Is it time for NFI to say bye-bye to Bumble Bee?

With its admission of price fixing, Bumble Bee violated a pledge all NFI members sign agreeing to work to stamp out seafood fraud. Should the tuna firm be kicked out of the group? And what about the future of NFI's Tuna Council, which is implicated in the price fixing case?

The ongoing investigation into price fixing by the Big 3 tuna companies is shining new and unwanted attention on the National Fisheries Institute’s (NFI's) species-specific councils, and how the trade group handles members who are found guilty of fraud, such as Bumble Bee.

The NFI operates four councils -- tuna, shrimp, crab and salmon -- all of which include leading seafood suppliers specializing in one of the four species. It also operates the Better Seafood Board, which theoretically polices economic fraud among NFI members, who must sign a pledge of economic integrity to be part of the trade group.

It is the group’s Tuna Council that is under scrutiny in an ongoing Department of Justice (DOJ) investigation and price fixing lawsuits against the tuna firms.

Last week, dozens of plaintiffs, including Walmart and other major US supermarket chains, filed amended complaints in ongoing antitrust lawsuit cases against the largest US tuna producers for allegedly conspiring to fix canned tuna prices.

The deadline to file amended complaints last week coincided with the DOJ's announcement that Bumble Bee Foods agreed to plead guilty for its role in a conspiracy to fix the prices of canned and pouched tuna sold in the United States.

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NFI’s Tuna Council has been implicated in the price fixing scheme through allegations detailed in the amended complaints.

Referring to NFI’s creation of the Tuna Council in 2007 -- the trade group’s first council and one that included Bumble Bee, Starkist and Chicken of the Sea (COS) as founding members -- court documents allege: “The culture of collusion” that existed during the time period relevant to the plaintiffs’ claim was “facilitated and enhanced” by certain trade associations that counted the tuna firms among their major, or only, members.

“One such trade association was the National Fisheries Institute (NFI),” said court documents.

“In 2007, NFI created the Tuna Council, whose only members were Bumble Bee, COS and Del Monte/StarKist. As soon as the Tuna Council was created, defendants used it to facilitate their collusion," according to allegations in the suit.

As an example, the court documents refer to a 2008 email exchange between the CEO of one of the major tuna companies and a NFI representative, in which it is alleged the tuna executive detailed “conspiratorial discussions, noting the confidential nature of his email and explaining that collusion on can-size was something ‘we need to discuss as an industry.’”

In addition, court documents allege, the tuna company execs had "at least one in-person meeting in Chicago (using as cover an NFI meeting) in which their agreements and understandings on promotional pricing terms was discussed."

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Other allegations in the court documents draw into question the tuna companies’ creation of the 'Wonderfish' consumer marketing campaign designed to boost tuna consumption. The program was developed under the auspices of the Tuna Council and paid for by the Big 3 tuna firms.

“During the planning and implementation of this marketing campaign (and later), using the cover of the Tuna Council (and the NFI), defendants communicated in furtherance of the conspiracy,” allege plaintiffs in the case.

NFI is not a defendant in the case and has not been charged with any wrongdoing, nor has the group’s President John Connelly, who has led the organization for the past 14 years, been charged.

However, Connelly is named in the court documents among 56 seafood professionals listed on a so-called “Conspiracy’s Players List.” The remainder of the list is made up mostly of senior executives from all three companies, two of whom have pleaded guilty to felony charges and are now cooperating with the investigation.

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So what now for Bumble Bee's membership in the trade group? And what now for NFI’s species-specific councils? Are they fertile grounds for antitrust activity? Are they cover for secret meetings? Or are they, as Connelly purports, tools for harnessing the collective action of NFI members to improve the industry.

“We remain very confident that at no NFI meeting was there any collusion on these matters,” Connelly told me Wednesday.

How can you be so sure, I asked. “Because NFI staff are in the room during those meetings and help manage the discussion. And by design we have systems to avoid anything that would be improper.”

Connelly said rarely in the 14 years he has been leading the organization have NFI staff had to intercede to halt discussions that might be drifting in the wrong direction. “And immediately at that point our members have said, OK, and they’ve moved on to other issues.”

Having trained counsel at the trade meetings with the power to interrupt if discussions infringe on antitrust issues, is a best practice, John Connor, a senior fellow at the American Antitrust Institute (AAI), told me.

Precautions such as these should work, but for several reasons sometimes they don’t. For example, he said, associations are funded by their members, which can put them in difficult situations.

“Some trade associations have been fined for facilitating collusion,” Connor said, “but it doesn’t happen very often.”

But as with most any trade event where competitors assemble, the ability to collude exists at meetings of NFI’s various species councils, making you wonder if it is time for the trade group to abandon the council model just to further insulate itself from allegations it is facing in the tuna case.

I asked Connelly if he is considering doing away with the councils. He wouldn’t directly answer the question.

He did say: “NFI performs a very important function in helping companies in a pre-competitive area deal with sustainability issues, with health-benefits related issues, trade related issues. That’s the function of what we do, is to help companies do so.”

Connelly said NFI members have discussions with proper antitrust guidelines in place. “So, we’re constantly looking at our systems and processes to be sure that they’re up to date, but remain comfortable and confident that the systems have precluded any kind of antitrust violations.” He added that NFI would "always look at any system and any council for areas and opportunities for improvement.”

And what about those late-night dinners during events, such as the one that allegedly took place in 2010, following the final day of the NFI conference, in which executives from two of the tuna firms discussed matching a recent price increase announced by Starkist?

“I can’t see how trade associations can be held responsible for extracurricular meetings of their members,” said Connor.

Connelly obviously agrees and says it’s a wise practice for organizations to remind companies that their responsibility to an organization such as NFI doesn’t end at the end of a meeting, but they are also under antitrust review by the government outside of meetings.

Still, the optics aren’t good, especially given NFI’s requirement that its members take a pledge to stamp out economic fraud in the seafood industry as part of the group’s Better Seafood Board (BSB).

On its BSB web site, NFI says, “Suppliers who cheat customers cheat the entire industry.”

Bumble Bee remains an NFI member, Connelly told me on Wednesday. But given Bumble Bee’s admission to cheating, seems like it is time for NFI to cut ties with the company and maybe the other tuna giants as well. And maybe it’s worth evaluating the future of NFI's species councils as well.

Comments: john.fiorillo@intrafish.com

Twitter: @john_fiorillo

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