USDA and Agribusiness Cartel Plot to Destroy a Small Business
A bipartisan bill was just introduced by Senators Cory Booker (D, NJ) and Mike Lee (R, UT) aimed at preventing federal programs that were established to promote sales of agricultural products from being illegally used to attack competitors and influence public policy. The Commodity Checkoff Program Improvement Act of 2016 is a reaction to the discovery last year of an egregious conspiracy between the American Egg Board and a U.S. Department of Agriculture official to destroy a small company producing an eggless vegan mayonnaise.
Documents released last year under the Freedom of Information Act revealed that the American Egg Board, a compulsory cartel of egg producers supervised by the USDA, attempted to destroy small start-up Hampton Creek, producer of Just Mayo. The Egg Board is one of several commodity checkoff programs that are designed to promote commodities such as eggs, beef, pork, mushrooms and soy. These programs are funded by mandatory fees levied on all producers of the commodity — whether they wish to participate or not — and their budgets and activities are supervised by USDA. The boards are legally barred from using their funds to attack competitors or influence public policy.
When Just Mayo appeared for sale on the shelves of the the Whole Foods grocery chain in 2013, Joanne Ivy, the president of the Egg Board, sounded the alarm to fellow cartel members via email, calling the new product "a crisis and major threat to the future of the egg product business" and asking:
What are we doing at AEB with regard to this competing product? We need to have an answer.
Several months later, in January 2014, a USDA official wrote to Ivy advising that Just Mayo's labeling claims be challenged with the FDA. Ivy approved and in August 2015, the FDA issued a warning letter, which listed violations such as making unauthorized health claims and misleading consumers by juxtaposing the image of an egg and the term "mayo" on the label. The AEB also hired a "sustainability contractor" to lobby Whole Foods to remove Just Mayo from its shelves. Whole Foods did not comply. Finally, the AEB worked covertly with Unilever, the $150-billion consumer products giant and the maker of Hellman's Mayonnaise, to quash Just Mayo. Unilever filed a suit against Hampton Creek alleging that Just Mayo was not really mayonnaise because it was eggless. The suit was withdrawn by Unilever a few months later.
Meanwhile, a food company executive and an executive of the Egg Board joked in emails about arranging a mafia-style assassination of Jeff Tetrick, the CEO of Hampton Creek. In December 13, 2013, AEB executive Mitch Kanter jested:
In the meantime, you want me to contact some of my old buddies in Brooklyn to pay Mr. Tetrick a visit?
Almost a year later, Mike Sencer an executive of food company Hidden Villa Ranch cracked:
Can we pool our money and put a hit on him?
While these were jokes, the nefarious plot by the USDA and the Egg Board to use the full might of the US government to destroy Mr. Tetrick's small business was very real. As Matthew Penzer, an expert in checkoff program law, put it:
Hampton Creek was being attacked by its own government.
Unfortunately, the bill introduced by Senators Booker and Lee is a futile gesture that will not ensure that commodity checkoff programs are not illegally misused by the industries involved. For as economists and historians have shown, in case after case since the 1880s, government regulatory agencies were invariably "captured" by the industry they are supposed to regulate and were induced to assist the industry in setting up compulsory anti-consumer cartels. The real problem is not that the laws are too vague in specifying the functions and purposes of these agencies and their programs, but that the agencies exist at all. For it is the US government itself through its legal power to regulate and intervene in economic activities that is the fount of all monopoly privileges, corporate welfare, and anti-consumer practices. The real solution is to abolish the Agricultural Department and all other regulatory agencies and restore a regime of strict laissez-faire capitalism in which consumers alone determine the kinds, quantities and qualities of goods and services that are produced by their purchasing decisions on free and competitive markets.