DOJ Reaches Settlement with Dean Foods

On March 29, 2011, Department of Justice (“DOJ”) reached a settlement with Dean Foods Company (“Dean”) that requires Dean to divest a significant milk processing plant in Waukesha, Wis., and related assets that it acquired from the Foremost Farms USA Cooperative, including the Golden Guernsey brand name. The DOJ's Antitrust Division and state attorneys general from Illinois, Michigan and Wisconsin, filed a proposed consent decree in U.S. District Court for the Eastern District of Wisconsin in Milwaukee. The settlement agreement resolves the antitrust concerns alleged in the civil antitrust lawsuit originally filed by the DOJ and the state attorneys general on Jan. 22, 2010.
The proposed settlement also requires that Dean notify the DOJ before it makes any future acquisition of milk processing plants for which the purchase price is more than $3 million. The DOJ believes that the divestitures and the settlement terms will restore competition in the sale of milk to schools, grocery stores, convenience stories and other retailers in Illinois, Michigan and Wisconsin. This will ensure that competition is protected in an important market and the school children and consumers can enjoy lower prices for their milk.

Dean acquired Foremost's Consumer Products Division in April of 2009. After investigating the consummated acquisition, the DOJ and the state attorneys general filed a lawsuit alleging that Dean's acquisition eliminated substantial competition between the two companies in the sale of milk to schools and retailers in Illinois, Michigan and Wisconsin. The DOJ determined through its investigation that the divestiture of the Waukesha dairy plant would address the competitive concerns in Illinois and Wisconsin.

This enforcement action is noteworthy for several reasons. First, the DOJ challenged a consummated merger. Second, the DOJ challenged the merger even though it was not HSR reportable because the dollar value of the deal was too low. This means that the DOJ will challenge any deal that raises anticompetitive concerns whether or not the transaction is HSR reportable due to the low value of the transaction. Third, the DOJ obtained a divestiture to resolve the anticompetitive concerns of a deal that was already consummated. Fourth, the DOJ obtained a requirement that Dean Foods must provide future notification of any future transactions even if the transactions are not HSR reportable. Given the narrow locality of the effect of the acquisition, it is interesting to find the DOJ enforce reporting duties on these smaller transactions. Such requirement displays the DOJ's particular concern in the agricultural and the farming industry, in general, and in the dairy industry, in particular.

Andre Barlow
(202) 589-1834
abarlow@dbmlawgroup.com

Yolinda Qu
(202) 589-1834
yqu@dbmlawgroup.com