If I ask you to picture a frozen potato product, I’m guessing many of you will see tater tots, those little deep-fried chunks of grated potato. Others may see French fries, plain or crinkled. Still others, hash browns.
Unless you’ve been following business or legal news, you may not know that four potato conglomerates have been charged with price-fixing (a violation of the Sherman Anti-Trust Act) in two separate private court filings in Illinois. Missing in action: the U.S. Department of Justice, which is responsible for enforcing anti-trust law.
Those four firms sell frozen potato products to restaurants like McDonald’s and Burger King as well as private labels like Costco and Kroger. What you may not realize is that the top brand name found in your grocery store is owned or manufactured by one of those four multinational corporations.
Collectively, these four global corporations control, on both retail and wholesale levels, at least 97% of the $68 billion annual frozen potato products market in the U.S. Lamb Weston Holdings alone controls 40% of the market. J.R. Simplot ranks 47th on the Forbes list of largest private companies.
Redner’s Markets, Inc., a Pennsylvania grocer, filed its lawsuit in Chicago, as did the second suit. Redner’s claims that the four colluded to raise prices 47% from July 2022 to July 2024, despite significantly lower product costs. The second law suit labels the four a “cartel.” This damning chart is part of both filings.
Clearly, prices charged customers jumped abnormally in 2022, moving dramatically upwards as the price of raw materials (the potatoes) plummeted. The beneficiaries are the conglomerates, not the contracted potato producers.
In 2023, the former VP of International at Lamb Weston acknowledged that Lamb Weston, J.R. Simplot, and McCain “have never ever seen margins this high in the history of the potato industry.” The reason for this success was, as he explained, that Defendants “absolutely” have “no incentive to fight that hard for each other’s share”; instead, they are all “behaving themselves” in order to maintain high margins.
The lawsuit claims that “in April 2022, one restaurant owner remarked that it was ‘[a]mazing how all of the major suppliers for French fries and the like are all raising their prices at the same time and by the same amount’.”
Restaurants are caught in a bind because “french fries are the most profitable food item for restaurants, and diners expect to see them on the menu.” How much can the restaurateur raise menu prices to offset the wholesale price increase without driving away customers? I can attest to shrinkflation at my local Chick-fil-A: those cardboard boxes aren’t bursting with waffle fries anymore.
The second court filing makes similar claims. Alexander Govea of Winchester, VA, is an “indirect plaintiff purchaser.” In other words, Govea has filed a class action lawsuit on behalf of every retail customer who has brought frozen potato products.
Where have these profits gone?
At Lamb-Weston, the five C-suite salaries range from $2,672,000 to $7,036,000. Simplot is privately held, so there’s no forced public record.
Sylvain Charlebois, a professor at Dalhousie University in Canada “believes the companies will settle out of court to avoid the negative publicity if the allegations are largely true.”
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