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Good and Bad Eggs in Antitrust Case

By William Vogeler, Esq. | Last updated on

Call it the egg conspiracy case.

It's easier than In Re: Processed Egg Products Antitrust Litigation, but you choose. Unfortunately, like most conspiracy theories, it is not that simple.

When a court has to use diagrams to show the connections between conspirators and non-conspirators, it is at least novel. The U.S. Third Circuit Court of Appeals also said it presented a question of first impression.

Egg Conspiracy

The case hatched from a series of individual and class actions that accused egg producers of price-fixing; one recently settled for $75 million. Between 1999 and 2008, they alleged, the producers conspired to reduce the population of egg-laying hens and drive up the cost of eggs and egg products.

In the multi-district litigation, the plaintiffs -- Kraft, Kellogg, General Mills, and Nestle -- gave expert evidence that the price-fixing damages to the market were $111 million. That was an aggregate claim, based conspirators' and non-conspirators' eggs.

A federal court in Pennsylvania wound up with a summary judgment motion from a group of egg suppliers. The defendants argued the plaintiffs didn't have standing to sue because they could not sort out the good eggs from the bad eggs, so to speak.

The judge agreed, and the plaintiffs appealed. The Third Circuit, which literally used diagrams to illustrate the conspiracy, reversed.

"Internal Eggs"

The appellate judges said it didn't matter whether the non-conspirator eggs were thrown in with the conspirators' eggs to allege damages. To avoid mixing things up, they called the bad eggs "internal eggs."

"[W]e conclude that Plaintiffs-Appellants have antitrust standing to pursue overcharge damages from the Defendants-Appellees from whom they purchased egg products, regardless of whether those egg products were made with internal eggs, non-conspirator eggs, or both," they said.

If it were a straight standing case, it might have been a little easier. But the appeals panel said it was novel for another reason.

"The novel issue is whether a direct purchaser of a product that includes a price-fixed input has antitrust standing to pursue a claim against the party that sold the product to the purchaser, where the seller is a participant in the price-fixing conspiracy, but where the product also includes some amount of price-fixed input supplied by a third-party non-conspirator," they said.


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