State sues big Minnesota egg producer, accusing it of price-gouging in pandemic

Minnesota Attorney General Keith Ellison is suing Sparboe Farms, alleging the Litchfield-based egg producer gouged consumers during the pandemic's initial food-buying frenzy.

Sparboe is firing back, asserting the attorney general's office either doesn't understand how the industry operates or is mistakenly blaming it for forces outside the company's control.

It's the latest in a string of lawsuits brought against egg producers by state attorneys general, all making similar claims of price gouging during the pandemic's early days. None of the suits have yet led to a guilty verdict.

The state alleges Sparboe violated Gov. Tim Walz's executive order that prohibited companies from raising prices on essential goods above 20% of what they cost in the 30 days prior.

From early March to early April, Sparboe's egg prices rose roughly 200% from less than $1 a dozen to nearly $3 a dozen, the suit notes.

Sparboe says the prices it charges wholesale and retail customers are — and have been for decades — tied to a market index of prevailing prices, as reported by business publication Urner Barry.

Ellison's office argues, in a complaint filed in Hennepin County earlier this month, that Sparboe could have charged its customers less than the prevailing prices but chose not to.

Britta McGuire, granddaughter of Sparboe's founder and head of its marketing, said the company didn't adjust its price during the spring of 2020, but kept doing what it has done for 40 years.

"We did not raise prices, but instead continued to apply our contracts — just as we always do in up, as well as down markets," McGuire said in a statement. "To state it as simply and clearly as possible, we have not, do not and will never engage in the practices the Attorney General accuses us of."

Shortly after the initial buying flurry, the Minnesota AG's office received complaints from grocery store chains and wholesalers of higher egg prices and began investigating.

McGuire says for the past 17 months, she — along with her mother and sisters who own and run Sparboe — tried to explain the history of their contracts.

"The facts here are really not complicated: We don't sell directly to consumers or retailers nor do we set the prices grocers and other retailers charge for eggs. We sell our eggs to our wholesale customers based on long-term contracts that have a market-based pricing formula — some in place for more than 40 years. That was true before COVID, it was true during COVID and it remains true today," McGuire said.

Sparboe's lawyer Troy Hutchinson said the company, before and during the crisis, offered to rework the long-term contracts with its customers in a way that would untether them from the constantly changing Urner Barry index. Its customers declined, he said.

"As the pandemic began in early 2020, Sparboe was on the tail end of a rough sales period that had seen Sparboe endure a large net operating loss, which the company blamed on a lackluster egg market," Eric Maloney, the assistant attorney general handling the case, alleges in the lawsuit.

The lawsuit alleges Sparboe was opportunistic during a public health crisis. Hutchinson argues Sparboe depends on the market peaks to offset times when the market is down just to break even.

The Urner Barry prices dropped soon after the early-April 2020 peak, McGuire said, with Sparboe, in the end, recording a financial net loss for 2020.

"It is immaterial to our allegations whether Sparboe ultimately made or lost money in 2020," John Stiles, deputy chief of staff in the AG's office, wrote in an e-mail. "We allege they profited to the tune of $2.1 million from their illegal price-gouging to the detriment of wholesalers and Minnesota consumers during the deadliest pandemic in a century."

The industry's reliance on the Urner Barry price quotes spurred a number of lawsuits against egg producers during this tumultuous period.

Texas sued Cal-Maine Foods, the nation's largest producer of shell eggs, in April 2020 under similar allegations. The Texas judge dismissed the case. New York Attorney General Letitia James last year filed suit against Hillandale Farms under the same basic premise. Hillandale agreed to donate 1.2 million eggs to New York food banks in exchange for having the case dropped.

In Minnesota, this is Ellison's second suit brought against an egg producer related to pandemic pricing. The state settled a lawsuit last year against egg producer Forsman Farms. The Cokato, Minn.-based company denied the allegations, but agreed to refund its retail customers retroactively for the price increases during the spring 2020 period when Urner Barry prices spiked.