Restaurant Owner Uncovers How State Regulations Inflate Egg Prices

A Tucson restaurant owner has been granted the right to legally challenge new state regulations aimed at improving the treatment of laying hens. Maricopa County Superior Court Judge Scott Blaney ruled on November 6 that Grant Krueger, who operates three restaurants, is directly impacted by these new rules.

Judge Blaney noted that Krueger is not merely an average consumer, as the new regulations impose significant costs on egg producers. These costs could ultimately affect consumers like Krueger, who claimed, “The rule in question will have material impact on the price of eggs that plaintiffs purchase.” With this ruling, Krueger can sue for damages on behalf of his establishments: Union Public House, Reforma Modern Mexican Mezcal + Tequila, and Proof Artisanal Pizza and Pasta.

However, the judge made it clear that Krueger must provide concrete evidence to support his claims. He denied Krueger’s request for a blanket invalidation of the regulations, setting the stage for a trial yet to be scheduled.

The regulations at the center of this dispute were enacted by the state Department of Agriculture in 2022. They mandate that eggs sold in Arizona come from hens housed in cages with a minimum space of one square foot per hen, doubling the previous standard. Starting in January, all laying hens must be kept in a cage-free environment.

The state estimates that these changes will add between a penny and 3.25 cents to the price of each egg. Given that Arizonans consume, on average, over 270 eggs annually, this could mean a cost increase of up to $8.79 per person.

In contrast, Krueger argues that his operations are not typical. In a recent year, he purchased 578 cases of eggs, totaling 104,400 eggs, which could result in an annual cost increase of approximately $3,380.

The burden now lies with Krueger and his legal team from the Goldwater Institute to demonstrate this financial harm in court. Opposing counsel, Assistant Attorney General Joshua Whitaker, asserts that there is no substantial evidence that the new regulations have impacted egg prices. He contends that the costs might be absorbed by producers, thus not affecting the retail prices.

Moreover, the regulations apply exclusively to farms with over 20,000 laying hens. In Arizona, only two entities meet this criterion, Rose Acre Farms and Hickman’s Family Farms. Whitaker emphasized that these firms have already begun adopting cage-free practices, suggesting that any cost implications for Krueger may stem from their decisions rather than the new regulations.

Still, Krueger’s attorney, John Thorpe, pivots the argument towards consumer rights, asserting that regulations infringe upon the right to buy and sell without undue restrictions. He highlighted that these rules not only restrict Arizona producers but also affect out-of-state operations, thereby limiting the availability of potentially less expensive eggs.

Thorpe invoked a precedent where consumers successfully sued the FDA over raw milk sales, arguing similar rights apply here. However, Whitaker countered that unlike the FDA case, the regulations do not outright prevent Krueger from purchasing eggs; they merely alter the available options.

Additionally, Whitaker contended that the regulations could inadvertently result in cost savings for consumers. He pointed to a prior ballot initiative advocating for cage-free eggs, which would have imposed stricter penalties. The current regulations, he argued, might represent a more measured approach, providing producers with additional time and potentially less financial strain.