Posted: Thursday, February 28, 2013 11:08 AM
Several consumers have filed a lawsuit accusing the Dairy Farmers of America cooperative of illegally fixing prices for dairy products.
The complaint seeks certification as a class action, which would allow other consumers to join the litigation, and compensation for at least $5 million in alleged damages.
Plaintiffs claim that DFA manipulated trading in the cheddar cheese and milk futures markets to drive up prices for its dairy products in the mid-2000s.
According to the complaint, the cooperative bought cheese on the Chicago Mercantile Exchange spot market even though "it had an inordinate supply of cheddar cheese and no conceivable use for the cheese it was purchasing."
The goal was to sustain higher cheese prices in that market, which isn't a major source of cheese for buyers but helps determine the broader value of dairy products sold in the U.S., the complaint said.
DFA later sold the cheese it had bought on the spot market "at a substantial loss" because it "had an excess inventory of cheese that was growing old and required liquidation," the complaint said.
The cooperative and its subsidiaries also bought milk futures contracts to create the appearance of demand and spur higher prices, the complaint said.
Food distributors and retailers passed on those higher prices to consumers, the complaint said. "They have been required to pay more for dairy products than they would have in the absence of the wrongful conduct."
Capital Press was unable to immediately get DFA's response to the allegations.
The cooperative has more than 9,500 member farms with 1.7 million cows across the U.S. Its brands include Borden Cheese, Cache Valley Cheese and Keller's Creamery Butter, among others.
In 2008, the U.S. Commodity Futures Trading Commission fined several executives from DFA and its subsidiaries more than $12 million for attempting to manipulate milk futures.
More recently, the cooperative and other defendants agreed to pay nearly $159 million to settle a class action lawsuit filed by member dairymen, who claimed DFA and other companies conspired to depress milk prices paid to growers.