Settlement Approved in Dairy Antitrust Case, N.H. Farmers to Receive Payments

Jun 14, 2016

A seven-year long battle between dairy farmers and the large dairy companies that buy raw milk came to an end last week. A federal judge approved the settlement of an antitrust case that alleged that Dairy Farmers of America, Dairy Marketing Services, and Dean Foods worked together to drive down milk prices in the Northeast.

Farmers in eleven states, including New Hampshire and the District of Columbia, will be getting payments under the agreement. New Hampshire farmer Steve Taylor helped outline the settlement conditions. He joined NHPR’s Peter Biello to discuss the lawsuit.

Let’s back up seven years. What were the conditions that prompted this lawsuit in the first place?

The conditions were that there was a very rapid contraction in the opportunities that farmers had for marketing their milk. A generation ago, farmers in New Hampshire might have had eight or ten different markets they could go to with their milk. But now, it was coming down to a point where there were really only two options. There was a widespread fear that this concentration was leading to a manipulation of the market, because large dairy corporations have tremendous power to control the flow of milk from the farm to various markets. And the farmers were coming out as the losers in the whole process.  

The suit alleges that the defendants conspired to drive down the price that the farmers got through what we’ll call “Full Supply Contracts.” In other words, Dairy Farmers of America assembled milk from the farm, hauled it to where it would be processed for the consumer, and then through a complex web of agreements and contracts and side arrangements, had the effect of driving down the price that the farmers were actually receiving below what they should have gotten. That was the allegation.

Why did it take seven years for the settlement come through?

There’s a saying about the dairy marketing system in the US: it’s akin to the world gold market—there are only about 150 people who understand how it works (and that’s the way they like it). It’s a very complicated, tricky system. There’s lots of intrigue, lots of opportunities for manipulations; there are lots of factions and a lot of battling back and forth. It’s not a pretty scene.

But the federal judge ruled in favor of the dairy farmers, and they’ll be getting about $4,000 each, several of whom are in New Hampshire.

Virtually all the commercial dairy farmers in New Hampshire will get a small check out of all this. The judge asked, in frustration, “Will you guys please work this out? It’s foolish for this to go to a full-fledged trial that is so complicated and difficult that nobody can get their arms around it. Let’s get a settlement.”

So a settlement was proposed last year. It went before the judge but some of the plaintiffs’ representatives rebelled. The judge said, “Well, go back to the drawing board and try again.” And so this time there is what many think is a much better settlement on the thing. The plaintiffs and the defendants agree. They got together, presented it to the judge, and the judge said, “Ok, I’ll buy into this and I’ll sign off on it.”

Is $4,000 adequate compensation for what farmers may have lost because of this alleged price fixing?

I don’t really think it is, but there are some non-monetary provisions in the settlement that might be more important than actual cash payout. Those will compel greater transparency on the part of the defendants and create a position of an ombudsman to represent and hear from producers who feel they may have been aggrieved. There are a lot of things in the proposed settlement on the non-monetary side that are positive.

Are you satisfied with the outcome?

I am. I recognize from long years so of experience that a settlement in any kind of legal matter represents some victories and some losses for both sides. I think that’s what you have here. There are plusses and minuses on both sides. But I think it is a fair and a decent outcome.

How will this settlement affect the New England dairy industry in the years to come?

The problem now is that the conditions that brought about this matter have changed. There’s a new dynamic abroad right now: there’s too much milk for what the market can absorb. And so we have a tidal wave of milk coming off the farms because they just keep getting ever more productive and efficient, and the market isn’t absorbing it. And so some milk right now, today, will be dumped, and that’s having a negative effect on the price farmers are receiving. So every drop in New England this morning is produced at a loss to the farmers. So there’s a real struggle going on on the farm.