Giant Eagle says egg firms hatched pricing plot

You can't make a profit without making fewer eggs.

That, according to Giant Eagle Inc., is the conclusion that U.S. egg producers reached in 1999, when talks began that led to a concerted reduction in hens and corresponding rise in prices. In a federal civil complaint filed last week, the region's dominant grocer charged it had been harmed by an egg cartel that, in the guise of protecting the chickens, hatched a price-fixing plot against consumers.

Giant Eagle's complaint against 21 egg industry firms and organizations, which has yet to be assigned to a U.S. District Court judge, piggybacks on a class action lawsuit in federal court in Philadelphia targeting the industry's big trade group, the United Egg Producers. UEP President Gene Gregory on Monday said the allegations were disproved by the industry's reliance on science in making the decisions that some grocers are targeting in lawsuits.

"We look forward to the day in court when we can argue that, because we know we are innocent of those things," he said.

Giant Eagle's lawsuit, by attorney Bernard Marcus of Downtown law firm Marcus & Shipira, said that an egg economist in the late 1990s recommended measures to lower, and stabilize, egg supply. That would end the cycles that had plagued egg producers as they boosted production to address rising prices, only to create gluts that caused prices to plunge.

The UEP, according to the lawsuit, at one time represented producers of some 96 percent of U.S. eggs. Mr. Gregory said the current figure was around 90 percent.

Its plan called for increasing the amount of cage space per hen from 48 square inches to 67 to 86 square inches, which would make producers look like do-gooders while reducing egg counts, according to the complaint.

Mr. Gregory said the industry saw European governments mandating such changes. "So we decided that if we were going to make changes in the United States, it should be based on science.

"This animal welfare program is one that was recommended by an independent scientific committee of poultry scientists," he said. "Do you think that a scientific advisory committee would damage their reputation by being involved in something that was price-fixing?"

He said organizations representing restaurants and food marketers approved the change.

Another lawsuit plank said UEP members were encouraged to reduce domestic supply by exporting eggs, even if prices overseas were lower. Nonexporting producers would subsidize those who were losing money by exporting.

Producers who did not play along were pressured, the complaint said. UEP representatives went to balky producers' customers and pushed to have them buy only "UEP Certified" eggs.

The result of those and other measures was that prices were "fixed, raised, maintained and/or stabilized" at above-market levels, Giant Eagle claims.

A group of Philadelphia restaurants and food merchants sued in 2008. A handful of egg producers settled with the plaintiffs, and agreed to provide documentation of price-fixing. That lawsuit continues.

Grocers who opted out of the Philadelphia class-action lawsuit are allowed to file their own complaints, and Giant Eagle is among a handful of companies that has done so, said Mr. Gregory.

"Obviously when you have these kinds of things," he said, "there are lawyers who are glad to take on additional business."

Rich Lord: or 412-263-1542.


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