Dairy Farmers Of America Settles Price-Fixing Suit
Dairy Farmers of America settled an anti-trust lawsuit Tuesday for $158.6 million, ending a long-running case that accused the country’s largest dairy cooperative of creating a monopoly in the Southeast, driving prices down for its own farmers and forcing many out of business.
The case, which was set to go to trial on Wednesday, was being closely watched by the industry as it could set the future for small and medium-sized dairy farmers. They have faced devastating losses as the industry consolidates and moves toward larger dairies based in the Southwest.
Dairy Farmers of America, which faced an estimated $1.2 billion in damages, admitted no wrongdoing. That’s similar to another settlement in this case, in which Dean Foods, a milk processor based in Dallas, settled with the farmers for $145 million last summer.
A conference call with DFA was set for 1 p.m. (Central) Tuesday.
Filed in 2007, some 7,388 farmers claimed in the class-action suit that DFA, which was supposed to represent them, actually entered into deals with Dean Foods, which should have been an adversary, creating a monopoly that kept raw milk prices low and gave farmers no alternative buyers.
The suit, along with a U.S. Department of Justice investigation, found that DFA and Dean executives were paid millions and flew in corporate jets while farmers were going broke. DFA’s former CEO, Gary Hanman, who was named in the suit, was paid $31.6 million during his seven years as head of the cooperative. Dean’s former CEO, Gregg Engles, was paid $156 million, according to published reports.
Dr. Sam Galphin, a veterinarian and dairy farmer from Raleigh, N.C., said today’s settlement won’t really help the many farmers already out of business, nor those few who are still around.
“For people who want to stay in the dairy business, the money that they’re talking about giving to the dairymen is insignificant,” he said. “They’ll have that money back out of our milk checks in a matter of a year.”
Peter Carstensen, a University of Wisconsin law professor who has watched the case for years, said he was not surprised by the settlement, but he was disappointed because most of the dairy farmers problems won’t be addressed.
“While it is nice that the farmers get some modest compensation for the harm that they suffered in the past, they remain at risk as does the entire milk industry by the failure to use this case to develop better, more open, and non-discriminatory access to markets for milk,” he said.
While it’s hard to say just what this decision will mean for consumers, Carstensen said it could mean that prices will remain high, as milk processors and groceries each use mark-ups.
The U.S. Justice Department investigated the industry on anti-trust issues in during the George W. Bush administration, but didn’t file any charges.
A similar case is pending in Vermont, which was filed in 2009 and involves dairy farmers in the Northeast.