Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Packers and Stockyards Act claims against chicken producer is subject of Supreme Court petition, (Jan 16, 2014)

By Jeffrey May, J.D.

Ninety “poultry-farm families” have asked the U.S. Supreme Court to review a decision of the U.S. Court of Appeals in New Orleans, holding that Pilgrim’s Pride Corporation—one of the world’s largest chicken producers—did not violate Section 192(e) of the Packers and Stockyards Act of 1921 (PSA) by reducing its commodity chicken output in an attempt to raise prices and avoid bankruptcy. The farm families, who “grew” chickens for a processing facility that was shuttered by Pilgrim’s Pride as part of its output reduction efforts, filed a petition for certiorari, on January 13 asking the Supreme Court to consider the appellate court decision rejecting their PSA claims (Agerton v. Pilgrim’s Pride Corp., Dkt. 13-840).

The appellate court had ruled that Section 192(e) of the PSA proscribed only anticompetitive conduct, and that Pilgrim’s Pride’s conduct was “merely the legitimate response of a rational market participant to changes in a dynamic market” (728 F.3d 457, 2013-2 Trade Cases ¶78,500). A lower court’s finding (2011-2 Trade Cases ¶77,616) that Pilgrim’s Pride idled chicken processing facilities in an unlawful attempt to manipulate or control poultry prices was reversed.

The Fifth Circuit erred by “rejecting 70 years of antitrust jurisprudence” and holding that “intentional price stabilization is not price ‘manipulation’ and is therefore not anti-competitive conduct under the PSA,” according to the petitioners. “Just as price stabilization cannot be pro-competitive under the Sherman Act, it cannot be pro-competitive under the PSA, as the Fifth Circuit panel has now held.”

The petitioners contended that the High Court needed to resolve a split among the circuits on the issue of injury to competition under the PSA. “The Fifth Circuit joined the Eleventh and Eighth Circuits in utilizing for PSA cases an injury to competition analysis that permits market-distorting conduct when such conduct inures to the financial benefit of the defendant, rather than an analysis of injury to competition that focuses on market-based considerations of competitive conditions,” the petitioners asserted. The Tenth Circuit purportedly focuses on injury to the market as a whole. Moreover, the petitioners argued that the Fifth Circuit’s decision conflicts with a long line of Rule of Reason decisions by the Supreme Court that require an analysis of “the impact on competitive market conditions” within the relevant market.

The petition raised the following four questions: (1) whether in an antitrust Rule of Reason analysis under the PSA the Courts of Appeals should analyze “the impact on competitive conditions” within the relevant meat or poultry market rather than only the financial benefits to the defendant; (2) whether unilateral output reduction for the purpose of achieving price stabilization constitutes price “manipulation” in violation of the PSA; (3) whether manipulation of price is established by proof that the defendant acted with the intent to increase price without regard to whether the intentional conduct was “deceptive, unnatural, or illegitimate”; and (4) whether an intentional reduction in market supply for the purpose of increasing price is sufficient to make a prima facie showing of injury to competition under the PSA.

Attorneys: Robert Lamar Depper Jr. (Depper Law Firm, Inc.) for Gary Heath Agerton.

Companies: Pilgrim’s Pride Corporation

News: Antitrust