Not so eggcellent: ACCC alleges egg industry cartel

Australia’s largest egg supplier, Sunny Queen, and 11 other egg producers and suppliers face Federal Court proceedings over allegations they coordinated production and supply decisions in breach of competition laws.

The Australian Competition and Consumer Commission (ACCC) alleges the businesses coordinated decisions on production volumes, distribution, expansion and bird culling since at least October 2020, in conduct that likely substantially reduced competition.

The allegations cover free-range, cage and organic eggs.

“Our investigation has uncovered alleged widespread anti-competitive conduct in the egg industry that we allege has impacted the supply of eggs to Australian consumers since at least 2020. This alleged conduct is extremely serious, which is why we have commenced this Federal Court action,” ACCC chair Gina Cass-Gottlieb said.

Production and retailer supply under scrutiny

The proceedings name businesses including Sunny Queen, Doug Hall Poultry, Alpair, trading as McLean Farms, Ellerslie Free Range Farms and Kinross Farm.

The ACCC alleges each of those five entities engaged in cartel conduct and a concerted practice with the purpose, effect or likely effect of substantially reducing competition.

“These companies are alleged to have coordinated in a range of decisions about their business operations, including the retailers each business could supply, what volumes they could produce and when to cull birds to manage periods of perceived over-supply,” Cass-Gottlieb said.

The regulator also alleges Sunny Queen, Hall and McLean Farms coordinated a property purchase in Pittsworth, Queensland, to prevent competing egg suppliers from acquiring it.

“We allege this coordination between Sunny Queen, Hall and McLean Farms extended to purchasing a property in Pittsworth, Queensland, for the purpose of preventing its acquisition by rival egg suppliers. We also allege this had the effect of substantially lessening competition.”

Sunny Queen’s dealings with Kinross are also part of the case.

“We also allege that Sunny Queen restricted how many eggs its rival Kinross could sell to customers, and prevented Kinross from selling its eggs to Coles, Woolworths, Aldi, Metcash or Costco.”

First case under concerted practice prohibition

The proceedings are the ACCC’s first to include concerted practice allegations since the prohibition was introduced in 2017.

A concerted practice involves communication or cooperation between businesses that goes beyond independently responding to market conditions, without requiring all the elements of an “understanding” under competition law.

The ACCC alleges Australia’s egg industry is highly concentrated, with a small number of large suppliers and significant barriers to entry and expansion.

According to the regulator, Sunny Queen accounts for approximately one-third of the national market for supplying eggs to retailers. It acquires, markets and distributes eggs across Australia and is jointly owned by Ellerslie and McLean Farms.

“Fair competition in the supply of fresh food such as eggs is extremely important. Anti-competitive conduct disadvantages Australian consumers, who can face reduced choice and higher prices, as well as those businesses seeking to compete fairly or who are seeking to enter markets to provide competing supply,” Cass-Gottlieb said.

Penalties and injunctions sought

The ACCC is seeking declarations, penalties, injunctions, costs and other orders. It said the maximum penalties applicable depend on when the alleged conduct occurred, with penalties changing in November 2022 and March 2026.

“These proceedings are a reminder that businesses must make their production, supply and pricing decisions independently,” Cass-Gottlieb said.

The court has not determined the allegations.