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April 12, 2010

The HSUS Asks Attorney General to Open Criminal Investigation of Egg Industry Price-Fixing Scheme

Major egg producer says trade association program covered up price-fixing

Monday, The Humane Society of the United States asked the U.S. Department of Justice to initiate a criminal investigation of the United Egg Producers—the nation's largest egg trade association—and several of its members. The request is based on new insider information that shows that egg industry executives allegedly fixed egg prices in an intentional scheme that caused prices to rise as much as 45 percent between August 2007 and March 2008—the fastest pace in 30 years.

The allegations were unsealed Thursday by a federal judge in Philadelphia who ordered the release of previously-withheld portions of Plaintiffs' Amended Class Action Complaint in In Re: Processed Egg Products Antitrust Litigation. The Defendants in that suit include several of the biggest producers in the egg industry, including Cal-Maine, Land O' Lakes, Moark, Norco Ranch, Michael Foods, Rose Acre Farms and NuCal.

"These shocking allegations show that laying hens are not the only ones being systematically abused by the egg industry," said Jennifer Fearing, chief economist for The Humane Society of the United States. "Factory farming interests claim they cannot afford to give hens enough room to spread their wings, yet they're gouging consumers through secret deals, collusion and retaliation. Consumers and animals continue to suffer while the egg industry cuts corners and lines its pockets."

The newly-revealed allegations include startling details supplied by an egg industry insider and several first-hand witnesses to the price fixing scheme. Pursuant to a settlement agreement, Sparboe Farms, Inc. (Sparboe) provided the plaintiffs with substantial information regarding the defendants' price fixing and deceptive marketing scheme. Sparboe is the fifth-largest egg producer in the United States and a formerly-named defendant in the class action. Sparboe is a long-time UEP member and its employees held key positions on various UEP committees during the time when the price fixing scheme was developed.

In order to conceal and police their scheme, Sparboe asserts UEP developed what it called "animal husbandry guidelines" which it designed to appear as a program to promote the welfare of egg laying hens and UEP implemented these guidelines through the "UEP Certified" program. However, according to the amended complaint, the purported animal welfare program was created as a pretext for the coordinated price fixing scheme, and did not meaningfully address the profound suffering that egg-laying hens endure. The hens are crammed into tiny cages and each bird is given less space than a letter-sized sheet of paper for life. In Sparboe's words, the certification program, "is in essence, a program being offered by our trade association and its members to reduce outputs in an effort to increase prices."

Highlights from the recently-released Amended Complaint include the following:

  • "On July 10, 2003, Sparboe drafted a letter to Al Pope [then-UEP president] and the UEP which expressed concerns about the 'hidden agenda' of the UEP Certified Program[.] The letter to UEP stated: "[W]hat concerns us is the 'hidden agenda' of the Animal Welfare Program. In short, we believe that if not carried forward properly a strong case could be made that the Animal Welfare Program is, in essence, a program being offered by our trade association and its members to reduce outputs in an effort to increase prices. Naturally that strikes of price fixing to us . . . ."
  • "Garth Sparboe of Sparboe Farms was a regular attendee of UEP Animal Welfare Committee meetings starting in 1999, at which time the "animal welfare" program was conceived. * * * In those meetings, the participants privately discussed the fact that the 'animal husbandry' program's express purpose was to reduce supply . . . with a superficially legitimate public purpose of animal welfare."

The consolidated class action lawsuit pending in federal district court in Philadelphia is captioned In Re: Processed Egg Products Antitrust Litigation, Case No. 2:08-md-02002-GP (E.D. Pa.).

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The Humane Society of the United States is the nation's largest animal protection organization — backed by 11 million Americans, or one of every 28. For more than a half-century, The HSUS has been fighting for the protection of all animals through advocacy, education and hands-on programs. Celebrating animals and confronting cruelty — On the Web at humanesociety.org.

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