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Egg Producers Can’t Crack Antitrust Suit

Posted  October 16, 2012

Sparboe Inc. and Land O’ Lakes Inc. continue to face a multidistrict antitrust litigation alleging they conspired to limit supply to increase the price of eggs after the U.S. District Court for the Eastern District of Pennsylvania struck down most of their arguments to dismiss the case.

Six grocers and food manufacturers that directly purchase eggs from Sparboe and Land O’ Lakes claim in the multidistrict case of In Re: Processed Egg Products: Antitrust Litigation that the companies used two trade associations to conceal anticompetitive behavior.

For example, the plaintiffs allege the defendants conspired to decrease egg supply through the development and implementation of animal health guidelines, which increase the size of hen cages through chick hatch reduction.

The plaintiffs also allege that defendants used a trade group, the United States Egg Marketers, to export eggs for the purpose of limiting domestic supply so that domestic prices would rise.

Judge Gene Pratter denied most of defendants’ motions to dismiss after acknowledging that each of the actions the trade associations implemented could have been driven by a legitimate concern to improve the health of chickens or the industry as a whole.  However, the court also stated that “reducing chick hatch while agreeing to not increase production capacity would, in the absence of agreement, be contrary to an individual egg producer’s business interests.”  As the court explained, a producer that followed such trade group guidelines “would be unable to enlarge its operations, fill additional barns, and expand egg production.”

The court concluded that “[w]hen a defendant’s action is only economically beneficial if considered from a group perspective, a reasonable inference of conspiracy exists.”

The court did dismiss, without prejudice, Sherman Act claims that plaintiff, Giant Eagle made against Land O’ Lakes, finding the allegations of Land O’ Lakes’ participation in the conspiracy to be inadequate.

Tagged in: Antitrust Litigation,