BOISE, Idaho - A U.S. wholesale grocer says America's potato farmers have run an illegal price-fixing cartel for a decade, driving up spud prices while spying on farmers with satellites and aircraft fly-overs to enforce strict limits on how many tubers they can grow.
Kansas-based Associated Wholesale Grocers' lawsuit against United Potato Growers of America and two dozen other defendants was shifted this week to U.S. District Court in Idaho, America's top potato-producing state at 30 percent of the nation's supply.
The grocery group, a cooperative which supplies more than 2,000 stores including IGA, Thriftway and Price Chopper in 24 states, contends that the potato growers banded together in 2004 to illegally inflate prices in a scheme akin to the petroleum-producing OPEC cartel, reducing planting acreages and destroying potatoes, all to restrict what was available for sale.
"UPGA utilized predatory conduct and coercive conduct in ensuring compliance with the price-fixing scheme," according to the lawsuit, which charges tactics including use of "satellite imagery, fly-overs, GPS systems, and other methods to enforce its agreement to reduce potato supply."
The grocers are asking for triple damages, likely in the millions, and are focusing on growers of fresh potato varieties found in big bags in supermarket produce aisles, as well as potatoes that are processed into golden fries, tater-tots and other products and sold in freezer sections of the group's stores.
United Potato Growers of America has organized growers in 15 states -it has members in Alaska, California, Colorado, Florida, Idaho, Kansas, Minnesota, Montana, Nebraska, North Dakota, Oklahoma, Oregon, Texas, Washington and Wisconsin, representing three-quarters of the nation's fresh potato production.
Dell Raybould, an owner of Raybould Farms and a Republican state representative, is a member of the co-op and has also been named in the lawsuit. He insisted on Thursday that those who set up the group in 2004 followed federal anti-trust laws.
Raybould, who grows Russet Burbanks and Norkotah Russets on 850 acres near Rexburg in Idaho's far east, paints a bleak picture of spud farming prior to 2004: A haphazard industry where farmers inevitably grew too many tubers, pushing prices into the cellar.
"I can remember when people hauled their potatoes out in the field with the manure spreader, dumped them and plowed them under," said Raybould, who has been growing potatoes since 1953. "They did try to level out production, so we didn't have the boom and bust thing all the time. And when they did the co-op, they went about this the right way. They got the best co-op attorney in the nation, and they did it right."
United Potato Growers of America's Salt Lake City-based attorney, Randon Wilson, contends that his group is shielded by the Capper-Volstead Act, the 1922 federal law that under some circumstances exempts agricultural cooperatives from antitrust regulations.
"Right from the beginning, we did everything right, to qualify for Capper-Volstead," Wilson said. "We know what you have to do to qualify for that limited exemption and we followed all those rules."
However, Associated Wholesale Grocers says the growers illegally sought to boost costs of America's most-popular vegetable.
At secret meetings in Idaho Falls, according to the complaint, big Idaho potato growers like Albert Wada and members of the Raybould family, as well as North Dakota ag-multimillionaire Ronald Offutt, worked with Wilson to hatch a far-reaching price-fixing scheme, creating a powerful agricultural juggernaut capable of squeezing customers like grocery stores.
"None of the defendants... is entitled to the limited protections found in the Capper-Volstead Act for their efforts to restrict potato supply and fix prices," wrote Patrick J. Stueve, the grocer's lawyer in Kansas City. "
Stueve didn't return phone calls, but his basic contention - that Capper-Volstead is being abused to illegally inflate potato prices - has emerged in numerous, commodity-related lawsuits in the last decade, said Peter Carstensen, a University of Wisconsin Law School professor in Madison who focuses on antitrust cases.
"It's because there's an increasing perception that Capper-Volstead is being abused," he said.
For instance, a similar lawsuit filed in 2010 targeting potato growers is now advancing through federal court in Idaho, a case that may eventually be combined with this one.
Meanwhile, other groups including the U.S. Department of Justice have lodged antitrust complaints against mushroom growers, dairy farmers, egg producers and cranberry farmers. Carstensen said a common gulf separates rival protagonists.
Large agricultural producers argue they're using the power of the cooperative to create a more efficient market, he said, while "the other side is saying 'No'... what you're doing is outside the scope of authorized conduct."
Federal prosecutors aren't involved in this latest litigation, but the DOJ has pushed recently to re-examine how large, modern agricultural cooperatives are using the Capper-Volstead Act, including holding workshops with the U.S. Department of Agriculture to scrutinize competition in the farming business.