By Patricia Breakey
Delhi News Bureau
DOJ —
Two Franklin dairy farmers and two Vermont farmers have filed a class-action antitrust lawsuit against Dallas-based Dean Foods Co., Dairy Farmers of America and two other groups, accusing them of monopolizing the milk market in the Northeast.
The suit was filed in October in U.S. District Court in Burlington, Vt., by Garrett Sitts and Ralph Sitts of Franklin and Alice H. Allen and Laurance E. Allen of Wells River, Vt., according to court documents.
The suit accuses Dean Foods Company, the nation's biggest fluid-milk processor, and Dairy Farmers of America, the nation's largest dairy cooperative, of "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."
Farmers sell raw milk to processors by going through marketers, such as Dairy Marketing Services. DMS and milk processor HP Hood also are named in the suit.
The class-action suit seeks status to include more than 10,000 farmers in 11 states.
The attorneys for both sides appeared in court in May to argue the merits of their cases and were given four months to file discovery motions.
The 67-page complaint alleges that, through a series of acquisitions, Dean and DFA acquired near monopoly power over the region's bottling plants and processing facilities, basically funneling all the raw milk produced into a single buying entity, allowing the companies to eliminate competition and name their own price.
The Vermont action is the third filed against Dean, the nation's largest dairy processor, since antitrust concerns were raised by dairy farmers who are receiving low prices for their milk.
Dean Foods Co. is now defending three antitrust lawsuits.
On Jan. 22, the Department of Justice, along with state attorneys general from Illinois, Michigan and Wisconsin, brought antitrust charges against Dean Foods in federal court in Milwaukee. The suit challenges Dean Foods' acquisition of two milk processing plants from competitor Foremost Farms, arguing the purchase has undermined competition and left many school districts in the three states with a monopoly milk provider.
The Justice Dept.'s lawsuit seeks to force Dean Foods to sell the dairy processing plants it bought from Foremost Farms.
"The purpose of the department's lawsuit is to restore competition so that schools, grocery stores and other retailers in Illinois, Michigan and Wisconsin, will pay lower prices for their milk," said Christine Varney, assistant attorney general in charge of the Antitrust Division, in a statement.
Dean and DFA are also defendants in a class-action suit filed in 2007 in the Middle District of Tennessee, where thousands of farmers in the Southeast say the companies engaged in price-fixing schemes to lower prices paid to dairy farmers.
Dairy Farmers of America said in a written statement that the suit is "without basis."
"It is disappointing that although Dairy Farmers of America's activities in the Northeast have improved prices for cooperative members and independent producers alike, these charges are being brought against us," the statement said.
As farmers suffer a crisis that has brought the dairy industry "to the brink of collapse," according to the plaintiffs, Dean Foods has enjoyed record profits.
In the company's first fiscal quarter of 2009, gross sales dropped by more than 10 percent over the same time period last year. Net profits, however, soared, from slightly more than $30 million in 2008 to $76.2 million in 2009.
Record profits aren't illegal. But the methods by which Dean Foods has achieved them, according to the class-action suit, violate U.S. antitrust legislation.
The plaintiffs are seeking monetary damages and injunctions on 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 theto 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 percent of the Northeast market for bottling fluid Grade A milk, and Hood, which controls approximately 20 percent of the market. This ensures that DFA and DMS would supply virtually all of 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 qualify to 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.
Garrett Sitts said Tuesday that he could not comment on the filing because all questions are to be directed to attorney Benjamin Brown of the Washington, D.C., firm Cohen Milstein Sellers & Toll.
Brown was out of the office Tuesday and did not reply to a message left at the office.
Dean Foods has denied the allegations of creating an illegal monopoly and price fixing in published reports. Dean Foods spokeswoman Marguerite Copel did not reply to a message left on her voicemail.
Calls to the New York Farm Bureau and Cornell Cooperative Extension of Delaware County were not returned.
Patricia Breakey can be reached at 746-2894 or at stardelhi@stny.rr.com.
