Dean Foods subject of D.O.J. antitrust lawsuit
January 22, 2010
by Keith Nunes
WASHINGTON – The U.S. Department of Justice has filed a civil antitrust lawsuit against Dean Foods Co. challenging the company’s April 2009 acquisition of Foremost Farms USA’s Consumer Products Division.
The D.O.J.’s Antitrust Division, in conjunction with state attorneys general from Illinois, Michigan and Wisconsin, filed a lawsuit Jan. 22 in U.S. District Court in Milwaukee, seeking to require Dean Foods to sell the dairy processing plants it acquired from Foremost Farms, and it requires Dean Foods to notify the D.O.J. at least 30 days prior to any future acquisition involving a milk processing operation.
Dean Foods said in a statement it “is disappointed that nearly 10 months after the transaction closed the Justice Department and the States of Wisconsin, Michigan and Illinois decided to challenge Dean’s acquisition of the DePere and Waukesha, Wisconsin, fluid milk processing plants from the Foremost Farms USA cooperative. We are anxious to have the opportunity to defend this pro-competitive transaction in court.
“The transaction has already produced important cost savings that will benefit customers and spur competition in and around Wisconsin, and it promises to deliver even greater customer benefits once the DePere and Waukesha plants are fully integrated into the Dean network. From day one the transaction has also benefitted Wisconsin dairy farmers in providing a stable and growing outlet for their milk. The complaint challenging the Foremost transaction is unsound, both legally and economically.”
The D.O.J. said the merger eliminates competition between the two companies in the sale of milk to schools, grocery stores, convenience stores and other retailers in Illinois, Michigan and Wisconsin.
“The purpose of the department’s lawsuit is to restore competition so that schools, grocery stores and other retailers in Illinois, Michigan and Wisconsin, will pay lower prices for their milk,” said Christine Varney, assistant attorney general in charge of the D.O.J.’s Antitrust Division.
The department’s complaint alleges that the transaction reduced competition substantially in the sale of milk to school districts in the upper peninsula of Michigan and Wisconsin. Dean Foods and Foremost Farms were the two best-situated processors from which to purchase milk for numerous school districts in the two regions. After Dean Foods’ acquisition of Foremost Farms’ Consumer Products Division, the districts have been left with a monopoly provider.
The D.O.J. also alleges there are a number of school districts in the region for which Dean Foods and Foremost Farms were two of only three recent or likely future bidders. The school districts have been left with only two choices after the acquisition.
A similar situation affects supermarkets, grocery stores, and other commercial customers throughout northeastern Illinois, the upper peninsula of Michigan and Wisconsin. Dean Foods’ acquisition deprived the retailers of the benefits of substantial head-to-head competition between Dean Foods and Foremost Farms, according to the complaint.