(NewsNation) — Four companies that produce 97% of the frozen potatoes for the U.S. and that generate an estimated $68 billion each year are facing multiple lawsuits claiming they conspired to spike the price of french fries, hash browns, tater tots and other spud-related products.
Canada-based McCain Foods Ltd. and Cavendish Farms Corp., along with American companies Lamb Weston Holdings and J.R. Simplot Co., are named in the class action suits, which were filed in Chicago.
The first suit, filed last week by a Pennsylvania grocery store chain, alleges the companies gouged customers and restaurants and spiked the price of their potato products by 47% between 2022 and 2024.
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A second complaint was filed Sunday in a Chicago federal court by another group that made similar allegations, referring to the companies as a “potato cartel.”
What is the ‘potato cartel’?
The four companies named in the lawsuits are considered the four dominant processors of frozen potatoes sold in the United States, the lawsuit states. McCain and Cavendish Farms are headquartered in Toronto and New Brunswick, respectively, while Lamb Weston and J.R. Simplot are located in Idaho and together have collectively produced nearly all of the frozen potatoes sold in the United States.
The Financial Post reported that McCain Foods claims that one in four french fries eaten in the world is produced by the company. McCain reported $14 billion in global revenues in 2023, according to the report. Cavendish Farms is reportedly the fourth-largest frozen potato producer in the world.
What are they accused of?
Collectively, the “potato cartel” is accused of sharing access to sensitive material and engaging in antitrust practices by using data aggregation services that allowed the companies to artificially fix the prices of frozen potato products.
The lawsuit filed last week by the Pennsylvania retailer claims that beginning in 2021, the companies conspired to fix the prices of their products “above competitive levels.” They then changed its pricing methods to “collectively impose strong-arm price hikes with no worry customers would defect to competing potato producers,” the suit said.
The prices of these products jumped by 47% between 2022 and 2024, according to both lawsuits.
How did they allegedly pull it off?
The lawsuits claim that the potato producers initially raised prices to address increased costs between 2021 and 2022. However, beginning in 2022, the complaints allege that input costs peaked and then fell steadily by 33%, according to the Financial Post report.
Despite the drop in input costs, all four companies continued to increase the price of their products to “uncompetitively high” levels, court documents state.
The spike in potato prices was so similar across the board that one restaurant owner stated it was amazing how all of the major suppliers of french fires were “raising their prices at the same time and by the same amount,” the lawsuit filed last week states.
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“Armed with the same access to each other’s data and other sensitive information as well as a direct line of communication to each other, the potato cartel moves prices skyward in lockstep harming all purchasers of potatoes in the process,” the lawsuit filed on Sunday in Chicago stated.
The complaints allege that McCain was one of the ringleaders of the “cartel” and state that company officials tore up contracts in 2022 and increased prices to ensure it would see a 30% sales margin. The complaint also states that company officials were aware of the pricing scheme.
In one of the lawsuits, a former Lamb Weston vice president claimed he had never seen margins like the ones the companies saw in the history of the potato industry.
McCain did not immediately respond to a request for comment from NewsNation but told Fortune that it “strongly disputes” the allegations found within the lawsuits. A Lamb Weston spokesperson also claimed that the lawsuits are without merit, Fortune reported.
All of the companies were linked to the National Potato Council, which is a lobbying group that refers to itself as the “voice of U.S. potato growers.”
Another organization, Potatoes USA, which was also named as a defendant in the second lawsuit, provided a way for all of the members of the “potato cartel” to communicate with one another, court documents claim.
The lawsuit also says that the organization provided all of the companies with joint marketing information, updates on export information and a means for all of the cartel members to exchange data.
Court documents allege company officials communicated via text message rather than email to avoid leaving a paper trail.
How much more did your frozen potatoes cost?
This year alone, prices rose 5.5%, according to Fortune, which cited data from the UN Food and Agriculture Organization’s food index.
The 47% jump over the last four years came during a period when Americans remained alarmed and upset about the prices of groceries.
A Pew Research poll showed in October that 75% of Americans are concerned about the price of food and other consumer products.
In a letter from Potato USA’s CEO that was released in October, 45% of restaurants had raised prices, and half of those restaurants expected to see more increases in the future.
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The organization also reported that retail sales of frozen potatoes rose by almost 15% between July 2023 and July 2024.
However, the high cost of groceries continues at a time when Trump has pledged to impose tariffs on products produced in countries like Mexico and Canada due to border concerns and drug trafficking.
The 25% proposed tariff for Canada could directly affect the two frozen potato companies based in Canada.
What happens next?
Both lawsuits seek monetary damages from the defendants, and a court order seeks an end to the price-fixing scheme. Two of the companies have denied the allegations, while the other two have not responded to requests for comments from various media organizations.
The Financial Post reported that the court must decide if the case meets the standard for class action status.
If so, anyone who has been affected by the alleged wrongdoing will be contacted. The report said that if the companies are found to be liable, any damages awarded will be split between consumers and retailers.
