The most important details of the Walmart suit against the “big three” tuna companies

In many ways, the lawsuit filed by Walmart on Monday, 31 October against the “big three” tuna companies – Bumble Bee, StarKist and Tri-Union/Chicken of the Sea – breaks little new ground, at least from the perspective of providing new information about the alleged tuna price-fixing scandal that has been in the news for the past year. But in a few important ways, the details of the suit shed new light on one of the most intriguing seafood stories of the decade.

The lawsuit, filed in the Western District of Arkansas branch of the United States’ district court system, alleges that the three companies, dubbed the “big three” tuna companies because they own a combined 70 to 80 percent of the multibillion-dollar packaged tuna industry in the United States, colluded to increase prices for packaged tuna from around 2008-2010 until at least July 2015.

The first major difference between this suit and others is its inclusion of Del Monte Foods Company among the plaintiffs. Del Monte, based in San Francisco, California, managed and operated StarKist, under a joint operating agreement with StarKist’s current owner, Dongwon Industries, through 2010. Walmart claims that StarKist executives also worked for Del Monte before and during the period when it alleges price-fixing occurred.

Secondly, although Walmart was preceded in filing suit by other major retailers including Wegmans, Kroger, Albertsons, Hy-Vee, Publix and Meijer, it is the biggest dog in the fight. Walmart is literally the biggest company in the world, with USD 480 billion (EUR 435 billion) in annual revenue in 2015, according to Fortune magazine. A company with Walmart’s resources is not to be taken lightly in any matter – but especially in a legal fight.

Walmart’s size also comes into play in another way: In its suit, Walmart says it purchased approximately USD 400 million (EUR 360 million) worth of packaged tuna products annually from the “big three” tuna companies between 2010 and 2015, when the fraud is alleged to have occurred. It estimates that total constituted approximately 25 percent or more of the packaged tuna products sold by the “big three.”

The lawsuit seeks damages estimated at three times the amount Walmart alleges it was overcharged by – a total to be determined at trial. That’s a lot of money – at or near the valuation of each of the “big three” on their own.

The suit copies its predecessors in citing an Mlex article claiming that Chicken of the Sea, in October 2015, sought “Type B” leniency from the U.S. Department of Justice, which grants immunity to the first company to come forward and admit cartel violations. When applying for leniency, an applicant must establish “the confession of wrongdoing is truly a corporate act, as opposed to isolated confessions of individual executives or officials,” according to the lawsuit. The Department of Justice only grants “Type B” leniency to applicants that admit to criminal antitrust violations, including participation in price fixing, bid rigging, capacity restriction or allocation of markets, customers, or sales or production volumes.

A Department of Justice spokesperson told SeafoodSource he couldn’t comment on the suit or any DOJ investigation into price-fixing in the tuna industry.

However, the Department of Justice filed a motion in January to stay discovery in the civil cases brought by retailers and consumers in order to aid an ongoing federal grand jury investigation in the Northern District of California.

Thai Union Chairman Karisorn Chansiri has also made reference publicly to Tri-Union’s participation in a DOJ investigation of antitrust activities concerning the packaged seafood industry in the United States.

The Walmart lawsuit gives further indications of a DOJ investigation into price-fixing, quoting Assistant Attorney General William J. Baer of the Department of Justice’s Antitrust Division as saying, “Our investigation [into Thai Union’s attempted acquisition of Bumble Bee in 2015] 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.”

The final big reveal of the Walmart suit is the detailing of the specifics of how the alleged price-fixing occurred. The “big three” carried out their scheme through in-person meetings (including at National Fisheries Institute Tuna Council meetings and ISSF meetings), as well as through emails and telephone calls, Walmart alleges in its suit. The scheme was aided by close relationships between both the executives at the companies and by intermingled business relationships, such as the co-packaging deal that had Chicken of the Sea packing Bumble Bee’s product in its Lyons, Georgia plant and Bumble Bee packing Chicken of the Sea’s products in its Santa Fe Springs, California plant, Walmart alleges.

“During these meetings and communications, [they] agreed on the terms of their conspiracy and exchanged confidential packaged tuna pricing and production information, including future confidential pricing and production information, and [they] agreed on the timing and amount of price increases,” Walmart alleges in its suit.

The lawsuit describes the numerous methods used by company executives to exchange information – allegedly containing pricing and marketing information – and accuses the “big three” of limiting promotions and discounts on their packaged tuna. It also accuses the “big three” of resisting efforts to make their products “more sustainable and less harmful to oceanic ecosystems” by jointly agreeing not to sell any tuna branded “FAD-free” – signifying it had been caught without the use of fish-aggregating devices.

Chicken of the Sea, Bumble Bee and StarKist “Possessed significant market power to raise prices for packaged tuna above competitive levels in the United States…and they conspired to ensure they would stabilize and maintain their market shares in the packaged tuna market despite declining demand,” Walmart said in its suit.

In an email, Walmart Director of National Media Relations Randy Hargrove told SeafoodSource Walmart believed the tuna companies’ actions were illegal and cost both the company and its customers money.

“We believe there is strong evidence that suppliers of canned tuna to Walmart conspired to artificially inflate and wrongfully fix prices in order to increase their own profits at the expense of consumers,” Hargrove said. “Our focus for more than 50 years has been on giving our customers great deals when they shop at our stores and increased costs like this directly impact the 260 million customers who visit our stores each week around the world. We filed suit today to best protect our rights and the interests of our customers.”