Wal-Mart the latest in a growing number to file an antitrust suit against canned tuna suppliers

by Kim Souza ([email protected]) 442 views 

Wal-Mart Stores and its other retail subsidiaries filed an antitrust suit against owners of Starkist, Bumble Bee and Chicken of the Sea tuna brands alleging conspiracy to fix prices and coordinate on can sizes.

The federal suit was filed Monday (Oct. 31) in the Western District of Arkansas by attorneys Kutak Rock of Little Rock. A similar and original lawsuit against the three tuna brands was filed in August 2015 by Olean, N.Y.-based Olean Wholesale Grocery Cooperative. Since that filing, several other distributors, restaurants and grocery store operators have filed suit.

The suit comes on the heels of other federal litigation resulting from the Department of Justice’s criminal probe on the matter. The DOJ’s investigation focuses on price fixing by the tuna industry’s major players Thai Union Group and Dongwon Industries who own Bumble Bee, Starkist and Chicken of the Seas shelf-stable tuna brands — a $2.6 billion market.

Wal-Mart told Talk Business & Politics it filed the suit to best protect its rights and the interests of its 260 million customers who shop its stores weekly. Wal-Mart also said there is strong evidence to support the price conspiracy claims in the complaint.

In the Wal-Mart complaint the retailer said it purchased approximately $400 million per year of self-stable tuna from the defendants in the years under investigation from 2008 through the July 2015. The retailer also claims responsibility for 25% of the defendants’ combined total sales. The gist of the 38-page complaint relates to collusion by the tuna companies. The complaint alleges agreements to reduce can sizes across the industry, to issue collusive list prices, to limit promotional or discount activity, and refrain from offering products using tuna caught without fish aggregation devices (FADs) to consumers.

The suit claims owners of Bumble Bee, Starkist and Chicken of the Sea carried out the conspiracy through secret e-mails and telephone calls, conversations, and meetings facilitated by various industry groups. The price fixing became apparent to the public after the DOJ’s investigation began in July 2015. Because the conspiracy was actively concealed though secret communications, Wal-Mart claims it did not know it was being overcharged for packaged tuna until the federal investigation was launched.

“The affirmative acts of the Defendant and their co-conspirator, including acts of further conspiracy, were wrongly concealed and carried out in a manner that precluded detection,” the complaint states.

MARKET ‘NOT FUNCTIONING COMPETITIVELY’
The alleged conspiracy to reduce can sizes is said to have begun when Starkist, Bumble Bee and Chicken of the Sea “collusively raised prices by decreasing the amount of tuna in cans sold to putative class members without also decreasing prices.”

Wal-Mart’s case also states there were economic incentives for the tuna suppliers to conspire given since 1960 the supply of packaged tuna increased because of fishing innovation. However, the demand for tuna has fallen since 1985, suggesting that more supply and lower demand would push prices lower. Wal-Mart claims tuna prices have risen since 2007 with significant jumps since 2011. The suit said retail tuna prices in the U.S. jumped 10.9% in 2010 and 6.6% in 2012 amid a 7.7% drop in consumption.

Wal-Mart claims the tuna companies violated the Sherman Act when they conspired to fix, raise or stabilize the price of packaged tuna products sold in the United States. The complaint asked the court to consider the charges and award damages at least three times the overcharges Walmart paid to the defendants in their relevant investigation period.

The tuna industry has been had its share of litigation in recent years. In May 2015 StarKist agreed to pay $12 million to settle claims it was underfilling the cans sold at retail. The case was litigated in California federal court. All three tuna companies faced similar claims in 2012 and agreed to a $3.3 million settlement, also in California.

The U.S. Department of Justice in December 2015 blocked a planned merger of Bumble Bee Foods and Chicken of the Sea, noting that “consumers are better off without this deal.”

“Our investigation convinced us – and the parties knew or should have known from the get go – that the market is not functioning competitively today, and further consolidation would only make things worse,” Assistant Attorney General Bill Baer note in a DOJ statement.

Talk Business & Politics has sought comment from Starkist. Bumble Bee has said it does not comment about ongoing litigation or investigations.

DEFENDANTS
• Bumble Bee Foods of San Diego, Calif. (privately held by Lion Capital)
Market share 25-28% of U.S. packaged tuna industry
$1 billion in annual revenue (2014)

• StarKist Company of Pittsburg, Penn., a subsidiary of Dongwon of Seoul, Korea
Market share 30-44% of U.S. packaged tuna industry
$700 million in annual revenue (2014)

• Chicken of the Sea, owned by Thai Union Group based in Samutsakhon, Thailand
Market share 13-20% of U.S. packaged tuna industry
$400 million U.S. revenue (2014)