Dairy Farmers of America faces a proposed class action over a series of allegedly anticompetitive actions in the Northeast market for raw Grade A milk.
The 81-page suit relays that the core function of the Dairy Farmers of America (DFA) cooperative is to facilitate the collective bargaining of its farmer members with the dairy processors who buy their raw Grade A milk for a competitive price. The expansion of DFA into dairy processing, however, has created “an inherent conflict of interest” between its members, who seek the highest price for the raw milk they sell, and its processor holdings, who seek to buy raw milk at the lowest price, the complaint says.
Rather than rectify this issue, DFA, according to the lawsuit, structured its business to thrive in a “low-price, high-supply milk environment” that benefits processors over farmers. The case says DFA dairy farmers have been running “break-even (if they are lucky),” and on razor-thin margins for years. Unlucky farmers, the suit says, have been forced to borrow against the equity of their farms to stay afloat or have gone under.
The lawsuit claims that Dairy Farmers of America’s “stranglehold on the Northeast dairy market”—Vermont, New York, Connecticut, Rhode Island, Massachusetts, New Hampshire, Maine, New Jersey, Eastern Pennsylvania, Maryland and Delaware—has foreclosed the ability of dairy farmers in the region to market their milk independent of the cooperative or profitability market their milk through DFA.
The filing claims that although DFA could pay out the profits from its processing operations to farmers, it instead hoards that cash for use in “a seemingly endless series of mergers and acquisitions.” The suit also alleges the money that could be paid to member farmers has been used for DFA executive salaries, and to build a $30 million headquarters in Kansas.
“Of course, DFA’s empire-building does not leave room for Northeast farmers that are not DFA members any more than it leaves room for Northeast dairy processors that are not controlled, either directly or indirectly, by DFA,” the complaint reads.
Over time, DFA, through “predatory and exclusionary actions,” has positioned itself as the “sole conduit” for dairy farmers in the Northeast, whether they are DFA members or not, to get their raw milk to market, the suit alleges. At the same time, DFA has also come to control the Northeast’s raw milk processing capacity, the case adds.
“Simply put, DFA has sought to stifle and smother all competition in the market for the purchase of raw milk in the Northeast,” the complaint alleges.
At the cooperative level, DFA has created a price environment that has pushed other dairy co-ops to “the brink of insolvency,” leaving them with no choice but to merge with the defendant, the lawsuit claims. Moreover, the case claims Dairy Farmers of America has purchased milk-hauling fleets that served non-DFA farmers and barred them from using those necessary services unless they joined up with DFA.
The complaint also alleges DFA attempted to manipulate the Federal Milk Marketing Orders pooling rules so as to continue to set low raw milk prices and disadvantage non-member farmer customers. Failing that, the lawsuit says, DFA withdrew its fee-based marketing services for non-DFA members, leaving them without another means of accessing the market without joining the co-op.
On the processing side, DFA took steps to deny independent co-ops and dairy farms access to DFA and non-DFA processing outlets, and removed some alternative outlets through mergers and acquisitions of non-DFA processors, the suit says.
The case claims the effect of DFA’s allegedly anticompetitive actions was that Northeast dairy farmers received lower prices for raw Grade A milk than they would have received in a competitive market.
The lawsuit looks to represent all dairy farmers, whether individuals or entities, who produced raw Grade A milk within the Northeastern United States—Vermont, New Hampshire, Maine, Massachusetts, Connecticut, Rhode Island, New York, New Jersey, Maryland, Delaware and most of Pennsylvania (except the western portion)—and sold raw Grade A milk within the Northeast at any time from May 10, 2016 to the present.
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