The Justice Department is Investigating the Purchase of Dean Foods

Matty-Sways

Dairy Farmers of America's purchase of Dean Foods Co. has garnered anti-trust attention from the Department of Justice.

Officials and people in the industry said the Justice Department is consulting with farmers and retailers about the possible repercussions of the acquisition of Dean Foods Co. by Dairy Farmers of America. They are concerned with the effect the deal will have on milk prices and the very high competition in the dairy business. The consumption of milk has fallen about 10% a decade over the last 40 years as demand for milk has waned over that time.  This has put a lot of pressure on the industry.

“We are investigating Dairy Farmers of America’s potential acquisition of Dean Foods and the potential loss of competition for selling raw milk,” an antitrust attorney at the Justice Department wrote in a message to a dairy farmer that was reviewed by The Wall Street Journal.

Dean is exploring an asset sale after filing for Chapter 11 protection. Dean, by sales, is the United States largest milk processing company. They are still in deal discussions as some farm groups have rung an alarm and the deal may create to large a concentration of milk buyers in certain parts of the country.

According to the U.S. Department of Agriculture data in 2018, there were 459 plants each producing an average of 103.9 million pounds of milk as compared to 1980 when there were 1,066 plants across the U.S. produced around 50 million annually. The plant closures and consolidation have tested dairy farmers, requiring them to find new buyers and others to close their milking parlors.

Overall the dairy consumption is growing due to other uses of milk products such as yogurt and cheese, however, the low milk prices have affected the farmers greatly since they are paid a higher price for raw milk. 

Dominant retailers like Walmart Inc. and Kroger Co. have added cheaper in-store brands, in some cases even building their own bottling plants, pressuring prices downward and in some cases reducing business for processors like Dean which would maybe show that they have no antitrust issues. 

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