Two Canadian food companies sued in U.S. over ‘potato cartel’ allegations – National
Two proposed class-action lawsuits in the United States name two Canadian food companies as alleged members of a “potato cartel” that’s accused of a years-long campaign of fixing prices on frozen products.
The suits, which have yet to be certified, were both filed last week in U.S. District Court in Illinois and name Canada’s McCain Foods Ltd. and Cavendish Farms, a subsidiary of J.D. Irving Ltd., alongside U.S.-based companies Lamb Weston Holdings and J.R. Simplot Co.
The proposed class actions allege that each of the four companies, which are estimated to account for up to 98 per cent of the frozen potato products market, “confirmed to fix the prices” of such products “above competitive levels.”
“Armed with the same access to each other’s data on pricing and other sensitive information, as well as with a direct line of communication to each other, the potato cartel moves prices skyward in lockstep – harming all purchasers of potatoes in the process,” one of the claims alleges.
Products in the alleged scheme include frozen french fries, hash browns and tater tots.
Frozen potato product prices grew 47 per cent between July 2022 and July 2024, according to the suit filed Friday on behalf of supermarket chain Redner’s Markets Inc. At the same time, the four defendants’ input costs “fell steadily,” the suit claims.
“The frozen potato products price hikes in 2021 and 2022 were no accident. Rather, the defendants imposed matching, simultaneous or near-simultaneous price increases on their customers,” the Redner’s suit alleges.
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A separate suit was filed Sunday on behalf of Alexander Govea, a consumer living in Virginia. That suit also names marketing group Potatoes USA and analytics firm Circana as part of its proposed class action.
The suits are seeking damages on behalf of all consumers and businesses who purchased frozen potato products from the defendants in the U.S. from 2021 through to the present day, as well as an end to the alleged conduct.
Global News reached out to the four potato product manufacturers named in the suits for comment on the allegations. Only McCain Foods responded before press time.
“McCain Foods strongly disputes any allegation that the company violated antitrust laws, or any other laws, with respect to the sale of frozen potato products,” Charlie Angelakos, the company’s vice-president of global external affairs and sustainability, said in a statement.
“McCain Foods intends to vigorously defend the recently filed lawsuits so that it can focus on what we do best: delivering high quality, affordable food to customers nationwide.”
Canada’s potato sector even more concentrated
The two class actions peg McCain as having a roughly 30 per cent share of the U.S. frozen potato product market, with Cavendish holding between seven and eight per cent.
In Canada, McCain Foods has even more dominance over the potato market, says Keldon Bester, executive director of the Canadian Anti-Monopoly Project, a think tank advocating for more competitive forces in the market.
On its own, McCain holds nearly 79 per cent of market share in Canada, with Cavendish holding roughly six per cent, according to 2020 figures from Agriculture and Agri-Food Canada.
A cartel like the kind alleged in the U.S. is designed to kill competition, Bester explains, giving participants price-setting power that skirts the competitive forces that would normally drive down end costs for consumers.
“These kind of suits are a reminder that when we allow markets to be consolidated into just a handful of players, we make it more likely that they’re at some point going to get together and decide that they know best — better than the consumer,” he says.
These kinds of class-action lawsuits alleging anti-competitive behaviour are more common south of the border, Bester notes, where lawyers tend to be “more active” in launching suits in that vein.
The most high-profile case north of the border is the bread-price-fixing scandal that first arose some seven years ago. The Competition Bureau continues to investigate allegations related to the case and a pair of class-action lawsuits are still working their way through the courts.
Canadian anti-competitive lawsuits are more rare than in the U.S., partially reflecting what Bester says has been historically weak competition laws and enforcement of those laws.
In the past year, however, he says that new legislation has emboldened the Competition Bureau, which has launched renewed investigations into property controls in Canada’s grocery sector, among other industries.
But he also warns that some sectors in Canada are already so concentrated that they near monopoly status — a dubious distinction that would forgo the need to form a cartel in order to manipulate prices.
— with files from Global News’s Touria Izri
© 2024 Global News, a division of Corus Entertainment Inc.
