Potatoes are big business in the United States, accounting for roughly $100 billion of our GDP.
However, only four companies are responsible for 98% of frozen potato products in the United States: McCain Foods, Cavendish Farms, Lamb Weston, and J.R. Simplot, whom I will collectively refer to as "the big tots" from this point forward.
And over the past few years, people have noticed something dicey in the big tots' pricing.
Check it out:
They all seem to be moving in lockstep, going up the same amount on the exact same day.
It's so weird that grocers in the U.S. have filed class action lawsuits accusing the big tots of colluding on prices, which is an appealing business practice for maximizing profits when a group of companies controls the market, but it's also highly illegal.
I love this headline, so I'm gonna leave it right here:
One document on behalf of Redner's Markets claimed the so-called potato cartel made 'matching, simultaneous or near-simultaneous price increases' in 2021 and 2022.
The lawsuit accused Lamb Weston of telling managers to only talk about their competitors' pricing over text — not email — to avoid creating an email paper trail 'that could be discovered in the event of an antitrust investigation.'
Even consumers are getting in on the lawsuit.
Alexander Gevoa, a consumer who lives in Virginia, said the companies allegedly used a data aggregation service and a trade association — Potatoes USA — to help swap information in order to 'manipulate and coordinate prices.'
If certified, Gevoa's class would include consumers who bought the companies' frozen potato products after Jan. 1, 2021.
So far, only one of the big tots has denied the claims.
McCain Foods released the following statement:
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.
McCain Foods intends to vigorously defend the recently filed lawsuits so that it can focus on what it does best: delivering high quality, affordable food to customers nationwide.
Which is kind of funny since the retail lawsuit names McCain as the godfather of the big tots. It was the first to shred its contracts, and set its margins at 30%.
Then the others followed suit.
A former VP who worked at three of the big tots during his career said,
I have never seen margins this high in the history of the potato industry.
The reason given was an unwillingness by the defendants to compete on price. He said the three companies had 'no incentive to fight that hard.' Instead, they were all 'behaving themselves' in order to maintain high margins.
Honestly, I'm shocked by these allegations.
I would think the potato industry would be the least likely to engage in such shadowy shenanigans and expect to get away with it.
There are just too many eyes in that industry.
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