October 3, 2006

US dairy Co-Op made to divest stake in dairy by anti-trust authorities

The Department of Justice has required Missouri-based Dairy Farmers of America Inc. (DFA), the largest dairy cooperative in the world, to divest its acquisition of Southern Belle Dairy Co in a settlement.

DFA's partner, the Allen Family Limited Partnership (AFLP), would also be required to sell its interest in Southern Belle. DFA and AFLP each owned 50 percent of Southern Belle Dairy Co. LLC.

Both DFA and AFLP would sell their interests in Southern Belle to Prairie Farms Dairy Inc, a buyer approved by the Antitrust Division.

The settlement restores competition for school milk contracts that serve schoolchildren in 100 school districts in Kentucky and Tennessee, said Thomas O. Barnett, Assistant Attorney General in charge of the Department's Antitrust Division.

The settlement marked the end of a lawsuit that began in April 2003. That year, the Department's Antitrust Division and the Commonwealth of Kentucky filed a lawsuit challenging DFA's acquisition of its interest in the Southern Belle dairy.

The acquisition would have given DFA an interest in Southern Belle and a nearby dairy, Fav-O-Rich. The two were the only contenders for school milk contracts for 45 school districts in eastern Kentucky. Also, the two companies only had one other rival bidder in 55 school districts in eastern Kentucky and Tennessee.

While the federal district court initially dismissed the case, the Department successfully appealed to the US Court of Appeals for the Sixth Circuit, which sent the case back for trial.

The agreement was reached before trial began.

In 2005, DFA sold 60 billion pounds of raw milk to dairies and other processors and had almost US$9 billion in revenue.