A New York grocer filed a proposed class action Thursday in Indiana federal court against the nation's largest conventional egg producers and two industry publications accusing them of a price-fixing conspiracy they falsely blamed on years-old bird flu outbreak.
The lawsuit filed by King Kullen Grocery Co. Inc. on behalf all entities and persons who purchased conventional shell eggs from the beginning of 2022 accuses the nation's five largest egg producers — Cal-Maine Foods Inc., Rose Acre Farms Inc., Versova Holdings LLC, Hillandale and Daybreak Foods Inc. — of colluding with industry publication Urner Barry Publications Inc. and industry marketplace exchange and publisher Egg Clearinghouse Inc. to raise the price of shell eggs by using the publications to reach unlawful antitrust agreements.
The egg industry pointed to the 2021-22 bird flu outbreak as being responsible for the exponential rise in egg prices, but the grocer argues that evidence, such as the cost of bird feed and fuel decreasing and the fact that prices in Europe did not spike nearly as high despite a similar bird flu outbreak around the same time frame, supports its case.
American egg producers were able to manipulate market prices through information provided to Urner Barry, as its price quotes are a benchmark for the industry, and by manipulating information on the Egg Clearinghouse, which processes about 5% of all industry sales but "plays an outsized role in how eggs are priced nationwide," according to the suit.
"Urner Barry's methodology allows for selective reporting, and the company does not verify every transaction reported by industry participants," King Kullen says. "Instead, it aggregates and 'scrutinizes' the information according to its own proprietary methods, the details of which are not subject to public oversight."
"This opaque process invites abuse in a market dominated by a handful of vertically integrated producers," King Kullen argues. "The egg producer defendants can monitor each other's reported prices, verify adherence to coordinated price levels, and punish deviations by reverting to benchmark linked pricing in subsequent transactions."
The lawsuit alleging Sherman Act violations comes after defendant Cal-Maine disclosed in April it is being targeted by a U.S. Department of Justice civil probe into spiking egg prices.
Conventional eggs make up about three-quarters of all shell eggs sold in the United States, compared to cage-free eggs at about 23.2%, and pasture-raised at less than 5%, according to the suit.
King Kullen says that since a highly pathogenic avian influenza outbreak in 2021 that led to the depopulation of around 43 million laying hens in the United States, egg prices have soared, reaching an all-time high earlier this year.
"In 2022 through 2024, price increases per unit of supply loss were three to four times greater than during the 2015 avian flu outbreak — a disparity that cannot be explained by legitimate cost or demand changes," the suit argues. During the time period since the outbreak, the cost of feed for hens, which is primarily corn and soy, has gone down, as has the price of fuel, yet prices kept rising, King Kullen notes.
"The U.S. egg price spike is even more puzzling when compared to Europe, which also saw a massive supply shortage in 2022 after 50 million layers were depopulated — compared to 43 million in the U.S." the grocer says. "And yet, prices only rose about 30% in Europe from January 2022 to January 2023, compared to nearly 170% in the U.S."
The suit also contends that after the DOJ investigation became public in March, egg prices "dropped precipitously," with the average wholesale price of a dozen large grade A white eggs going from $8.12 on March 5 to $3.03 on March 19, or a 62.7% decrease.
The egg producer defendants account for about 50% of all eggs produced in the United States and are also vertically integrated, as they "own breeder flocks, operate multiplier and pullet farms, manufacture feed, run in-house grading and breaking facilities, and maintain dedicated trucking fleets," King Kullen says.
The price increases are a result of a conspiracy between the defendants, which "coordinated with each other to systematically increase the price of eggs by manipulating egg pricing benchmarks such as those published by Urner Barry and ECI," the suit claims.
Urner Barry is a powerful and highly influential publication in the egg industry, and for decades has published an egg pricing index that sets the standard for prices in the country, according to the suit.
"Unlike other agricultural commodities like soy, coffee, and sugar traded on transparent public exchanges, eggs lack a regulated exchange, and price discovery has effectively been delegated" to Urner Barry and the Egg Clearinghouse.
The problem is that the information exchanged with the publications has fallen out of favor with the DOJ, which earlier this year pulled a 1996 policy that proved an "antitrust safety zone" for industry information exchanges. Under the policy, the agency said it would be less likely to scrutinize an industry information exchange platform if it met certain criteria, including that the information was managed by a third party and the information provided by the parties was at least three months old.
After the policy was pulled, then-Deputy Assistant Attorney General Doha Mekki in February said that "throughout its enforcement and policy work, the DOJ has had 'serious concerns' about whether the factors set out in the safety zones are appropriate for the industry as it exists today," according to the suit.
Mekki also noted that "exchanges facilitated by [third-party] intermediaries can have the same anticompetitive effect as direct exchange among competitors, and that "the suggestion that data that's at least three months old is unlikely to be competitively sensitive or valuable is underpinned by the rise of pricing algorithms that can increase the competitive value of historical data."
The suit claims the egg industry possesses certain "plus factors" and "super plus factors" that prominent antitrust experts and scholars cite as possible evidence of price fixing.
"Here, several plus and super plus factors support the plausible inference that defendants are members of a per se unlawful price fixing cartel," the suit says. "These include: (1) defendants' exchange of competitively sensitive information; (2) the presence of a price-verification scheme; (3) a motive to conspire; (4) opportunities and invitations to collude; (5) an increasingly concentrated market; (6) high barriers to entry; and (7) a commodity product."
"The risk of collusion is further heightened because Urner Barry disseminates forward-looking forecasts to its subscribers," King Kullen adds. "By jointly relying on the same projections of future supply, demand, and pricing, the egg producer defendants could align their expectations and production plans around shared market outlooks — coordinating not only current pricing but anticipated future conditions."
Greg Asciolla of DiCello Levitt, who represents the proposed class, said in a statement Thursday that the case "is about restoring competition and fairness to a market that touches every American household. Egg producers and their co-conspirators have used their market power and control over industry benchmarks to drive up prices, leaving retailers and consumers to foot the bill. Now more than ever, the cost of groceries is a critical issue for families, and we are proud to represent King Kullen and others harmed by this conduct."
The defendants did not immediately respond to requests for comment.
The proposed class is represented by Irwin B. Levin, Scott D. Gilchrist and Edward B. Mulligan of CohenMalad LLP, Gregory S. Asciolla, Alexander E. Barnett and Jonathan S. Crevier of DiCello Levitt, David E. Kovel, Thomas W. Elrod, Lauren Wands and James Isacks of Kirby McInerney LLP and Heidi M. Silton, Jessica N. Servais and Joseph C. Bourne of Lockridge Grindal Nauen PLLP.
Counsel information for the defendants was not immediately available.
The case is King Kullen Grocery Co. Inc. v. Cal-Maine Foods Inc. et al., case number 1:25-cv-02274, in the U.S. District Court for the Southern District of Indiana.
Nov 6
Deal Summary
