DOJ probes Dean Foods/Dairy Farmers of America proposed merger
The Department of Justice is looking into the potential antitrust implications of a proposed deal between bankrupt milk processor Dean Foods and the giant dairy cooperative Dairy Farmers of America (DFA). According to a Monday report in the Wall Street Journal, the department is investigating “the potential loss of competition for selling raw milk” that could result from a merger.
Dean Foods filed for Chapter 11 bankruptcy in November after a long period of declining sales. The company’s collapse has been attributed, in part, to lower milk consumption, higher consumer interest in plant-based dairy alternatives, and the opening of Walmart’s milk processing plant in 2017. At the time of its bankruptcy, Dean said it was in “advanced discussions” with cooperative DFA to buy its assets.
DFA is the largest dairy cooperative in the U.S. and boasts over 14,000 members and a 30 percent market share of national milk sales. The co-op has been sued by its members several times over the past two decades for alleged anticompetitive conduct, including restricting the ability of members to move between co-ops and attempting to monopolize the dairy sector. The relationship between Dean and DFA, and their exclusive supply contracts, was investigated by the Justice Department in the early 2000s, but it did not lead to charges.
If a merger is approved, Dean and DFA would control a massive share of milk sales and processing, and its influence would be felt in some regions more than others. For instance, a combined Dean-DFA would control 60% of fluid milk sales in upper Midwestern markets, according to the WSJ.
The Justice Department also has its eye on antitrust issues elsewhere in the agriculture sector. As FERN reported last June, the DOJ is investigating allegations of anticompetitive behavior that have been made against the nation’s poultry companies. Distributors, consumers, and farmers have alleged that the chicken giants colluded to artificially raise prices over a span of several years and to suppress farmer revenue.