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DFA and Dean Sued for Price-Fixing

DFA and Dean Sued for Price-Fixing
Class-action case filed in Vermont for Northeast dairy farmers.

On Thursday, a class action, antitrust lawsuit was filed in U.S. District Court at Burllington, Vt., against Dairy Farmers of America and Dean Foods Company. The suit charges DFA and Dean with monopolizing fluid milk distribution and forcing Northeast dairy farmers to join DFA or its affiliate Dairy Marketing Services to survive, according to lead attorney Benjamin Brown, of Cohen Milstein.

DMS and milk processor HP Hood also were named in the suit; Hood, for aiding in the monopolization and, DMS, for price-fixing with DFA.

The Alice H. Allen, et al. vs. Dairy Farmers of America suit alleges that DFA, the nation's largest cooperative, and Dean, the nation's largest processor, lowered the price they receive for fluid milk by making DFA and its affiliates the exclusive suppliers of milk to Dean and HP Hood. Together, the two processors bottle about 90% of the Northeast's fluid milk.

"Many dairy farmers have been forced to choose between joining DFA or DMS or going out of business," says Brown. "If they join, they have to pay a fee to continue to market to their own customers at prices fixed by DFA, DMS and other cooperatives. Meanwhile major milk processors Dean and HP Hood, part-owned by DFA, enjoy the economic benefits."

The suit alleges unlawful series of contracts, agreements and understandings that defied restrictions that the U.S. Department of Justice and various state attorneys general offices imposed. It seeks monetary damages and injunctive relief that could have far-reaching effects on the American dairy industry. Specific charges include:

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.

Defying explicit DOJ instructions, DFA entered into unlawful agreements with Dean Foods, which controls approximately 70% of the Northeast market for bottling fluid Grade A milk, and HP Hood, which controls approximately 20% of the market. This ensures that DFA and DMS would supply virtually all of the fluid Grade A milk bottled in the Northeast.

Independent dairy cooperatives and independent dairy farmers have been forced to pay membership fees and dues to join DFA or DMS for access to bottling plants. Access to such plants is the only way to qualify for minimum monthly payments on Grade A milk sales set by U.S. Department of Agriculture.

DFA and DMS allegedly suppressed and fixed milk prices, thus increasing Dean and HP Hood profit. It also permitted DFA's management to divert revenue to themselves and outside business partners.

"At virtually every stage of this conspiracy, the Department of Justice or state attorneys general intervened to place conditions on major transactions to preserve competition," says Brown. "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," he concludes.

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