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Watchdog starts proceedings against alleged egg cartel attempt

By RJ Whitehead , 30-May-2014

The Australian Competition and Consumer Commission has begun proceedings in the Federal Court against the country’s representative body for the egg industry and two producers over an alleged attempt to create a cartel.

The ACCC alleges that the Australian Egg Corporation Limited (AECL), Twelve Oaks Poultry and Farm Pride Foods “attempted to induce egg producers… to enter into an arrangement to cull hens or otherwise dispose of eggs, for the purpose of reducing the amount of eggs available for supply to consumers and businesses in Australia.”

An industry corporation, AECL collects levies for promotional activities and research and development from member egg producers.  At the time of the allegation, AECL had between 100 and 150 egg producer members.

Oversupply crisis

The action dates back to November 2010, when the ACCC alleges the AECL board encouraged producers, through member publications, to reduce egg production in a move that would increase prices by preventing oversupply.

It is also alleged that, in February 2012, AECL held an “Egg Oversupply Crisis Meeting”, attended by egg producers in Sydney, where it allegedly sought a coordinated approach by egg producers to reduce the supply of eggs, in response to what had been perceived as an oversupply. 

James Kellaway, managing director of AECL, and Zelko Lendich, a director of AECL and Twelve Oaks, both attended and spoke at this meeting, which was chaired by Jeffrey Ironside, a director of AECL and a former director of Farm Pride. The three men are also named in the proceedings.

‘Impact on egg prices’

Egg consumption per capita has increased in the past 10 years leading to an increase in the demand for producers’ eggs,” ACCC chairman Rod Sims said. “[We are] concerned that the alleged attempt sought to obtain agreement by egg producers to reduce supply, which if successful could have impacted on egg prices paid by consumers. 

Detecting, stopping and deterring cartels operating in Australian markets remains an enduring priority for the ACCC because of the ultimate impact of such anti-competitive conduct on Australian consumers who will pay more than they should for goods.”

Sims added that industry associations should be conscious of competition compliance issues when they bring competing firms together. 

Today’s action sends a clear message that attempts by industry associations to coordinate anti-competitive behaviour by competitors will not be tolerated.

The ACCC is seeking declarations, injunctions, pecuniary penalties and orders that AECL, Farm Pride and Twelve Oaks establish and maintain a compliance programme and that Kellaway, Ironside and Lendich each attend compliance training. 

It is also requesting an adverse publicity order and a community service order against AECL, disqualification orders against the people named, as well as costs.

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