Northeast farmers accuse dairy firms of price fixing

11-Oct-2009 - Last updated on 12-Oct-2009 at 15:50 GMT

Related tags Milk

A group of northeastern dairy farmers has filed a class action lawsuit against four milk marketing firms, accusing them of monopolizing the market and fixing prices.

Dairy farmers have faced hugely fluctuating prices for some time, and milk futures are currently down about 50 percent from June 2007 on record production and competition from imports. Meanwhile, the cost of production, at around $17 per hundred pounds, outweighs milk prices paid to farmers, which have fallen to as low as $10 per hundred pounds.

Law firm Cohen Milstein, which is representing a number of independent dairy farmers, said that independent dairy cooperatives have been forced to pay the Dairy Farmers of America (DFA) – the biggest dairy cooperative in America – or their marketing affiliates the Dairy Marketing Service (DMS) in order to gain access to bottling plants. The firm claims that this is the only way they can get minimum monthly payments on milk sales set by the US Department of Agriculture.

Lead attorney Benjamin Brown said: "Many dairy farmers have been forced to choose between joining DFA or DMS or going out of business. If they join, they have to pay to market to their own customers at prices fixed by DFA, DMS and other cooperatives.”

However, the Dairy Farmers of America has said that the allegations are “without basis.”

DFA’s vice president of communications Monica Massey said in a statement: “We are continuously looking for additional ways to increase dairy farmer pay price and net returns, not suppress them, and have been successful in doing so.”

But Cohen Milstein claims that the cooperative, along with processors Dean Foods and HP Hood, largely controls the milk distribution system through a “string of unlawful mergers, acquisitions and closures of bottling plants” and accuses it of violating restrictions imposed by the Department of Justice (DOJ) and state attorneys general.

Brown said: "Time and time again, DFA and others circumvented and thwarted the conditions imposed by DOJ and state antitrust authorities. Now, these defendants are using their resulting market power to deny farmers the benefits of competition. This has got to stop, which is why we filed this lawsuit on behalf of all Northeast dairy farmers."

DFA’s Massey said the cooperative would "aggressively defend" itself against the allegations and added: “Dairy farmers have many choices and markets for their milk in the Northeast. We just work to provide them with the best choice.”