Pilgrim’s Pride Lands in Front of SEC Over Its Chicken Claims

(Bloomberg) -- The Humane Society of the United States has tried for months to stop poultry giant Pilgrim’s Pride Corp. from calling its chicken “100% natural” and “humanely” raised, claiming it’s neither. 

Following complaints to the U.S. Federal Trade Commission and state attorneys general, the animal welfare group has now filed a 100-page administrative complaint with the Securities and Exchange Commission. Once again, the group is arguing that Pilgrim’s Pride and its parent Brazilian meat processing giant JBS SA are using misleading advertising and marketing to sell its chicken.

This time, though, the group claims the language is hurting investors. 

“Pilgrim’s Pride is deceiving stakeholders concerned about the suffering of animals with false assurances of the animals’ living conditions and treatment,” the Humane Society said, according to a copy of the complaint filed Thursday with the regulator. “Poor animal welfare practices are a serious investment risk…that [can] cause negative effects on demand and can cause stock prices to drop.”

The group also took issue with the company’s claims that the chickens are “natural,” citing crowded conditions in feces-filled barns and a slaughter method that sometimes results in birds being “scalded alive.” The alleged misleading statements, Humane Society argued in its filing, are violations of the Securities Exchange Act of 1934 and Commission Rule 10b-5 because they constitute untrue statements of material fact.  

Pilgrim’s Pride and the SEC didn’t immediately respond to calls or emails seeking comment.

Cameron Bruett, a spokesman for Pilgrim’s Pride, has previously rejected the Humane Society’s allegations. “Pilgrim’s is committed to the well-being of the poultry under our care,” Bruett wrote in an email in December. “We welcome the opportunity to defend our approach to animal welfare against these false allegations.”

The $6.85 billion company is one of the largest chicken producers in the U.S., and sells its birds all over the world. With revenue close to $11 billion, Pilgrim’s Pride estimates that it produces “nearly 1 out of every 5 chickens” in the country, and has the capacity to process more than 45 million birds each week.

Last month, in response to the Humane Society’s claims, the FTC declined to take formal action against Greeley, Colorado-based Pilgrim’s Pride or JBS. In an April 1 letter to the company, a copy of which was obtained by Bloomberg, the federal agency noted that Pilgrim’s Pride told the FTC that it had removed the claims. The company told Bloomberg the changes to its websites were part of a previously planned redesign. 

Bruett said at the time that “the website revamp project was unrelated to the complaint.” The Humane Society, however, notes that not all of the claims at issue were taken down. 

The Humane Society told the SEC that claims remaining on the website include “Pilgrim’s strongly supports the humane treatment of animals [and] maintains a strict animal welfare program,” and “Pilgrim’s works closely with our grower partners, customers, and other industry stakeholders to humanely raise and process the birds under our care.”

The HSUS said in its filing that “several undercover investigations—including one at a Pilgrim’s Pride slaughterhouse in Mt. Pleasant, Texas, and one at a Pilgrim’s Pride contract growing facility in Hull, Georgia—showed that products Pilgrim’s advertises as ‘humane’ came from conditions that were anything but.” The investigations showed “broiler chickens raised in unnatural and cruel conditions, cramped together, and treated horrifically in the process leading to their slaughter.”

The group said the SEC has jurisdiction in part because “an informed consumer base is an essential condition for a free and fair marketplace and protects investors from risks related to misinformation, especially in deceptive advertising. Misleading stakeholders about the level of welfare a company provides creates enormous investment risk; when exposed, retailers, restaurants and individual consumers can seek alternative sources for products and/or alternative products and the company’s stock can plummet.”

SEC enforcement complaints like the one filed by HSUS can result in injunctions, financial penalties or the disgorgement of money resulting from the conduct at issue. In its complaint, Humane Society asked only that the regulator investigate the issue and stop Pilgrim’s and JBS from making the claims at issue. 

“Ideally,” said Peter Brandt, managing attorney of the Humane Society’s farm animals litigation arm, “we’d like them to improve their practices.” 

In March, HSUS sent letters to the attorneys general of Massachusetts, Florida, Pennsylvania, Virginia, Washington, Illinois and Maryland, urging them to open investigations of their own. The company, it argued, was misleading consumers in their states with their animal welfare claims. Today, the organization expanded that list to attorneys general in Arizona, Colorado, Michigan, New Mexico, Vermont, Wisconsin and Rhode Island, as well as the Department of Consumer and Regulatory Affairs in the District of Columbia.

Brandt said the organization’s shotgun approach to seeking enforcement—states, the FTC and now the SEC—is simply pragmatism. “There are multiple agencies at the state and federal level that would have jurisdiction” over the company’s statements, he said. The group will “go to as many of them as we think is prudent.”

Some see HSUS’s effort in less charitable terms. “This latest effort is a testament to persistence or desperation (or both), depending upon your perspective,” attorney John E. Villafranco, who practices advertising law at Kelley Drye & Warren LLP, wrote in an email. “But no matter how you look at it, it is starting to feel like HSUS is tossing spaghetti against the wall and hoping something sticks.”

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