A U.S.
wholesale grocer says America's potato farmers have run an illegal
price-fixing cartel for a decade, driving up spud prices while spying on
farmers with satellites and aircraft fly-overs to enforce strict limits
on how many tubers they can grow.
Kansas-based Associated
Wholesale Grocers' lawsuit against United Potato Growers of America and
two dozen other defendants was shifted this week to U.S. District Court
in Idaho, America's top potato-producing state at 30 percent of the
nation's supply.
The grocery group, a cooperative which supplies
more than 2,000 stores including IGA, Thriftway and Price Chopper in 24
states, contends that the potato growers banded together in 2004 to
illegally inflate prices in a scheme akin to the petroleum-producing
OPEC cartel, reducing planting acreages and destroying potatoes, all to
restrict what was available for sale.
"UPGA utilized predatory
conduct and coercive conduct in ensuring compliance with the
price-fixing scheme," according to the lawsuit, which charges tactics
including use of "satellite imagery, fly-overs, GPS systems, and other
methods to enforce its agreement to reduce potato supply."
The
grocers are asking for triple damages, likely in the millions, and are
focusing on growers of fresh potato varieties found in big bags in
supermarket produce aisles, as well as potatoes that are processed into
golden fries, tater-tots and other products and sold in freezer sections
of the group's stores.
United Potato Growers of America has
organized growers in 15 states —it has members in Alaska, California,
Colorado, Florida, Idaho, Kansas, Minnesota, Montana, Nebraska, North
Dakota, Oklahoma, Oregon, Texas, Washington and Wisconsin, representing
three-quarters of the nation's fresh potato production.
Dell
Raybould, an owner of Raybould Farms and a Republican state
representative, is a member of the co-op and has also been named in the
lawsuit. He insisted on Thursday that those who set up the group in 2004
followed federal anti-trust laws.
Raybould, who grows Russet
Burbanks and Norkotah Russets on 850 acres near Rexburg in Idaho's far
east, paints a bleak picture of spud farming prior to 2004: A haphazard
industry where farmers inevitably grew too many tubers, pushing prices
into the cellar.
"I can remember when people hauled their
potatoes out in the field with the manure spreader, dumped them and
plowed them under," said Raybould, who has been growing potatoes since
1953. "They did try to level out production, so we didn't have the boom
and bust thing all the time. And when they did the co-op, they went
about this the right way. They got the best co-op attorney in the
nation, and they did it right."
United Potato Growers of
America's Salt Lake City-based attorney, Randon Wilson, contends that
his group is shielded by the Capper-Volstead Act, the 1922 federal law
that under some circumstances exempts agricultural cooperatives from
antitrust regulations.
"Right from the beginning, we did
everything right, to qualify for Capper-Volstead," Wilson said. "We know
what you have to do to qualify for that limited exemption and we
followed all those rules."
However, Associated Wholesale Grocers says the growers illegally sought to boost costs of America's most-popular vegetable.
At
secret meetings in Idaho Falls, according to the complaint, big Idaho
potato growers like Albert Wada and members of the Raybould family, as
well as North Dakota ag-multimillionaire Ronald Offutt, worked with
Wilson to hatch a far-reaching price-fixing scheme, creating a powerful
agricultural juggernaut capable of squeezing customers like grocery
stores.
"None of the defendants... is entitled to the limited
protections found in the Capper-Volstead Act for their efforts to
restrict potato supply and fix prices," wrote Patrick J. Stueve, the
grocer's lawyer in Kansas City. "
Stueve didn't return phone
calls, but his basic contention — that Capper-Volstead is being abused
to illegally inflate potato prices — has emerged in numerous,
commodity-related lawsuits in the last decade, said Peter Carstensen, a
University of Wisconsin Law School professor in Madison who focuses on
antitrust cases.
"It's because there's an increasing perception that Capper-Volstead is being abused," he said.
For
instance, a similar lawsuit filed in 2010 targeting potato growers is
now advancing through federal court in Idaho, a case that may eventually
be combined with this one.
Meanwhile, other groups including the
U.S. Department of Justice have lodged antitrust complaints against
mushroom growers, dairy farmers, egg producers and cranberries.
Carstensen said a common gulf separates rival protagonists.
Large
agricultural producers argue they're using the power of the cooperative
to create a more efficient market, he said, while "the other side is
saying 'No'... what you're doing is outside the scope of authorized
conduct."
Federal prosecutors aren't involved in this latest
litigation, but the DOJ has pushed recently to re-examine how large,
modern agricultural cooperatives are using the Capper-Volstead Act,
including holding workshops with the U.S. Department of Agriculture to
scrutinize competition in the farming business.