Two prominent Canadian entities, McCain Foods Ltd. and Cavendish Farms Corp., have been implicated in a lawsuit filed in a Chicago federal court. The litigation, initiated by Redner's Markets Inc., a grocery chain based in Pennsylvania, alleges that these companies, alongside American counterparts Lamb Weston Holdings Inc. and J.R. Simplot Co., engaged in price-fixing activities concerning frozen potato products such as French fries, hash browns, and tater tots. A subsequent consumer class action lawsuit echoes these accusations, naming the same corporations plus marketing group Potatoes USA.
While McCain Foods has publicly refuted these claims, Cavendish Farms has not issued a statement. Collectively, the accused controls an estimated 98% of the US$ 68 billion market for frozen potato products. The litigations argue that these companies manipulated prices by sharing sensitive market data through a third-party industry group, which discouraged competitive practices.
Both legal actions suggest the price-fixing scheme began no later than January 2021, with the companies allegedly coordinating to adjust, maintain, and stabilize prices. Following a price hike announcement by McCain in February 2021, the other firms purportedly enacted similar increases, leading to a 47% price surge in frozen potato products between July 2022 and July 2024, despite a 33% reduction in input costs.
The lawsuits detail how industry executives were purportedly aware of the collusion, facilitated by their membership in the National Potato Council and interactions with Potatoes USA. This setup allegedly allowed for the exchange of competitive information under the guise of market development and expansion efforts.
Sylvain Charlebois, a professor at Dalhousie University, highlighted the gravity with which the U.S. views such collusion and price-fixing allegations, noting the substantial evidence typically required to advance such claims. The issue of price fixing is not unfamiliar in Canada, with notable cases such as Loblaw Cos. Ltd. and George Weston Ltd.'s settlement over bread price-fixing, suggesting a broader pattern of market manipulation concerns within the food industry.
The outcome of these U.S.-based lawsuits remains pending, with the courts yet to determine their eligibility as class action suits. Should they proceed, affected consumers and retailers could be entitled to compensation for the alleged price manipulations since January 1, 2021.
Source: Financial Post