Chicken of the Sea, which is owned by Thai Union Group Public Co.
By Stephanie Ritenbaugh / Pittsburgh Post-Gazette
Canned tuna has long been a pantry staple for the budget-conscious to get an affordable protein, Omega-3s and even a way to stay meat-free during Lent.
But a heap of lawsuits by grocers, restaurants and suppliers around the country, as well as the U.S. Department of Justice, is driving an investigation into whether the ”big three” tuna companies have been working together to keep the price tag on those cans in the cupboard artificially high.
The original lawsuit filed by New York-based Olean Wholesale Grocery Cooperative in August names Pittsburgh’s StarKist Co., as well as Bumble Bee Foods and Tri-Union Seafoods, which trades under Chicken of the Sea. The latter are both based in San Diego.
Adding another ripple to the case, the Department of Justice has successfully intervened in the proceedings because the original civil lawsuit shares “common questions of fact and law” with the feds’ own ongoing criminal investigation.
Judge Janis Sammartino granted the Department of Justice’s motion to intervene Jan. 20, which also means a delay to the original lawsuit while the federal grand jury investigation continues. The motion was unopposed.
“With the Department of Justice intervening, this tells you as an observer that their investigation is very active,” said Christopher Lebsock, a partner at San Francisco-based Hausfeld LLP, which is representing Olean. “They’re asking us to agree on a stay on the discovery process so they can conduct grand jury proceedings without all the defendants having access to the materials that otherwise would be released.
“The comments suggest that the Department of Justice is very serious about this case,” Mr. Lebsock added.
In the original lawsuit, Olean Wholesale Grocery claimed the three largest domestic manufacturers of tuna have been conspiring to fix prices of their seafood in tins, pouches and ready-to-eat serving packages starting “no later than July 24, 2011.”
Similar lawsuits have been filed by other distributors, restaurants and grocery stores across the country, including O’Hara-based grocer Giant Eagle.
The stakes are large. According to a May 2012 presentation by Bumble Bee, total U.S. retail sales of self-stable seafood products were $2.3 billion in 2011 and about $2.4 billion the following year, as cited in the lawsuit. Of that total, canned tuna represents about 73 percent.
A spokeswoman from StarKist said the company does not comment on ongoing litigation. A spokesman from the Department of Justice also declined to comment.
Bumble Bee, StarKist and Chicken of the Sea are the three largest domestic manufacturers of canned seafood products and “the industry is highly concentrated,” the lawsuit states.
Bumble Bee had a 29 percent slice of the shelf-stable seafood market in 2011; followed by StarKist at 25.3 percent and Chicken of the Sea at 18.4 percent. Culled down to just tuna products, StarKist’s chunk of the market swells to 34.6 percent, followed by Bumble Bee at 27.8 percent and Chicken of the Sea at 19.4 percent, according to court documents.
“This oligopolistic structure within the industry is the result of recent mergers and acquisitions,” the Olean lawsuit states, which consolidated the industry’s players.
Unlike a monopoly in which one company controls a market, in an oligopoly, a small number of players dominate.
Among those deals, the suit cites the 2008 acquisition of StarKist by South Korean firm Dongwon Enterprise from Del Monte Foods for $363 million.
The documents also note a recent deal that collapsed last year after the parent company of Chicken of the Sea, Thailand-based Thai Union Frozen, announced it would buy Bumble Bee for $1.51 billion. The merger would have “created a virtual duopoly, with the combined entity substantially exceeding the market share of StarKist,” Olean’s lawsuit states.
But the deal was dropped in light of a grand jury investigation launched by the antitrust division of the Department of Justice.
“Consumers are better off without this deal,” said Assistant Attorney General Bill Baer of the department’s antitrust division in a statement released in December.
“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.”
Consumption sinks; prices float?
Overall, Americans haven’t been buying as much tuna as they used to. Annual consumption of packaged seafood products fell to 2.3 pounds per person in 2013, down from 3.1 pounds in 2005, according to data cited in Olean’s lawsuit.
But, the lawsuit states that consumers have been forking over more cash for what they do buy, even as volume sales sink.
“Given this decline in consumption … one would expect rational businesses to reduce the prices for [packaged seafood products] but that didn’t happen.”
Olean claims the companies had several opportunities to collude on prices.
One arose when StarKist, Bumble Bee and Chicken of the Sea worked on a “Tuna the Wonderfish” advertising campaign through the National Fisheries Institute’s Tuna Council from 2011-2012, the lawsuit states.
Another opportunity was provided through co-packing agreements between Bumble Bee and Chicken of the Sea. “Thus, even before the proposed merger, these two companies were cooperating closely,” the lawsuit states.
Richard Brunell, vice president and general counsel of the Washington, D.C.-based American Antitrust Institute, said this is the kind of case that hits consumers at home.
“If the allegations are true — and they certainly raise suspicions — this is something that affects consumers quite directly,” Mr. Brunell said.
“It makes it easier to fix prices when you have so few players in an industry,” Mr. Brunell said, adding that regardless of the result of the lawsuits, there’s a troubling issue at hand.
“This should send a message to the government that you really need more than three players in a market to make sure there’s adequate competition,” he said. “It’s bad for the consumers whether it ends up being a conspiracy to fix prices or ends up being oligopolistic behavior.”
The cases are still in an early stage and will take some time to resolve.
It’s not the first time the tuna industry has been on the hook. In one recent instance, a California court in October approved a $12 million class-action settlement involving StarKist meant to resolve a lawsuit alleging cans were underfilled.
StarKist said customers were not shorted but said it wanted to see the litigation resolved.
Stephanie Ritenbaugh: email@example.com or 412-263-4910.
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