Dairy Processor News

Alleging monopolization, Northeast farmers sue processors

October 13, 2009
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A class action, antitrust lawsuit was filed Thursday on behalf of Northeast dairy farmers against the Dairy Farmers of America and Dean Foods Co. in U.S. District Court in Burlington, Vt., according to lead attorney Benjamin Brown of Cohen Milstein.

The suit charges DFA and Dean each with monopolizing a level of distribution of fluid milk in the Northeast and forcing dairy farmers to join DFA or its marketing affiliate Dairy Marketing Services to survive. DMS and milk processor HP Hood also were named in the suit for aiding DFA's and Dean's monopolization and, in the case of DMS, for price-fixing with DFA.

Northeast dairy farmers blame DFA, the nation's largest cooperative, and Dean, the nation's largest processor, for lowering the price they receive for fluid milk by making DFA and its affiliates the exclusive suppliers of milk to Dean and Hood. Together the two processors bottle about 90% of the fluid milk in the Northeast.

"Monopolization and price-fixing have contributed to the milk-pricing crisis dairy farmers -- especially small, family-owned dairies in the Northeast -- face today," Brown says. "Many dairy farmers have been forced to choose between joining DFA or DMS or going out of business. If they join, they have to pay to market to their own customers at prices fixed by DFA, DMS and other cooperatives. Meanwhile, major milk processors Dean and Hood, which [are] part-owned by DFA, enjoy the economic benefits."

The DFA, DMS, Dean and Hood domination of the milk distribution system resulted from an unlawful series of contracts, agreements and understandings that defied restrictions that the U.S. Department of Justice and various state attorney’s general offices imposed, Brown says. 

The suit, Alice H. Allen, et al. vs. Dairy Farmers of America, which seeks both monetary damages and injunctive relief that could have far-reaching effects on the American dairy industry, charges that:

·    DFA and others engaged in a string of unlawful mergers, acquisitions and closures of bottling plants -- many of which violated conditions imposed by the DOJ -- to strengthen their control of the fluid Grade A milk market.
·    Defying the explicit instructions of the DOJ, DFA entered into unlawful agreements with Dean Foods, which controls approximately 70% of the Northeast market for bottling fluid Grade A milk, and Hood, which controls approximately 20% of the market. This ensures that DFA and DMS would supply virtually all the fluid Grade A milk bottled in the Northeast by Dean and Hood.
·    Independent dairy cooperatives and independent dairy farmers have been forced to pay membership fees and dues to join DFA or DMS so they can obtain access to bottling plants. Access to such plants is the only way they can receive minimum monthly payments on Grade A milk sales set by the United States Department of Agriculture.
·    DFA and DMS suppressed and fixed milk prices for Northeast dairy farmers, thus increasing the profits of Dean and Hood and permitting DFA's management to divert revenue from farmers to themselves and outside business partners.

"At virtually every stage of this conspiracy, the DOJ or state attorney’s general intervened to place conditions on major transactions to preserve competition," Brown says. "Yet time and time again, DFA and others circumvented and thwarted the conditions imposed by DOJ and state antitrust authorities. Now, these Defendants are using their resulting market power to deny farmers the benefits of competition. This has got to stop, which is why we filed this lawsuit on behalf of all Northeast dairy farmers."

For more information about Cohen Milstein, visit www.cohenmilstein.com

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