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Price Fixing Lawsuit: Egg Cartel Not Giving Consumers A Break?

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Wed, Jan 12, 2011 at 8:15 AM

Atwater Village Farmers Market: Eggs
Several of the country's largest egg producers stand accused of participating in a scheme that drove up the wholesale price of eggs by 40%. And they did it under the guise of treating animals more humanely: By systematically killing off egg-laying hens, supposedly to increase cage space for the remaining ones. Even stranger, the deception was only uncovered because of Proposition 2.

Officially known as the Prevention of Farm Animal Cruelty Act, the 2008 ballot initiative that banned confining crates for several farm animal, was resoundingly approved by voters. In the run-up to the election, staffers at the Humane Society "discovered egg industry documents they said showed that producers were manipulating the market by collectively shrinking supply to boost prices," reports the Los Angeles Times.

The suit, filed last Thursday in U.S. District Court in Philadelphia, pits French food giant Sodexo Inc., U.S. grocers, food suppliers and distributors against the United Egg Producers, a trade group whose members control about 95% of all the nation's egg-laying hens.

The case hinges on the Capper-Volstead Act, not to be confused with the Volstead Act, which ushered in Prohibition). Also known as the Co-operative Marketing Associations Act, Capper-Volstead allowed agricultural producers to form associations that had exemptions from certain antitrust laws.

Sodexo, which bought more than $250 million in egg products between 2002 and 2010, asserts that the United Egg Producers and its members violated antitrust laws by systematically killing their hens to drive up prices.

For both sides, this is merely the first skirmish in a massive antitrust battle.

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