US dairy giants to pay $52m to milk purchasers in court settlement

By Mary Ellen Shoup

- Last updated on GMT

The antitrust suit alleged that the "Cooperatives Working Together" killed 500,000 cows in order to control milk prices in the US. © iStock/erdinhasdemir
The antitrust suit alleged that the "Cooperatives Working Together" killed 500,000 cows in order to control milk prices in the US. © iStock/erdinhasdemir

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Some of the largest dairy producers in the US will have to pay $52m to milk purchasers across 15 states and the District of Columbia, after US District Judge Jeffery White granted preliminary approval to the antitrust class action lawsuit last month.

Late in August 2016, US purchasers of dairy products containing raw milk ingredients produced by the National Milk Producers Association, aka Cooperatives Working Together (CWT) sought preliminary approval from a California federal judge for a $52m settlement in an antitrust suit.

The allegation against US dairy

The lawsuit alleged that the CWT took coordinated efforts since 2003 to limit the production of raw farm milk through premature “herd retirements” ​in order to increase the price of raw farm milk.

According to court documents the CWT involves “dairy producers in every state,”​ who are producing “almost 70% of the nation’s milk”​ and includes Dairy Farmers Of America, Inc.; Land O’Lakes, Inc.; Dairylea Cooperative Inc.; and Agri-Mark, Inc who were also named as defendants in the case.

In the complaint, filled in April 2011, plaintiffs Geoffrey Robb and Nels Thogersen stated that by “manipulating the supply of raw farm milk through herd retirement, price competition has been suppressed and prices have been supported at artificially high levels throughout the United States. As a result, indirect purchasers of milk and other fresh milk products have paid supracompetitive prices.”

Estimated 73 million eligible class members

The $52m-settlement amount represents approximately 30% of the plaintiffs’ total estimated damages and was the result of five years of litigation between the two parties. In their motion for settlement the plaintiffs estimated that 73 million class members qualify to receive a portion of the $52m fund.

The court document defines a class member as a consumer who purchased fresh milk products (e.g. cream, half & half, yogurt, cottage cheese, and/or sour cream) between 2003 and 2012 as a resident of the following states:

Arizona, California, Kansas, Massachusetts, Michigan, Missouri, Nebraska, Nevada, New Hampshire, Oregon, South Dakota, Tennessee, Vermont, West Virginia, Wisconsin, and the District of Columbia.

Cheryl Leahy, general counsel for animal rights organization Compassion Over Killing, said her organization "was proud to have spearheaded the research"​ that led to this class action litigation.

"Not only was the price of milk artificially inflated, but this scheme ultimately cost 500,000 young cows their lives,"​ Leahy said in a statement.

Five years of back and forth

CWT is a voluntary dairy herd removal program implemented by U.S. dairy cooperatives from 2003 through 2010 in an effort to reduce the aggregate milk supply and increase the amount of money dairy producers received for milk.

Through the program, participating cooperatives bought out herds from dairy farmers, who were then required to sell their entire herds to slaughter and not re-enter the dairy farming business for at least one year.

The lawsuit claimed these dairy companies, which account for nearly 70% of US milk production, illegally conspired to raise market prices, costing consumers $9.55bn in inflated milk prices.

CWT members defended their actions by saying that the cooperative “was created in 2003 as a self-help initiative to assist family dairy farmers and members of dairy cooperatives who were losing money producing milk. The program was designed and has always been operated in a manner fully consistent with the anti-trust laws of the United States.”

CWT stated the purpose of the organization was to increase profitability.

“Indeed, CWT’s primary activity since inception has been to increase the profitability of dairy producers through coordinated herd retirements. Through this program, dairy producers can submit bids for the price at which they will sell their herd to slaughter prematurely. CWT provides a formula through which farmers can calculate their bids essentially based on subtracting the price the farmer can recoup by selling them at auction as slaughter cows from their market value as producing dairy cows, with CWT paying the difference.”

Dairy companies moved to dismiss the allegations but were denied by the court in 2012.

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