(UPDATED COVERAGE, July 2)
The United Potato Growers of America, a cooperative that includes growers from major production areas across the country, is facing a lawsuit claiming it and other companies engaged in âclassic cartel behavior,â conspiring to control potato supplies and fix prices at artificially high levels.
The civil suit, filed in June, claims United Potato and other companies, including Dole Food Co., âentered into an admitted and overarching agreement to manage the supply of potatoes in the United States for the purpose of elevating the sales prices,â according to the lawsuit, filed June 18 in U.S. District Court for eastern Idaho.
Barb Shelley, a spokeswoman for the Salt Lake City-based United Potato Growers, said the allegations are unfounded.
â(The United Potato Growers) have shown great care to follow the law and will defend ourselves against the complaint,â she said.
According to the lawsuit, the defendants in 2004 formed regional and national cooperatives for the âsole purpose of creating a national vehicle for potato growers and their co-conspirators â¦ to reduce potato output and fix prices.â
Additionally, the defendants allegedly erroneously touted immunity from price-fixing activities under the 1922 Capper-Volstead Act, which provides limited exemption from antitrust laws to agricultural producer cooperatives, the lawsuit said.
The lawsuit, which seeks class-action status, was filed by Brigiottaâs Farmland Produce and Garden Center Inc., Jamestown, N.Y. Other defendants include the United Potato Growers of Idaho and Wada Farms Inc., an Idaho Falls-based grower.
Potato growers join citrus, egg and tomato industries as targets of lawsuits or government investigations in recent years generally revolving around the questions whether agricultural cooperatives violated antitrust laws and illegally colluded to manipulate prices.
In a separate lawsuit filed June 23 in U.S. District Court in Los Angeles, the United Potato Growers and others are accused of conspiring to fix potato prices.
The Los Angeles lawsuit, filed on behalf of a California resident, Todd Simon, also seeks class-action status, is intended to represent consumers, or âindirectâ purchasers, said Jon King, a lead attorney for the plaintiffs in the Idaho case.
King said the groupsâ actions forced higher potato markets, leading to higher consumer pricing. Both the Idaho and Los Angeles lawsuits ask for triple the actual damages allegedly sustained by the plaintiffs, without specifying dollar figures.
The potato groups went beyond the cooperative group protections under the Capper-Volstead act and âextended it into something that isnât lawful,â said King, an attorney with Hausfeld LLP in San Francisco.
According to the Idaho lawsuit, potato growers suggested they should âstudyâ the model used by the Organization of Petroleum Exporting Countries, the oil cartel that sets production limits on member nations. Defendants suggested they be referred to as the âOPEC of Potatoes.â
The potato groupsâ efforts led to a near-doubling in Idaho prices, the lawsuit said. Citing a 2008 University of Idaho study, the stateâs fresh potatoes climbed from $3.89 per cwt. before the cooperative was formed in 2004 to as much as $6.63, per cwt. outpacing a 46% increase in the nationwide average.
Approximately 60% of the price increases were due to reasons other than increased production costs, according to the study, and the cooperativesâ price-fixing efforts were âlikely to be the most significant factor explaining the identified price increases,â the lawsuit said.
Efforts by cooperatives such as the United Potato Growers help protect producers and maintain adequate supplies of high-quality supplies, Shelley said.
âUnitedâs mission is to bring stability to the potato industry,â Shelley said. âA stable industry allows growers the financial resources to continue to develop products to better serve buyers and their customersâ needs today and in the future.â
A spokesman for Wada Farms declined to comment, referring questions to the United Potato Growers. A Dole spokesman didnât immediately respond to a message.