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Dean Foods, Dairy Co-op Sued Over Alleged Monopoly

Oct. 9 (Bloomberg) -- Dean Foods Co., the biggest U.S. milk-products maker, and the Dairy Farmers of America cooperative were sued by a group of dairy farmers for allegedly operating a monopoly in the Northeast U.S., the farmers’ law firm said.

The farmers receive lower prices because Dean buys milk exclusively from the cooperative and its affiliates, according to a proposed class-action complaint filed yesterday in federal court in Burlington, Vermont, the Washington-based law firm Cohen Milstein said today in a statement.

Dean Foods, based in Dallas, and Dairy Farmers of America are forcing farmers to join the cooperative or its affiliate, Dairy Marketing Services, to survive, according to the complaint. The marketing unit and another processor, HP Hood, also were named in the suit and accused of fixing prices with the co-op, the law firm said.

“Monopolization and price-fixing have contributed to the milk-pricing crisis dairy farmers, especially small, family-owned dairies in the Northeast, face today,” the group’s lawyer, Benjamin Brown, said in the statement. Dean and HP Hood bottle about 90 percent of the milk in the Northeast region, according to the statement.

Dean Foods spokeswoman Marguerite Copel said she couldn’t comment on the allegations because the company hadn’t been served with the complaint.

‘Unlawful Contracts’

The cooperative, along with Dean Foods and Hood, dominates the milk-distribution system through an “unlawful series of contracts, agreements and understandings” that violate restrictions by the U.S. Justice Department and various state attorneys general offices, according to the statement.

The alleged violations include mergers, acquisitions and closings of bottling plants to “strengthen their control” of the milk market, according to the statement.

Monica Massey, a spokeswoman for the Dairy Farmers of America, said today in a statement that the lawsuit is “without basis,” and that the cooperative’s practices in the Northeast benefit dairy farmers by cuttings costs and increasing efficiency.

“We are continuously looking for additional ways to increase dairy farmer pay price and net returns, not suppress them, and have been successful in doing so,” Massey said.

The group of farmers claims the situation is more complex.

“Independent dairy cooperatives and independent dairy farmers have been forced to pay membership fees and dues to join DFA or DMS so they can obtain access to bottling plants,” the group said in the statement. Such access is required to receive minimum monthly payments on Grade A milk sales set by the U.S. Department of Agriculture, the farmers said.

Dean Foods rose 24 cents to $19.40 at 3:28 p.m. in New York Stock Exchange composite trading. The shares have climbed 8 percent this year.

To contact the reporter on this story: Erik Larson in New York at elarson4@bloomberg.net.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.

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