The Third Circuit’s Scrambling of Precedent in Processed Eggs

In 2020, the Third Circuit upheld a judge’s decision that the rule of reason applied to a conspiracy among egg producers to limit production of eggs by agreeing on how they engaged in production and the disposition of some eggs. A jury had found that the agreement existed and that its intent was to restrain production, but based on the instructions from the court, it also found that these restraints were “reasonable.” On its face, this decision upends more than a century of case law holding that naked restraints of competition among competitors are illegal per se. One of the restraints involved an agreement to increase the size of the cages used for the hens laying eggs. The courts appear to have concluded that an agreement among competitors to increase cage size could be a lawful cartelistic conspiracy, despite the jury finding that the intent was to restrict production. The jury instructions themselves conflated the issues of whether there was a conspiracy to restrain the production of eggs and the issue of whether the conspiracy had in fact caused any reduction in production. Hence, although the Court of Appeals decision provides defendants a basis to claim that any justification for collusion should be considered, the specifics of the case suggest that the jury may have found that the conspiracy was ineffective and so caused no harm. Such a conclusion would be consistent with existing law.