Tyson Foods Subject Of Federal Price Fixing Investigation

Tyson Foods (NYSE:TSN) revealed Monday in a filing that the U.S. Securities and Exchange Commission is investigating the company over allegations the American chicken industry colluded to fix prices on broiler chickens. The SEC reportedly served the company with a subpoena on Jan. 20. The company said that it is cooperating with the investigation, which is at an early stage. The SEC declined to comment on the investigation.

The new federal investigation was apparently sparked by private lawsuits accusing Tyson, the country’s largest chicken producer, and others of manipulating chicken prices to drive prices higher. More than 20 other chicken producers, including Koch Foods, Pilgrim’s Pride, Perdue Farms and Sanderson Farms, are also named in the lawsuits. Tyson and the other producers have denied the allegations.

Accusers claim the industry collusion started in 2008. In a lawsuit filed in 2016, U.S. poultry buyers claimed that Tyson and its competitors had colluded to reduce output and manipulate prices. Investors have alleged in separate lawsuits that the processors made misleading statements or failed to disclose information about price fixing. Customers and farmers have also alleged antitrust violations relating to production and compensation.

The U.S. chicken industry has transformed itself into a heavily consolidated sector controlled by several multibillion-dollar companies over the past several decades. Chicken consumption in the U.S. has more than doubled over the past 40 years. Last year, consumers spent roughly $90 billion on chicken products. Broiler chickens account for roughly 98 percent of the chicken meat sold in the U.S.

Tyson had record profit in the first quarter of its fiscal year despite the controversy. Net income rose to $1.59 a share from $1.15 in the same quarter a year earlier, beating the $1.27 estimated by Wall Street analysts. Sales were $9.18 billion, up from $9.15 billion. Analysts on average expected revenue of $9.05 billion. The company announced that adjusted earnings for the 12 months through September will be $4.90 to $5.05 a share, higher than its December forecast of profit at $4.70 to $4.85.

Tyson sells a range of frozen and fresh chicken and other meat products. The company has sought to increase its profits in recent months by selling more value-added items, which command higher margins than basic meats. The company’s goal is for long-term earnings per share growth to be in the high single digits.

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