Vermont Senator Bernie Sanders Targets Dean Foods, Dairy Antitrust Vermont U.S. Senator Bernie Sanders is focus- ing his substantial energies on the lack of competi- tion in farm milk procurement and fluid milk pro- cessing. Sanders – the only “Independent” serving in the United States Senate – is pressing the United States Department of Justice (DOJ) to open a new investigation by the Antitrust Division into dairy practices. Key areas that Sanders wants Antitrust investigators to dig into include: * Farm milk procurement. * Dean Foods’ massive share of fluid milk sales in numerous regions of the country. * Whether Dean Foods’ spectacular profits in 2009’s first half were unduly gained at the expense of dairy farmers and consumers. Dean Foods controls an estimated 70% of all fluid milk distributed in New England. Sanders charges that undue control by Dean Foods in numer- ous markets around the United States has allowed the company to unduly profit in early 2009 by prop- ping up charges for packaged fluid milk sold to supermarkets and other buyers. These excess profits were taken during a period when milk prices paid to dairy farmers declined by nearly 50 percent (com- pared to 2008 levels). Statements by Dean Foods’ CEO Gregg Engles, at a dairy processors conference in England earlier this year, indicated that Dean Foods owned about 37% of the nation’s fluid milk volume. Engles bragged at that same forum that Dean Foods’ market share exceeded the next five largest fluid milk processors’ combined volumes. Dean Foods’ control of farm milk prices tracks back to an arrangement with Dairy Farmers of America (DFA). In early 2003, Dean Foods dumped all of its 2,500+ dairy farmers supplying raw milk to the firm. Those producers’ milk markets were pushed into marketing their milk with Dairy Market- ing Services (DMS) – a joint venture controlled by DFA. DMS has dumped undue marketing costs on the backs of dairy farmers. In public and private communications, Sanders is demanding that the new head of DOJ’s Antitrust Division, Christine Varney, reopen antitrust investi- gation into dairy. Varney is a critical figure in the growing swirl of dairy antitrust charges. She inher- ited an Antitrust Division that, during both the Bill Clinton and George W. Bush administrations, was intentionally asleep at the switch on dairy matters. In late August 2006, a DOJ antitrust task force com- pleted a two-year investigation into competitive mis- deeds by Dean Foods and DFA. That Antitrust task force, which included representatives from about a dozen and a half states’ Attorneys General offices, recommended indictments against both Dean Foods and DFA. But top-level DOJ appointees squelched those recommended indictments, thanks to top-level political contacts enjoyed by Dean Foods and DFA. Recent events – including spectacular profits recorded by Dean Foods so far in 2009 and a new administration in the White House – set the table for demands by Wisconsin Senator Russell Feingold and Sanders that DOJ refocus on competition problems in dairy. In February 2009, during her confirmation hearings held by the Senate Judiciary Committee, Varney promised that she would be open to review of mergers and acquisitions already approved by DOJ. Feingold, publicly and privately, has commu- nicated anti-competitive practices to Varney’s atten- tion – including the April 1, 2009 Dean Foods’ pur- chase of Foremost Farms’ consumer division. Crit- ics charge that Dean Foods’ purchase of Foremost’s fluid division leaves virtually no competition for school milk contracts in the eastern half of Wiscon- sin. Political practicality: Join farmers’ and consumers’ interests Bernie Sanders is not a native Vermonter, he can’t hide a classic Brooklyn (New York City) accent. But Sanders’ origins as a city fellow haven’t been a problem for Vermont voters, who’ve elected and re- elected the 68-year old ball of populist spirit to a series of public offices since 1981. Sanders was elect- ed as U.S. Senator from Vermont in 2006. Prior to the Senate seat, Sanders served as Vermont’s lone Con- gressional representative for 16 years. Bernie rode his popular, nine-year tenure as mayor of Burlington – Vermont’s largest city – to Washington, D.C. As Sanders tries to kindle dairy antitrust flames, the core of this issue presents a unique opportunity to build upon a long-term, practical political philosophy, which The Milkweed editor first heard Bernie detail at a dairy farmers’ meeting in Morrisville, Vermont about dozen years ago. That simple practicality: agricultural issues must be couched as consumer issues, in order to generate adequate political support. Stated more simply: farmers alone don’t have enough political clout to win an issue; dairy farmers must network with con- sumers’ interests to be effective. What better issue to work Sanders’ “farmers and consumers” strategy than Dean Foods’ spectacular 2009 profits that allegedly are derived from depressing farmers’ milk prices and holding up consumers’ milk costs? Schoolyard tactic: whip the biggest bully Targeting Dean Foods is a classic underdog tactic: pick out the biggest bully in the schoolyard and thrash that bully. Until this point, virtually no political figures have seriously taken on Dean Foods. Sanders’ targeting Dean Foods is well-aimed. In both private meetings and public statements, Fein- gold and Sanders helped bring DOJ Antitrust Chief Christine Varney up to speed on Dean Foods’ control of the fluid milk business, and and they have plead- ed with her for a serious Antitrust investigation. Meanwhile, Sanders has been publicly egging on Dean Foods’ CEO Gregg Engles with a well-pub- licized exchange of letters. On July 20, 2009, Sanders wrote Engles inviting the CEO to meet with financially-struggling Vermont dairy farmers. Engles’ July 24, 2009 reply passed on the invite to meet with Sanders and Vermont dairy producers. Engles’ letter noted: “As you know, dairy processors do not set price of milk paid to dairy farmers. The price that farmers receive for the milk they produce is set primarily by the United States Department of Agriculture. Dean Foods purchases this milk at regulated prices under the USDA’s Federal Milk Marketing Orders. Adding to the complexity is the fact that we and other processors are just one part of a complicated system that stretches from the farm to the grocery shelf.” Sanders’ July 27, 2009 reply to Engles July 24 letter was a classic. Bernie ripped into Engles’ deflection of milk pricing responsibility, noting that the U.S. Department of Labor’s minimum wage law does not determine all wages in America. Sanders further ventured: “Dean Foods’ significant influence over the price of milk goes beyond its position as a dominant processor. What must also be considered is the exclusive arrangements it has with established dairy cooperatives across the country that limit the ability of dairy farmers to get the best price for their milk in an open and competitive market. By limiting the group of cooperatives from which it will buy milk in New England, Dean Foods is controlling the market on a number of different levels.” Sanders is tireless. And he’s intent upon seeing an honest probe of Dean Foods’ actions in dairy by the Antitrust Division of the U.S. Department of Jus- tice. Stay tuned. Bernie Sanders has his sleeves rolled up and he’s going after one of the big “bullies” in the dairy industry. by Pete Hardin 4 — The Milkweed • August 2009 On August 6, 2006, three United States Sena- tors wrote a formal letter to the head of the Antitrust Division of the U.S. Department of Justice, request- ing that investigation alleged, anticompetitive actions by Dean Foods – the nation’s largest fluid milk processor. (The Milkweed has reproduced the entire letter from these three senators to the head of the DOJ Antitrust Division on the adjoining page.) Senators Bernard Sanders (I-VT), Russell Feingold (D-WI) and Charles Schumer (D-NY) jointly signed the four-page request to Christine Var- ney, the Assistant U.S. Attorney General who heads the Antitrust Division. The formal request to Varney follows months of spade-work by Feingold and Sanders. The two have attempted to reverse more than a decade of federal antitrust laxity in dairy antitrust matters. In February 2009, Feingold grilled Varney (pub- licly and privately) during her Senate confirmation hearing on dairy matters. Feingold has been a long- term critic of dairy antitrust matters. However, 2009 represents the first time in many years that his politi- cal party controlled both Senate and White House. In focusing on Dean Foods, the letter from the three senators brings together several dairy issues of recent vintage: low farm milk prices, seemingly high consumer costs, and record profits reported by Dean Foods during the first two quarters of 2009. The letter stated: “The beneficiaries of this situation are increas- ingly consolidated corporate entities that exist between farmers and consumers. Dean Foods, the nation’s largest processor, reported $76.2 million in profits for the first quarter of 2009, up 147.4% from its $30.8 million in the firs quarter of 2008. Since its merger with Suiza Foods in 2001, Dean Foods has seen its profits skyrocket, enough thatover the last five years it has paid its CEO Gregg Engles $116.38 million. Based on our research and conversations with agricultural economists, we believe thaton rea- son for Dean Foods’ recent profits may be its ability to exercise monopoly pricing power in many parts of the country. “It is our understanding that Dean Foods con- trols large portions of the market for fluid milk in a number of regions of the United States. We understand that it controls approximately 90% in Michigan, about 80% in Massachusetts, 80-90% in Tennessee, 70% in New England, over 80% in Northern Alabama, and over 70% in northern New Jersey. Without such concentrated market condi- tions, farmers would have greater options as to where they sell their product and would likely see higher prices on the farm and consumers may even see more competitive prices in the store.” The letter from Senators Sanders, Feingold and Schumer details seven specific areas of competitive concerns in dairy – references that show a tremen- dous degree of research by the Senators and their staffs. The letter’s concluding sentence is classic Bernie Sanders logic: linking producers and con- sumers interests: “While we do all that we can to ensure that dairy farmers receive a fair price for their product, we hope that your department will create a competitive market for them so that they will be able to sell their product at a price they deserve.” --Sanders (VT), Feingold (WI) & Schumer (NY) Senators Seek Antitrust Scrutiny of Dean Foods Summer 2009: Vermont Senator Bernie Sanders jawbones USDA Secretary Tom Vilsack about the milk price crisis.