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Food Giants File Complaint against Egg Firms

15 December 2011, at 11:09pm

US - Some of the country's leading egg producers are being sued by food giants following allegations that the egg companies conspired to fix prices by reducing egg supplies between 1999 and 2008.

In a battle of corporate food titans, some of the United States' largest egg suppliers are being sued by national food companies over claims of anti-trust activity, reports AllGov. The plaintiffs are Kraft Foods, Kellogg, General Mills and Nestlé, while the defendants consist of United Egg Producers, United States Egg Marketers and 11 egg farms and distributors. The latter are accused of conspiring to fix prices through schemes to reduce egg supplies from 1999 to 2008.

Besides the usual practices of agreeing as a group to lower the number of eggs for sale, the egg suppliers allegedly took advantage of outside concern for the welfare of their chickens to reduce the number of their laying hens. When certified guidelines required them to increase the cage space for each hen from 53 square inches to 67 square inches, the producers, rather than build new facilities, killed some of the hens, thus limiting the supply of eggs.

During the period in question, more than 2,000 small egg farms went out of business, say the food companies. According to the complaint, 'in 1987 the number of companies with flocks of 75,000 hens or more was around 2,500. In 2010, however, the number of companies with 75,000 hens or more (accounting for the ownership of 95 per cent of layer hens) had shrunk to about 205.'

In the words of United Egg Producers CEO, Gene Gregory, the "US egg industry is much like a small community or a family. There are fewer than 250 commercial size egg farmers remaining in the industry. We all know one another. We see one another at meetings. We compete but remain friends."

When Sparboe Farms – now one of the defendants – tried to withdraw from the supply control programme, Gregory contacted the Canada Egg Marketing Agency to encourage them to stop buying Sparboe eggs, according to AllGov. United Egg Producers staff made similar approaches to Wal-Mart and Albertson's, according to AllGov.

Courthouse News reports the food companies saying the egg cartel created chick hatch reduction, emergency flock reduction and hen disposal programs as short-term measures to control prices and supplies.

"Beginning at least as early as August 2002 and continuing through at least March 2008, defendants engaged in coordinated, large-scale exports to control the supply of eggs. In a private document, UEP acknowledged that 'exports [we]re only taken in large volume shipments over a very short delivery period for the purpose of having the greatest impact upon surplus supply reduction.' Defendants often exported eggs at a loss, and agreed to reimburse each other for related losses. These coordinated exports had a direct and substantial impact on domestic egg prices," the complaint states.

The food companies claim they learned of the conspiracy from public disclosures of a government antitrust investigation in 2008. According to Courthouse News, they seek monetary damages for antitrust violations and fraudulent concealment and an injunction barring the egg producers from controlling prices and supply.