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The Egg Bandits Made a Thousand Times the Fine They Just Paid for Price Fixing

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Re: The Egg Bandits Made a Thousand Times the Fine They Just Paid for Price Fixing

#201

Post by phil21 »

stickfigure wrote: post #54
Taronar wrote: post #8

Things like this mainly occur in markets with little competition, killing of small business causes issues like this. Much of our grievances are caused by our high level of market concentration.

This was addressed by Matt Levine in today's Money Stuff. The problem was not the presence or lack of competition, it was a technical failure of the market structure. Matt: This is a familiar story and you probably know the ending. There’s a big market (egg producers selling eggs to supermarkets etc.), and there’s a small market (egg producers selling extra eggs to each other on an electronic exchange). The price in…

What’s weird is the big market is pegged to the small market?

What is the point of signing a direct supply contract if you are just gonna be paying spot prices anyways? I suppose guaranteed supply priority?

Re: The Egg Bandits Made a Thousand Times the Fine They Just Paid for Price Fixing

#202

Post by GetTheFacts »

JKCalhoun wrote: post #138
throwway120385 wrote: post #137

Earlier quoted context omitted.

The major egg supplier for most of the grocery stores decided not to buy as many pullets to replace the ones they culled from Avian Flu, and then the second and third largest also followed suit. As a result there was a bug supply crunch that coincided with Avian Flu cullings. Unless Biden was there making command decisions about how many pullets to buy that year he had nothing to do with it.

Not disagreeing, but all I heard was Biden-flation (or whatever they called it) was why we needed a new President.

>all I heard was Biden-flation (or whatever they called it) was why we needed a new President.

From whom did you only hear that? Newsmax? The Drudge Report?

Re: The Egg Bandits Made a Thousand Times the Fine They Just Paid for Price Fixing

#203

Post by decimalenough »

autoexec wrote: post #190
decimalenough wrote: post #185

Earlier quoted context omitted.

On its face, this is a normal market response: if demand is unchanged and overall supply goes down, prices go up. The criminal conspiracy part here was manipulating the index prices in tandem so that everybody raised prices in lockstep.

> if demand is unchanged and overall supply goes down, prices go up. How much did supply go down considering that Cal-Maine Foods, Inc is (or at least was) the single largest supplier of eggs in the country? Ultimately their profits increased 718% ( https://www.cnn.com/2023/03/29/business/egg-profits-cal-main... ) which seems unlikely to be explained away by reduced supply. They were price gouging and fixing prices w…

I'm agreeing with you here? All I'm saying is that one company raising prices and raking in profits by itself is not a crime. The key parts here are conspiring with other producers to make sure everybody does the same, and manipulating the index to make it look legit.

Re: The Egg Bandits Made a Thousand Times the Fine They Just Paid for Price Fixing

#204

Post by robocat »

eigenrick wrote: post #168
BrenBarn wrote: post #151

This is the perennial problem in our society with regulation. We're not willing to set the penalties high enough. The penalties need to be absolutely ruinous.

If we jack the financial penalties up, it will just screw over the consumers. We need to send people to prison. Bankrupting the company is an interesting strategy, but I think that'd just result in more consolidation.

Prison is expensive for the state, and in my limited experience prison has rather hideous personal costs (for the individual and their friends and family).

Perhaps can fine the wealthy to pay for their own imprisonment, maybe within a luxury hotel?

Re: The Egg Bandits Made a Thousand Times the Fine They Just Paid for Price Fixing

#205

Post by thephyber »

CGMthrowaway wrote: post #91

I did not realize the egg crisis was found to be price fixing operation. As I recall during the whole thing the news was non-stop about how it was related to broad-based inflation, chicken culling for avian flu, etc. Seems like all that was a lie, or at least merely a half-truth.

Those contributed.

But also, the news isn’t privy to an actual price fixing conspiracy while it’s happening. To the extent that a news org reports on it, it’s because someone within the system grows some ethics (very hard to burn a bridge when it means no more revenue in the industry). It took even the regulators years to build a case for it.

People have long complained about the consolidation of the chicken production chain in the US. Only 2-3 major companies control most of the supply via contracts. The farms are required to follow the terms of the contract closely when raising chickens or risk getting locked out of the major distributors. Post-consolidation, the industry is ripe for abuse.

The combination of very strong contract enforcement and weak regulatory enforcement means the industry is effectively rent-seeking by design. This much was known, but without subpoena power, actual price fixing is just a suspicion.

Re: The Egg Bandits Made a Thousand Times the Fine They Just Paid for Price Fixing

#206

Post by nobody9999 »

everyone wrote: post #153
Taronar wrote: post #8

Things like this mainly occur in markets with little competition, killing of small business causes issues like this. Much of our grievances are caused by our high level of market concentration.

I think perhaps the USA's modern decline right into the toilet is the result of changes made in the 80's, like gutting anti-trust. What we're seeing now is just the visible manifestation of corruption that has been allowed to grow and metastasize since then.

>the result of changes made in the 80's, like gutting anti-trust.

The '90s didn't help a lot either. cf. the repeal of Glass-Steagall[0] which, arguably, did much more to damage the US economy (there's a direct line from its repeal to the 2008 financial crisis) than a lack of anti-trust enforcement.

That said, dismantling anti-trust enforcement (which was pretty hit or miss anyway) didn't help either.

[0] https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_legisla...

Re: The Egg Bandits Made a Thousand Times the Fine They Just Paid for Price Fixing

#207

Post by nxtfari »

arjie wrote: post #87

Wow, well I have egg on my face. I have frequently used this as an example of the "oh so the egg guys got greedy and then got saintly" to parody the idea that price is primarily determined by greed. Welp! Now to see if I can eke out some pride by finding out what percentage of the price fluctuations was due to coordination. > During the 2024 campaign, when Kamala Harris meekly suggested price gouging to tame inflatio…

An important idea I’ve observed true across industries is “prices rise like a rocket and fall like a feather,” meaning that even though price rises are usually genuinely driven, you can bet that once they’re up the involved parties are doing whatever they can to keep them up. Humans are greedy.

More formal reading: https://en.wikipedia.org/wiki/Asymmetric_price_transmission

Re: The Egg Bandits Made a Thousand Times the Fine They Just Paid for Price Fixing

#208

Post by thephyber »

autoexec wrote: post #180
Aurornis wrote: post #166

Earlier quoted context omitted.

The avian flu pandemic started in early 2022. I looked up old news articles and a lot of them are dated February 2022. It really did increase egg prices. The collusion quotes in this article start in October 2022, though it doesn't say exactly when the collusion started. As far as I can tell, avian flu did create a supply shock, which did raise prices. When the avian flu problem started going away, the egg companies…

According to one lawsuit, Cal-Maine wasn't impacted at all by the avian flu, they just jacked prices up 270% anyway while using the avian flu as an excuse. > Meanwhile, in context and during the class period, egg producers like Cal-Maine increased egg prices by as much as 270% in 2023 despite having zero Avian Flu outbreaks in their egg laying hen layers on Cal-Maine affiliated farms ( https://www.classaction.org/new…

“As an excuse” is a weird way of saying “responding to national supply and demand”. 100% of the suppliers who didn’t have to cull all of their chickens raised their prices.

Re: The Egg Bandits Made a Thousand Times the Fine They Just Paid for Price Fixing

#209

Post by lokar »

phil21 wrote: post #201
stickfigure wrote: post #54

Earlier quoted context omitted.

This was addressed by Matt Levine in today's Money Stuff. The problem was not the presence or lack of competition, it was a technical failure of the market structure. Matt: This is a familiar story and you probably know the ending. There’s a big market (egg producers selling eggs to supermarkets etc.), and there’s a small market (egg producers selling extra eggs to each other on an electronic exchange). The price in…

What’s weird is the big market is pegged to the small market? What is the point of signing a direct supply contract if you are just gonna be paying spot prices anyways? I suppose guaranteed supply priority?

If there is (or you think there is) a generally fair and stable price that represents some base, then it’s natural to contract based on that.

It’s near universal for variable interest rate loans.

Re: The Egg Bandits Made a Thousand Times the Fine They Just Paid for Price Fixing

#210

Post by JKCalhoun »

GetTheFacts wrote: post #202
JKCalhoun wrote: post #138

Earlier quoted context omitted.

Not disagreeing, but all I heard was Biden-flation (or whatever they called it) was why we needed a new President.

>all I heard was Biden-flation (or whatever they called it) was why we needed a new President. From whom did you only hear that? Newsmax? The Drudge Report?

Apparently vox populi. A majority of the U.S. must frequent those sites.

(I'm beginning to think some people missed the sarcasm in my earlier posts.)

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