PER CURIAM:
Appellant Pilgrim's Pride Corporation ("PPC"), a large producer of processed chicken, idled a number of its chicken processing
PPC, a Delaware corporation, is one of the world's largest suppliers of chicken and processed chicken products. The heart of PPC's operations is its network of chicken processing facilities located in the Southeast United States, from which it produces chicken for four primary product markets: (1) prepared chicken foods, (2) fresh food service, (3) retail or case-ready chicken, and (4) commodity chicken. PPC does not actually raise the chickens processed by these facilities, instead relying upon the husbandry services of dozens of local chicken growers. Under its Poultry Grower Agreements with chicken growers, PPC provides the chicks, feed, and other supplies, and the chicken growers provide the facilities and labor necessary to raise the chickens.
Facing severe economic difficulties in 2008, PPC ceased profitability and began losing substantial amounts of money. The primary reason for PPC's mounting financial problems appeared to be the company's over-extension into the commodity chicken market, of which PPC held an estimated 50% market share. When PPC evaluated its operations, it concluded that it was unnecessarily producing a surplus of commodity chicken at great cost to itself. In an effort to stem its losses and streamline operations, PPC closed or idled several processing and distribution facilities, divested assets, restructured supply contracts, and laid off a number of employees. However, these measures proved ineffective and PPC ultimately filed for Chapter 11 bankruptcy relief in December 2008.
One of the PPC facilities most affected by the company's financial challenges was its El Dorado, Arkansas, processing complex. Identified as a potential candidate for strategic decommission, the El Dorado facility struggled with high operating costs, poor performance, and low-margin operations focused on commodity chicken. PPC hoped that by divesting itself of underperforming and unprofitable assets producing commodity chicken, it could increase profitability while de-emphasizing its position in a riskier market. By reducing PPC's output and the surplus supply of commodity chicken, it is also alleged that PPC hoped commodity chicken prices would stabilize at a higher equilibrium price.
After PPC filed for bankruptcy, it received approval from both the bankruptcy court and the unsecured creditors committee to idle or sell three of its processing complexes, including the El Dorado facility. PPC was unable to solicit an offer that even approached the El Dorado facility's appraised value, and the facility was officially idled in May 2009. As a result of the facility's closure, the husbandry services of some 163 contract chicken growers were no longer needed, and PPC rejected all related Poultry Grower Agreements.
In response to the termination of their growing agreements, a group of the affected chicken growers filed suit under the Packers and Stockyards Act of 1921 ("PSA"). 7 U.S.C. §§ 181 et seq. Specifically, the growers alleged that PPC had engaged in a course of business for the purpose of "manipulating or controlling prices" in violation of PSA § 192(e). The growers originally filed suit in bankruptcy
We review a district court's findings of fact for clear error and its conclusions of law de novo. City of New Orleans v. BellSouth Telecommunications, Inc., 690 F.3d 312, 322 (5th Cir.2012).
PPC first argues that the district court erred in its conclusion that PPC's deliberate reduction in commodity chicken output constitutes an illegal manipulation of poultry prices under the PSA.
Under the relevant provision of the PSA,
7 U.S.C. § 192(e). In finding a violation of § 192(e), the district court's analysis was simple: If PPC hoped to increase chicken prices by reducing the quantity of chicken offered on the market, then it had attempted to manipulate chicken prices and thereby violated the PSA. However, PPC contends that the district court's simplistic interpretation of § 192(e) is flawed. Specifically, PPC argues that § 192(e) is an antitrust statute, and therefore is only violated by attempts to affect market prices which are anti-competitive, or "injurious to competition." Because its output reductions were not anti-competitive, PPC asserts, it has not violated § 192(e).
In response, the growers emphasize that violations of the PSA are not strictly limited to the traditional antitrust realms of price-fixing conspiracies and monopolization. Rather, the history of the PSA supports a "wider power to prohibit unfair methods of competition than did antecedent anti-trust legislation." Wheeler v. Pilgrim's Pride Corp., 591 F.3d 355, 357 (5th Cir.2009) (en banc).
In Wheeler v. Pilgrim's Pride, the en banc court considered whether PPC had violated PSA §§ 192(a) or (b) by providing preferential terms of dealing to certain chicken growers. Id. Of particular concern to the Wheeler court was the broad prohibition of § 192(a), which makes it unlawful to "[e]ngage in or use any unfair... or deceptive practice." We first observed that "the object of the PSA was to secure the flow of livestock from the farms and ranges to the slaughtering center and into meat products unburdened by collusion that unduly lowered the prices to the shipper and unduly increased the price to the consumer." Id. at 358 (emphasis added). We next reviewed the decisions of our sister circuits, which unanimously
Our decision in Wheeler leaves little doubt that § 192(e) proscribes only anti-competitive conduct. Moreover, unlike the broad language of § 192(a), § 192(e) explicitly requires a purpose or effect of "manipulating or controlling prices." Because the protection of natural price levels is the object of prohibitions against anti-competitive conduct, § 192(e) is clearly directed at conduct that is anticompetitive.
The express wording of § 192(e) bolsters this conclusion. Section 192(e) does not forbid all conduct which might affect prices, but only conduct that is designed to manipulate or control prices. In the absence of statutory definitions, "manipulation" ordinarily requires the use of deceptive or unfair means to accomplish something;
The relevant question thus becomes whether PPC's decision to reduce
The growers' alleged injury to competition stems entirely from PPC's alleged intent to influence prices. However, we remain conscious of the fact that laws against anti-competitive conduct seek to protect competition, not low prices. Competition, of course, is merely the existence of genuine commercial rivalry. While we agree that a goal of competition is lower price levels, a unilateral attempt to raise prices, without more, is not inherently illicit or anti-competitive.
506 U.S. 447, 458, 113 S.Ct. 884, 122 L.Ed.2d 247 (1993). Moreover, because healthy competition depends on individual firms aggressively pursuing their own interests, we are particularly hesitant to condemn the unilateral act of a single firm.
In the instant case, PPC had overextended itself into the commodity chicken market, was producing more chicken than the market appeared to need, and was thereby driving the market price of chicken down at great cost to itself. Recognizing the damage inflicted by its own excess production, PPC wisely decided to stop flooding the market with unprofitable chicken.
PPC's conduct was merely the legitimate response of a rational market participant to changes in a dynamic market. If a firm inadvertently over-produces a good and drives down prices, it does not break the law by cutting production so that prices may recover. We therefore hold that PPC did not violate PSA § 192(e) by reducing its commodity chicken output.
For the reasons stated above, the judgment of the district court is REVERSED, and judgment is RENDERED in favor of PPC.
REVERSED and RENDERED.
While a better argument could be made that PPC violated the PSA by intentionally creating a chicken supply shortage, nothing in the record supports that assertion. Moreover, in the months following the El Dorado facility's idling, the total domestic supply of commodity chicken actually increased. Thus, the chicken processing industry either had enough new entrants or enough unused capacity to immediately compensate for any supply shortage created by PPC.