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In re Processed EGG Products Antitrust Litigation

United States District Court, E.D. Pennsylvania

June 27, 2017

IN RE PROCESSED EGG PRODUCTS ANTITRUST LITIGATION THIS DOCUMENT APPLIES TO: ALL INDIRECT PURCHASER S

         MULTIDISTRICT LITIGATION

          MEMORANDUM

          GENE E.K. PRATTER, UNITED STATES DISTRICT JUDGE

         Pratter, J. June 27, 2017 The Court's resolution of the Indirect Purchaser Plaintiffs' motion for class certification in this multidistrict antitrust litigation left open the possibility of certifying an injunctive relief class, noting that the parties had failed to adequately brief the issues surrounding such a class and expressing some skepticism that certification would be appropriate. The parties then separately briefed the issue in the wake of the denial of certification of the Indirect Purchaser Plaintiffs' damages class. After reviewing the parties' submissions and hearing oral argument, the Court denies the renewed motion and declines to certify an injunctive relief class.

         Background

         Because the Court has written extensively on the factual background of this case, the following background discussion will be brief.

         a. Allegations of Fact

         The alleged conspiracy in this antitrust action consisted of three general tactics: (1) a series of short-term egg-supply reduction programs, (2) a long-term plan to reduce the supply of eggs under the pretext of an “animal-welfare program, ” and (3) exporting eggs at a loss. These tactics allegedly reduced the supply of eggs and resulted in higher prices paid by the putative class of indirect purchasers.

         1. Short-term Supply-Reduction Programs

         Beginning in 1999, members of the United Egg Producers (“UEP”) agreed to a series of programs designed to immediately reduce the supply of eggs. These programs were implemented by a committee within UEP known as the “Marketing Committee.” Members of UEP were then to commit to implementing the programs. These programs included inducing hens to molt earlier[1], slaughtering flocks of hens earlier, and reducing the hatching of chicks. UEP members were also encouraged to stop or slow considerably backfilling cages (that is, replacing dead hens with younger hens). These egg supply reduction programs reportedly succeeded in reducing flock size and driving the price of eggs up, and were implemented on a number of occasions between 1999 and 2006.

         2. The Scheme to Reduce the Supply of Eggs Under the Pretext of a Certified Animal-Welfare Program

         The alleged conspiracy to reduce the supply of eggs went beyond these short-term strategies and included the creation and implementation of a certified program purporting to improve the welfare of the hens. In fact, according to Plaintiffs, this program was a scheme to reduce the supply of eggs. The program's goal of reducing the egg supply primarily relied upon requirements for increased cage space per hen. Compliance with this program was monitored by monthly reporting requirements and periodic audits. The cage-space requirement was supplemented by three additional requirements that ensured the certified program would have its intended effect: (1) the 100% Rule, which required that all of a producer's facilities, including those of its affiliates, comply with the Certified Program's cage-space requirements in order for any egg from that producer to be “certified;” (2) a prohibition on backfilling within the certified program; and (3) a rule that failing to comply with the cage-space or backfilling requirements would result in an “automatic fail” of an audit under the certified program-even though other shortcomings under the program (such as improper lighting or handling) did not result in an “automatic fail.” The certified program was promoted as an animal-welfare program, with labels on egg packaging certifying that the eggs were “Animal Care Certified.” But the accusation is that this was merely a pretextual justification for this supply-reduction program. In fact, following a Federal Trade Commission investigation concerning whether the “Animal Care Certified” label was misleading, UEP agreed in 2005 to change the name of its certified label from “Animal Care Certified” to “UEP certified.”

         3. Egg Exports at a Loss

         The final component of the alleged supply-restriction program was the exporting of eggs at a loss (essentially “dumping” eggs in foreign markets so as to drive the domestic price of eggs up). The scheme, implemented by members of the United States Egg Marketers (“USEM”) and managed through the UEP Export Committee, required all USEM members to either export their own eggs at a loss or sell their eggs to UEP at domestic prices and later receive a bill for the difference between the domestic price and the export price. USEM members who did not contribute eggs to the export scheme contributed money to help fellow members bear ...


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