Minnesota Attorney General Keith Ellison is suing Sparboe Farms, alleging the Litchfield-based egg farmer scammed consumers during the pandemic’s initial food-buying spree.
Sparboe retaliates, saying the attorney general’s office either does not understand how the industry works or wrongly blames it for forces beyond the control of the company.
It is the latest in a series of lawsuits filed against egg farmers by state attorneys general, all making similar allegations of price hikes at the start of the pandemic. None of the prosecutions have yet resulted in a guilty verdict.
The state alleges Sparboe violated Gov. Tim Walz’s executive order that prohibited companies from raising the prices of essentials above 20% of what they had been sold in the previous 30 days.
From early March to early April, prices for Sparboe eggs rose about 200%, from less than $ 1 a dozen to nearly $ 3 a dozen, the costume notes.
Sparboe says the prices it charges wholesale and retail customers are – and have been for decades – tied to a prevailing market price index, as the business publication Urner Barry reports.
Ellison’s office argues, in a complaint filed in Hennepin County earlier this month, that Sparboe could have charged its customers less than the going prices, but chose not to.
Britta McGuire, granddaughter of the founder of Sparboe and head of its marketing, said the company had not adjusted its price in the spring of 2020, but had continued to do what it had been doing for 40 years.
âWe did not raise prices, but rather continued to enforce our contracts – as we always do on the upside and downside in the markets,â McGuire said in a statement. “To put it as plainly and clearly as possible, we do not have, do not engage in and will never engage in the practices that the Attorney General accuses us of.”
Shortly after the initial wave of buying, the Minnesota AG office received complaints from grocery chains and wholesalers about rising egg prices and began to investigate.
McGuire says that over the past 17 months she – along with her mother and sisters who own and run Sparboe – has tried to explain the history of their contracts.
âThe facts here really aren’t complicated: We don’t sell direct to consumers or retailers, and we don’t set the prices that grocers and other retailers charge for eggs. We sell our eggs to our wholesale customers on the basis of long term contracts which have a market based pricing formula – some in place for over 40 years. It was true before COVID, it was true during COVID and it remains true today, âsaid McGuire.
Sparboe’s attorney, Troy Hutchinson, said the company, before and during the crisis, had offered to rework long-term contracts with its clients so as to detach them from the ever-evolving Urner Barry Index. His clients have declined, he said.
“As the pandemic began in early 2020, Sparboe was at the end of a difficult selling period that had seen Sparboe suffer a large net operating loss, which the company blamed on a lackluster egg market,” Eric Maloney, the deputy attorney general responsible for handling the case, alleges in the lawsuit.
The lawsuit alleges Sparboe was opportunistic during a public health crisis. Hutchinson argues that Sparboe depends on market peaks to compensate for times when the market is falling just to break even.
Urner Barry’s prices fell shortly after the peak in early April 2020, McGuire said, with Sparboe ultimately recording a net financial loss for 2020.
“It doesn’t matter to our allegations whether Sparboe ultimately made or lost money in 2020,” John Stiles, deputy chief of staff in the AG’s office, wrote in an email. “We say they profited up to $ 2.1 million from their illegal price hikes at the expense of wholesalers and consumers in Minnesota during the deadliest pandemic of the century.”
The industry’s reliance on Urner Barry’s price quotes sparked a number of lawsuits against egg producers during this tumultuous time.
Texas sued Cal-Maine Foods, the nation’s largest shell egg producer, in April 2020 under similar claims. The texan judge closed the case. New York Attorney General Letitia James last year filed a complaint against Hillandale Farms under the same rule of thumb. Hillandale agreed to donate 1.2 million eggs to New York City food banks in exchange for dropping the case.
In Minnesota, this is Ellison’s second lawsuit against an egg farmer related to the pricing of a pandemic. The state settled a lawsuit against egg farmer Forsman Farms last year. The Cokato, Minnesota-based company has denied the allegations, but has agreed to reimburse its retail customers retroactively for price increases during the Spring 2020 period when Urner Barry’s prices skyrocketed.