Judge rules DOJ antitrust case against Dean Foods to continue

By Agri-Pulse Staff

© Copyright Agri-Pulse Communications, Inc.

Milwaukee, April 9 – In a first test of the Obama administration’s promised crackdown on antitrust law violations, the U.S. Department of Justice (DOJ) sued Dean Foods in January over its $35 million acquisition last year of two Wisconsin fluid milk processing plants from Foremost Farms USA, a dairy cooperative. The DOJ charge is that the acquisition stifles competition in Illinois, Michigan and Wisconsin. The response from Dallas-based Dean Foods, the largest U.S. dairy products processor and distributor, was to seek a legal dismissal, maintaining that the purchase will increase rather than stifle competition.

This week, U.S. District Court Judge J.P. Stadtmueller issued a written order in Milwaukee ruling that the DOJ charge lacked “specificity,” that DOJ needs to present a better case, but that proceedings should continue.

Commenting on the ruling, Dean Foods stated that, “We believe our acquisition of Foremost Farms is promoting competition in the region and has already produced benefits for consumers and farmers. We continue to believe that the government’s complaint against us is unfounded.” The company noted that the way courts handle a motion to dismiss creates “a high bar for any defendant.” While the company did not win a dismissal, Dean Foods stated that “we are encouraged by the court’s recognition of the ‘shortcomings’ of the plaintiffs’ pleadings, which the court called ‘not well structured,’ and we look forward to the discovery process.” Justice Department spokeswoman Gina Talamona commented that “We’re pleased the judge denied the motion to dismiss and we’re prepared to litigate the case in court.”

According to Christine Varney, assistant attorney general in charge of DOJ’s Antitrust Division, “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.” Along with reversing Dean Foods’ 2009 purchase, if the lawsuit is successful, Dean Foods would be required to notify DOJ 30 days before making any future acquisitions of milk processing operations. In pursuit of these objectives, the Attorneys General of Wisconsin, Illinois and Michigan have joined in the DOJ suit.

The Justice Department and the three state Attorneys General maintain that their complain includes “enough facts to raise a reasonable expectation that discovery will reveal evidence supporting the plaintiff’s allegations” against Dean Foods. They point out that current law “makes acquisitions by one corporation of another unlawful ‘where in any line of commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.’”

When Foremost officials discussed the sale of their two fluid milk processing plants in Wisconsin last year, they explained that the sale freed the cooperative to focus on developing wholesale markets for cheese, butter, and dairy product ingredients.

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