Are Processors Inflating the Price of Beef for Consumers? Award-Winning Antitrust Lawyer Omar Ochoa Explains Current Class Action Lawsuit
05/04/2022, Miami, FL // PRODIGY: Feature Story //
Across the United States, shoppers have seen food prices rise exponentially. The common reasoning behind this is that production has slowed due to circumstances surrounding the COVID-19 pandemic. While that may have been true for a time, it’s becoming increasingly clear that these price increases may actually be attributable to price gouging — a practice that runs fundamentally counter to the competitive nature of capitalism — resulting in a major class-action lawsuit that has shaken up the industry.
The class-action lawsuit that has rocked the beef industry accuses major beef suppliers of price gouging. Prices have been going up for consumers, and many have argued that the reason why is that these major beef companies have colluded to reduce the number of cattle being slaughtered for meat production, creating artificial scarcity and rising prices. The impact that this could have on consumers is profound and worrisome.
Price fixing in the beef industry
Although many sectors of the broader food industry are ruled by big corporations, beef production is mainly dictated by the companies that are becoming known as “Big Beef”: JBS, Tyson Foods, Cargill, and National Beef. Ranchers hoping to be in the big leagues only have these four companies to sell to, as smaller, independent suppliers will not bring them the same level of success. As a result, these four corporations have almost all the power in determining prices and practices across the beef industry.
This price-fixing is dangerous for consumers, as it creates a market that has little competition, resulting in more expensive, lower-quality products ending up in shoppers’ kitchens. Although price fixing is illegal, it can sometimes be difficult to prove that companies are actually conspiring to raise prices, and it isn’t just that the cost of bringing these products to market is increasing. However, in times of crisis and higher demand, such as the COVID-19 pandemic, unnatural surges in prices can indicate a price-gouging situation, as was the cause behind this recent lawsuit. “Charging artificially-inflated prices is wrong and bad for the economy,” says Omar Ochoa, lawyer and owner of Omar Ochoa Law Firm. “It hurts consumers twice: first by forcing them to pay more than they should, and second by disrupting market prices more broadly and forcing people to pay more for related items.”
Often, it is asked why a class-action lawsuit is even beneficial. Ultimately, these types of lawsuits tend to be much more efficient and effective than if there were hundreds of cases being litigated across the country; instead, all of the resources of the plaintiff’s lawyer team can be devoted to getting the desired verdict. It also increases the pressure on the companies being sued in a “strength in numbers” way. “Class action lawsuits, and the threat of them, keep corporate actors in check by making them consider the potentially high cost of acting badly,” says Ochoa.
The impact of the JBS settlement
The first pillar to fall was JBS, which settled in early April for $52.5 million. Although it is important to note that the Colorado-based meat supplier did not admit any wrongdoing in the situation, and will continue to defend themselves against other plaintiffs, many have seen this as an indicator that additional settlements may be on the way. Like many class-action lawsuits, JBS found it in its best interest to reach a settlement, rather than to draw out any litigation proceedings.
At this point, grocery stores and wholesalers can expect other leaders in the beef industry to reach some settlement, but the time it will take to reach that point is less clear. Although JBS has effectively started the wave of meat suppliers reacting to the lawsuit, it can sometimes take years to reach the final settlements. “As an ‘icebreaker’ settlement, JBS has given the case against the beef industry a foothold to continue the fight so that all companies that artificially fixed pricing are held accountable,” Ochoa explains.
Holding the beef industry accountable
To boost competition in the meat industry, the Biden administration has approved $1 billion in funding to support independent slaughterhouses. Currently, the four “Big Beef″ companies control approximately 80% of the beef produced in the United States, and these measures will hopefully increase the diversity of companies who control the price of beef. “The goal should be to spark competition in the meatpacking industry,” Ochoa asserts. “If more meat packers can provide a greater share of product, then Big Beef will have even more pressure to compete fairly.” The result will be better profit for ranchers, and cheaper prices for consumers.
There have also been calls for increased transparency in the beef industry. This issue came about due to there being little understanding between ranchers and grocers as to the prices being set by the meat suppliers. In this situation, the middleman can set prices because ranchers don’t know how much grocers are paying for meat, and grocers don’t know how much ranchers are selling their cattle for. As a result, meat processors have been able to fill their pockets with little consequence.
The JBS settlement is just a first step in holding the beef industry accountable for maintaining transparency in pricing. Doing so will result in a better market for both consumers and ranchers. Only time will tell if the other big three beef companies will follow suit and settle, or if any of them will admit their wrongdoing, but measures are being taken to reduce the power of these middlemen.
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