The National Milk Producers Federation reached a settlement last week in a class-action lawsuit alleging its now defunct herd-retirement program artificially inflated the price of raw milk, butter and cheese.
The lawsuit, filed in U.S. District Court for the Southern District of Illinois in May 2013, was brought by retailers and other companies that purchased milk and dairy products from dairy cooperatives participating in NMPF’s Cooperatives Working Together program.
Plaintiffs in the case alleged the program violated the Sherman Antitrust Act.
NMPF denies the allegation but agreed to pay $220 million to avoid the potential of much larger damages.
The plaintiffs were seeking $1.3 billion in damages, which under civil suit rules can be tripled, Alan Bjerga, NMPF senior vice president of communications, said.
“So maximum damages could have been just under $4 billion,” he said.
The NMPF decision was based on the uncertainties inherent in any jury trial, the large damages sought by the plaintiffs and the fact that CWT’s export assistance program would be unaffected.
“There is no way to sugarcoat a settlement of this size,” Jim Mulhern, NMPF president and CEO, said in a press release.
But resolving the case eliminates the possibility of a truly crippling outcome, he said.
“Lifting this cloud will aid us in our work advancing the well-being of U.S. dairy producers, which includes the current robust CWT export-assistance program,” he said.
The herd-retirement program operated between 2003 and 2010. Designed to help dairy producers in difficult times, it was lauded by two USDA secretaries and leading members of Congress, he said.
Funded by participating cooperatives and individual dairy farmers, the program paid qualifying dairy producers to send their herds to slaughter to strengthen and stabilize milk prices.
Plaintiffs in the case allege “defendants engaged in a continuing contract, combination and conspiracy to limit production of raw farm milk through premature herd retirements” in violation of the Sherman Act, according to the settlement agreement.
They also allege the principal purpose and effect was to reduce the nation’s supply of raw milk and to produce both short- and long-term increases in the price of raw farm milk, butter and cheese.
Neither NMPF nor any of its member cooperatives admit any wrongdoing as a result of the settlement. NMPF is the sole defendant in the settlement, but the settlement extinguishes claims against all defendants, NMPF stated.
“Defendants have denied and continue to deny each and every claim and allegation of wrongdoing made in the action and all charges of wrongdoing or liability against them arising out of any conduct alleged or that could have been alleged in the action,” the settlement agreement states.
NMPF discontinued the herd retirement program in 2010 but has continued the export assistance portion of CWT. Participating cooperatives and individual producers contribute 4 cents per hundredweight of milk they produce to the program.
In 2018, the program aided 57% of U.S. American-style cheese exports, 44% of butter exports and 39% of whole-milk powder exports, according to NMPF.