Food Lion and the Maryland and Virginia Milk Producers Cooperative Association filed an antitrust lawsuit on Tuesday against Dairy Farmers of America that challenges DFA’s $433 million purchase of the majority of Dean Foods.
The suit, filed in North Carolina, claims that DFA’s acquisition of bankrupt Dean Foods is monopolist, stating that the deal is anti-competitive and made through a corrupt bargain.
See sections of the lawsuit complaint below:
“This action arises out of Defendant Dairy Farmers of America, Inc.’s longstanding effort to seize control of the milk supply chain. Indeed, 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 anti-competitive agreements through which it has gained near-complete control over the purchasing of key nationwide milk processors. This anti-competitive campaign has allowed DFA to transform itself from a modest regional dairy cooperative into the Standard Oil of the modern dairy industry.”
“DFA accomplished this transformation through a mutually advantageous partnership with Dean Foods Company, formerly the nation’s largest processor of raw milk. Their partnership was forged through a corrupt bargain entered into at the time of a prior merger between Dean and another dairy processing giant, in order to avoid U.S. Department of Justice scrutiny through subterfuge and deception. The illicit side agreement allowed DFA to secure full-supply rights for its higher-priced raw milk to the newly merged Dean processing plants through a twenty-year exclusive dealing arrangement, in exchange for an agreement not to compete with Dean at the processing level.”
“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 complaint goes on to say that the alleged 20-year deal between DFA and Dean was set to end in April 2021, but that Dean’s bankruptcy filing in November 2019 accelerated DFA’s need to maintain control over Dean’s production plants, thus leading to the acquisition that was approved by the DoJ on May 1.
Food Lion and MDVA are requesting that the court grant a preliminary inunction to prevent the acquisition and “ensure the viability of a divestiture remedy until the conclusion of this matter.” The plaintiffs also seek permanent injunctive relieve that would require DFA to divest at least one of the legacy Dean facilities in the Carolinas to an independent purchaser that is unaffiliated with DFA.
“Without such remedies, competition in the raw and processed milk markets in the region will be lost forever,” the suit states.