Over the last two weeks, at least three class action lawsuits have been filed in federal courts across the country alleging U.S. egg producers, trade associations and cooperatives illegally fixed prices to their customers. These civil lawsuits, which mark the latest in a series of antitrust investigations into agribusinesses, were prompted by public disclosure of an investigation by the U.S. Department of Justice (DOJ) into suspected antitrust violations by egg producers in a Wall Street Journal article published on September 23, 2008. In its investigation, the DOJ reportedly issued criminal grand jury subpoenas to three of the largest egg producers in the United States: Golden Oval Eggs LLC, Michael Foods, Inc. and Land O’Lakes, Inc. The DOJ’s inquiry appears to currently be focused on potentially illegal activities among competitors related to the pricing and marketing of processed egg products, which include pasteurized eggs, liquid eggs and powdered eggs. The federal government recently has investigated antitrust violations in the fertilizer, cheese, milk, citrus and tomato industries.

Generally, after a government price fixing investigation becomes public, plaintiffs’ lawyers will move quickly to file civil lawsuits on behalf of potential purchasers that may have paid inflated prices because of the alleged conduct. Consistent with this trend, ZAZA Inc., a Florida-based bakery, filed the first lawsuit just one day after the government investigation was made public. ZAZA’s complaint, which was filed in federal court in Minneapolis, Minnesota, largely parrots the information reported in the Wall Street Journal and claims that the prices for processed egg products were artificially increased by virtue of a price fixing agreement between the three companies that reportedly received subpoenas from DOJ. ZAZA seeks recovery of damages on behalf of all purchasers of processed egg products since 2002.

However, another lawsuit filed shortly after news of the DOJ probe focuses on collusion involving fresh eggs. T.K. Ribbing’s Family Restaurant filed its complaint in federal court in Philadelphia, Pennsylvania, accusing United Egg Producers, Inc. (UEP), a prominent industry trade association that represents domestic egg producers, of conspiring with more than a dozen egg producers to manipulate and artificially limit fresh egg production. According to the suit, the UEP engaged in a variety of tactics to ensure that U.S. egg production would not increase. The UEP allegedly instituted these production limits through multiple programs that promote animal welfare/husbandry (such as encouraging increased cage size for chickens) and the use of egg exports to foreign countries to artificially reduce the available supply of eggs in the United States. The reduced supply of fresh eggs allegedly resulted in increased fresh egg prices for all U.S. consumers and a windfall profit for egg manufacturers and processors since 2000 that Ribbing’s seeks to recover for itself and all fresh egg purchasers. A third antitrust lawsuit, also making similar allegations against egg producers, was filed by a Pennsylvania food processor in federal court in Allentown, Pennsylvania, on September 26.

Regardless of the outcome of the DOJ investigation and the merits of these lawsuits, the egg industry and agribusinesses generally face some very serious legal issues. First, these cases signal renewed attention to the scope of antitrust exemptions for agribusinesses under federal law. These exemptions, such as the 1922 Capper-Volstead Act, are very fact-specific and can protect agriculture producers and cooperatives from antitrust liability under certain circumstances. However, the federal antitrust regulators have indicated that they will look very carefully at whether agribusinesses, including the egg entities involved in the newly revealed investigation, have fully complied with the spirit and letter of such exemptions. Thus, all agribusinesses may wish to re-examine their use and compliance with such laws.

Second, regardless of the industries involved, the costs and stakes of antitrust investigations are serious. If criminal violations are proven, executives can be punished by up to 10 years in jail, and both they and the companies can be fined millions of dollars. In addition, plaintiffs bringing antitrust complaints are allowed to seek monetary damages equal to three times the amount of any overcharge, injunctive relief (an order from a court requiring the parties to stop the alleged misconduct) and payment of attorneys’ fees. Thus, companies must take any allegation of improper conduct with competitors very seriously.

Ultimately, while only three lawsuits related to the egg investigation have been filed thus far, we can expect to see additional cases filed in other courts in the near future and continued scrutiny by the government and plaintiffs of agribusiness activities.