Grocers Allege Price Fixing in Raw Milk
BENTON, Ill. (CN) - A dairy cartel fixes prices and restrains trade "through premature 'herd retirements' that require participating dairy farmers to destroy all of the dairy cows in their herds," a grocer claims in a federal antitrust complaint.
Fifty Third Hampton LLC dba Hampton Foods sued the National Milk Producers Federation, Cooperatives Working Together, Dairy Farmers of America, Land O'Lakes, Dairylea Cooperative and Agri-Mark dba Cabot Creamery Cooperative.
Hampton claims the defendants limit production of raw farm milk, "the key ingredient or component in fluid milk products and manufactured dairy products, including, but not limited to, cream, half and half, yogurt, dry milk, cottage cheese, cream cheese, sour cream and ice cream."
Hampton, which buys these products, claims that "Cooperatives Working Together (CWT) and its members have engaged in a continuing contract, combination and conspiracy over the past eight years to limit the production of raw farm milk through premature 'herd retirements' that require participating dairy farmers to destroy all of the dairy cows in their herds and, beginning April 1, 2009, agree not to re-enter the dairy farming business for at least a year.
"The principal purpose and effect of this contract, combination and conspiracy has been to eliminate competition, significantly reduce the number of dairy farmers competing in the market and to produce both short term and long term increases in the price of raw farm milk and manufactured dairy products."
Members of CWT pay yearly assessments based on milk production, which are "in turn used ... to pay some members of CWT to prematurely retire (slaughter) their entire herd, and agree to refrain from milk production for a certain time - the practical effect of which is permanent retirement - in order to eliminate competition ... and 'strengthen and stabilize' raw farm milk prices," the complaint states. (Parentheses in original.)
Hampton claims that dairies submit bids for "Dairy Herd Retirement," at which point "CWT then reviewed and tentatively accepted bids subject to farm visits by CWT auditors, who supervised the tagging of the herds for removal. The producers were then required to ship their cows for slaughter within 15 days after completion of the audit. CWT made payment of the amount due to the farmers within 30 days of receiving verification that all cows had gone to slaughter."
The grocery company claims that in 2009, "CWT was spending $217 million toward herd retirements out of a total of $219 million in total revenue and carried over contributions. Nearly the entire revenue of CWT was expended on 'retiring herds' - that is, paying dairy farmers to exit dairy farming and thereby to cease competing - and with the effect of substantially constraining output and reducing the supply of raw milk."
From 2003 to 2010, "CWT was responsible for removing over 500,000 cows from production, reducing the nation's raw milk supply by approximately 10 billion pounds. ... By the end of the program in 2010, it was responsible for a cumulative increase in milk price revenue of $9.55 billion," the complaint states.
Hampton seeks class certification, and treble damages for Sherman Act violations.
It is represented by Charles Barrett of Nashville.
Milk pricing has been the subject of litigation for more than 50 years, with allegations of price-fixing, political payoffs, and skullduggery of all sorts. Dairy farmers, particularly small family farms away from the Midwest, continue to be whipsawed by price fluctuations.