Grocery group sues United Potato Growers
By JOHN O'CONNELL
Salt Lake City-based United Potato Growers of America and several members have been targeted by yet another federal lawsuit alleging they artificially inflated prices through cartel-like efforts to limit supply.
On April 17, Associated Wholesale Grocers Inc., a buying group headquartered in Wyandotte County, Kan., that supplies more than 2,000 grocery stores, filed the latest antitrust suit in Kansas federal court. The corporation is seeking damages of more than $75,000, plus legal fees and costs, at a jury trial.
The complaint closely mirrors a 2010 class-action case brought in Pocatello, Idaho, federal court by the Jamestown, N.Y., wholesale potato buyer Brigotta's Farmland Produce and Garden Center.
University of Wisconsin law professor Peter Carstensen suspects the new case will ultimately be merged with the Idaho class-action suit.
"It's very common in these big claim cases these big-volume buyers ... will try to separate themselves out," Carstensen said. "That gives them more bargaining power when it comes to a settlement."
And if the Idaho case is ultimately dismissed due to problems of uniformity within the class, Carstensen said the new case could still go forward.
Carstensen explained the Kansas plaintiffs are also testing a state law that could significantly increase damages owed them. Unlike federal law, the Kansas law covers damages for purchases made indirectly with a conspirator through an intermediary. The Kansas law also awards full repayment for commodities sold at an illegal price, rather than actual damages awarded under federal law.
The plaintiffs have asked the federal court to assume jurisdiction over the alleged state law violation because the case involves residents in two states and more than $75,000 in alleged damages. Carstensen said the constitutionality of the Kansas law hasn't been thoroughly tested.
The Associated Wholesale Foods complaint alleges UPGA, formed in 2005 to address low prices, was modeled after the notorious Organization of Petroleum Exporting Countries. The complaint contends UPGA fined any growers who planted too many acres, using satellite surveillance, random inspections and other methods to achieve compliance. Supply management allegedly resulted in a dramatic reduction in spud shipments, thereby tripling prices to $11.42 per hundredweight by 2010-11.
UPGA's "goal has been to help growers provide quality potatoes at reasonable prices to American consumers," said Jerry Wright, president and CEO of UPGA. "We have always acted openly within the bounds of the law. We are confident in our legal position and look forward to a favorable outcome in court."
Brent Hueth, a University of Wisconsin agricultural economist, doubts the plaintiffs can prove they've suffered any damages.
"If I were a judge I'd be very skeptical of any claim of long-run price enhancement capability on the part of any farming organization," Hueth said. "If you get any kind of price increase results from (supply management), new production areas are going to open up in other areas of the country."
Associated Wholesale Grocers has argued the defendants' actions shouldn't be covered by the federal Capper-Volstead Act, which grants associations of agricultural producers certain exemptions from antitrust laws. In the Idaho case, Chief U.S. District Judge B. Lynn Winmill has already ruled on that matter, concluding: "Acreage reductions, production restrictions and collusive crop planning are not activities protected by the Capper-Volstead Act."