Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Grocery alleges dairy cooperative conspiracy to raise milk prices, (Sep 4, 2013)

By Tobias J. Gillett, J.D., LL.M.

A retail grocery business has filed a complaint in the federal district court for the Southern District of Illinois asserting that the National Milk Producers Federation (NMPF) and its member dairy cooperatives violated Section 1 of the Sherman Act by engaging in a conspiracy to eliminate competition and raise prices in the markets for raw milk and manufactured dairy products (Fifty Third Hampton LLC v. National Milk Producers Federation, September 3, 2013).

Fifty Third Hampton LLC, doing business as Hampton Foods, is a Wisconsin retail grocery business. According to its complaint, the NMPF’s “Cooperatives Working Together” (CWT) program is a self-described “voluntary, producer-funded national program developed by the National Milk Producers Federation to strengthen and stabilize milk prices.” Members of the NMPF fund the program through assessments paid based on the amounts of raw milk produced. The assessments are then used to pay some members of CWT to “retire” (slaughter) their herds, and refrain from producing milk for a certain time period. The complaint alleges that this arrangement amounts in practice to permanent retirement. CWT pays the difference between the amount a farmer could obtain from selling his or her cows for slaughter and their market value as producing dairy cows.

Hampton Foods claims CWT funded ten rounds of herd “retirements” between 2003 and 2010, resulting in the removal of over 500,000 cows from production and a reduction of the nation’s milk supply by approximately 10 billion pounds. The complaint alleges that the program was responsible for a cumulative increase in milk price revenue of $9.55 billion and that the effects of herd retirements extend into the future such that the defendants are still profiting from previous retirements.

In addition, until September 2004, CWT allegedly also operated a Reduced Production Marketing program that compensated dairy producers for reducing their milk production. CWT purportedly also operates an Export Assistance program designed to remove dairy products from the U.S. market by subsidizing export of the products. CWT’s programs have allegedly caused Fifty Third Hampton and other direct purchasers of raw milk, fluid milk products, and manufactured dairy products to pay supracompetitive prices for the products from 2008 to the present.

The complaint also asserts that CWT is not protected by the antitrust immunity granted by the Capper-Volstead Act. The Capper-Volstead Act grants certain agricultural cooperatives limited immunity under the antitrust laws when they are acting “in collectively processing, preparing for market, handling, and marking in interstate and foreign commerce” their agricultural products. According to the complaint, CWT is not protected by the Capper-Volstead Act because the Act provides immunity only for efforts “to assist producers in marketing the available supply of agricultural products,” not for “pre-production output restraints” like those in CWT. Moreover, the complaint asserts that CWT does not qualify as a Capper-Volstead entity because its membership includes entities that do not produce milk, and NMPF’s control over CWT conflicts with “the equality of corporate suffrage” that would entitle CWT to capper-Volstead immunity. Finally, even if CWT satisfied the requirements of the Capper-Volstead Act, the Act’s immunity does not extend to the “predatory, anticompetitive conduct” allegedly engaged in by the defendants.

The complaint asserts cause of action for violation of Section 1 of the Sherman Act. It seeks a declaration that the defendants’ actions constituted unlawful restraints of trade in violation of Section 1 of the Sherman Act, damages and treble damages, pre- and post-judgment interest, costs of suit, attorney fees, an injunction, and any other just and proper relief.

The case is No. 3:13-cv-00913-MJR-DGW.

Attorneys: Charles Barrett (Charles Barrett, P.C.) for Fifty Third Hampton LLC.

Companies: Fifty Third Hampton LLC; National Milk Producers Federation; Cooperatives Working Together; Dairy Farmers of America, Inc.; Land O’Lakes, Inc.; Dairylea Cooperative Inc.; Agri-Mark, Inc.

News: Antitrust IllinoisNews