closely guarded nonpublic information about prices, capacity, sales volume and demand, including through third party co-conspirator Agri Stats.”

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Carl Hittinger, Jeanne-Michele Mariani Article Takes a Look at Antitrust Division’s Renewed Focus on Bid Rigging

Partner Carl Hittinger and Associate Jeanne-Michele Mariani authored an article published May 8, 2019, by The Legal Intelligencer. The article, “Antitrust Division’s Renewed Focus on Bid Rigging Promises to be Perilous,” focuses on the Department of Justice Antitrust Division’s campaign to investigate and

prosecute criminal cartel behavior relating in particular to bid rigging involving government contracts overseas and in the United States. The division has revealed that there are presently 91 grand juries examining such bid-rigging activities.

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Carl Hittinger, Tyson Herrold Article Examines Antitrust Legacy of Former Chief Judge Dolores Sloviter

Partner Carl Hittinger and Associate Tyson Herrold authored an article published on April 12, 2019, by Temple University’s business law publication, The Temple 10-Q. The article, “Judge Dolores K. Sloviter’s Antitrust Legacy,” discusses the significant antitrust contributions of former Chief Judge of the Third Circuit Sloviter, from her days as an antitrust lawyer to her rulings in the Third Circuit, including her landmark en banc decision in LePage’s Inc. v. 3M.

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Carl Hittinger, Jeanne-Michele Mariani Author Article Examining NCAA’s Monopoly Status

Partner Carl Hittinger, the Antitrust and Competition team leader, and Associate Jeanne-Michele Mariani authored an article published in the March 29, 2019, issue of The Legal Intelligencer. The article, “The NCAA, Which Is Tied to Education, May Be a Necessary Monopoly,” discusses a recent successful challenge made to the NCAA’s governing policies on antitrust grounds. That ruling, now on appeal, upheld the plaintiffs’ argument that the NCAA has a monopoly on the college athletic market and has misused it.

Hittinger and Mariani discuss the potential inequities of permitting player compensation and some of the scenarios that could arise and conclude: “The verdict is still out as to whether a drastic change is necessary or even better, but if the status quo of at least the operation of [Division 1] sports is optimal, then it may be that the NCAA’s monopoly presence remains necessary.”

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Carl Hittinger, Julian Perlman Article Examines Antitrust Legacy of Judge Thomas Vanaskie

Partner Carl Hittinger and Counsel Julian Perlman authored an article published March 1, 2019, by The Legal Intelligencer. The article, “Circuit Judge Thomas Vanaskie’s Antitrust Legacy: 2 Significant Cases,” examines opinions issued by recently retired Third Circuit and former MDPA Chief Judge Vanaskie. The article discusses Vanaskie’s thorough and fair-minded opinions in the epic antitrust dispute between competitors Santana Products and Bobrick Washroom Equipment in the late 1990s through the early 2000s (in which Carl Hittinger was lead counsel for Bobrick). Hittinger and Perlman also consider Vanaskie’s decisions in a precedential antitrust class action dispute involving the adhesive label industry. Both cases serve as role models for other judges to follow.

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Carl Hittinger, Jeanne-Michele Mariani Examine Drug Price Spikes and Antitrust Laws

Partner Carl Hittinger and Associate Jeanne-Michele Mariani authored an article published by The Legal Intelligencer on Nov. 30, 2018. The article, “Price Hikes and Spikes and the Antitrust Laws,” uses the well-known example of “Pharma bro” Martin Shkreli and his company’s abrupt price hike for Daraprim from $13.50 to $750 a pill to consider whether such price jumps should be necessarily considered antitrust violations.

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Carl Hittinger, Jeanne-Michele Mariani Assess Justice Kavanaugh’s Testimony Regarding Antitrust Law

Partner Carl Hittinger and Associate Jeanne-Michele Mariani authored an article published Oct. 26, 2018, by The Legal Intelligencer. The article, “Justice Kavanaugh’s Antitrust Testimony Before the Senate Judiciary Committee,” examines the testimony of U.S. Supreme Court Justice Brett Kavanaugh during his confirmation hearings last month, before his nomination was approved in the Senate. They write that when asked about his Court of Appeals dissents in antitrust cases, he provided little indication that he had wavered in his apparent pro-merger attitude, even when it conflicts with previous binding Supreme Court decisions regarding antitrust law, which he boldly claimed “had not stood the test of time.”

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A Look at Judge Kavanaugh’s Antitrust Record

BakerHostetler Partner Carl Hittinger and Associate Tyson Herrold authored an article published Aug. 24, 2018, by The Legal Intelligencer. The article, “Is Judge Kavanaugh a Fan of Antitrust Laws? Let’s Take a Look,” examines the limited antitrust jurisprudence record of U.S. Court of Appeals Judge Brett Kavanaugh, who has been nominated to replace Justice Anthony Kennedy on the U.S. Supreme Court. Hittinger and Herrold examine two Kavanaugh dissenting opinions in antitrust cases and note that other judges on the D.C. Circuit have strongly criticized him for his naivety on antitrust issues and his seeming disregard for stare decisis and the rule of law that may indicate a willingness to take issue with other Supreme Court precedent. They also point out that Kavanaugh’s dissents illustrate his view that the antitrust laws are designed to promote consumer welfare and business efficiency at the expense of competition when those two goals are at odds, which is reminiscent of onetime Supreme Court nominee Judge Robert Bork’s controversial thinking.

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Update: Section 1 Challenge to Jimmy John’s No-Poach Agreement Survives Motion to Dismiss

We recently wrote that the Department of Justice’s and the Federal Trade Commission’s announcements condemning no-poaching agreements already have sparked civil class actions, including a putative class action against Jimmy John’s. Butler v. Jimmy John’s Franchise, LLP, No. 18-cv-0133, 2018 WL 3631577 (S.D. Ill. July 31, 2018). Since then, the district court denied a motion by Jimmy John’s to dismiss the plaintiff’s Section 1 claim.

According to the allegations, the plaintiff in Jimmy John’s, Sylas Butler, worked as a delivery driver and in-store employee for a Jimmy John’s franchise, but his supervisor cut his hours to approximately four hours per week. Butler wanted to transfer to a different Jimmy John’s franchise, but the Jimmy John’s franchise agreement prohibits any franchisee from soliciting or hiring any employee who has worked at another Jimmy John’s franchise within the previous 12 months. The franchise agreement imposes strict penalties for violating that clause, including termination of the franchise agreement. The franchise agreement also provides that all current and future franchisees are third-party beneficiaries of the agreement, meaning that other Jimmy John’s franchisees can enforce the no-hire provision. Finally, Jimmy John’s franchisees require their employees to sign a noncompete agreement, based on a form agreement provided by Jimmy John’s, that forbids their employees from working for any other area business that sells subs or sandwiches for two years after leaving the franchisee’s employment. Thus, the Jimmy John’s franchise agreement and the noncompete agreement allegedly precluded Butler from transferring to a different Jimmy John’s or a similar business.

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