Tyson: SEC Investigating Allegations of Chicken Pricing

Accusations claiming collusion have dogged the chicken industry in the United States the past few months but took another turn when Tyson Foods, the largest producer in the U.S. said the Securities and Exchange Commission was investigating those allegations and had sent the company a subpoena.

On Monday, the company through one of its filings said that based upon the little information in its possession, it believes the ongoing investigation is related to allegations that were contained in litigation related to antitrust involving broiler chickens.

Tyson, based in Springdale, Arkansas and its biggest competitors were named as defendants in a number of lawsuits recently that claim the chicken industry colluded beginning in 2008 to push prices up, allegations Tyson and its competitors denied.

Tyson through its filing said it was cooperating with the SEC investigation, which was still in its earliest stage. CEO Tom Hayes did not comment any further than to say Tyson wanted to defend itself in court.

Tyson shares fell by up to 5% after the news, while Sanderson Farms and Pilgrim’s Pride, two of its rivals, and also fell.

Shares of poultry producers have dropped due to the scrutiny the industry has received over its pricing practices as well as the subpoena by the SEC, said a Wall Street analyst.

The charges contained in the most recent lawsuits will be tough to prove, but because of their gravity, they are weighing on equity at Tyson, said an analyst on Wall Street.

Over a period of many decades, the chicken industry in the U.S. had transformed itself from mostly a group of farms that are family owned, into a consolidated group controlled by a few multibillion dollar companies.

Chicken consumption per capita in the United States has more than doubled over the past 40 years. In 2016, consumers paid $90 billion for chicken products.

As the companies’  power and market share has grown, more scrutiny has been placed upon them for their practices related to production, such as use of contract farming for raising birds for slaughter.

Some changes have taken place in the industry amidst the legal complaints. However, despite the current controversy, Tyson post record profit for its first quarter with net income reaching $1.59 per share for the three-month period ending December 31.

That was compared with $1.15 per share for the same period one year ago and beating analyst estimates that averaged $1.27.

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