Chicken processors to pay farmers $85 million in antitrust settlement, scrap pay system called abusive and opaque

"Cargill Inc. and the newly formed Wayne-Sanderson Farms have agreed to pay $85 million to settle claims they violated antitrust laws by sharing information about poultry workers’ wages," reports The Wall Street Journal. "The Justice Department on Monday alleged that Cargill, Sanderson Farms, a data consulting firm and Wayne Farms for decades shared information about wages and benefits in a way that held down the pay for processing plant workers. The Justice Department also alleges that the chicken companies failed to give farmers enough information about the systems used to compensate them for raising birds for slaughter."

The settlement is technically with Cargill and Continental Grain, since Cargill and Continental just bought Sanderson Farms for $4.5 billion and will merge it with Continental subsidiary Wayne Farms. Wayne-Sanderson Farms will account for about 15% of the nation's chicken production, Diane Bartz and Tom Polansek report for Reuters. Data consulting firm Webber, Meng, Sahl and Co. also settled with the government.

According to the terms of the civil settlement, contract farmers for Wayne-Sanderson would no longer be paid through the tournament system, which forces farmers to compete against each other to determine payment. The practice has long been criticized as abusive and opaque. "The companies will pay about $85 million in restitution to plant workers, of which Cargill will pay $15 million. The government would also impose a court-appointed compliance monitor to oversee processing facilities, farms and antitrust compliance for a decade, which the companies would have to fund," the Journal's Patrick Thomas and Dave Michaels report. "Wayne-Sanderson would still offer bonuses to farmers who perform well and include a base pay, assistance for accessing capital and a profit-sharing program for growers and employees."

The settlement includes other important stipulations, Reuters reports: "The companies will not be allowed to lower the base pay of chicken growers, but will be allowed to offer incentives. The agreement also prohibits retaliation for growers who raise antitrust concerns with the government."

"Monday’s settlement with the government preventing Wayne-Sanderson Farms from using the tournament system is a major shake-up in how chicken companies have done business with farmers for decades. A shift away from the tournament model by one of the largest chicken companies could give rivals a competitive advantage or prompt a broader shift away from the model in the industry, poultry industry officials and analysts have said," Thomas and Michaels report.