Sysco, US Foods sue “Big Three” tuna makers over price fixing
America’s largest food distributors, Sysco and US Foods, sued the makers of Chicken of the Sea, Starkist and Bumble Bee canned tuna brands this week, adding two more names to the litany of retailers suing the “Big Three” tuna companies alleging price-fixing of tuna products.
Defendants in the two separate complaints, filed in United States District Courts in Illinois and Texas, list the defendants as: Dongwon Industries, which owns the Starkist brand and several other major brands; Thai Union Group, which owns Chicken of the Sea; Del Monte Corporation; and Tri-Union Seafoods dba Chicken Of The Sea International. Thai Union owns Tri-Union.
“The defendants are the three largest producers of packaged seafood products in the United States, collectively accounting for approximately 80 percent of shelf-stable tuna sales,” US Foods said in the complaint. “Defendants agreed to fix, stabilize, maintain and/or raise the price at which they each sold shelf-stable tuna to plaintiff and others,” in violation of the Sherman Act.
The two new lawsuits come a few months after Thai Union Group acknowledged that its U.S. subsidiary, Chicken of the Sea, is the whistleblower in a price-fixing scandal that led to a major United States Department of Justice investigation and prosecution of its primary competitors in the U.S. canned tuna market.
The ongoing investigation by the DOJ has already resulted in the criminal prosecution of Bumble Bee Foods, resulting in a USD 25 million (EUR 20.3 million) fine, reduced due to concerns over the company’s solvency. Former Bumble Bee executives Walter Scott Cameron and Ken Worsham and StarKist executive Stephen Hodge also each pleaded guilty to conspiracy as part of the investigation.
In the new complaint, US Foods alleges that the tuna manufacturers recognized that their tuna was used interchangeably by U.S. consumers, so no one company could raise prices above its peers without the risk of customers abandoning its product, Law360.com reported. At the time, demand for packaged tuna was also dropping, according to the complaint.
“The solution they embraced in 2004 was to enter into an unlawful agreement to increase prices of shelf-stable tuna sold to plaintiff and others in the United States by, among other conduct, coordinating price increase announcements or pricing terms, secretly and collusively exchanging pricing information and prospective pricing announcements and business plans, and collectively reducing quantity and restraining output,” the complaint said.
The price collusion was helped by a revolving corporate door where numerous executives and other employees frequently moved between the companies, according to the complaint.
US Foods contends the defendants collaborated on reducing the size of their tuna cans and conspired with coordinated messaging to produce “pretextual justifications” for their industrywide price increases.
“These pretextual explanations by defendants for their shelf-stable tuna price increases were intended to create the illusion that the market for shelf-stable tuna in the United States was competitive when it was not,” the complaint said.
A spokesperson for US Foods said the distributor would not discuss pending litigation, and Sysco did not respond to requests from SeafoodSource for comment.