New York accuses one of the nation’s largest egg producers of price gouging during the pandemic
In some cases, consumers may have paid five times more for eggs in March than they did in January.
New York State Attorney General Letitia James filed a lawsuit on Tuesday against one of the nation’s biggest egg producers, Hillandale Farms, accusing the company of taking advantage of consumers during the Covid-19 pandemic by charging “unconscionably excessive prices” for eggs.
Ohio-based Hillandale, with subsidiaries in Pennsylvania, Delaware, and Connecticut, is a major supplier to retailers in New York, and distributes to regional and national grocery chains like BJ’s, Stop & Shop, and Associated Supermarkets.
According to James’s investigation, the company appears to have increased the price of eggs it sold to retailers by nearly five times between January and March. Like many of its competitors, Hillandale’s egg prices spiked in March—just about the time New York City was becoming the pandemic hot zone.
Here’s what those numbers looked like at the grocery store: In mid-January, Hillandale charged Western Beef, a New York City supermarket chain, $0.59 for a dozen of large white eggs. By the end of March, it was charging $2.93. Similarly, Hillandale charged Stop & Shop $0.85 for a dozen jumbo white eggs in January, a price that doubled by mid-March, then nearly quadrupled to $3.16 by early May.
James’s investigation also cited numerous complaints it had received about egg prices through its online tip portal:
“How is a person to survive if the companies and markets keep doubling [prices],” one complainant wrote. “I understand [supply] and demand but to make a dollar [off] of struggling people isn’t right. Would be great to afford basic foods again.”
James’s office argues that Hillandale’s prices violated a New York State law prohibiting price gouging, defined as “charging grossly excessive prices for essential goods and services” during “extraordinary adverse circumstances.”
For its part, Hillandale said it had worked hard to keep up with the increased demand the pandemic had presented, but that egg prices were subject to market fluctuations. “As retail demand for eggs reached historically high levels earlier this year, our dedicated personnel rose to the challenge and worked tirelessly to meet that demand through the most consistent production and delivery measures possible,” the company wrote in an emailed statement to The Counter. “We wanted to be sure that eggs would remain on store shelves for customers in New York and other markets. Historically, eggs, like some other commodities, have been subject to volatile pricing. As an example, prices for eggs are now below what they were in August 2019, and well below what they were in January through March 2019. But our approach to pricing has been consistent for decades, and without complaint, whether that has led to profits or losses, and the last several months have been no exception.”
As is the case in other sectors of the food economy—poultry, for instance—producers, processors, distributors, fast-food operators, and chain-store buyers use price indexes as benchmarks by which to set their own prices. The indexes, published by third-party companies, use prices quoted by a range of operators over a given period to provide consistent information on price averages.
One third-party publisher of note for egg producers is Urner Barry, whose market intelligence platform, Comtell, publishes more than 10,000 benchmark quotations and data points for the meat, poultry, egg, and seafood industries.
“Our approach to pricing has been consistent for decades, and without complaint, whether that has led to profits or losses, and the last several months have been no exception.”
Use of these indexes is entirely voluntary, but it can be an effective tool in price negotiations. That’s all well and good, as long as the third-party information is accurate, and compiled by unbiased experts.
But price indexes have also come under fire: Two years ago, a widely-used poultry price index run by the Georgia Department of Agriculture, the Georgia Dock, was called out by a whistleblower named Arty Schronce, who expressed concern that the prices it reported were artificially inflated. Instead of calculating and updating industry-average poultry prices, Schronce claimed in a memo to department officials, some producers were telling him to keep prices “the same.” Schronce’s concerns supported some buyers’ suspicions that poultry producers were engaged in a decade-long price fixing scheme. Multiple related lawsuits are still making their way through courts.
There’s another issue that price indexes present. They can serve as useful cover for producers who’d like to cast the blame onto everyone’s favorite impartial friend: data. Vendemia defended Hillandale’s pricing practices in his correspondence with James’s office by arguing that they’re set according to industry standards, as reported by Urner Barry.
It’s not atypical of a major commodity producer to cite market fluctuations as the reason behind its rising prices.
James’s office doesn’t seem to be buying that defense, noting in its lawsuit that Urner Barry’s price reporting is directly informed by companies along the egg supply chain—companies, for instance, like Hillandale.
“It’s a—if you’ll pardon the pun—a chicken and egg problem,” said Peter Carstensen, professor of law emeritus at the University of Wisconsin-Madison, referring to who really sets egg prices.
It’s a similar defense argued by Cal-Maine, the nation’s top egg producer, which is currently facing a price-gouging lawsuit of its own in Texas. Like Hillandale, Cal-Maine insists that its prices are based purely on Urner Barry’s reports. “We have no control over this market quote,” it insisted in a response to the lawsuit.
Some states have set explicit price increase thresholds that determine whether or not price gouging has occurred, though that’s not the case in New York.
It’s also not atypical of a major commodity producer to cite market fluctuations as the reason behind its rising prices. And Hillandale did just that.
“This method has nothing to do with cost and or overhead—strictly market based,” the company’s president Steve Vendemia wrote in an email to the AG’s office in May.
But sudden price spikes aren’t necessarily an indication of price gouging either. When retail prices for meat rose dramatically this year, meatpackers argued it was due to Covid outbreaks in their processing facilities, which drove costs up and production down.
What’s notable in Hillandale’s case is that—in its correspondence with the AG’s office—the company appears to say that recent price jumps are not attributable to higher expenses. So, where’s the beef?
Whether or not Hillandale’s price increases amounted to gouging is up to the state’s Supreme Court to decide.
“There is a strong suggestion in that email, that the pricing structure produces gouging of consumers,” said David Domina, a lawyer who has specialized in antitrust in agriculture. “The pricing philosophy in that email translates, to me, into: ‘We’ll get whatever the market will bear and we will take advantage of the circumstances’—instead of saying, ‘We recognize that we can’t take an artificial profit because of an emergency.”
Some states have set explicit price increase thresholds that determine whether or not price gouging has occurred, though that’s not the case in New York. (In New York City, an increase of 10 percent or more during a state of emergency like the Covid-19 pandemic, qualifies as price gouging.) Whether or not Hillandale’s price increases amounted to gouging is up to the state’s Supreme Court to decide.
The New York attorney general’s office estimates that Hillandale has made at least $4 million in additional revenue due to price-gouging during the pandemic, and is demanding that the Supreme Court order the company to issue as much in refunds, to pay the state a civil penalty, and to pay every shopper impacted by the alleged gouging $2,000.
That’ll buy you a lot of eggs.