Supermarket Chains Facing Lawsuit over Alleged Price Gouging During Pandemic
A new lawsuit claims that it was not the law of supply and demand that led egg prices to rise this spring, but price-gouging.
The lawsuit, filed in the U.S. District Court for the Northern District of California, lists an array of companies it thinks may have been guilty. The list includes Costco, Trader Joe’s, Albertson’s, Whole Foods, Walmart, and Kroger.
It was filed by the Birmingham, Alabama-based law firm of Davis & Norris LLP on behalf of 10 named individuals and seeks class-action status.
The suit claims price-gouging must have taken place because of the rise in the price of eggs. Egg prices tripled in March, Fox Business has reported.
“The price of eggs nearly tripled between the onset of the COVID-19 pandemic and the end of March. Egg prices have remained much more than ten percent higher than they were prior to the declaration of emergency. Some or all of the defendants are engaging in price-gouging prohibited by California law. Plaintiffs allege this because of the undeniable fact that egg prices nearly tripled after the emergency declaration,” the lawsuit said.
The lawsuit admits that it took a shotgun approach in making its claims.
“This California class action concerns the despicable and illegal practice of price- gouging of essential groceries, specifically eggs, in the midst of the ongoing and unprecedented pandemic. Plaintiffs and the class they seek to represent bought grossly marked-up eggs through the supply chain created by the defendants, which includes producers, wholesalers, and retailers,” the lawsuit said.
“Because consumers such as plaintiffs lack access to information about which of the defendants, or all of them, participated in the price-gouging resulting in a near-tripling of egg prices in the past 30 days, plaintiffs have sued all the defendants in the alternative. Plaintiffs cannot assert that every defendant engaged in price-gouging, but plaintiffs can and do assert that some or all of these defendants illegally marked up egg prices following the Governor’s declaration of an emergency in violation of California law,” the suit said.
California Gov. Gavin Newsom declared a state of emergency in California on March 4.
The suit portrays egg farmers and retailers as evil.
“As in any time of economic turmoil, there are those who seek to profit from the misery of millions. Defendants, who are producers, wholesalers, and retailers of eggs, comprise one such set of actors seeking to unfairly profit from the increased consumer demand for eggs in the midst of the ongoing crisis,” the suit said.
“Again, because it is impossible for consumers such as plaintiffs to obtain information concerning the secretive process of price-setting, this lawsuit does not assert that each and every defendant engaged in price-gouging. Rather, plaintiffs assert that, at a minimum, some of these defendants did so,” it said.
The lawsuit was met with denials.
“This case has no merit,” a spokesperson for Trader Joe’s said, according to Fox News. “Even while our costs were rising, we chose not to raise our prices on eggs during the time referenced. In fact, for a period of time, we lost money on eggs because of this. Some basic homework by these attorneys would have shown that our egg pricing was another example of how Trader Joe’s does everything we can to keep prices down for our customers.”
“Costco Wholesale has not engaged in price gouging in the sale of eggs. To the contrary, it has lodged complaints with governmental authorities that egg suppliers have charged Costco increased prices that did not seem in line with feed and production costs of those suppliers,” the company said in a statement to Delish.
Cal-Maine Foods, which was among the defendants in the California suit, is also facing a lawsuit in Texas filed by Attorney General Ken Paxton, according to a press release on Paxton’s website.
“No one is exempt from price gouging laws in Texas, including suppliers of grocery stores and pharmacies,” Paxton said. “My office will not tolerate any person or business taking advantage of hardworking Texans. Those who violate the Texas Deceptive Trade Practices Act will be met with the full force of the law.”
The Texas lawsuit claims tripling the price of eggs was not justified, even in a time of severe economic disruption.
“In the recent past, the prices for Cal-Maine’s generic eggs have hovered around $1. During the COVID-19 pandemic, the market has driven generic egg market prices over $3 per dozen and Cal-Maine has charged its customers accordingly. On information and belief, Cal-Maine has not experienced any supply issues or other disruptions that are driving it to charge more for eggs. It is simply charging more because it can, or, more specifically, because the pandemic caused market demand to jump,” the lawsuit said.
UPDATE, May 4, 2020: After the publication of this article, Cal-Maine spokesperson Jeff Eller provided The Western Journal with the following statement:
“We strongly deny the allegations made in this litigation. Cal-Maine has not engaged in price gouging and never would. The domestic egg market is intensely competitive and highly volatile. For decades, we (like other egg producers) have sold most of our eggs pursuant to contracts that are priced off an independent, third-party market quote published by Urner Barry Publications, Inc. We have no control over this market quote and it fluctuates wildly from week to week and sometimes day to day. We have been consistent in our pricing practices whether we sell at a profit or at a loss. And in fact, with consumer demand so high in the early days of the pandemic, we had to purchase eggs on the open market to supplement our productions, which was very expensive, which we then sold at a loss to our customers to meet demand. We do not sell eggs directly to consumers. In recognition of the way in which agricultural commodities are tied to indices, many states expressly exempt agricultural products from price gouging laws. In fact, the pandemic has adversely affected our business, just like everyone else. We are part of the nation’s critical infrastructure — we operate under bad conditions, all conditions. These accusations are a slap in the face of the hardworking people in our company, all of whom deserve recognition for their steadfastness during this difficult time. We have invested significant dollars in employee safety, increased employee pay and have added employees to meet demand. As to demand, eggs have remained at all times one of the cheapest complete proteins available. They are delicious and on a per-egg basis have always been cost-effective and nutritious. More to the point, retail prices for conventional eggs were only briefly elevated and have already come back down. As for Texas specifically, our company has invested more than $627,000,000 in infrastructure in Texas. We have 1300 employees in Texas. We are creating good jobs in Texas and meaningfully supporting the economy in Texas and elsewhere. Since 1958, Cal-Maine Foods has operated with honesty and integrity. We are steadfast in our belief these charges are grossly unfair and without merit. In sum, Cal-Maine Foods has not engaged in price gouging and never would.”
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