Does Dean Foods Have Monopoly Power?

Two dairy farmers have filed a lawsuit against Dean Foods and Dairy Farmers of America. Dean is the country’s largest dairy processor and DFA its largest cooperative, and the farmers accuse them of “monopolizing a level of distribution of fluid milk in the Northeast and forcing dairy farmers to join DFA or its marketing affiliate, Dairy Marketing Services, to survive.” The lawyer representing the farmers says he is seeking class-action status, meaning thousands of other affected farmers could join the suit.

It’s true that dairy farmers have not been faring well, with prices falling below the cost of production for many farmers, while Dean Foods has been profiting from the low prices. But many industries are in trouble right now, and it remains to be seen whether Dean is responsible for this particular crisis, and whether monopoly power can be proven.

Dean Foods achieved its massive size in 2001, when it merged with Suiza Foods, and the crisis is much more recent than that. In fact, a couple of years ago, milk prices were at record highs.

The lawsuit isn’t the first call for an investigation into the issue; in August, senators Charles Schumer (D-NY) and Russ Feingold (D-WI) wrote a letter to the Department of Justice saying that Dean controls 70 of the milk market in New England and an even higher percentage in a few other states.

Dean Foods and Dairy Farmers of America say the claims are entirely without merit, obviously, because to say anything else in an antitrust case would be idiotic.