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Law360 (April 23, 2020, 6:56 PM EDT) -- Texas Attorney General Ken Paxton on Thursday accused the country's largest egg producer, behind brands such as Eggland's Best and Land O' Lakes, of more than tripling the price of a dozen eggs to take advantage of increased demand during the coronavirus pandemic.
Paxton says in a Harris County District Court lawsuit that Cal-Maine Foods Inc., doing business in the Houston area as Wharton and Wharton County Foods LLC, violated the state's deceptive trade practices act by driving up the price of generic eggs from $1.02 per dozen at the end of February to $3.32 per dozen after Gov. Greg Abbott urged Texans to stay home to slow the spread of COVID-19, the disease caused by the novel coronavirus.
The attorney general petitioned the court for a restraining order that would prohibit Cal-Maine from price-gouging grocery stores in Texas, where the company operates more than 90% of the largest processing facilities in the state. Cal-Maine is the largest producer and marketer of shelled eggs in the country, holding 19% of the overall market share, according to the petition.
"Cal-Maine has not experienced any supply issues or other disruptions that are driving it to charge more for eggs," the petition says. "It is simply charging more because it can, or, more specifically, because the pandemic caused market demand to jump."
Paxton points to Cal-Maine's own website and statements assuring consumers that supply levels are good and that its facilities are fully operational to argue the company has no financial reason to increase its prices.
In fact, Paxton says, Cal-Maine's current prices are higher now than during the 2015 avian flu outbreak, which did affect the company's facilities. The avian flu outbreak is estimated to have killed about 12% of the national flock of egg-laying hens, yet at its height, egg prices only reached $2.97 per dozen, according to the petition. The petition doesn't adjust the prices for inflation, but the 2015 figure is about $3.22 in 2020 dollars, according to a U.S. Bureau of Labor Statistics calculator.
Cal-Maine has also allegedly made misleading and false statements about egg prices, claiming it was out of the company's control, according to the petition.
"This is misleading, because as a producer selling on the spot market, Cal-Maine can offer purchasers whichever price it chooses," the petition says.
Along with the restraining order, Paxton has petitioned the court to force Cal-Maine to turn over weekly and daily price sheets for egg prices, any emails mentioning price-gouging and any policies or procedures that discuss complying with price-gouging-related statutes, according to the petition.
Paxton also asked the court to fine Cal-Maine up to $10,000 per violation, and $250,000 per violation that involved deception of anyone 65 or older, which the Texas Deceptive Trade Practices Act calls for.
"No one is exempt from price-gouging laws in Texas, including suppliers of grocery stores and pharmacies," Paxton said in a statement announcing the lawsuit Thursday. "My office will not tolerate any person or business taking advantage of hardworking Texans."
Cal-Maine spokesman Jeff Eller told Law360 in an emailed statement Thursday that Paxton's allegations are "grossly unfair and without merit." He said the company has no control over a "intensely competitive and highly volatile" egg market.
"We have no control over this market quote and it fluctuates wildly from week to week and sometimes day to day," Eller said. "We have been consistent in our pricing practices whether we sell at a profit or at a loss."
The state is represented by Daniel Zwart, Rick Berlin, William Carpenter Jr. and Pedro Perez Jr. of the Texas Office of the Attorney General.
Counsel information for Cal-Maine wasn't immediately available Thursday.
The case is Texas v. Cal-Maine Foods Inc. dba Wharton et al., case number 20205427, in the 215th District Court for Harris County, Texas.
--Editing by Stephen Berg.
For a reprint of this article, please contact reprints@law360.com.
