Dairy farmers pack anti-trust hearing

By:  John Dillon
Vermont Public Radio

St. Albans, VT

(Host) The head of the Justice Department's anti-trust division says she'll investigate whether dairy farmers are being unfairly squeezed by giant milk processors.

Christine Varney told a hearing of the Senate Judiciary Committee held in St. Albans that she'll prosecute companies if she finds evidence of anti-trust or illegal market concentration,

VPR's John Dillon reports:

(Dillon) The hearing in the heart of dairy country was packed with farmers who have seen prices fall to their lowest level in 40 years.

Senator Patrick Leahy - who chairs the Senate Judiciary Committee - said the market is now controlled by a handful of milk buyers.

(Leahy) "There's been a breakdown of competition. Vermont dairy farmers are not getting their fair share of the retail price of milk. But it seems like some of the corporate processors rake in profits even as they raise prices to consumers. This is way out of whack." 

(Dillon) Christine Varney, who took over the anti-trust division last spring, gave a brief overview of what could be called market power 101.

A monopoly, Varney said, can occur when there are only a few companies selling a product.

What may be happening in the dairy industry, she said, is technically a monopsony - a consolidation of power among a handful of dominant buyers.

Varney said she's looking into market concentration across the food industry. In the dairy sector, Varney said she wants to examine the relationship between dairy co-ops and milk processors.

(Varney) "And how we've evolved to the point where the co-ops are basically captive of one distributor. I want to understand how we got there and what kind of competition exists."

(Dillon) Senator Bernie Sanders wants Varney to focus on Dean Foods of Dallas Texas. Dean is the is the nation's largest milk company and Sanders said it controls 70 percent of the milk market in New England. Sanders said profits for Dean Foods rose 147 percent in the first quarter of the year, just as prices paid to farmers plummeted. The senator said there was an obvious connection between low prices to farmers and high profits for the company.

(Sanders) "And if you don't get that, let me throw a third fact into you. Over the last five years, while dairy farmers in the state of Vermont have struggled, in the last year, while 32 dairy farmers in this have gone out of business, the CEO of Dean Foods, a gentleman named Greg Engles , received $116 million in compensation in the last five years."

(Dillon) Sanders said the Justice Department under the Bush Administration had conducted a sweeping, two year investigation of anti-competitive practices in the dairy industry. But he said the investigation was quashed by political appointees in the Bush Justice Department.

He asked Varney if she would pick up the case.

(Varney) "I can give you every assurance, senator, that any investigation that I undertake that leads us to believe there is evidence sufficient to prosecute will be prosecuted. There is no doubt that we will prosecute that kind of activity should we find it."  (Applause)

(Dillon) Later in the hearing Sanders asked a panel of dairy farmers what they thought of the market concentration and high profits among dairy processors. William Rowell of Highgate said there's nothing wrong with earning a profit.

(Rowell) "You know if in fact everything is fine and that's the American way, fine. Then, they're entitled to their profit. But don't keep skinning it off the back of the farmer to the point where you cause a large extinction of farmers and jeopardize the food supply so somebody can walk away with all the goodies. It doesn't work for me."

(Dillon) Dean Foods said in a prepared statement that it makes no sense to blame the company for the sharp drop in milk prices.

The company said farmers increased production when times were good, and prices have now fallen because there's an over-supply of milk.

For VPR News, I'm John Dillon in St. Albans.