Maybe There Was an Egg Cartel After All(politico.com) |
Maybe There Was an Egg Cartel After All(politico.com) |
I guess the thing I'm confused about is how bidding above market rates for eggs didn't just result in these companies being stuck with a bunch of eggs that they grossly overpaid for? How did the scheme actually work?
I can’t tell from the article if they were bidding on each others eggs or bidding on other farmers eggs and then canceling.
https://www.goodreads.com/book/show/57573604-naked-short-and...
https://www.dtcc.com/products-and-services/clearing-settleme...
No, the price drops at the exact moment the DoJ starts looking into it.
1) Putting in the out of market bid and immediately cancelling so the high bid doesn't get filled. Sometimes they might make this bid in small size so it doesn't matter too much if they do get filled (but this only works if the market is relatively thin or illiquid). Depending on the market, you might be able to put order flags or abuse the matching algorithm to make it less likely to be filled even though your order seems to cross the spread. So for example sometimes people will put in an order, cancel and then place it again so they go to the back of the queue at that level for example.
2) Stuffing the order book lower down with (larger) passive sell orders that will get hit as the market followers start bidding up in anticipation of the price move caused by the very high bid.
I'm not as familiar with the regime in the US markets but in UK/EU markets this behaviour is absolutely market abuse and can result in criminal prosecution and disgorgement of profits.
> they had the ability to create the illusion of [consumer demand] through bids on the surplus exchange for purchases they had no intent of completing
This seems like a system tailor-made for collision. It seems like the consumer protection agency should force changes. Too bad they've been made toothless.
It's a perfectly fine system if the egg producers are using it genuinely, it's only a problem when they start submitting fraudulent bids to accomplish illegal market manipulation.
Elections have consequences. This is one of them.
Which oddly did not increase in price much. I was in a discussion once on a forum and brought up that eggs around me (PNW) were still in the $6 for 18 when everyone else was complaining about $10 for a dozen. Next time I bought eggs, the ones I buy were the same price as always but the normal white eggs were in fact $10 a dozen...
Reported also here by Matt Stoller:
https://www.thebignewsletter.com/p/crime-pays-the-egg-bandit...
> 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 the small market determines the price in the big market. Participants in the small market are also participants in the big market. You can spend a little money in the small market to move the price, which can make you a lot of money in the big market.
“Egg LIBOR was also manipulated” (Paywalled) https://www.bloomberg.com/opinion/newsletters/2026-07-01/egg...
The magic Latin words to ward away CAC farmers[0] are "straight tender-to-tender transaction", aka "you're just moving money around, it's not a real transaction". I am wondering if we need a similar kind of mind-numbing rhetoric to refer to exchanges that are not valid markets: i.e. do not have opposing supply and demand. These exchanges nominally serve some kind of purpose - they balance supply across suppliers - but they should not be allowed to participate in price discovery as they are not a market.
[0] "Customer acquisition costs" refer to any money paid by a business to attract new customers only. A lot of business risk management is put into making sure your customer acquisition costs are not functionally a straight-up discount or giveaway.
Some background for the <1% estimate:
- The fine was for 3M vs a 13B egg market
- The only quotation I could find covering how much the cartel raised prices was "placed bids at a price that was two cents greater" from Matt Levine's piece: https://emailshot.io/p/LKaQi73kHN4uv5sVMUbfSXNQdm3ELgy9j. That's ~1% of the Northwest Large White benchmark price of $5.43
I dunno. It's a weird situation. And eggs are particularly weird because, as the article notes, people are definitely willing to pay more for them; the low prices have less to do with true demand and more to do with competition.
Adam Smith - "The Wealth of Nations"
Settlements instead of jail time will only cause this behavior to continue. Economic white collar crimes need far higher punishments it seems when the only downside is you return only some of the higher profits you made.
There's lime, avocado, milk, oil and corn cartels. Why not eggs?
Seems to me there must have been some new incentive structure in place.
There are a certain group of people who don't know anything unless it is publicized in certain approved outlets, and they are a problem.
edit: and to be less laconic, if these outlets, which are all owned by plutocrats, all collude to simply not report on a story, you can't convince these people of anything.
I'm confused by your aspersions. should or should not Politico have written this piece? and what is this group of people, and what "approved" outlets do you refer to? are they the ones who naysaid the allegations to begin with or the opposite? have the conviction to name those you accuse.
On the other hand, price fixing is relatively easy, and as long as the players don’t get too greedy and don’t leave a paper trail, they’re unlikely to be caught. The only way it usually happens is if there is a whistleblower.
The ADM lysine case years ago also threw a lot of cold water on whistleblowers when the whistleblower ended up getting more jail time than any of the other conspirators.
Anyhow, the fact you even see any successful prosecutions given how hard it is prove, and the paradoxical fact that in some commodity industries, you actually do see decent profit margins tells me that this sort of thing is actually probably very common.
The title uses the word Maybe. What does this mean in legal terms exactly?
Now, turns out, there was actual price manipulation occurring (Read the article. It's clear what was going on. There were text messages of their criminal conspiracy!) Now the headline is sassily saying "hey, maybe there was price collusion!" This use of "maybe" is a common expression of sarcasm.
"It sure looks like there was an egg cartel after all" would give the same rhetorical effect but be much clearer.
However, specialty eggs sold to consumers rather than businesses will be much more elastic, and thus there will be much less price change with supply changes.
At least that is my understanding of the way the scale is managed.
> On Wednesday, Hickman saw evidence that Urner Barry was taking in data that would lower prices — “pull the market down,” in the words of one executive — and goaded his erstwhile competitors to respond. “As a group,” the executive followed up, “we need to bid like they vote in Chicago, early and often.”
So while they were actively breaking the law, colluding to screw over the free market, they soothed themselves with jokes about non-existent voter fraud.
They stopped this particular instance of it after the horse already left the barn and did nothing to dissuade future anticompetitive collusion.
Story goes that Tyson's chickens were becoming larger and larger and thus Tyson wanted more money.
Costco wants to keep the chicken at $5, so they starter their own plant.
If you live near a Costco, you can. The one near me is opening in a week, and I can't wait.
So she can lose more lawsuits related to her anti-silicon valley obsession? I'd rather get someone who is actually objective and takes a holisitic look at every industry.
Her blinders kept her from focusing on truly monopolies and anti-trust behavior like cable and broadbrand providers, regional hospital systems, etc.
I think you have blinders on because she challenged both those groups.
The link you posted doesn’t support this claim.
Adam smith was hostile towards monopolies (which your link refers to - nothing to do with price fixing although the conclusion is the same) and his critiques being very apparent throughout Wealth of Nations. This is a common opinion with proponents of free markets.
So what specifically about capitalism makes this a "natural consequence"?
The Soderbergh film The Informant! starring Matt Damen is about that story.
Now Whittacre was crazy and unstable, but what the DOJ did by giving him a bigger sentence for the embezzlement than the heads of ADM that he made the case against IMO sent a message that cooperating with the government on a price fixing case is not going to help you.
What the story really says IMO also is that one of the only ways for the government to actually get enough evidence to prosecute these cases is to have someone who is part of the conspiracy that has committed some other crime, and the feds can flip them. That's not going to happen too often.
Ultimately the government also proved that ADM was also part of a completely separate citric acid price fixing cartel involving different players, but the MO was exactly the same mustache twirling crazy conspiracy theorist's dream of the players sitting down together in a hotel conference room dividing up the market.
"Whitacre was sentenced to nine years in federal prison for embezzling $9.5 million from ADM at the same time he was assisting the federal price-fixing investigation."
Not that I trust Wikipedia, but I think if the common narrative is wrong it'd probably behoove you to pre-empt it because anyone who looks it up is going to come away feeling deceived by your statement as written.
Sadly, changing headlines won't solve functional illiteracy, in this case, the belief that the headline is the story.
Efficient markets are impossible without regulation.
I think efficient markets and unregulated/totally-free markets are separate dimensions, no?
Free markets are great but to really work they need to come with competition enforcement (including total M&A bans in high risk industries), strong unions, support for worker ownership and a tax structure that rewards productive investment instead of executive payouts. Market socialism instead of capitalism.
In this case it looks like the price-setting market was the spot market for excess eggs but that market was a small percentage of the overall egg market: the majority of eggs are sold in private, years long contracts that are negotiated to adjust to the prices in that small excess egg market. The vulnerability of this kind of market to manipulation is obvious.
There was also some spoofing which apparently also affected the actual prices because the egg market index was not as sophisticated as stock market indexes are.
If there's actual collusion: sure, that's bad! But to be clear, this is not the total solution to the egg price puzzle; we don't know the extent to which this impacted the market.
I guess I just don't like the idea that every price spike is read as greed, because you lose the ability to tell cartel behavior from a supply shock, and actual bad behavior gets less scrutiny, not more. I'm seeing it in this thread: capitalism bad, republicans bad, khan good, etc. Perhaps I did the same thing in the opposite direction.
The issue is not the complaining, it’s the illegal behavior.
As you probably know the $1.5 hotdog is made possible in part by raising prices on the other menu items.
An economist would say profits go to zero if markets are really free. Like if there were no barriers to entry and consumers chose purely on price firms would keep entering and would always be incentivized to lower prices to get the sale.
There are barriers that are natural, like "I already have a relationship with vendor A", or "I really enjoy brand B", "I'll have to invest a lot of money to start this business and I won't do it if it seems unlikely I'll make a profit", etc. Then there are barriers like "we have a patent on this technology", "we own a copyright on this movie", "we control the distribution channels", "we pass laws to get keep out competitors."
Business is all about finding ways to beat the economic constraints and ensure you get a profit!
The best case you can make for our system, in my mind, is that there is competition so that vendors have an incentive to provide good products and services at fair prices. Sure, there has to be enough profit to attract investment, but our system works better for all of us when regulation encourages competition.
The canonical example is oil. It costs about $3 to pull a barrel of oil from the ground and pipe it to port in the best oil fields of Saudi Arabia. OTOH, Canadian tar sands cost $50 to pull out of the ground and another $10+ to get to port. During normal times the natural price of oil is ~$60.
Avoiding those outcomes while attracting is steadily growing number of protesters, with the most recent attracting 8 to 9 million is in itself a huge accomplishment. Way too big to ignore and within reach of overwhelming numbers.
Which is to say you could've picked a better example than M4A. Holding that up as a minimum expectation is hardly radical.
I'm not commenting on whether it's radical, just that if they had the choice between something like the ACA and nothing, many in these groups would rather have nothing. In fact, many would argue (as they would against other things they consider "incrementalism") that anything less than their demands would actually be detrimental somehow. Very much in opposition to "don't let the perfect be the enemy of the good". This is exemplified in the whole M4A "force the vote" nonsense.
It's strange to ignore all of the actual criticisms, such as that they are protests with absolutely no demands, and that they're arranged by Democratic Party insiders using spam farms. The reason they're called "No Kings" is because nobody knows what that's supposed to mean. It was consciously concocted as an alternative to fighting the "oligarchs" as Sanders constantly said, because Democrats support oligarchs.
> with the most recent attracting 8 to 9 million is in itself a huge accomplishment.
It's not. They're just faithful movement Democrats walking together in the street trying to figure out different ways to yell "fuck Trump." They're a mockery of protests, they're just extremely ineffective marketing.
They wouldn't be tiresome if they were easy to answer for you. Accusing people of just complaining about people and things not being "perfect" is a sign of somebody who doesn't even have a dishonest argument to make, so they're resorting to making no argument at all, and instead calling you a snob.
> they're arranged by Democratic Party insiders using spam farms
Ah yes, the tried and true "they are paid protestors" shtick. Yawn.
> The reason they're called "No Kings" is because nobody knows what that's supposed to mean.
It's very simple - Trump acts like a king, wielding his power however he wants while ignoring any checks and balances. People are very much against that for obvious reasons.
> because Democrats support oligarchs.
curious what your thoughts are on Elon Musk and DOGE
> trying to figure out different ways to yell "fuck Trump."
Yea there's no reason why anyone would have legitimate issues with Trump as a president.. He certainly doesn't provide new ones on a daily basis
The only reason anyone has any pleasant feelings about ACA is because a Medicaid expansion was passed at the same time. Of course I would prefer nothing. ACA stopped the momentum for M4A, as it was designed to do. Forcing the vote was a litmus test that Democrats purporting to understand this failed.
The problem is in the old days we had a fake "insurance". This wasn't a problem with cheapskates, but with how the industry worked. Companies would offer a plan for a little while, only let healthy people in, premiums were reasonable. Then they would offer something a tiny bit different, give it a new name. As time went on the people on the old plan would develop health problems, premiums were calculated based on what THAT PLAN had to pay out, so premiums went up. Healthy, jump ship to the new one. Not healthy, you can't. The old plan would soon go into a death spiral and you would be uninsured.
Thus anyone with a chronic health problem was stuck.
And they're trying to bring back the old days. Allow other health insurance to be sold, the healthy people will jump to it and the ACA will death spiral.
We did get the unexpected result of exposing the large number of people with "insurance" that was basically a scam. A lot of people didn't know they had policies that had insanely low limits or the like. I'm thinking of a post from back then, a student health plan that had gone up like 10x, "where's the difference?" And a bunch of people who couldn't understand even when I pointed out how the cheap version was effectively worthless for anything that needed more than a doctor's visit.
I remember WHY the Heritage foundation put together their plan. It was cause Hillary Clinton dared, as first wife, put together a plan for single payer. Republicans howled at it nonstop with complaints of government death panels, and you guessed it, China.
That was also back when republican thinktanks actually put together plans. Terrible ones, sure, but actually had plans, rather than "concepts of a plan" (trumps own words).
Of course, Romney ran with it. It was, as you guessed it, terrible for Massachusetts. And surprise surprise, when the black guy speaks for it it turns into extreme hyper-communism... but it was really just garden variety racism by republicans. But now, we have for-profit insurance death panels.
And no, shlant, when your form of "compromise" entails in a one-way ratchet and your control is whether its slow or fast and not reverse, its not a compromise. Blow this shit up. Plenty of us are done with your idea of compromise oro 'reaching across the aisle' ala obama. It has never worked, since Reconstruction. Just gets worse and worse.