An antitrust lawsuit was filed in North Carolina federal court this week by grocery retailer Food Lion and the Maryland & Virginia Milk Producers Cooperative Assn. Inc. challenging Dairy Farmers of America’s (DFA) recent acquisition of more than 40 milk processing plants from bankrupt Dean Foods Co. The $433 million transaction, which was recently approved by the U.S. Department of Justice, pending certain divestitures, established DFA as not only the largest milk producer but now also the largest processor in the U.S.
The lawsuit alleges that for the past two decades, “DFA has rapidly consolidated and dominated the market for the supply of raw milk not by competing on the merits but through unlawful conduct and anticompetitive agreements through which it has gained near-complete control over the purchasing of key nationwide milk processors.”
This campaign, the lawsuit states, “has allowed DFA to transform itself from a modest regional dairy cooperative into the Standard Oil of the modern dairy industry.”
Furthermore, the lawsuit alleges that Dean Foods and DFA forged a partnership through “a corrupt bargain” entered into at the time of a prior merger between Dean and another dairy processing giant in order to avoid DOJ scrutiny.
“Together, these two dairy conglomerates have suppressed competition, raised market concentration and bolstered each other’s market power ever since, to the detriment of independent dairy farmers at one end of the milk supply chain and customers at the other,” the suit alleges.
According to the lawsuit, harm will be particularly acute in the areas surrounding milk processing plants in North and South Carolina, where the Maryland & Virginia Milk Producers Cooperative Assn. is DFA's only significant remaining competitor for the supply of raw milk, and Food Lion is one of the largest retailers selling milk to consumers.
The plaintiffs are requesting that the court grant a preliminary injunction until DFA divests at least one of the Dean facilities in the Carolinas to “a viable, qualified and independent purchaser unaffiliated with DFA.
“Without such remedies, competition in the raw and processed milk markets in the region will be lost forever,” the lawsuit states.
In a statement to Feedstuffs, DFA said it is aware of the lawsuit but added that the transaction has been approved by the bankruptcy court and, after a rigorous review, by DOJ.
“We believe these claims are meritless and perplexing, and we will aggressively defend ourselves,” said Monica Massey, executive vice president and chief of staff for DFA. "Our primary focus in acquiring these facilities has been, and continues to be, to maintain milk markets and minimize disruption to the dairy industry.”