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AU AG Economist Key Witness in Historic Court Case

AUBURN — An Auburn University agricultural economist delivered the decisive testimony in a $1.28 billion price-fixing verdict a federal court jury in Montgomery handed down last week against beef-processing giant Tyson Foods.

Testifying as an expert witness for the plaintiffs in the class-action lawsuit, Auburn's Robert Taylor provided explicit evidence that Tyson Fresh Meats, formerly IBP Inc., used contracts with a select few ranchers to create a captive supply of cattle and thereby drive down the prices paid on the cash market to independent cattle producers an average of 5.1 percent a year from 1994 through 2002. In actual damages, that is a loss of about $40 on every fed steer or heifer sold on the cash market by the 30,000 producers represented in the suit.

Taylor, the Alfa eminent scholar in agricultural and public policy in AU's College of Agriculture, based his statements under oath on exhaustive statistical analyses he conducted on previously undisclosed internal financial records detailing the per-head prices IBP/Tyson paid to independent producers over the course of almost nine years.

In addition to providing concrete evidence of the depressive effects of captive supplies on cattle prices, Taylor's testimony also challenged claims by Tyson that captive-supply marketing arrangements result in more efficient processing and higher-quality beef.

"My extensive analysis of over 1 million transactions showed that there were absolutely no packing plant efficiencies associated with captive supply, and, more important, that Tyson's captive cattle graded almost 10 percent less choice than cattle bought on the open market," Taylor said.

The lawsuit, known as Pickett v. Tyson/IBP Inc., was filed in1996 by six cattle owners in Alabama, Kansas, Nebraska, Montana and South Dakota. The plaintiffs contended that Tyson's practices were unfair, discriminatory and anticompetitive and that they violated a part of antitrust law know as the Packers and Stockyards Act. Congress passed that act in 1921 to break up the collusive dominance of five major packing companies that controlled 40 percent of the cattle market.

Today, Taylor said, Tyson and four other meatpackers control, not 40 percent, but 85 percent of the slaughter market, up from 35 percent 20 years ago.

In 2002, Pickett v. Tyson/IBP was granted class-action status, allowing 30,000 producers who had sold to Tyson from 1994 through 2002 to join in. The trial began Jan. 12 in Montgomery before U.S. District Judge Lyle Strom. The jury heard closing arguments Feb. 10 and then deliberated four full days before unanimously agreeing with the plaintiffs that Tyson/IBP used large supplies of cattle illegally contracted outside the market to manipulate cattle prices.

The Tyson suit marked Taylor's first experience as an expert witness in a court case, and it was not a pleasant ride. During the course of the lawsuit and the trial, defense attorneys repeatedly attacked Taylor's credentials, his analytic methods, his statistics and his testimony, but Taylor did not waver.

"Every word of my testimony was based on an extremely thorough and accurate evaluation of all the data sets I could get my hands on," Taylor said.

The case is still far from over. If the judge accepts the jury's verdict, the case will move to a separate trial in which Strom must decide whether to severely restrict Tyson's use of contractual arrangements and order the meatpacker to buy the majority of its cattle on the open market. Tyson has said that if the judge does not set aside the verdict, it will appeal.

Still, Taylor said the verdict is a major victory for independent cattle farmers and ranchers and for consumers because it is a giant step toward reestablishing competition in the nation's cattle industry.

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CONTACT: Robert Taylor, (334) 844-1957

News from:
AG COMMUNICATIONS & MARKETING
Alabama Agricultural Experiment Station
Auburn University College of Agriculture
2 COMER HALL, AUBURN UNIVERSITY, AL 36849
334-844-4877 (PHONE) 334-844-5892 (FAX)
Jamie Creamer: jcreamer@auburn.edu
2/25/04