Wednesday, September 24, 2008

Government investigating price-fixing in food

USAToday reports that the Justice Department is investigating allegations of price-fixing in two more categories of the US food market -- tomatoes and eggs (they have been investigating citrus for the past year).

These investigations are into price-fixing not by manufacturers, but by producers -- farmers and cooperatives.

Although federal law bars competitors from collaborating when setting their prices, Congress has created antitrust exemptions intended to help small farm groups and cooperatives bargain with large food processors.

Inquiries into whether food producers overstepped those limits are being run by federal prosecutors in Sacramento, and an antitrust division of the Justice Department based in Philadelphia.

A separate report, a few days previous, in the Wall Street Journal, said that the Commodity Futures Trading Commission (CFTC) is investigating the dairy industry, specifically Dairy Farmers of America, a cooperative that processes one-third of the nation's milk.

According to the Journal report, the CFTC is investigating whether DFA drove up the prices of milk and cheese futures through strategic trading of cheese contracts on the Chicago Mercantile Exchange. Because DFA purchases milk from farmers based in part on the prices of dairy futures, this would amount to an illegal maneuver to increase the price of milk.

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