A class action lawsuit has been filed against Dairy Farmers of America (DFA), alleging that the co-operative has violated antitrust laws and artificially lowered milk prices for its Northeast region’s dairy farmers.
The lawsuit was filed by New York State dairy farm and DFA member S.R.J.F. Inc. on 29 July in the U.S. District Court in Vermont.
Two similar lawsuits have been filed against DFA in the same court, settled in 2013 and 2020.
This lawsuit is seeking to represent any parties who have sold non-organic, Grade A milk since May 10, 2016, in DFA’s 11-state Northeast region, including both DFA farmer members and non-members, and is seeking to recover damages “to the maximum extent allowed under the Sherman Act”.
The lawsuit alleges that the DFA, the largest dairy co-op in the United States, has violated the 1890 Sherman Antitrust Act by creating a monopsony – that is, a market with one single buyer and a number of sellers – in Vermont and 10 other northeastern states. It states that “as a direct and proximate result of DFA’s actual or attempted monopsonisation of the Northeast raw Grade A milk market, Plaintiff and the Class received lower prices for raw Grade A milk than those dairy farmers would have received in a competitive market”.
DFA is a non-profit milk marketer, processor and hauler headquartered in Kansas. It has approximately 14,000 members, over three thousand of which are in the Northeast of the US.
Through a series of mergers and acquisitions, the DFA has gained control of over half of the Northeast’s fluid milk market, making it impossible for dairy farmers to sell their milk without working with DFA, the lawsuit claims. DFA’s merger with the St. Albans Cooperative Creamery in 2019 was the catalyst for the lawsuit filed last month, which plaintiffs say offered St. Alban’s a “Hobson’s choice” as to whether to merge with DFA.
“The result of DFA’s anticompetitive, exclusionary, and predatory conduct is that it has reinforced and extended its monopsony buyer power over the Northeast market for raw milk,” says the lawsuit.
The suit also references a case brought against DFA by the US Government in 2020, which attempted to block DFA’s acquisition of a number of milk processing plants from Dean foods due to anticompetition concerns. DFA had, as a result of the complaint, agreed to divest one of the plants, in Franklin, Massachusetts, but a suitable buyer could not be found, leading the Department of Justice to consent to DFA retaining the Franklin plant despite its concerns. Following this acquisition, DFA went from selling over 50% of its members’ milk to third-party processors in 2019 to selling over 66% of its members’ milk to itself in 2021.
The plaintiffs also claim that there is an “inherent conflict of interest between its members’ interest in receiving the highest price for their raw milk and its processor holdings’ interests in buying raw milk at the lowest price … DFA structured its business to thrive in a low-price, high-supply raw milk environment – exactly the kind of environment that benefits its processor holdings, at the expense of its member farmers’ milk checks.”
Kristen Coady, senior vice president of corporate affairs at DFA, described the allegations of the Vermont lawsuit as “baseless and completely without merit”.
“DFA is a co-operative that was formed by, is owned by, and is governed by dairy farmers. Any claim that a farmer-owned, farmer-governed co-operative is motivated to self-inflict damage on its member-owners is preposterous, irrational and blatantly inaccurate.
“Since DFA’s formation, our farmer-owners have worked to build a co-operative that is strategically invested in assets to ensure milk markets and provide additional returns on their investment in their co-operative,” Ms Coady said, adding, “we will, as we always have, continue to make decisions and take actions that are in the best interest of our farmer-owners – now and for generations to come.”
Dairy producers in New Mexico also filed a separate lawsuit against DFA, Select Milk Producers and the Greater Southwest Agency Inc., in April this year, alleging that they conspired to drive down milk prices milk in the Southwest from January 2015.