Sugar Companies Accused of Price-Fixing
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Bakeries, restaurant groups, and pharmaceutical companies have filed nearly two dozen antitrust class actions this year against sugar companies. The latest, filed two weeks ago, claims that dominant sugar makers including United Sugar, Domino, and Cargill illegally coordinated price hikes by sharing sensitive pricing and production information.
These private suits build off of documents revealed by the Department of Justice in their attempt to block United Sugar’s 2022 takeover of Imperial Sugar. While the DOJ’s case against the deal failed in court, this wave of price-fixing claims suggests that sugar markets are dangerously consolidated.
“You read this [lawsuit] and the [court’s] decision becomes even harder to understand,” says antitrust law professor Peter Carstensen. “This is an industry that needs more competitors, not less.”
The sugar industry has a long history of antitrust violations. Sugar is a highly uniform product with inelastic demand, which means that buying habits do not change much with price. Sugar companies cannot easily boost their sales volumes by lowering prices, and likewise, they can raise prices without losing customers. This dynamic incentivizes sugar manufacturers to collude and raise prices rather than fight for sales with price competition.
In the 1930s, large sugar refiners formed a trade association, the Sugar Institute, through which members agreed to share their pricing and contract terms. The Supreme Court upheld that the Sugar Institute restrained trade. Later in the 1970s, the DOJ issued a consent decree banning major sugar companies from price-fixing or communicating about their future prices, directly or through a broker.
In 2022, the Justice Department tried to prevent further consolidation in sugar refining by challenging the merger between Imperial Sugar, a subsidiary of commodity giant Louis Dreyfus, and United Sugar, the second largest marketer of sugar in the U.S. Antitrust enforcers warned that this deal could make price coordination easier and diminish head-to-head competition in the Southeast.
The DOJ ultimately lost, in part because a veteran economist from the Department of Agriculture, Barbara Fesco, testified that the merger would produce efficiencies that could lead to lower sugar prices. Fesco testified that she personally trusted the executives of Imperial Sugar and United Sugar. “Knowing these people as long as I have,” she said in her testimony, “I had high faith that [the merger] was good.”
While the DOJ could not convince a judge that the deal would increase sugar prices, their trial did raise red flags for private antitrust plaintiffs’ attorneys. Specifically, the DOJ’s investigation unearthed e-mails and other internal documents suggesting that sugar companies used an intermediary consultant and a data firm to tell competitors about price increases and match their pricing. These documents helped form the base for dozens of new class action lawsuits.
The most recent suit, filed two weeks ago, follows largely the same fact pattern as others filed earlier this year. It charges five sugar companies, their subsidiaries, and a data sharing company, Commodity, with conspiring together to raise sugar prices. The sugar companies, which include major sugar beet cooperatives, Cargill, United Sugar, and the American Sugar Refining group behind brands such as Domino and Redpath, represent at least 68% of the U.S. sugar market, though likely more.
These companies gave Commodity “competitively sensitive” information or information that ordinarily companies would not want their competitors to know. In this case, that includes their current and future pricing, contract prices, sales volumes, crop yields, and sold positions, which together paint a picture of the future sugar supply and their pricing strategies. “There is no innocent, economically rational reason for the Producing Defendants to share this competitively sensitive information,” the complaint argues.
Critically, Commodity did not share any of this information with sugar buyers. E-mails show that sugar executives relied on one Commodity employee, Rich Wistisen, to quickly collect and share information between competitors. This helped sugar companies negotiate contracts without undercutting each other’s prices since buyers could not credibly threaten to find a lower price with a competitor. One VP of sales for United testified that he “could better avoid these destructive situations” with buyers when he “had better information about what [his] competitor’s actual prices were.”
This price coordination contributed to a dramatic rise in U.S. sugar prices, the case alleges. According to the Bureau of Labor Statistics, the average retail price for sugar in the U.S. grew from 59 cents per pound in 2019 to 92 cents per pound in 2023. This was also a period of overall food inflation and weather disruptions that hurt global sugar production. However, the U.S. relies heavily on domestic sugar due to tariffs on imports. The complaint argues that U.S. sugar supplies did not decline during the alleged conspiracy period. According to USDA data, U.S. sugar production remained remarkably stable from 2020 to 2023 and even increased from 2019 to 2020.
United Sugar and Cargill deny these price-fixing allegations.
These cases mirror recent claims that meatpacking companies used a data broker, AgriStats, to share detailed information about their production and pricing to coordinate supply restrictions, raise prices, and lower prices paid to farmers and workers. Meatpackers have paid hundreds of millions of dollars to settle these claims. Former DOJ antitrust attorney and law professor, Peter Carstensen, who has studied sensitive information exchange, suspects sugar companies will settle as well.
“The evidence they’ve got of the information exchange [between sugar companies] is far worse than anything AgriStats did,” Carstensen says. “This is very direct, disclosed information about ‘Company A is doing this,’ and ‘Company B is doing this.’”
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