Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Grocers charge mushroom cooperative, growers with price fixing conspiracy, (Dec 10, 2015)

By Linda O’Brien, J.D., LL.M.

A large mushroom cooperative and several mushroom producers conspired to fix the prices for fresh and processed mushrooms sold in the United States by controlling and reducing the supply of mushrooms, according to a complaint filed in the federal district court in Philadelphia (Winn-Dixie Stores, Inc. v. Eastern Mushroom Marketing Cooperative, Inc., December 7, 2015).

Winn-Dixie Stores and Bi-Lo Holdings operate retail grocery stores located in the southeastern United States.

According to the complaint, each year U.S. consumers spend over $800 million on mushrooms. The vast majority are fresh Agaricus mushrooms, the common table variety. In January 2001, various individuals and entities formed the Eastern Mushroom Marketing Cooperative (EMMC). In May 2001, EMMC and its members undertook a “Supply Control” campaign to impede and forestall competition from independent, non-cooperative member farmers. Specifically, the EMMC and its members implemented their campaign by entering into agreements to eliminate a significant amount of the supply from competing mushroom growers.

EMMC, acting as an agent for its members, purchased four mushroom farms with an annual growing capacity of approximately 29 million pounds and then sold the four properties to non-member purchasers at a loss. The non-member purchasers agreed to place permanent deed restrictions on the properties, prohibiting the conduct of any business related to the growing of mushrooms. Similarly, in February and August 2002, EMMC, acting as an agent for its members, entered into lease options on two additional mushroom farms with a combined annual growing capacity of approximately 14 million pounds. Under the lease options, the non-member third parties agreed to file deed restrictions on the two properties that prohibited the conduct of any business related to the growing of mushrooms for a time period of ten years, the complaint states.

The complaint alleges that, by imposing such deed restrictions on the purchased and leased properties, EMMC and its members were able to substantially reduce the amount of land available for mushroom production. EMMC touted the success of its Supply Control campaign to its membership, claiming to have eliminated over 50 million pounds of production from facilities that could have remained in production. By reducing the amount of land and facilities available to produce mushrooms, EMMC and its members were able to maintain artificial price increases for mushrooms in the United States of at least eight percent.

EMMC was formed as a pretext for a price fixing and anticompetitive supply control scheme, the complaint asserts. Since its formation, EMMC has purportedly performed no activities that promotes market efficiency and has no legitimate business justification for its existence. EMMC members have agreed to set increased minimum prices at which its members and non-members would sell fresh mushrooms in geographic regions covering the entire continental United States. As a result of the illegal price fixing scheme, purchasers of mushrooms were forced to pay higher prices for Agaricus mushrooms than they would have paid in the absence of the defendants’ unlawful conduct, the complaint alleges.

The plaintiffs assert claims for unlawful acquisition and monopolization in violation of Sections 1 and 2 of the Sherman Act and Section 7 of the Clayton Act. The action seeks declaratory relief, treble damages, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 5:15-cv-06480-TON.

Attorneys: Krishna B. Narine (Meredith & Narine) and Patrick J. Ahern (Ahern and Associates, P.C.) for Winn-Dixie Stores, Inc. and Bi-Lo Holding, LLC.

Companies: Winn-Dixie Stores, Inc.; Bi-Lo Holding, LLC; Eastern Mushroom Marketing Cooperative, Inc.; Brownstone Mushroom Farms, Inc.; To-Jo Fresh Mushrooms, Inc.; Cardile Mushrooms, Inc.; Country Fresh Mushroom Co.; Forest Mushroom Inc.; Franklin Farms, Inc.; Gino Gaspari & Sons, Inc.; Giorgio Foods, Inc.; Kaolin Mushroom Farms, Inc.; South Mill Mushroom Sales, Inc.; LRP Mushrooms Inc.; Leone Pizzini and Son, Inc.; Modern Mushroom Farms, Inc.; C & C Carriage Mushroom Co.; Oakshire Mushroom Farm, Inc.; Phillips Mushroom Farms, Inc.; Harvest Fresh Farms, Inc.; Louis M. Marson, Jr., Inc.; Mario Cutone Mushroom Co., Inc.; M.D. Basciani & Sons, Inc.; Monterey Mushrooms, Inc.; Masha & Toto, Inc.; W & P Mushroom Inc.

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