Northeastern dairy farmers today filed a federal class action lawsuit accusing the nation’s largest dairy cooperative, Dairy Farmers of America (“DFA”), of violating federal antitrust laws.
The lawsuit centers around a conflict of interest: when DFA expanded into dairy processing, its duty to its members to secure the highest price for their milk came up against its processor holdings’ interest in buying raw milk at the lowest prices. DFA resolved that conflict in favor of its processor holdings, pushing down raw milk prices and creating an antitrust injury of the type that antitrust laws were designed to punish and prevent.
The lawsuit alleges that DFA constrained the ability of Northeast dairy farmers to get raw Grade A milk to market other than through DFA. The complaint was filed in the United States District Court for the District of Vermont by the law firms of Lockridge Grindal Nauen P.L.L.P., Hagens Berman, and Scott+Scott Attorneys at Law LLP.
“Northeastern dairy farmers face dire straits,” said Brian Clark, a partner with Lockridge Grindal Nauen. “Over the last several years, Northeastern dairy farmers have seen their milk pay plummet, and many have been forced out of business. DFA is a recidivist actor, previously sued in the Northeast for antitrust violations. The situation is now worse than ever, with a more consolidated market that DFA has manipulated to the detriment of Northeastern dairy farmers, as alleged in the complaint,” said Clark.
“There clearly exists antitrust behavior in this market,” said Steve Berman, managing partner of Hagens Berman. “This isn’t our first rodeo taking this industry to task on antitrust violations, and we have amassed a highly skilled team of antitrust attorneys to take on Dairy Farmers of America.”
“The impact on Northeast dairy farmers has been catastrophic,” said Patrick McGahan, partner with, Scott+Scott Attorneys at Law. “It is important that steps are taken to protect the health and integrity of the Northeast raw milk market, and the dairy farmers who work hard to guarantee America’s milk supply.”
Dairy cooperatives like DFA play a vital role in the Northeast dairy industry. The majority of dairy farmers are members of, and market their milk through, the cooperative, which in turn then markets the milk to be processed and bottled for fluid or other uses, such as in cheese, yogurt, ice cream, and milk powder.
According to USDA data cited in the lawsuit, from 1997 to 2017, the total number of U.S. dairy farms decreased by more than half (from 125,041 to 54,599), with the same trends reflected in the Northeast market – widespread dairy closures and bankruptcies in recent years. Likewise, cooperatives have seen the same shrinkage. In 1964, there were 1,244 U.S. dairy cooperatives. In 2017, there were only 118. The lawsuit blames DFA’s “predatory and exclusionary conduct” for the further consolidation witnessed during the class period.
Beginning in at least May 2016, the complaint alleges DFA attempted to or did monopsonize the market for raw Grade A milk in the Northeast. The lawsuit alleges that DFA did so by foreclosing Northeast dairy farmers’ ability to market their milk independently of DFA, and even foreclosed farmers’ ability to profitably market their milk through DFA. It achieved this foreclosure through a series of anticompetitive actions at both the cooperative and processing levels of the Northeast raw Grade A milk market. All of these actions were directed to reducing the prices paid to Northeast dairy farmers for their raw milk.
Among other cooperative-level abuses of power alleged by the farmers, the lawsuit states that DFA used its market power to create a price environment that pushed other dairy cooperatives to the brink of insolvency, leaving those cooperatives with no choice but to join DFA through mergers.
The lawsuit alleges that DFA also took steps to deny its competitors, including independent cooperatives and dairy farms, access to both DFA and non-DFA raw milk processing outlets.
More information about the case and a copy of the complaint is available here: