Land O'Lakes to pay $25M in egg price-fixing case

Land O'Lakes, one of more than 10 egg producers that a group of restaurants and food processing companies claims conspired to fix egg prices nationwide, has agreed to a $25 million settlement, according to a court filing.

The payment represents about 12 percent of Land O'Lakes 2009 profit of $209.1 million.

The food giant has also agreed to hand over internal documents that could implicate other companies that are targets of a price-fixing lawsuit.

The restaurants and processors allege egg prices skyrocketed between 2004 and 2008 because industry officials conspired to reduce production. According to U.S. Commerce Department data, the wholesale price of eggs roughly tripled from 2007 to 2008.

The restaurants and processors filed suit against the egg producers in September, 2008 in U.S. District Court in Philadelphia.

Land O'Lakes, its egg-producing subsidiary Moark and Moark's Norco Ranch Inc., are participating in the settlement. Claims remain active against more than 10 of the biggest producers in the egg industry, including Minnetonka-based Michael Foods Inc. Michael Foods declined to comment.

The plaintiffs include restaurants such as T.K. Ribbing's Family Restaurant in Falconer, N.Y., and Lisciandro's Restaurant in Jamestown, N.Y., among others. Other plaintiffs are food processors including Solovy Foods Inc. in Vernon, Calif., and Karetas Foods Inc. in Reading, Pa.

The lawsuit alleges that egg producers reduced supply in a number of ways, such as cutting the number of hens at laying farms, portraying it as a response to animal welfare advocates. Those advocates had complained for years about what they call inhumane treatment of chickens.

The second alleged method for reducing the U.S. egg supply involved dumping eggs below cost in foreign markets.

The egg industry maintains price fixing simply did not take place, that there was no industrywide effort to boost the cost of raw eggs and egg products.

But the case unearthed documents indicating another Minnesota firm had sounded an alarm about price fixing.

Sparboe Farms, another large egg producer, cut a deal earlier this year to be dropped from the case.

In exchange, the Litchfield company agreed to turn over documents and communications it had with the United Egg Producers.

The Associated Press reported that in one of the documents, Sparboe expressed concerns that some industry actions "strikes of price fixing to us."

The AP reported that another document quoted an industry trade group economist saying reducing egg supply would earn the industry more money. An attorney for the plaintiffs in the case, Michael Hausfeld, said in an interview he believes the Sparboe information contributed to Land O'Lakes decision to settle.

Land O'Lakes released a statement Friday saying its settlement of the case does not imply an admission of wrongdoing. The company said instead that it settled the case to avoid the expense of protracted litigation.

The $25 million settlement payment would be the first monetary compensation for direct purchasers of eggs, according to Hausfeld's firm.

If the egg price fixing is proven, it would probably be greeted with a collective 'told you so' by many businesses and farmers in the U.S.

For years there have been complaints that many commodity markets are fixed, a beef heard recently from cattle and hog producers.

They say there are so few meatpackers left there really isn't a competitive market anymore for their animals. They say there aren't enough bidders out there to play off against each other to boost prices.

The Obama administration is apparently paying attention to this concern. All this year the Department of Justice is holding public meetings across the U.S. exploring anti-trust allegations in agriculture.

(The Associated Press contributed to this report)

Gallery

Fullscreen SlidePrevious Slide

1 of 1

Next Slide