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'Potato Cartel' Accused Of Price Fixing In Federal Antitrust Suits

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POTATO CARTEL
Two federal antitrust suits allege that a growers group has become the "OPEC of potatoes." | Getty Images

What energy-rich commodity is harvested from beneath the Earth's surface and subject to price fixing by a small group of powerful landowners?

If you guessed "oil," you're not wrong. But according to the plaintiffs in antitrust disputes currently underway in two U.S. District Courts, "potatoes" is a valid answer too.

The first complaint was filed in the Eastern Division of Idaho by a group of disgruntled supermarket shoppers from around the country in 2010. The Associated Wholesale Grocers (AWG), which represents major supermarkets and distributors throughout the country, filed the second on April 17 in Kansas.

Both suits allege that in the mid-2000s, the farmers who own 80 percent of the country's potato acreage banded together to form the United Potato Growers of America (UPGA) in order to artificially inflate the price of potatoes by reducing production. The AWG argues that the UPGA functions as an illegal cartel, calling it the "OPEC of Potatoes," after the 12-member Organization of the Petroleum Exporting Countries (OPEC) that has held oil prices high by keeping output low.

No one disputes the existence of the UPGA, or even its core mission. According to its website, the Salt Lake City-based group was founded in 2004 with the goal of helping farmers "manage their potato supply, matching it to demand to help their growers receive a reasonable price for their product."

What's at issue, instead, is the legal status of the UPGA. The group calls itself a "cooperative," and argues, in its answer to the 2010 complaint, that it is "entitled to protection under the Capper-Volstead Act." That 1922 law grants certain groups of farmers exemptions from antitrust regulations. It allows farmers to bargain collectively in negotiations with supermarket chains, for example, or share the cost of vegetable cleaning equipment.

But the plaintiffs in both cases argue that the UPGA fails to meet the criteria necessary for antitrust immunity under the Capper-Volstead Act. They note that the UPGA, unlike a more conventional farmers' cooperative, does not engage in processing, handling, distributing or marketing its members' potatoes for them. The AWG complaint argues that the UPGA is "made up of direct competitors rather than small farmers banding together to cut out the corporate middlemen who would otherwise market their potatoes," violating the terms of the Capper-Volstead Act. The UPGA also allegedly cooperates with other groups of potato growers, both in America and abroad, to keep potato production down.

Moreover, both complaints allege that the UPGA coerces and browbeats potato farmers to comply with their production limits. They mention enforcement measures -- satellite surveillance, surprise inspections, hefty fines -- that would seem draconian even in the real OPEC. The UPGA could not immediately be reached for comment.

Whether or not the courts ultimately find the UPGA's activities to be legal, they certainly seem to have been effective. USDA data show that American potato production dropped 6.6 percent, and prices rose 63 percent, between 2004 and 2011, which pushed the total value of the U.S. potato crop above $3 billion for the first time in history. (In 2011, sales totaled $3.48 billion.) That may be good news for potato farmers, but it's not so great for families who rely on potatoes as cheap, nutritious staples in their diet.

UPDATE: Wednesday April 24 --The UPGA issued the following statement on the case in an email to The Huffington Post:

United Potato Grower’s goal has been to help growers provide quality potatoes at reasonable prices to American consumers. We have always acted openly and within the bounds of the law. We are confident in our legal position and look forward to a favorable outcome in court.

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