McDonald’s is suing a group of beef suppliers, accusing them of using a variety of methods to drive up the price of beef over several years.
The Chicago-based fast-food giant, the world’s largest restaurant chain, filed the lawsuit late last week against Cargill, JBS, National Beef Packing Company and Tyson Foods. The lawsuit was filed in a federal court in New York.
The lawsuit claimed that the “conspiracy” started in 2015 and continued until the present that drove up the price of beef even as the suppliers cut the prices they paid for cattle.
“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 be in absence of their conspiracy,” McDonald’s said in its lawsuit, adding that the “conspiracy was effective and achieved that goal.”
It is the latest in a series of actions on the part of purchasers of various proteins against suppliers, fueled at least in part by investigations by the U.S. Department of Justice into what has been seen as price-fixing actions by suppliers of chicken, pork and beef.
Dozens of restaurant chains, for instance, have sued various chicken producers over chicken prices over the years and many have sued over pork prices. Sysco in 2022 sued producers over beef prices.
The Justice Department announced that it was looking into beef prices in 2020. The next year, a group of 26 U.S. senators sent a letter to the department complaining about the “stranglehold large meatpackers have over the beef pricing market.”
“From our perspective, the anticompetitive practices occurring in the industry today are unambiguous and either our antitrust laws are not being enforced or are not capable of addressing the apparent oligopoly that apparently exists.”
None of the suppliers have yet responded to requests for comment on Monday.
According to the lawsuit, the suppliers in the McDonald’s lawsuit accounted for more than 80% of the U.S. beef supply. The next largest, according to the lawsuit, had just a 2% to 3% market share.
McDonald’s in its lawsuit said that suppliers “exploited” their role in the process of buying cattle to produce beef. The company also noted that various “economic factors made the market for the production and sale of beef conducive to cartelization.”
Suppliers’ profit margins increased in the period of the lawsuit, McDonald’s said.
The burger chain said that executives and key employees of the different companies met frequently during trade association conferences and other industry events and used those meetings to determine when to restrict supply.
McDonald’s said that the companies would coordinate on prices they would pay for fed cattle and also coordinated cattle slaughter volumes. That over time drive up prices, McDonald’s said.
The company provided some data showing that the suppliers cut down on the number of cattle slaughtered after the “conspiracy” began. Independent packers, on the other hand, increased the amount of cattle slaughtered.
McDonald’s also said that the conspiracy changes the way the market for cattle and beef operated. After 2015, the company said, the price of cattle and beef stopped moving in tandem. “The relevant supply and demand factors in the industry no longer explained the prices charged to direct purchasers” such as McDonald’s, the company said. In addition, the spread between the price of cattle and the price of wholesale beef increased 143% from 2015 to 2021.
Essentially, the suppliers cut the prices of cattle over that period while they maintained “inflated beef prices” after 2015.
Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.