Egg Industry Probe Is Urged

The Humane Society of the United States petitioned the Justice Department and Federal Trade Commission to investigate the nation's largest egg producers, alleging that their animal-welfare program masked an illegal plan to limit supply and raise egg prices.

Quality-control worker Phyllis Raber checks eggs for impurities as they roll over a bright light at Sauders Egg Processing plant in Winesburg, Ohio.

Egg producers also faced a growing number of lawsuits from customers seeking to recover alleged overcharges. Several of the lawsuits seek class-action status and could bring large damage awards if they prevail.

Egg prices are up 41% in two years, outpacing higher feed and energy costs. The Wall Street Journal reported Tuesday that part of the increase may be due to an industry cartel that arranged a series of large export orders and pressed its members to adopt new cage-size standards. Both efforts had the effect of cutting supply, which led to higher prices.

The industry group, United Egg Producers, has said its actions were proper and fully protected under a 1922 exemption to antitrust law. The Georgia group represents more than 250 U.S. egg farmers.

The Food Crisis

The most significant of the new antitrust suits, filed in U.S. District Court in Philadelphia by a New York restaurant, alleges a longstanding scheme to limit supply in the multibillion-dollar market for fresh eggs and egg products. The suit, which seeks to invalidate United Egg's antitrust exemption, cites internal documents and witnesses, and was brought by Cohen, Milstein Hausfeld & Toll, a Washington, D.C., law firm. The United Egg Producers has said it will defend its exempt status.

A second suit, brought by a Florida bakery and filed in federal court in Minneapolis, focuses on the smaller market for liquid and powdered egg products. An investigation of possible price fixing is under way in the egg-products market, a Justice Department official confirmed earlier this week.

The national Humane Society is engaged in a pitched battle with the egg industry in California, where a proposition on the November ballot would force producers to improve conditions for farm animals. The industry has said that Proposition 2 would be too costly for many farmers, and that it already is taking steps to give caged animals such as hens more room to move.

The Humane Society won an injunction in federal court in San Francisco last week barring an industry marketing group, the American Egg Board, from using U.S. Department of Agriculture funds to attack the proposition in an advertising campaign.

In Washington, U.S. antitrust enforcers declined to comment on the complaints filed this week by the 10-million-member nonprofit group.

By: John Wilke
Wall Street Journal; September 27, 2008