A group of Northeast dairy farmers has filed a lawsuit against Kansas City-based Dairy Farmers of America and Dallas-based Dean Foods Co., charging they fixed prices and monopolized the fluid milk distribution market.
The lawsuit, filed in U.S. District Court in Burlington, Vt., on Oct. 8, seeks class-action status. Benjamin Brown, an attorney with Cohen Milstein, estimates there are more than 10,000 dairy farmers in the Northeast region, including organic dairy farmers.
The lawsuit also names DFA’s marketing affiliate Dairy Marketing Services as well as milk processor HP Hood of Lynnfield, Mass.
The dairy farmers charge that DFA, the nation’s largest cooperative, and Dean, the nation’s largest processor, have lowered the price the farmers receive for fluid milk by making DFA and its affiliates the exclusive suppliers of milk to Dean and Hood. The two processors bottle about 90 percent of the fluid milk in the Northeast, which encompasses 11 states and the District of Columbia.
“Monopolization and price-fixing have contributed to the milk-pricing crisis dairy farmers, especially small, family-owned dairies in the Northeast, face today,” Brown said. “These issues have been a source of concern for years. If something isn’t done now, it’s going to be too late.”
“Many dairy farmers have been forced to choose between joining DFA or DMS or going out of business,” Brown said. “If they join they have to pay to market to their own customers at prices fixed by DFA, DMS or other cooperatives. Meanwhile, major milk processors Dean and Hood, which is part-owned by DFA, enjoy the economic benefits.”
Brown said the independent dairy farmers and cooperatives have been forced to pay membership fees and dues to join DFA or DMS so they can obtain access to bottling plants. That access is the only way they can qualify to receive minimum monthly payments on Grade A milk sales set by the Department of Agriculture, he said.
The lawsuit seeks monetary damages, but more important, says Brown, it seeks injunctive relief asking the court to declare the current supply agreements null and void.
Monica Massey, vice president of communications for DFA, issued a statement saying the allegations are “without basis. Our strong relationship with other cooperatives and the creation of Dairy Marketing Services in the Northeast has enabled us to achieve efficiencies and obtain cost-savings in the areas of field services, hauling and administration – all for the benefit of dairy farmers.”
Marguerite Copel, vice president of communications for Dean Foods, said the company had not seen the complaint and could not comment.
Vermont farmers were paid $11.28 per hundredweight for milk in June. That's down from $18.91 in June 2008 -- a 40 percent decline, according to state data. The June price was well below the level needed to break even: $17 to $18 per hundredweight, according to Vermont farmers.