A federal antitrust lawsuit will seek to undo Dallas, Texas-based Dean Foods‘ acquisition of Wisconsin-based Foremost Farms USA‘s consumer products division. U.S. Department of Justice antitrust regulators say the deal eliminates substantial competition in milk sales in three states. Wisconsin Attorney General J.B. Van Hollen joined his counterparts in Michigan and Illinois in the lawsuit, filed Friday in federal court in Milwaukee. “Given the importance of dairy to our state, it is vital that consumers have choices when it comes to their milk purchases and that farmers have options when selling their milk to processors,” Van Hollen said.

“This consolidation would be terrible for Wisconsin consumers and school districts, as well as Wisconsin farmers,” said Wisconsin Senator Russ Feingold, who called the DOJ action a welcome change after years of inaction. The legal challenge marks the first time the Obama administration’s antitrust team at the Justice Department, led by Christine Varney, has sued to block or undo an acquisition. During Varney’s confirmation hearings in March 2009, Feingold’s questioning focused on competition in the dairy industry. Varney had pledged to take a close look at competition issues in agriculture.

The lawsuit seeks to undo the 2009 deal, and also seeks to require that Dean notify the Justice Department at least 30 days in advance of any future acquisition of a milk-processing operation. Antitrust regulators said in court documents that Dean had substantially weakened competition in certain dairy markets when it acquired two Wisconsin dairy processing plants from Foremost, which is a dairy cooperative owned by farms in seven states.

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