Four companies currently dominating a multibillion-dollar market in the United States are being accused of sharing detailed, sensitive inside information with each other as part of an alleged conspiracy to raise the price of their goods and make more money off consumers.
To be clear, this is a story about potatoes.
Two proposed class actions filed this week in U.S. District Court claim that four leading potato companies — McCain Foods, Cavendish Farms, Lamb Weston and J.R. Simplot — have privately swapped intel to inflate the price of frozen potato goods, like fries, hash browns and tater tots, over the last several years.
“Armed with the same access to each other’s data on pricing and other sensitive information, as well as with a direct line of communication to each other, the potato cartel moves prices skyward in lockstep — harming all purchasers of potatoes in the process,” one of the claims read.
McCain and Cavendish are both based in Canada.
The lawsuits have not been certified as class actions, and the allegations have not been proven in court. None of the four companies have filed defences, nor did they respond to requests for comment from CBC News.
‘Matching’ price increases started in 2021, lawsuit alleges
Companies in Canada and the United States are supposed to settle on a price for their products on their own. When they co-ordinate with each other and set an agreed rate, it’s called price-fixing — which generally makes the price higher for the consumer, since the main-player companies are agreeing not to compete with lower prices.
In one lawsuit filed in Illinois on Friday, a Pennsylvania-based supermarket chain alleged McCain, Cavendish, Lamb Weston and J.R. Simplot have been working together to fix the price of frozen potato products “above competitive levels,” in violation of antitrust laws, since at least early 2021.
The document on behalf of Redner’s Markets claimed the so-called potato cartel made “matching, simultaneous or near-simultaneous price increases” in 2021 and 2022. The claim said one restaurant owner in Washington, D.C., noticed the alleged timing and posted about it online on April 19, 2022.
“Amazing how all of the major suppliers for french fries and the like are all raising their prices at the same time and by the same amount,” read a post on X from the owner of Ivey and Covey. “Totally not collusion or anything, right?”
Canada Bread must pay a $50 million fine for being part of a scheme to fix the price of bread in Canada over 14 years. It’s the highest fine the Competition Bureau has ever levied. Andrew Chang explains how the scheme worked, and why this may only be the beginning.
Since the potato companies together control up 98 per cent of the frozen potato products market in the U.S., the lawsuit says, an alleged agreement to work together would keep prices high across the board.
The lawsuit accused Lamb Weston of telling managers to only talk about their competitors’ pricing over text — not email — to avoid creating an email paper trail “that could be discovered in the event of an antitrust investigation.”
A second suit filed Sunday also in Illinois on behalf of Alexander Gevoa, a consumer who lives in Virginia, said the companies allegedly used a data aggregation service and a trade association — Potatoes USA — to help swap information in order to “manipulate and co-ordinate prices.”
If certified, Gevoa’s class would include consumers who bought the companies’ frozen potato products after Jan. 1, 2021. Redner’s Markets’ claim would include people or entities who bought the products from the same date until the point “that the adverse effects of defendants’ anti-competitive conduct cease[d].”
The potato sector in the United States contributed over $100 billion US to the national economy in 2021, according to the National Potato Council.
Potato allegations come 1 year after Canada Bread fine
The potato allegations south of the border come just over a year after Toronto-based Canada Bread was fined $50 million for its role in a widespread scheme to fix the price of packaged bread for at least 14 years.
Loblaw and its parent company George Weston separately agreed this year to pay to settle a class action over their involvement in the scandal for $500 million, which lawyers representing the plaintiffs described as the largest antitrust settlement in Canadian history.
Loblaw and its parent company, George Weston Ltd., have agreed to pay out $500 million to settle a class-action lawsuit linked to a bread price-fixing scheme. The company also acknowledged the impact of a recent boycott.
McCain was founded as a family business in New Brunswick in 1957. The company is still family-owned and now headquartered in Toronto and Florenceville-Bristol, N.B.
Cavendish is headquartered in Dieppe, N.B., east of Moncton. It was part of a company founded in the late 1880s and was acquired by Irving Group in 1980 and renamed Cavendish Farms.