A “potato cartel” allegedly conspired to artificially raise the prices of fries and hash browns in order to corner the $68 billion frozen spud market, according to multiple lawsuits.
After decades of consolidation, Lamb Weston, Canada-based McCain Foods, J.R. Simplot Company and Cavendish Farms Inc., according to an antitrust lawsuit filed in the U.S. District Court for the Northern District of Illinois. Just four companies control 97% of the market. November.
According to court documents, from July 2022 to July 2024, these tater giants conspired to jack up prices, increasing the price of frozen potato products by 47%.
“When there are only a handful of participants in the market, collusion becomes too attractive for these companies to pass up,” said Lindsey Owens, executive director of the economic think tank Groundwork Collaborative. He told the Washington Post.
The companies blamed the price increases on higher operating costs, but frozen potato prices remained high for a long time even after operating costs were eased, the lawsuit alleges.
Mark Doucette, vice president of communications for Cavendish Farms, said the lawsuit's allegations are “baseless.”
“We will defend ourselves vigorously against them,” Doucette told the Post on Friday.
The other three companies mentioned in the lawsuit did not respond to requests for comment.
Since November, restaurants and grocery stores have filed more than a dozen class-action lawsuits alleging that prices charged by the “potato cartel” are hurting profits.
About 40 percent of the potatoes grown in the country, or 17 billion pounds, are sold to frozen potato companies each year, according to the lawsuit.
According to the lawsuit, Lamb Weston and McCain control 70% of the market, JR Simplot 20% and Cavendish Farms 7%.
“All of these industries are trending toward duopoly, the Coke and Pepsi model,” said Philip Howard, a professor at Michigan State University who studies concentration in food systems. told leveran investigative news site.
While other sectors aren't as bad as Big Potato's 97% concentration, “many industries are getting closer and closer to that level,” Howard said.
According to the complaint, the four companies have been colluding to fix prices since 2021.
In April 2022, Josh Saltzman, the owner of a sports bar in Washington, D.C., said he received a notice from his food distributor that each of his four major suppliers would raise prices by 12 cents per pound. In a post that went viral on social media, he joked: “It's not collusion at all, is it?”
“This was the clearest example of collusion I've seen in a long time,” he told Lever. “Each company raised their prices by about the same amount within a week.”
According to the lawsuit, the four companies raised prices in similar ways several times between 2021 and 2022. In some cases, rival companies have announced price increases within days of each other on the same date.
Court documents say executives at the frozen potato company made comments alluding to a price-fixing scheme, but it's unclear when or where the comments were made.
The former McCain Foods director said in 2023 that he wanted to compete with Lamb Weston on pricing, but was told by “upper management” not to do so, according to the complaint.
That same year, a former Lamb Weston executive said competitors were “behaving well” and “never seen profit margins this high in the history of the potato industry,” the complaint says. .
In October 2023, Lamb Weston announced a 111% year-over-year increase in net income, which the company's chief executive blamed on “pricing behavior,” according to the complaint.
Mr Howard said it was surprising that regulators had allowed frozen potato companies to gain such overwhelming market power.
“It's interesting that this industry has been allowed to reach the levels it has, even in a very permissive environment for mergers and acquisitions,” he told The Lever.
