McDonald’s has big beef with its meat distributors. This past Friday, the billion-dollar fast-food chain filed a lawsuit against major meat processing companies, including Cargill, JBS, and Tyson Foods.
The restaurant famous for the Golden Arches and Happy Meals is not too pleased with the meatpackers, alleging the group has “engaged in a contract, combination, or conspiracy” to reduce output since 2015. In doing so, these companies have driven “prices artificially higher than beef prices would have been in the absence of their conspiracy.”
Part of the issue is that the distributors have a tight grip over the industry, asserted McDonald's. In 2018, 25 million pounds of fresh and frozen beef was sold in the U.S. Four of the major meat manufacturers that are currently being sued represented 80% of said sales McDonald's alleged in its lawsuit. The following top competitor, which is not being sued, held only a 2% to 3% share of the market.
McDonald’s is far from the first to sue beef manufacturers for violating antitrust laws. Complaints from retailers such as BJ’s Wholesale, Target, and Aldi, as well as ranchers and consumers, have been consolidated under the purview of a Minnesota federal court. McDonald’s did not immediately respond to Fortune’s requests for comment. The distributors have all denied wrongdoing.
In June 2020, the Department of Justice’s antitrust division sent subpoenas to a number of the defendants. Both the DOJ and the Department of Agriculture have also launched investigations into the supposed fixed pricing, noted McDonald’s in its lawsuit.
Some have since settled. JBS in 2022 agreed to pay $52.5 million to settle a class action lawsuit it faced from manufacturers. Ranchers have not had as much luck, as their lawsuit against the Big Four meat packing companies—Cargill, JBS, National Beef Packing, and Tyson Foods—for fixing prices was overturned in August of last year.
“Only colluding meatpackers would expect to benefit by reducing their prices and purchases of slaughtered cattle, fully aware that their conspiracy would shield them from the pressures of a competitive market,” said McDonald’s, alleging that by underpaying suppliers and reducing output the Big Four and others "have been able to increase their margins and profits, confident that none of them would take volume from each other.”
McDonald’s has made a name for itself as a more affordable option for consumers, a reputation that has waned in recent years. During the second quarter of 2024, the chain reported weaker sales as customers beleaguered by inflation skipped the franchise. Pro-Palestine protests over Israel’s bombings in Gaza also had a “meaningful business impact,” according to CEO Chris Kempczinski, who also blamed misinformation.
Kempczinski also acknowledged to investors that raising prices “disrupted long-running value programs and led consumers to reconsider their buying habits." Kempczinski has since vowed to “reignite share growth in all our major markets regardless of the prevailing market conditions," he continued. "This won't happen overnight, but it will happen.”
