Agreement to drop tuna can sizes at heart of collusion allegations

Top tuna execs allegedly left a trail of deceit in effort to downsize cans and fix prices.

Faced with falling canned tuna demand, top executives at the big three US tuna companies allegedly colluded to downsize their cans while raising prices, according to filed amended complaints in ongoing antitrust lawsuit cases.

Last week, dozens of plaintiffs, including Walmart and other major US supermarket chains, filed these new complaints against Bumble Bee Foods LLC, StarKist Company, Dongwon Industries Co. Ltd., Del Monte Corporation, Tri-Union Seafoods LLC d/b/a Chicken of the Sea International, Inc. and Thai Union Group PCL.

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The collective decision to move to smaller can sizes was made it a surprisingly short period of time. According to redacted portions of court documents filed with the US Department of Justice (DOJ) and obtained by IntraFish, the idea of downsizing the cans from six to five ounces emerged after a December 1, 2007 conversation between vice presidents at two rival tuna companies.

Following the discussion, that same day one of the VPs “reported this conversation to his colleagues” and “advised his CEO” of the other tuna company’s intentions, as well as their desire to talk to the third tuna firm “so that agreement could be reached among the Big 3," according to the documents.

"[O]ver the next two months, defendants communicated in person, by telephone and by email and as a result of these meetings, each agreed to downsize its cans to five ounces," the filings read.

The redacted portions of the documents were in several cases gathered by DOJ investigators through interviews with executives familiar with the alleged scheme, a source familiar with the case told IntraFish.

DECEMBER 2007: The fix is in

On Dec. 27, executives at one tuna company allegedly reached a decision to act.

“[They] were debating whether to downsize, and [the CEO] stated to his colleagues that he would reach out to” the other tuna company, which he allegedly did on Jan. 4, 2008, according to the documents. That CEO allegedly then reported to his firm’s executives the other tuna company’s “tentative timetable for downsizing.”

The CEO told the other tuna company his firm was making similar plans. He also allegedly “asked his colleagues to keep the information confidential.”

JANUARY 2008: Getting buy-in for the game plan

Several VPs of the tuna companies met in January to discuss this agreement and the CEO of one of the parent companies was CC'd on the emails arranging the meetings.

Although one tuna firm was allegedly prepared to downsize in January 2008, it “delayed initiating the process of converting its cans until late April 2008, which was after agreement was reached between all three Defendants to downsize” in order to allegedly avoid any one company from losing market share.

The collusive can-size reduction was allegedly facilitated by co-conspirator Impress, a canner with facilities in American Samoa that held a commercial relationship with Del Monte/StarKist, Bumble Bee and Chicken of the Sea. Impress allegedly scheduled meetings with representatives from the three tuna firms.

After one January meeting in Los Angeles, there were a “series of internal communications confirming [one of the tuna firms] were continuing their plan to move to a five ounce can, as well as its plan to reduce the net weight of its pouch tuna product from seven ounces to six ounces." Representatives at another tuna firm allegedly “began gathering information concerning the pricing changes that would be required for them to make a similar package downsizing.”

During this process, executives of one of the parent companies, including the CEO and executive director, were allegedly briefed on the situation on Jan. 28, as it was “recognized that any decision on changing can sizes would be subject to [the parent company’s] approval.”

FEBRUARY 2008: Settling the price

Meanwhile in late February 2008 several executives at two of the tuna firms decided to meet to make a final decision on downsizing.

MARCH 2008: Sealing the deal

Top executives allegedly finalized their agreement in a way that seemed straight out of a Hollywood mob movie.

"[They] ultimately agreed to meet in the backroom of Milton’s, a restaurant on Via de la Valle in Del Mar, at 8 a.m. on Thursday, March 13, 2008," the documents alleged.

In attendance were the CEO and a VP from one tuna firm as well as the CEO and VPs of another tuna company.

After this March meeting, the two tuna firms allegedly informed the third and “discussed their agreement at an in-person meeting held on March 30, 2008, at an unknown location.

"After receiving the assurances of its conspirators that an agreement had been reached, [one tuna firm] began the process of implementing the can downsizing in late April 2008," according to the documents.

APRIL 2008: Old cans kicked to the curb

On Apr. 29, 2008, one VP allegedly “circulated to the other senior executives at [his company] a confidential presentation by [a second tuna firm] marked for “Internal Distribution Only” concerning the downsizing," the documents allege.

Allegedly, "the same presentation was also provided to [the third tuna company]. The presentation explained the respective roles of [the second tuna firm and its parent company] in implementing the package resizing and the complete timetable for that implementation," the documents state.

"The presentation also indicated that by July 21, 2008, old package sizes of canned tuna would no longer be available and would be replaced with the new 'rightsized' cans," allegedly.

MAY 2008: The customer isn't always right

Around May 2008, one of the tuna companies allegedly “began to give presentations to its customers that flatly misled them about the reason for [the tuna company’s] decision to downsize its cans," the documents allege.

The presentation also stated this tuna firm decided to downsize in March 2008 "after it purportedly learned about [another tuna firm’s] plans for the first time from its customers.”

Around that time, one of the tuna firms allegedly received approval from its parent company to downsize its cans in accordance to the agreement made with the other two tuna firms. In May, the executive at this parent company advised 10 fellow executives, including the CEO, GM and executive director “of the progress on transitioning to five ounce cans.”

After a May 27 meeting in Bangkok involving executives from all three tuna companies and one parent company, one tuna firm allegedly contacted executives at the other two firms “to determine if they would join in a list price increase for canned tuna that they would implement in tandem with the can downsizing … a series of telephone calls resulted in an agreement that all three defendants would announce list price increases at approximately the same time and at similar magnitudes.”

JULY 2008: All systems go

In July, the third parent company “approved of the conspiratorial agreement and agreed to reduce the size of its cans intended for the United States to five ounces," the documents allege.

The three tuna firms allegedly then began distributing five-ounce cans of tuna to replace their six ounce cans, as each had agreed, the documents state.

"The can size change was largely completed in early 2009 and, besides reducing quantity, constituted an increase in the price per ounce of canned tuna sold to defendants’ customers," allege the documents.

"Also as part of this price increase, defendants agreed to put customers on allocation, meaning that they would not sell to customers at a volume that exceeded the retailer’s historical volume, which helped ensure that customers did not load up on six-ounce cans and blunt the impact of the collusive price increase."

JUNE 2008: Setting the price

On June 13, 2008, one tuna company allegedly “held a confidential, internal conference call, in which it determined its pricing for the fourth quarter of 2008, and shared the details of this call with” a second tuna firm, who in turn shared details with another executive at his company.

“As agreed in these communications, defendants did issue list price increases in the third quarter of 2008," the documents read.

Allegedly, one of the tuna companies announced a price increase on June 15 and another tuna firm announced its price increase on June 26, followed by the third tuna company’s price increase announcement one day later. All price increases went into effect in the fourth quarter of 2008.

“These collusive price announcements implemented virtually identical price increases on canned tuna," the documents allege.

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