Food Lion files Antitrust Suit against Dairy Farmers of America

Grocery chain Food Lion filed a lawsuit against Dairy Farmers of America alleging that their purchase of processing plants from Dean Food Company, who recently filed bankruptcy, constitutes anti-competitive activity. “DFA’s ownership of the majority of the legacy Dean milk processing plants represents the coup de grâce for competition in the relevant fluid milk markets,” the complaint stated.

Food Lion is represented by Hunton Andrews Kurth. Maryland and Virginia Milk Producers Cooperative Association Inc. (MDVA), represented by Troutman Sanders, is also a plaintiff in the case which was filed in the North Carolina Middle District Court before Judge Catherine C. Eagles. They argued that the purchase of Dean Food Company plants will allow DFA the ability and incentive to wipe out all competition and maintain a monopoly on the dairy supply chain.

Food Lion said the transaction will have harmful effects across the country but particularly in the areas around the milk processing plants in North and South Carolina. In these areas, MDVA is the “only significant remaining competitor for the supply of raw milk.”  MDVA claimed that since the Dean Food Company facilities in North and South Carolina have been purchased by DFA, MDVA will not have access to the facilities and will likely not be able to continue to operate in the area. Food Lion is one of the largest milk retailers in the area and is claiming it will have a negative effect on it as well.

Dean Foods Company, formerly the largest raw milk processor in the nation, previously partnered with DFA, allegedly in an attempt to boost each other’s power in the market. As they became more dominant in the market, each company had more control over contracts. The complaint says this deal, which it calls an “anti-competitive cycle of harm,” was set to expire in April 2021, but in 2019 Dean Food Company filed for bankruptcy allowing DFA to purchase 44 of their processing plants and continue the antitrust activity.

The complaint alleged that DFA has made a “longstanding effort” to seize control of the supply chain. “For the past two decades, DFA has rapidly consolidated and dominated the market for the supply of raw milk not by competing on the merits, but through unlawful conduct and anti-competitive agreements through which it has gained near-complete control over the purchasing of key nationwide milk processors.  This anti-competitive campaign has allowed DFA to transform itself from a modest regional dairy cooperative into the Standard Oil of the modern dairy industry.”

An antitrust lawsuit was recently filed by the United States of America, Massachusetts, and Wisconsin against DFA and Dean Foods Company in an attempt to stop the business deal saying a business deal between the two companies would reduce competition in the market giving DFA 70% of the market share in Wisconsin and 50% in New England.

Food Lion and MDVA requested that an injunction against the purchase is granted against at least one of the three processing facilities purchased by DFA in North and South Carolina and that the acquisition is ruled as a violation of the Sherman Act.