Two of the nation's largest dairy corporations used an illegal stranglehold over the fluid-milk market to artificially depress prices paid to Northeast dairy farmers, according to a class-action suit filed Thursday in U.S. District Court in Burlington.
Dairy Farmers of America, the country's largest dairy cooperative, and Dean Foods Company, the nation's biggest fluid-milk processor, have violated federal antitrust statutes in an attempt to exert monopoly power over the region's dairy farmers, according to the suit.
Benjamin Brown, a Washington, D.C. lawyer, filed the suit on behalf of two Northeast farmers, including Wells River dairy farmer Alice Allen. He said on Friday that the case could ultimately represent all of the region's dairy farmers.
"In a well-functioning market, farmers should have competition for where they can sell their milk," Brown said. "This case is about a conspiracy to monopolize and monopsonize, a case about the defendants' efforts to basically tie up those outlets."
Dean Foods, which controls roughly 70 percent of the fluid-milk buying market in New England, and Dairy Farmers of America, already are the subjects of numerous probes into alleged antitrust violations. The U.S. Department of Justice last month announced an investigation into the companies' dealings. And Dean and DFA are defendants in a separate class-action suit in the southeastern United States, where thousands of farmers say the companies engaged in price-fixing schemes to lower prices paid to dairy farmers.
"The Justice Department ... has expressed that they're concerned by what they've seen in the Northeast and that they're looking hard at the conduct we've highlighted in our complaint," Brown said.
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, essentially funneling all the raw milk produced here into a single buying entity.
That power, the suit claims, allowed the companies to eliminate competition and name their own price.
Vermont Secretary of Agriculture Roger Allbee declined comment on the suit directly but said consolidation in the milk-buying market has long been a concern in the Vermont dairy industry. The Vermont Milk Commission, Allbee said, listed lack of competition in the regional buying market as among the critical issues facing local farmers.
"I think we've all had concerns," Allbee said Friday. "There are some major issues that need to be looked at."
The spate of complaints against Dean Foods and DFA comes in the wake of an industry-wide financial crisis that has forced many dairy farmers out of business and pushed others to the brink of ruin.
The price for conventional raw milk this summer hit lows unseen since the late 1970s, and prices are still well below the cost of production.
"This complaint arises from a crisis in the dairy industry in the Northeast United States, "the severity and urgency of which ... cannot be overstated,'" the suit says, borrowing a recent quote from Sen. Patrick Leahy.
Vermont's congressional delegation has sought federal help for dairy farmers, most recently securing a $350 million emergency aid package. However Sen. Bernard Sanders remains strident in his calls for antitrust probes against Dean Foods and DFA as part of longer-term structural reform needed to rescue the state's dairy industry.
"You've got a situation where it is clear that farmers do not have many options as to where they can sell their product," Sanders said recently. "And if I'm the only game in town, you will take the money that I give you."
Asked for comment, Marguerite Copel, vice president of communications for Dean, said in a statement that "we have not been served with a copy of the lawsuit."
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. Dean Foods itself attributes the good news to lower "input" costs - during the first four months of 2008, the company paid almost $19 for 100 pounds, or hundredweight, of milk, the industry's standard unit of measurement. In 2009, that price fell to below $12.
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.
Brown said his plaintiffs are seeking redress in the form of monetary damages and injunctive relief that would end the alleged corporate malpractice. Brown said the plaintiffs have yet to calculate exact damages.
"There is a crisis in dairy, particularly in the Northeast United States, and it's just getting more and more acute," Brown said. "We believe now is the time to address it."