Arizona Restaurant Owner Sues Over Costly Cage-Free Egg Mandate

The Arizona Department of Agriculture says all eggs sold must be cage-free, a power that according to the lawsuit belongs to the state legislature.

An Arizona poultry regulation is increasing egg prices for restaurants and consumers. A Tucson restaurateur is suing, asking courts to declare the rule invalid.

In April 2022, the Arizona Department of Agriculture (AZDA) enacted a rule to shift the state to all cage-free eggs by 2025, based in part on "the public's growing concerns about animal welfare." Beginning in October 2022, "all eggs sold in the state must come from laying hens" with "at least one square foot of usable floor space per laying hen." Beginning in 2025, all hens in the state must be housed in such a manner. It was the tenth state to enact such a mandate.

Conditions in traditional egg production facilities can be miserable, with hens crammed into stackable cages smaller than their wingspans. Unable to move, they are forced to eat, sleep, and lay eggs in their own filth.

In 2017, responding to public pressure, businesses representing 70 percent of U.S. egg demand pledged to go cage-free within a decade.

According to the U.S. Department of Agriculture (USDA), "cage-free" means that birds are "able to freely roam a building, room or enclosed area with unlimited access to food and fresh water during their production cycle." This differs from "free-range," which includes all cage-free criteria plus "continuous access to the outdoors."

No system is perfect. Cage-free facilities have higher rates of death and injury for birds as well as higher potential for disease and infection. And the cost to go from a stacked-cage system to cage-free is expensive, averaging around $40 per hen; in August 2022, the U.S. averaged 371 million egg-laying hens, according to the USDA. Poultry industry estimates have put the cost of switching the industry to cage-free at $6 billion or more.

A lawsuit filed last week by the Goldwater Institute, a free-market public policy organization, and the Pacific Legal Foundation, says the AZDA overstepped its authority. The groups note in their complaint that any such regulation must come from the Arizona Legislature, "which has the exclusive power to make laws."

In its rule, the AZDA claims "the express authority to regulate 'poultry husbandry' for eggs produced and sold in Arizona" under state law. In response, the complaint notes that the law says nothing about eggs or their sale.

Goldwater Institute attorney John Thorpe told Reason that even if the legislature had intended for the AZDA to have such authority, it couldn't. Under the Arizona Constitution, "it's unconstitutional to give that kind of sweeping delegation to an agency to essentially create new policies or to go in a new direction with regulation outside of the purpose that they've been tasked with."

The lawsuit was filed on behalf of Grant Krueger, a Tucson restaurateur, and three restaurants he owns and operates. Krueger told Reason that between those three restaurants, he purchases "well over 100,000 eggs a year," and since switching to cage-free eggs to comply with the new rule, his costs have "doubled if not tripled." As costs are passed on to diners, Krueger worries "that there is some degree of elasticity in demand and that ultimately consumers will choose with their wallets and potentially dine out less often."

Even before the new rule, egg consumers were struggling nationwide. While inflation has been persistent for the last couple of years, the retail price of a dozen eggs more than doubled between January 2022 and January 2023. The dramatic spike came as the result of an avian flu epidemic that devastated the egg-laying hen population; prices have since fallen, almost to their previous levels.

But prices aren't Krueger's primary complaint; even if a ban had come from the legislature, he says he would prefer it. "However the law would have been crafted from the legislators of the 30 legislative districts that make up Arizona, it would be more reflective of some of these legislative districts that have a strong agrarian focus to them. So, the lawmakers that would make the law would probably be substantially more sensitive to their constituencies' needs rather than it just being made by bureaucrats in Phoenix."

"It's just as much an issue of separation of powers" as about costs, Krueger says, and "ultimately, laws that are put upon us should be done by the legislative branch of the government, that more accurately reflect the people who have chosen those electors to make those decisions for them. It's the core of representative democracy."