McDonald’s Sues Major Beef Processors Over Alleged Price Fixing and Collusion

McDonald’s Takes on Beef Processors in a Major Legal Battle

In a significant legal showdown, the golden arches are standing tall against some of the biggest names in the beef processing industry. McDonald’s Corporation has filed a lawsuit against Kansas City-based National Beef Packing Co. and several other major beef suppliers, claiming they have been involved in illegal practices that have hurt the fast-food giant’s bottom line.

The Big Accusations

On October 4, McDonald’s kicked off this whirlwind of a lawsuit, accusing these companies of colluding to inflate profits. The defendants include heavyweights such as Cargill Inc., Tyson Foods, and JBS—a lineup representing about 80% of the beef supplied to the U.S. market. That’s quite a beefy percentage, don’t you think?

McDonald’s alleges that these companies engaged in some shady behavior by coordinating to drive down the prices paid for cattle while simultaneously restricting their production capacity. Essentially, they are accused of artificially creating a beef shortage to hike up prices for customers like the fast-food chain.

How It All Went Down

The lawsuit claims that the collusion dates back to at least early 2015. During that time, the average annual slaughter numbers for these beef giants significantly decreased—from around 2015 to 2019—compared to the prior five years. In sharp contrast, independent meat processors increased their slaughter capabilities, but they just didn’t have enough capacity to fill the beef gap created by the industry titans.

McDonald’s presented compelling data from the U.S. Department of Agriculture, showing the spread between the price farmers received for beef and the wholesale prices jumped dramatically. It revealed a staggering 77% increase from 2015 to 2019, followed by a 103% increase in 2020 and a further 28% increase in 2021.

Record Profits Amidst Claims of Price Fixing

As more details emerged, the lawsuit noted that by the end of 2021, the two leading defendants, Tyson Foods and JBS USA, were raking in record revenues. Tyson reported an operating margin of nearly 18%, which was almost nine times its operating margin from 2014. On the other hand, JBS USA announced an impressive $27.18 billion in net revenue for its beef operations in 2021—a 25.8% increase from its 2014 revenue.

McDonald’s contends these companies were either shutting down or idling their processing plants, slashing their annual slaughter capacity by around 2 million cattle a year without any corresponding change in consumer demand. Talk about playing with fire in a beef market!

Seeking Justice and Damages

This lawsuit is not just a friendly disagreement over prices—McDonald’s is seeking treble damages, along with attorney fees, interest, and a permanent injunction to stop these companies from colluding in the future. They want to ensure that fair competition is restored in the beef market.

The Defendants Remain Silent

So far, representatives from National Beef Packing have chosen to remain tight-lipped about the allegations, and none of the defendants have publicly responded to the lawsuit as of now. It seems they’re waiting for the dust to settle before making any statements.

The Road Ahead

This lawsuit could significantly impact how beef is processed and sold in the U.S. If McDonald’s succeeds, it could lead to a more competitive landscape, one more favorable to smaller processors and to the ultimate consumer looking to grab their favorite burger. For now, this case serves as a stark reminder of the complexities within our food supply chain and the power struggles behind the scenes.

As this legal battle unfolds, one thing is for sure: it’s a big beef issue that could shake up not just the fast-food industry but the entire beef market!