Legal News

Antitrust Loophole Up for Review as Feds Investigate Tomatoes, Eggs

By Dan Slater

Greece had its Golden Age. . . and now the U.S. egg industry is having its turn. Egg prices have soared at historic highs through months in which producers usually hold on for dear life. — February issue of Watt’s Egg Industry newsletter

(AP Photo/Rich Pedroncelli)

For those keeping tabs on investigations into possible price-fixing in the food industry, you can now add eggs and tomato products to your list of fertilizer, cheese, milk and citrus fruit.

The WSJ’s John Wilke reports that, while food prices have climbed in response to rising world demand and the rising cost of fuel and feed, years of unrestrained consolidation among food producers may have also been responsible for price hikes. “When big guys get bigger, it makes collusion easier,” said Peter Carstensen, a University of Wisconsin law prof who’s testified in Congress on competition in the food industry.

Here’s the legal landscape, according to the WSJ:

Under U.S. law, it’s a crime for competitors to collaborate on production or prices. However, many farm groups and cooperatives are allowed to work together under antitrust exemptions such as the 1922 Capper-Volstead Act. The act, one of a web of loopholes carved out over the years, was originally meant to help small farms bargain with big processors. Egg and tomato producers say their cooperation is shielded by these exemptions. In stepping up enforcement in food, prosecutors are signaling a new willingness to test these exemptions’ limits.

“Some of these exemptions have outlived their usefulness” given vast changes in the economy, said David Wales, competition chief at the Federal Trade Commission, which shares antitrust enforcement with the DOJ. “If businesses are going to use one of these narrow exemptions to engage in anticompetitive conduct, we’re going to take a hard look at that.”

Full post as published by Law Blog - WSJ.com on September 23, 2008 (boomark / email).