Posted on Thu, Aug. 12, 2004


U.S. reportedly investigating KC dairy co-op


Chicago Tribune

WASHINGTON — The nation's largest dairy cooperative is under investigation by the Antitrust Division of the Department of Justice, according to several dairy farmers.

Farmers interviewed as part of the inquiry said the Kansas City-based Dairy Farmers of America is being investigated for trying to corner the raw milk market in several regions of the country.

The cooperative markets milk for one-third of the nation's dairy farmers. Critics have long complained that the cooperative has grown by using predatory practices that violate federal antitrust laws.

Justice Department officials declined to comment.

David Geisler, the co-op's legal counsel, said the department has not contacted the cooperative about its investigation. But he said that in the six years since the Dairy Farmers of America was formed, the department has frequently reviewed the cooperative's acquisitions and mergers.

“In many ways, the government is fairly active in a number of businesses, and the milk business is one they have been involved with historically,” Geisler said. “It's a sensational, attention-grabbing headline. I think it's viewed by us as part of our normal business operations.

“If we are contacted, we plan on cooperating.”

He denied that the cooperative is trying to monopolize the raw milk market. He noted that the government has repeatedly reviewed the cooperative's actions and not charged it with any violations.

Several dairy farmers in Louisiana said two federal prosecutors and a Justice Department economist met with about 15 dairy farmers and their wives on Aug. 5. Representatives of the attorneys general in Florida and Louisiana also participated, the farmers said.

Officials from those offices in Florida and Louisiana did not return messages seeking comment.

The prosecutors asked the dairy farmers about their experiences with the cooperative, which markets raw milk for an estimated 90 percent of the dairy farmers in eastern Louisiana, said Jerome Walker, a dairy farmer at the meeting.

A company partially owned by the cooperative is trying to buy a milk plant in Hattiesburg, La., that is one of the few remaining plants that buys milk from independent dairy farmers, including Walker and the other meeting participants. The sale is awaiting approval from the Justice Department.

Among the complaints against the cooperative is that it acquires exclusive rights to supply milk to processors — and then allegedly prohibits other cooperatives and independent farmers from selling milk to those processors unless they affiliate with the Dairy Farmers of America, several farmers said.

Joseph Wright, president of Southeast Milk in Florida, said his cooperative has been asking federal authorities to investigate the Dairy Farmers of America for 18 months and only recently was told a formal investigation is under way.

Wright said his cooperative had to start paying the Dairy Farmers of America $3.5 million a year last year to continue selling milk at two bottling plants where the Dairy Farmers of America acquired exclusive supply agreements.

Peter Hardin, editor of The Milkweed, a dairy industry publication, said the Dairy Farmers of America has gotten so large that dairy farmers no longer control it or benefit from its rapid growth. Much of the money that the cooperative generates is plowed into expansion rather than back to its members, he said.

“Money that was the farmers' originally goes to buy these businesses, but then they don't share in the profits,” said Hardin, whose publication is a frequent critic of the cooperative.

The Dairy Farmers of America was created in 1998 by the merger of four large dairy cooperatives. It has 13,445 member farms and markets 57 billion pounds of milk a year, one-third of the nation's milk production.


First glance

• Several dairy farmers say the Kansas City-based Dairy Farmers of America is under investigation for trying to corner the raw milk market in parts of the country.





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