Lawsuit relies on milk price analysis by Cooperatives Working Together

By MATEUSZ PERKOWSKI

Capital Press

Several large U.S. dairy cooperatives have been accused of violating antitrust laws by participating in a herd retirement program aimed at reducing milk supplies.

Several milk consumers have filed a legal complaint against the National Milk Producers Federation, which includes the cooperatives Dairy Farmers of America, Land O'Lakes, Dairylea and Agrimark.

The lawsuit challenges the Cooperatives Working Together program, under which dairy producers were paid to sell their dairy cattle for slaughter, thereby reducing total milk production.

"By manipulating the supply of raw milk through herd retirement, price competition has been suppressed and prices have been supported at artificially high levels throughout the United States," the complaint said.

Plaintiffs want to launch a class action lawsuit that encompasses dairy consumers from 26 states and the District of Columbia, seeking more than $5 million in damages. The actual amount would be determined at trial.

In a statement, the Cooperatives Working Together program said its actions would be vindicated because the program was designed and operated in a way that complies with U.S. antitrust laws.

The statement claimed the lawsuit was instigated by an animal rights group.

The Compassion Over Killing animal rights group claimed that some of its members are plaintiffs in the lawsuit against the dairy cooperatives.

In addition to manipulating prices for dairy products, the Cooperatives Working Together program "unfairly increased the profits of agribusiness giants by putting small farms out of business," the animal rights group said in a statement.

On its website, Compassion Over Killing announced its support of the lawsuit in conjunction with a release of photos and videos that purport to show the "filthy, barren, fly-infested conditions" of "California dairy factory farms."

The lawsuit, filed in federal district court in San Francisco, makes generous use of the Cooperatives Working Together's own economic analyses, which showed that it had removed more than 500,000 cows from milk production during 10 retirement rounds between 2003 and 2010.

For example, the complaint points to a report by an agricultural economist, Scott Brown of the University of Missouri, which showed herd retirements had boosted the price of milk to farmers by about $1.75 per hundredweight in 2010.

The complaint also relies on Brown's finding that herd retirements had boosted farm milk price revenues by more than $9.5 billion in total.

Retail milk prices track farm prices over time, as evidenced by USDA data, which means the program caused consumers to pay more than they had to for dairy products, according to the complaint.

The plaintiffs also contend that Cooperatives Working Together isn't entitled to any exemption from antitrust laws offered to farm cooperatives under the Capper-Volstead Act.

The exclusion doesn't apply to Cooperatives Working Together because it has members that don't actually produce milk or dairy products and it's governed by the National Milk Producers Federation, which has board members that aren't part of the program, the complaint said.

It's interesting that the plaintiffs claim the program has violated state antitrust laws, rather than federal statutes, Peter Carstensen, a law professor at the University of Wisconsin who specializes in agricultural antitrust and the Capper-Volstead Act.

This reliance on state laws could possibly be a way to open up a "separate line of argument" -- that Cooperatives Working Together can't benefit from Capper-Volstead because its actions violate state laws, he said.

In any case, the cooperatives participating in the program would likely feel a lot of pressure to settle the lawsuit if it does end up getting certified as a class action, Carstensen said.

The risk of setting a threatening legal precedent -- for example, that Capper-Volstead doesn't apply to supply management strategies -- may diminish their willingness to fight for a favorable judgment, he said. "Do you want to bet the farm, or the co-op, on that?"

Online

Cooperatives Working Together: www.cwt.coop

Compassion Over Killing: www.cok.net