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Egg Sector under Investigation in Australia

30 May 2014

AUSTRALIA - Australian Competition and Consumer Commission (ACCC) has begun an investigation into allegations of cartel activity in the country's egg industry.

ACCC has instituted proceedings in the Federal Court against:

  • the Australian Egg Corporation Limited (AECL)
  • James Kellaway, the managing director of AECL
  • two egg producing companies, Ironside Management Services Pty Ltd (trading as Twelve Oaks Poultry) (Twelve Oaks Poultry) and Farm Pride Foods Limited (Farm Pride)
  • Jeffrey Ironside, a director of AECL and Twelve Oaks Poultry, and
  • Zelko Lendich, a director of AECL and a former director of Farm Pride.

The ACCC alleges that AECL and the other corporate and individual respondents attempted to induce egg producers who were members of AECL 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. It is not alleged that this attempt to make a cartel arrangement involving Australian egg producers was successful.

AECL is an industry corporation that collects levies for promotional activities and research and development activities from member egg producers. At the relevant time, AECL had between 100 and 150 egg producer members.

The ACCC alleges that from November 2010, in AECL member publications, the AECL board (which included Mr Kellaway, Mr Ironside and Mr Lendich) encouraged its members to reduce egg production, in order to avoid oversupply which would affect egg prices.

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 reducing the supply of eggs, in response to a perceived oversupply of eggs. Mr Kellaway and Mr Lendich both attended and spoke at this meeting, which was chaired by Mr Ironside.

ACCC Chairman, Rod Sims, said: “Retail egg sales, one of many sales channels, were valued at over A$566 million in 2012 and eggs are a staple food product for Australian consumers. Indeed, egg consumption per capita has increased in the past 10 years leading to an increase in the demand for producers’ eggs. The ACCC is 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 remain 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.

“Industry associations need to 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,” Mr Sims added.

ACCC is seeking declarations, injunctions, pecuniary penalties, orders that AECL, Farm Pride and Twelve Oaks establish and maintain a compliance program and that Mr Kellaway, Mr Ironside and Mr Lendich attend compliance training, an adverse publicity order and a community service order against AECL, disqualification orders against Mr Kellaway, Mr Ironside and Mr Lendich, and costs.

Egg Farmer's Reaction to the Investigation

A Victorian egg producer is welcoming an Australian Competition and Consumer Commission (ACCC) investigation into allegations of cartel activity in the egg industry, reports ABC Rural.

The ACCC is taking the Australian Egg Corporation, its director and two big egg producers to the Federal Court, alleging they attempted to induce egg producers to enter into an arrangement to cull hens or dispose of eggs to reduce the amount of eggs available on the market.

Free-range egg producer, Meg Parkinson, says the majority of egg producers have not been involved in market manipulation and she thinks the ACCC investigation will be good for the industry.

She said: "The ACCC is working, not only in the egg industry, but for a whole lot of industries to try to sort out cartel behaviour, market manipulation and I think that will be good for consumers, but I think it also will be good for all those players in the industry who are just doing their best to make a living for their families. I think it will help all of us as well."

Ms Parkinson says smaller egg producers do not have the ability to affect the market price for eggs.

She told ABC Rural: "The average egg producer who produces eggs themselves doesn't have enough eggs to affect the market.

"It's only those large players who can do this and obviously the ACCC thinks it's found two large players who have been doing it.

"If I've got 4,000 birds I can't affect anything; if I've got 20,000 birds, I can still can't affect anything.

"You have to be up there in the million-plus category to be able to affect the market, and even then, it would have to be a few of you."

TheMeatSite News Desk

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