Two retail companies are accusing a national dairy organization of manipulating milk prices, opening a new front in litigation over a herd retirement program.
Piggly Wiggly Midwest, a grocery chain, and Kinney Drugs, a pharmacy chain, have filed an antitrust complaint against the National Milk Producers Federation and associated dairy cooperatives.
The lawsuit claims that NMPF’s “Cooperatives Working Together” program repeatedly paid farmers to send their herds to slaughter between 2003 and 2010, thereby reducing milk output and inflating prices for dairy products.
The plaintiffs characterize the program as an unlawfully anti-competitive “conspiracy” and have requested class action status that would allow other direct dairy purchasers to join in the lawsuit to seek compensation.
NMPF has been battling similar allegations for the past four years, but that class action case was brought on behalf of consumers rather than retailers.
Chris Galen, senior vice president of communications for NMPF, said the group could not yet comment on the latest complaint.
“We just learned of this litigation and we’re still consulting with our attorneys,” he said.
According to NMPF, the herd retirements were protected by the Capper-Volstead Act, which provides farm cooperatives with some exemptions from antitrust liability.
Since the original antitrust lawsuit was filed in 2011, NMPF has continued defending the program despite suffering two significant legal setbacks.
The organization asked U.S. District Judge Jeffrey White to dismiss the case on the grounds that USDA and not the federal court has jurisdiction over the controversy.
In 2012, White rejected that argument as well as the claim that plaintiffs were barred from filing the lawsuit by the statute of limitations.
Last year, the judge dealt NMPF another blow by certifying the consumer case as a class action — a step that often exposes defendants to greater financial losses and thus creates pressure to settle.
A jury trial in the consumer case is scheduled for February 2016.
It’s likely that NMPF will again ask the judge to throw out the case before it goes to trial, based on the theory the cooperatives are protected by Capper-Volstead, said Peter Carstensen, a law professor specializing in agricultural antitrust at the University of Wisconsin Law School.
If the judge agrees that NMPF is shielded by that law, it would effectively end the case and foreclose the plaintiffs from filing a similar lawsuit, he said.
“You won’t be able to come back and have another crack at it,” Carstensen said.
As for the new retailer lawsuit, it could be an attempt by other attorneys to join the dispute in the hope of eventually winning a share of the fees, he said.
The latest complaint could also be strategically aimed at expanding the class of plaintiffs, Carstensen said. “It’s possible this is a way of adding another component to the litigation.”
Aside from milk, similar lawsuits have targeted volume-control systems for potatoes, eggs and mushrooms in recent years, he said.
Given the legal uncertainty about such programs and their vulnerability to litigation, other farm sectors will likely think twice about trying to limit production, Carstensen said. “My advice would be, ‘Don’t do it.’”