Nov. 23—The four largest producers of frozen potatoes and french fries, including two companies based near Boise, have supersized their profits over the last few years by gouging American consumers through higher prices that they improperly set by agreement, according to a federal anti-trust lawsuit filed this week.
The suit, filed in Illinois by California-resident Karen Pollack, claims that J.R. Simplot Company and Lamb Weston, both based in Idaho, conspired with competitors McCain Foods and Cavendish Farms, both based in Canada, to collude instead of competing for larger shares of the market.
Combined, those four companies control about 95% of the frozen potato market.
According to the suit, rather than compete on the open market for a higher percentage of customers, the companies agreed to similar price increases to raise the price of frozen potato products by 47% from 2022 to 2024.
While sales have remained relatively flat, Lamb Weston earlier this year reported profits 111% higher than 2023 for the first quarter of this year.
"Defendants' wrongful and anticompetitive actions had the intended purpose and effect of artificially fixing, raising, maintaining, and stabilizing the price of Frozen Potatoes," the suit states. "On behalf of a proposed class of tens of millions of consumers nationwide" the suit seeks to end the "illegal scheme, to recover damages, and to restore competition in the Frozen Potato marketplace."
In 2023, Idaho led the nation in potato production and Washington was second. Combined, the Gem and Evergreen states produced about 56% of all the 44 billion pounds of potatoes grown in the United States, according to the U.S. Department of Agriculture.
Of those potatoes grown, about 70% go to companies like Simplot, which use specialized machines and processes to convert the raw potatoes into french fries, tater tots and potato chips. They are sold in frozen bags of potatoes at grocery stores and at fast food restaurants.
As the finished potato prices have soared the last two years, potato farmers in the Columbia River valley have not received the same windfall.
In 2023, the average price for 100 pounds of potatoes in Washington was $11.20, which was up 23% from 2022. In Idaho, farmers fared worse, selling their potatoes for an average of $9.63 for 100 pounds, which was down 11% from 2022.
But those numbers don't track with the price hikes shown by the four major producers, the suit alleges. According to Federal Reserve Economic Data, the producer price index of frozen potatoes had remained near constant but climbed slightly from 2006 to 2020, but it then rose sharply in 2021.
Chris Voigt, executive director of the Washington state Potato Commission, said that about 90% of all the potatoes grown in the Evergreen State are sent to processors like Simplot and Lamb Weston.
Voight noted that his organization has no regulatory control over pricing. It mostly serves to help growers stay in business.
Asked if Washington growers have received similar boost to profits as the lawsuit claims for the producers, Voigt responded: "I don't think so. We have certainly seen increases in input costs and labor," he said.
He noted that of the potatoes grown for processing, which is the vast majority of Washington's crop, some 95% of those spuds are grown on contract. That means farmers and companies like Simplot and Lamb West agree ahead of time what will be paid to the farmer.
Farmers "will calculate how much it will cost to grow a crop and throw 7% on top of that," Voigt said. "That's generally what most folks strive for."
The suit notes that the producer's price increases coincided with the time that the companies shared detailed and "closely guarded" information with each other.
"Defendants engaged in a conspiracy to fix and raise the price of Frozen Potatoes," the suit states. The producers "coordinated price increases at identical or near-identical times during" the scope of the suit.
For instance, Simplot and McCain each sent price-increase letters to their customers within one day of each other in 2021. Both announced that the cost of frozen potatoes would be going up the same 4 cents per pound.
"The letters sent by Simplot and McCain both indicated the effective date of March 15, 2021," according to the suit.
In February 2022, all four companies sent price-increase letters within five days of each other. While some of the price increases differed, they all had the same effective date: April 1, 2022.
It quoted a former Lamb Weston vice president who said its company's price increase "will probably be exactly the price increase McCain wanted." The company executive, who was not named, added: "And they hope McCain will follow, and Simplot will follow, and Cavendish will follow."
A former senior director of McCain Foods, which has headquarters in Toronto and Oakbrook Terrace, Illinois, stated "in or around" 2023 that he wanted to compete on prices for battered fries with Lamb Weston, based in Eagle, Idaho, but higher level company officials in the room thought: "We're going to screw it up for everyone. So we shouldn't risk it."
About the same time, when an executive at Lamb Weston was asked if there was no incentive to fight for market share, the executive replied: "Absolutely. 100% And they are behaving themselves."
The same executive, who again was not named in the suit, said he had "never seen margins this high in the history of the potato industry. So this is unusual for people that have been in the industry this long."
McCain Foods denied to the Washington Post that it had engaged in anticompetitive activity.
"McCain Foods strongly disputes any allegation that the company violated antitrust laws, or any other laws, with respect to the sale of frozen potato products," Charlie Angelakos, McCain Foods vice president of global external affairs and sustainability, said in a statement to The Washington Post. "McCain Foods intends to vigorously defend the recently filed lawsuits so that it can focus on what we do best: delivering high quality, affordable food to customers nationwide."
Simplot representatives did not return a message seeking comment on Thursday. Lamb Weston spokeswoman Teresa Paulsen emailed this response to questions: "We believe the claims are without merit and intend to vigorously defend our position."
Two of the lawsuits also name the National Potato Promotion Board, a trade association, and market research firm Circana as defendants.
The lawsuits claim the two entities facilitated the alleged price-fixing by allowing the competitors to exchange data on spud pricing strategies.
The spike in prices for frozen potatoes happened about the same time as the previously mentioned communications, according to the suit against the big four producers.
"Examination of these price spikes indicate that they cannot be explained by non-conspiratorial explanatory variables including the price of potatoes, price of cooking oil, and wages of Frozen Potato manufacturers," the suit states.
Of the companies that control the market, Lamb Weston holds more than 40% followed by McCain at about 30%, Simplot at 20% and Cavendish at below 10%.
"This high market concentration paved the way for conspiracy, since Defendants only needed to agree with, and police, a few market participants for their price-fixing agreement to be successful," the suit states.
It seeks a federal judge to approve a "nationwide" class for the suit that includes all consumers from most states who paid what it alleges are improperly inflated prices between Jan. 1, 2021 to present. Omitted from the list of states were Washington and Idaho. The lawsuit does not explain why consumers in some states are excluded from the complaint.
"This is an antitrust injury of the type that antitrust laws were meant to punish and prevent," the suit states.
The Washington Post contributed to this story.
