Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Grocers charge potato cooperatives, growers with price fixing conspiracy, (Oct 21, 2015)

By Linda O’Brien, J.D., LL.M.

Two Idaho potato cooperatives and several potato producers conspired to fix the prices for fresh and process potatoes sold in the United States by controlling and reducing the aggregate supply of potatoes, according to a complaint filed in the federal district court in Jacksonville, Florida (Winn-Dixie Stores, Inc. v. United Potato Growers of America, Inc., October 16, 2015).

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

According to the complaint, potatoes are the most important vegetable in U.S. consumers’ diet and the potato industry is a multi-billion dollar annual market. While potatoes were the single most consumed vegetable in the U.S. in 2007, consumption in total pounds and as a percentage of total vegetables consumed has been declining since 2001. In response to declining prices and concern about profits, Albert Wada of Wada Farms, one of the largest potato growers in the country, formed an Idaho cooperative with other growers to manage the supply of potatoes in the U.S. The cooperative, United Potato Growers of Idaho (UPGI), served as the basis for a larger, nationwide cooperative, United Potato Growers of America (UPGA).

In 2004, the UPGA’s website allegedly stated that certain potato growers had decided that long-term production and supply management was needed to provide stability and a reasonable return for growers. In published articles, Wada acknowledged that those activities might be subject to antitrust laws and discussed that the UPGI and UPGA would have to conform to the Capper-Volstead Act and remain a “pure farmer’s cooperative.” However, UPGI negotiated memorandums of understanding with shippers and marketers to facilitate the reduction in potato supplies, the complaint alleges.

The lawsuit states that, to achieve its supply reduction objectives, the UPGI developed and enforced programs and policies targeting production and marketing of fresh potatoes. The level of production was controlled through two policies. First, an acreage management program implemented through a bid buy down program was enforced before the beginning of a planting season. Second, production was monitored and accurate yield predictions made during the potato growing season before harvest. UPGI’s marketing programs also included coordinated potato shipments throughout the marketing year and sought to remove excess potatoes by identifying new market opportunities such as donating potatoes to charities.

Most effective in controlling the supply was to manage crop production through acreage reductions. UPGI’s first year acreage management program was implemented in 2005. UPGI executed a secondary market strategy by diverting the surplus crop to charities and food banks. UPGA implemented the supply reduction techniques on a nationwide scale and announced its first acreage buy down program in 2005. UPGI and UPGA also coordinated potato flow control through the marketing year in order to control the supply of potatoes. As a result of the cartel’s efforts in reducing potato supply through acreage restrictions, acreage buy downs, and flow control measures, there was a significant increase in prices of potatoes, price competition was suppressed, and purchasers such as the plaintiffs were deprived of the benefits of open competition, the complaint also alleges.

The plaintiff asserts claims for restraint of trade and unfair competition in violation of Section 1 of the Sherman Act and the Florida Deceptive and Unfair Trade Practices Act. The action seeks declaratory and injunctive relief, damages, pre-judgment and post-judgment interest, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 3:15-cv-01243-MMH-MCR.

Attorneys: H. Timothy Gillis and Nancy A. Johnson (Gillis Way & Campbell 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; United Potato Growers of America, Inc.; United Potato Growers of Idaho, Inc.; Wada Farms, Inc.; Blaine Larsen Farms, Inc.; Potandon Produce LLC; Cornelison Farms, Inc.; Snake River Plains Potatoes, Inc.; Driscoll Potatoes, Inc.; Rigby Produce, Inc.; Pleasant Valley Potato, Inc.; KCW Farms, Inc.; Raybould Brothers Farms, LLC; R.D. Offutt Co.

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