Saturday, September 27, 2008

Feds Probe Food-Price Collusion

Department of JusticeAccording to a recent article in the Wall Street Journal, federal prosecutors have opened separate criminal probes into possible price-fixing by major egg producers and California tomato processors.
The investigations, which have not been previously reported, add to concerns that beyond the rising cost of fuel and feed, a hidden factor may be driving food prices higher: collusion among farmers, food processors or exporters.
The article describes how the FBI is looking into allegations of price-fixing, and bribes are responsible for higher food prices. The Chicago Tribune also reported on the federal investigations and reported several specific incidents:
In Sacramento, FBI agents tapped Rahal's telephones late last year and allege to have uncovered buyers at six food companies taking payments from him. Federal investigators also raided SK Foods on April 16. Investigators say they subsequently coaxed admissions from purchasers receiving payments at Agusa Inc., Kraft Foods Inc., Safeway Inc. and Frito-Lay, which is a division of Pepsico Inc.

Kraft Foods declined comment about the investigation.

Frito-Lay spokeswoman Aurora Gonzalez said the buyer who admitted taking payments no longer works for the company.
What is most interesting is seeing the names of the major food companies from the Grocery Manufacturers Association on this probe list for lies, bribes and higher prices. While making record profits, blaming all of the cost increases on corn costs, someone wasn't watching the business back at home.

The WSJ article also discussed how the fresh egg industry through the United Egg Producers tightened domestic egg supply to increase prices.
Fresh-egg farmers acted together through a series of export shipments, organized by United Egg Producers, an industry cartel whose 250-plus members include virtually all of the nation's big egg producers. By removing a small fraction of eggs that would have been bound for U.S. sales and arranging instead for their export, United Egg helped tighten domestic supply and drive up the price of eggs across the country, according to newsletters and other documents that United Egg sent to its members.

Source: Wall Street Journal

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