The United States Department of Justice (DOJ) has concluded its investigation into the proposed acquisitions of fluid milk processing plants from Dean Foods Company, a major player in the dairy industry, by Dairy Farmers of America Inc. (DFA) and Prairie Farms Dairy Inc. (Prairie Farms). This announcement comes at a critical time for the dairy sector, with Dean Foods, alongside Borden Dairy Company, navigating bankruptcy amidst significant market challenges.
The Antitrust Division of the DOJ, in collaboration with the attorneys general of Massachusetts and Wisconsin, initiated a civil antitrust lawsuit in the U.S. District Court for the Northern District of Illinois. This legal action aims to prevent DFA’s acquisition of three Dean Foods fluid milk processing plants located in Illinois, Wisconsin, and New England. Simultaneously, the department proposed a settlement that, if approved by the court, mandates the divestiture of plants in Harvard, Illinois; De Pere, Wisconsin; and Franklin, Massachusetts, along with associated equipment, to an acquirer approved by the U.S. Government. Concerns raised by the DOJ regarding DFA’s potential acquisition of additional Dean Foods plants in the Upper Midwest led DFA to withdraw its bids for those facilities.
In a parallel investigation, the DOJ examined Prairie Farms’ proposed acquisition of Dean Foods’ fluid milk processing plants in the Southern and Midwestern regions. The department decided to close this investigation, determining that these plants were likely to face closure due to Dean Foods’ financial distress and the absence of other viable buyers.
Assistant Attorney General Makan Delrahim of the Antitrust Division emphasized the challenging landscape of the dairy industry, marked by the bankruptcies of Dean Foods and Borden Dairy Company and compounded by the pandemic-induced collapse in demand from schools and restaurants. He stated, “In the face of these challenges and Dean’s worsening financial condition, the department conducted a fast but comprehensive investigation, and our actions today preserve competition for fluid milk processing in northeastern Illinois, Wisconsin, and in New England.” Delrahim further noted that the closure of the Prairie Farms investigation would ensure essential outlets for dairy farmers and maintain the supply of milk to consumers by keeping these plants operational.
Wisconsin Attorney General Joshua L. Kaul highlighted the importance of the DOJ’s intervention for maintaining competition within the dairy industry in Wisconsin, especially during the pandemic. He stated, “While strong competition in the market is always important, it’s incredibly important now, as we’re living through a pandemic. Our supply chain must have robust competition to ensure a continued supply of milk to those who need it.”
The settlement reached with DFA and Dean Foods is poised to secure the ongoing operation of numerous fluid milk plants. This action is crucial in protecting supermarkets, schools, convenience stores, hospitals, and other consumers from potential disruptions caused by the loss of Dean Foods’ processing capabilities due to its bankruptcy.
Background on the Companies Involved
Dairy Farmers of America (DFA) is a cooperative marketing association based in Kansas City, Kansas, representing nearly 14,000 farmer-members across the United States. In 2018, DFA reported revenues of $13.6 billion.
Prairie Farms Dairy, headquartered in Edwardsville, Illinois, is a corporation with over 700 farmer-members and annual revenues exceeding $3 billion.
Dean Foods, formerly headquartered in Dallas, Texas, is a Delaware corporation that operated 57 fluid milk processing plants across 29 states. Dean Foods reported revenues of $7.75 billion in 2018 but filed for Chapter 11 bankruptcy protection on November 12, 2019, and is set to cease operations as a going concern in May 2020.
Legal and Procedural Details
As mandated by the Tunney Act, the proposed settlement, accompanied by a competitive impact statement, will be published in the Federal Register. The public is invited to submit written comments regarding the proposed settlement within a 60-day period to the Antitrust Division of the U.S. Department of Justice. Following this comment period, the U.S. District Court for the Northern District of Illinois will determine whether to enter the final judgment, based on its assessment of public interest.
