Court proceedings begin against alleged egg cartel members

The Australian Competition and Consumer Commission (ACCC) has commenced Federal Court proceedings against a number of egg producers and organisations for allegedly attempting to make a cartel arrangement that would reduce the number of eggs available to Australian consumers and businesses.

Implicated in the alleged cartel are:

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

The ACCC has alleged that these parties attempted to convince AECL members to cull hens or dispose of eggs to reduce the availability of eggs in Australia. The ACCC has not alleged that this cartel attempt was successful.

The AECL board has been accused of encouraging its members to reduce egg production to avoid oversupply, which would have affected egg prices.

In February 2012, AECL held an Egg Oversupply Crisis Meeting at which methods of carrying out this action were allegedly discussed. Kellaway and Lendich both attended and spoke this meeting, which was chaired by Ironside.

“Retail egg sales, one of many sales channels, were valued at over $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,” ACCC Chairman Rod Sims said.

“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.

“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.”

The ACCC is seeking a number of outcomes from the court action, including declarations, injunctions, fines, costs and orders that AECL, Farm Pride and Twelve Oaks adhere to a compliance program. It also aims to ensure that Kellaway, Ironside and Lendich attend compliance training, that disqualification orders are brought against the three men and that an adverse publicity order and a community service order be brought against AECL.