Texas Attorney General Ken Paxton filed a lawsuit against Cal-Maine Foods, alleging the world’s largest egg producer is taking unfair advantage of the COVID-19 disaster declaration in the state by gouging prices by as much as 300%.
Cal-Maine Foods, however, said prices are higher as the COVID-19 pandemic caused a massive disruption in the egg industry, pushing retail demand for eggs to historically high levels, causing a temporary increase in egg prices.
About the lawsuit
Paxton’s filing stated that after Gov. Greg Abbott declared a disaster due to the pandemic on March 13, the increased demand for eggs resulted in egg prices jumping 300%, and “for the most part, these prices are passed on to retail customers.” The filing stated that in the recent past, “Cal-Maine’s generic eggs” have sold for around $1 per dozen, but they are now selling for around $3 per dozen.
“On information and belief, Cal-Maine has not experienced any supply issues or other disruptions that are driving it to charge more for eggs. It is simply charging more because it can, or more specifically, because the pandemic caused market demand to jump,” the filing read.
In a press release, Paxton said under the Texas Deceptive Trade Practices Act, any price gougers may be required to reimburse consumers and may be held liable for civil penalties of up to $10,000 per violation, with an additional penalty of up to $250,000 if the affected consumers are elderly.
Cal-Maine Foods responds
Cal-Maine said it strongly denies Paxton’s allegations and will vigorously defend itself.
“Cal-Maine has not exploited this tragic national pandemic for gain. Cal-Maine Foods is the largest producer and distributor of fresh shell eggs in the United States and sells the majority of its shell eggs in states across the southwestern, southeastern, mid-western and mid-Atlantic regions. The company’s 3,490+ employees have worked hard during this crisis to meet increased consumer demand. In doing so, Cal-Maine Foods has not changed its longstanding approach to pricing. Any allegation to the contrary is simply not true,” the company said in a press release.
“There has always been great volatility in the egg pricing market. The COVID-19 pandemic caused a massive disruption in every sector of the economy, including the egg industry. Retail demand for eggs reached historically high levels and egg prices increased significantly in line with those demand trends. However, egg prices have since declined quickly to pre-COVID-19 levels.”
The company explained that the domestic egg market is highly volatile even under normal market circumstances.
For decades, Cal-Maine has priced egg sales based on a model utilizing third-party market quotes published by Under Barry.
“Cal-Maine Foods has always been consistent in our pricing practices, whether we sell at a profit or a loss. Cal-Maine Foods has hewed to those practices and its longstanding customer agreements throughout the COVID-19 pandemic,” the company stated.
Demand for eggs not only has been high in recent months due to consumer reactions to the COVID-19 pandemic, but also because of the Easter season, when eggs typically are in higher demand when compared to other times of the year.
Cal-Maine Foods has 12 production facilities and more than 1,300 employees in Texas, including facilities gained through the recent acquisition of Mahard Egg Farm.
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