The Kansas City Star

By STEVE EVERLY

January 11, 2011

A major food wholesaler and area grocers are suing egg producers and trade groups accounting for most of the country's egg supply, accusing them of a conspiracy to raise prices.

The suit in U.S. District Court in Kansas contends the egg industry violated antitrust laws by forming a "cartel" to reduce the number of eggs sold in the United States so prices would rise.

The producers and trade groups deny the charges in the suit and in earlier, similar suits filed by wholesalers and grocers nationwide.

The latest suit was filed by Associated Wholesale Grocers in Kansas City, Kan., and companies that own several area Price Chopper, Hen House and other grocery stores.

It says that the alleged conspiracy began as early as 1999, and that over the years egg prices more than doubled. Average retail egg prices peaked at $2.20 a dozen in March 2008, compared with $1 a dozen in March 2002.

Patrick Stueve, an attorney representing Associated Wholesale Grocers and the area grocery stores, said the amount of the overcharges had not been totaled. But he said that over the period of the alleged conspiracy, his clients bought eggs for hundreds of millions of dollars.

And higher wholesale prices typically are passed on to consumers, in this case the grocers' customers.

To raise prices, the suit contends, producers reduced the number of laying hens while also exporting eggs, often at a loss. They also supposedly agreed to reduce the number of chickens per cage, publicizing it as improving animal welfare when it was actually meant to reduce the number of eggs.

"Defendants' collusion resulted in unprecedented egg prices and unprecedented profits for defendants," the suit contends, and they "knew the decrease in the egg supply would result in a dramatic increase in the price of eggs."

The alleged conspiracy began coming to light after the U.S. Department of Justice opened an investigation into egg pricing in September 2008.

Prices came down some after the investigation was disclosed, but the new lawsuit seeks to discover whether the alleged conspiracy is still going on.

The lawsuit also seeks damages for antitrust violations and restraint of trade.

After the investigation came to light, wholesalers and grocers nationwide began suing egg producers and trade groups. Many of those suits were later consolidated into a class-action suit.

Associated Wholesale Grocers and the local grocers decided to opt out of that class action and file their own case.

Their lawsuit, filed in late December, has 22 defendants including egg producers and trade groups such as United Egg Producers, whose members account for about 95 percent of laying hens in the U.S.

The trade group, based in Georgia, allegedly was the enforcer of efforts to control egg supplies. The group in a statement denied any conspiracy.

"Nothing could be further from the truth. UEP, its members, and all defendants are vigorously defending these lawsuits," the group said.

In the suit, the Missouri Egg Council, a nonprofit group known for promoting deviled eggs and other ways to eat more eggs, is said to have been one of the parties pushing the animal welfare plan to reduce supplies.

Jo Ann Manhart of the Missouri Egg Council said the group was not involved in what the lawsuit alleges.

The suit filed in Kansas relies in part on documents uncovered by the Justice Department investigation and other lawsuits to sketch out the alleged conspiracy that began in 1999.

At that time, egg producers were complaining about low prices. An economist for United Egg Producers said that more hens meant less profit and that any reduction in egg supplies would help everyone in the industry.

In one meeting, the suit alleges, egg producers in the trade group agreed to the "bold move" of a 6 percent cut in the number of laying hens.

The number was reduced by about 7 million, in part by the Animal Care Certified Program, which the trade group publicized as better treatment for the hens. Under the program, from 2002 to 2008 each hen got about 20 percent more cage space.

But the real purpose of the program was to reduce egg supplies, the suit contends. If a producer didn't voluntarily comply, the suit says, United Egg Producers would try to get retailers to stop buying eggs from that supplier.

Some egg producers began exporting eggs to Europe, often at a financial loss, which further reduced egg supplies in the U.S. Other moves to reduce the number of eggs laid included reducing the hens' feed and the hours of light in the chicken coops, the suit said.

Producers were no longer complaining about low prices. Farm prices for eggs in 2007, for example, rose by 63 percent.

Meanwhile, two settlements have been made in another lawsuit alleging an egg-price conspiracy. Land O'Lakes Inc. agreed to pay $25 million but said it was settling to avoid further legal costs. In the other agreement, Sparboe Farms Inc. in Minnesota agreed to settle by providing information to authorities about the alleged conspiracy to raise egg prices.