The food giants filed the suit in Illinois federal court in December 2011, arguing that between 1999 and 2008, Cal-Maine Foods, Rose Acre, United Egg Producers (UEP) and United States Egg Marketers “unlawfully agreed to and did engage in a conspiracy to control supply and artificially maintain and increase the price of eggs”.
In the case of the manufacturers, these would be “eggs, either whole or separated, that have been removed from their shells and are then processed into dried, frozen, or liquid forms”.
On 21 November, the jury ruled that Cal-Maine Foods – the largest egg producer and distributor in the US – Rose Acre Farms (the second largest) and the trade associations ‘rigged’ the market by conspiring to keep prices high, costing the food companies tens of millions of dollars.
The plaintiffs were seeking $31m in damages, but were ultimately awarded $17.7m, although this could be tripled to more than $53m under US antitrust law.
The jury ruled all four defendants will share responsibility for the damages, awarding $12.83m to Kraft, $3.22m to Kellogg Company, $910,000 to General Mills and $810,000 to Nestle.
“We are extremely grateful for the jury's service and findings,” said Brandon Fox, counsel for the plaintiffs.
“This was an important case for many reasons and the jury’s award recognises its significance.”
Despite the verdict, Ridgeland, Mississippi-based Cal-Maine still denies any wrongdoing, stating it will ‘continue to evaluate its options, including, if necessary, an appeal’.
“Cal-Maine Foods respects the jury's decision and appreciates that the damages awarded by the jury are relatively modest compared to the damages sought but remains disappointed with the verdict as Cal-Maine Foods continues to believe that the company did nothing wrong,” it said in a statement.
Rose Acre – the family company of John Rust, who is running for the US Senate in Indiana – is equally disappointed.
“Rose Acre has – and continues to – steadfastly deny being part of any anti-competitive egg price-fixing conspiracy, and we will continue to explore and consider all legal options, including post-trial relief and appeal,” it said.
Hen welfare vs company profits
The five-week trial highlighted various means allegedly used by the defendants to limit the domestic supply of eggs to increase the price of products.
The food titans had accused the egg suppliers and trade associations of using animal welfare as a pretext to keep supply low and prices high.
In 2008, Cal-Maine and Rose Acre adopted the animal welfare guidelines issued by the UEP. Following the growing concern for animal welfare worldwide, the UEP developed the first industry guidelines in the 1980s. It claims the guidelines – which are backed by decades or research and recommendations from an independent Scientific Advisory Committee and regularly updated – are driven by industry rather than government mandate; and designed to create a level playing field for both egg farmers and their customers.
UEP guidelines requires more cage space for hens (a minimum of 1-1.5 sq. ft. of usable floor space per hen to allow for normal behaviour), which ultimately reduces the number of birds that can be raised.
“The plaintiffs continue to demand egg products created from UEP Certified eggs and/or eggs from hens that otherwise are humanely raised,” said the defendants in a statement.
The jury, however, found the egg suppliers exported eggs abroad to reduce the overall supply in the domestic market, as well as limited the number of chickens through means including cage space, early slaughter and “to reduce the national flock by seven million hens in an effort to increase prices. Again, fewer hens meant fewer eggs, and fewer eggs meant higher egg prices.”
At trial, the defendants argued their actions were the result of consumer demand and corporate interests.
Cal-Maine is adamant the plaintiffs presented insufficient evidence on both liability and damages and has asked US District Judge Steven Seeger to enter judgment in its favour, which would moot the jury’s verdict. That request is pending.
The case is Kraft Foods Global Inc v. United Egg Producers Inc, US District Court for the Northern District of Illinois, No. 11-cv-8808.
The plaintiffs are Kraft Foods Global Inc., Kellogg Co., General Mills Inc. and Nestle USA Inc.
For the plaintiffs: Jenner & Block
For United Egg Producers and United States Egg Marketers: Troutman Pepper Hamilton Sanders
For Cal-Maine: King & Spalding
For Rose Acre: Porter Wright Morris & Arthur