Thursday, December 15, 2011
Gene Gregory: Bad Egg
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. 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 percent of layer hens) had shrunk to about 205.”
In the words of United Egg Producers CEO Gene Gregory, the “U.S. 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 program, Gregory contacted the Canada Egg Marketing Agency to encourage them to stop buying Sparboe eggs. United Egg Producers staff made similar approaches to Wal-Mart and Albertson’s.
-David Wallechinsky
Kellogg Says Cartel Fixes Egg Prices with Supply Squeeze (by Glynis Farrell, Courthouse News Service)
Kraft Foods et al. v. United Egg Producers et al. (U.S. District Court, Northern Illinois) (pdf)
Big Agriculture Companies Look to Congress for Help against Smaller Producers (by Noel Brinkerhoff, AllGov)
How Eggs are Made in the United States (by Noel Brinkerhoff, AllGov)
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