Schumer on Dairy Industry Antitrust

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Responding To Schumer's Call, DOJ's Head Of Antitrust Investigations Will Come To New York To Explore Anticompetitive Practices In The Dairy Industry

November 16, 2009 -- Today U.S. Senator Charles E. Schumer announced that at his urging Christine A. Varney, Assistant Attorney General in charge of the Department of Justice's (DOJ) Antitrust Division, will come to New York to meet with dairy farmers and consumers to explore potential anticompetitive behavior on the part of dairy processors.

Varney is the nation’s top antitrust investigator and she is coming to NY following a request by Schumer this August that DOJ launch a formal investigation into anticompetitive practices on the part of large milk processors, such as Dean Foods. The specific areas of focus may include excessive market concentration, marketplace transparency and vertical integration in the dairy industry. The exact times and locations have not yet been scheduled.

“These anticompetitive practices on the part of the nation’s largest milk processors are squeezing both consumers at the grocery store and dairy farmers while securing the middlemen record profits,” said Schumer. “The Department of Justice is doing the right thing by sending the nation’s top antitrust investigator to New York to suss out what’s going on.”

This August, Schumer released a report showing that while the price paid to dairy farmers for milk has cratered by almost 50% since January 2008 to historic lows that threaten the viability of countless dairy farms, the price consumers pay in grocery stores has fallen a mere 15% over the same period. Additionally, the amount of revenue dairy farmers receive per dollar consumers spend on milk has precipitously declined.

Although the price that dairy farmers are paid remains lower than in nearly four decades, less than $1 for a gallon of milk this summer, the cost that consumers pay for milk in stores remains relatively high. Schumer said there seems to be a disconnect between the rock bottom prices that are being foisted on dairy farmers and the still sticky price of milk at the store. As a result of these plunging wholesale prices, family dairy farms across the country have gone out of business or are in severe danger of doing so. This is a disaster not only for the thousands of rural communities that rely on the dairy industry for support, but also for the many consumers who want fresh and locally produced food. Further, a reduction in the diversity of the supply of wholesale milk would likely lead to further vertical concentration in the dairy industry, concentrating market share – and pricing power – in the hands of a very few operations, an outcome that would weaken the interests of both dairy farmers and consumers.

But, as producers of dairy—our family farms—struggle, some buyers and distributors of the product have enjoyed a correlating surge in profits. One particular firm, Dean Foods, the largest fluid-milk buyer in the country, recorded record profits in the company's first fiscal quarter of 2009. Profits more than doubled from slightly more than $30 million in 2008 to $76.2 million in 2009.

Dean Foods manages large portions of the market for fluid milk in a number of regions of the United States controlling approximately 90% in Michigan, about 80% in Massachusetts, 80 to 90% in Tennessee, 70% in New England, over 80% in Northern Alabama, and over 70% in northern New Jersey. Schumer said that without such concentrated market conditions, farmers would have greater options as to where they sell their product.

Schumer said that Dean Foods is just one of his concerns, but that the source of the disconnect between the prices consumers are paying and prices dairy farmers are receiving needs to be identified immediately and appropriate action needs to be taken to correct it.

In an effort to reduce the pressure on struggling dairy farmers, Schumer called on the Department of Justice and the Federal Trade Commission to take a hard look at the dairy industry and identify where the problems lay. In response to Schumer’s urging, the nation’s top antitrust official will be coming to New York State to meet with dairy farmers and consumers to explore this problem.

“It defies logic that dairy farmers are getting raked over the coals and consumers have seen such a minimal drop in price,” Schumer said. “Something is clearly rotten in the state of Denmark – and it’s not the milk the our family dairy farmers produce.”

Source: Senator Charles E. Schumer