May 30, 2014

Australia egg industry faces court action for manipulating egg prices

Australia's egg industry faces legal actions over an alleged attempt to maintain high prices deliberately by slaughtering chickens and burying eggs, according to a report by The Guardian.

A consumer watchdog has begun court proceedings against the Australian Egg Corporation (AECL), its managing director, James Kellaway, and directors, Jeffrey Ironside and Zelko Lendich. Twelve Oaks Poultry and Farm Pride, the respective companies of Ironside and Lendich, are included as well.

The AECL, which includes competing companies, is accused of conspiring to encourage other members of the lobby group to cull chickens and dispose eggs in order to restrict supply and keep prices high. 

"In the 26 November 2010 edition of EggCorp EggsPress, AECL advised recipients including many of the specified members that egg production was at critical levels and the egg industry could only avert a catastrophic result by culling birds 14 days earlier than their usual expected disposal dates until April 2011," said the Australian Competition and Consumer Commission's (ACCC) statement of claim.

According to the ACCC's statement, the AECL held an "egg oversupply crisis meeting" in Sydney in 2012. The meeting was intended to help coordinate a restriction of supply.

Details of the meeting revealed of a presentation by Kellaway which offered short-term solutions to the oversupply. The disposal of eggs through donation to charity groups or dumping had been suggested, along with the culling of chickens.

A subsequent email from Kellaway made several statements, including laying partial blame for the oversupply on producers who had increased production by more than 5% in the last three years.

It suggested that producers could take action by "retiring" birds six to eight weeks early or "immediately" donating extra eggs to Foodbank.

Meanwhile, the AECL said it has co-operated with the ACCC's investigations.

Kellaway is facing a two-year ban from managing a corporation if the ACCC's court action is successful. Ironside and Lendich each face one-year bans.

The ACCC is seeking five-year orders on each of the parties, restraining them from "inducing, or attempting to induce" other suppliers to make any agreement around the restriction of egg production.

It is also seeking financial penalties against all parties, the establishment of a compliance program and mandated training sessions for the named individuals on their legal responsibilities and obligations.

In an interview with Guardian Australia, ACCC chairman, Rod Sims, claims that the case is one of the larger cartel investigations the ACCC is investigating.

Egg sales in Australia have reached almost $600 million in 2012. According to Sims, another US$1 billion worth of eggs goes to other food products annually.
 

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