meta Lawsuit accuses Dairy Farmers of America of creating ‘monopsony’ in the Northeast :: The Bullvine - The Dairy Information You Want To Know When You Need It

Lawsuit accuses Dairy Farmers of America of creating ‘monopsony’ in the Northeast

A New York state dairy farm is leading a class-action lawsuit in federal court in Vermont against Dairy Farmers of America — the country’s largest dairy cooperative — arguing the organization has violated antitrust law and artificially lowered the price of raw milk. 

The lawsuit, filed July 29, claims Dairy Farmers of America has created a “monopsony,” which is defined as a market in which many sellers have only a single buyer, across the dairy industry in Vermont and 10 other states in the northeastern U.S. 

At issue, it says, is an “inherent conflict of interest” between two related segments of the cooperative’s business. 

Dairy Farmers of America is tasked with ensuring its members get the highest possible price for their milk, per the lawsuit. But farmers must sell their milk to processors, who use it to make other products, to make money. And the defendant argues that Dairy Farmers of America’s milk processing operations benefit from lower milk prices. 

As a result, S.R.J.F., Inc. of Stamford, New York — the lead defendant — alleges it, and the more than 3,000 other milk producers in the cooperative’s Northeast region, operate in a highly consolidated market that has led them to make less money than they otherwise would with greater market competition. 

“DFA structured its business to thrive in a low-price, high-supply raw milk environment  — exactly the kind of environment that benefits its processor holdings, at the expense of its member farmers’ milk checks,” the lawsuit says. 

In a statement, Kristen Coady, Dairy Farmers of America’s senior vice president of corporate affairs, called the allegations in the lawsuit “baseless,” saying the company has made strategic investments since its founding that benefit all of its members. 

“Any claim that a farmer-owned, farmer-governed cooperative is motivated to self-inflict damage on its member-owners is preposterous, irrational and blatantly inaccurate,” Coady said. 

The lawsuit claims Dairy Farmers of America’s holdings have become so extensive over the past six years that it has become difficult, if not impossible, for many independent farms or dairy cooperatives to be successful without joining Dairy Farmers of America’s network. 

The Kansas City-based cooperative has come to control as much as 60% of the Grade A milk market in the Northeast in that time, the lawsuit says. Nearly all milk produced in the U.S. is Grade A, meaning it is certified by the federal government for use in liquid products. Court documents also point to one estimate from June of this year that the cooperative controls 85% of the region’s fluid milk processing capacity. 

As such, the lawsuit estimates there are at least 7,000 possible defendants for the class-action lawsuit: anyone who has sold non-organic, Grade A milk since May 10, 2016, in the cooperative’s northeast region of Maine, New Hampshire, Vermont, Massachusetts, Connecticut, Rhode Island, New York, New Jersey, Maryland, Delaware and most of Pennsylvania. 

The lawsuit also points to multiple past acquisitions and mergers involving Dairy Farmers of America — including its merger with the St. Albans Cooperative Creamery in 2019 — as evidence of the organization’s efforts to eliminate competition at the expense of smaller entities in the region. 

Members of the 100-year-old cooperative in Franklin County voted overwhelmingly to become part of Dairy Farmers of America, though the lawsuit says some members saw little choice because the St. Albans organization was staring down bankruptcy. 

The defendants cited the St. Albans merger as a reason why they filed the lawsuit in the U.S. District Court in Vermont. 

“Like the arsonist taking credit for putting out the fire, DFA has sought to spin its actions as saving or stabilizing the Northeast Dairy Market it was hellbent on bleeding to death,” the lawsuit said. 

The lawsuit stretches back to May 10, 2016, because that’s one day after claims were last released in a previous lawsuit— Allen v. Dairy Farmers of America — in which the cooperative settled for $50 million, some of which went to dairy farmers in Vermont, according to court documents. 

That class-action case, filed in 2009, alleged Dairy Farmers of America had conspired to become the sole seller of Grade A milk in the Northeast. The cooperative, according to the lawsuit, was not member-focused and forced small farmers to join in order to avoid market pressures that would put them out of business.

Dairy Farmers of America has also been involved in multiple previous lawsuits, according to the July 29 complaint. 

The most recent case seeks damages for Northeast dairy farmers “to the maximum extent allowed” under the federal government’s 1890 Sherman Antitrust Act, which, it alleges, Dairy Farmers of America has violated in multiple ways. 

It also notes that while Dairy Farmers of America has gained market share in recent years, the number of dairy farms has decreased and output on remaining farms has gone up. 

It cites data from Vermont showing a 37% decline in the total number of operating dairy farms in the 10 years preceding 2020, but a 30% increase in herd size per remaining farm. In 2020, about 40 dairy farms closed in the state, the lawsuit says. 

The Burlington-based attorneys representing the defendants could not be reached for comment Tuesday.


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