DFA no longer has milk monopoly, judge rules

A federal judge has ruled that Dairy Farmers of America (DFA) does not have a monopoly on school milk sold in parts of Kentucky and Tennessee.

Kansas City MO-based DFA owns a 50% share of each of the only two dairy firms serving the area. However, it has relinquished its voting rights in one of the firms and now doesn’t control that company’s prices, according to United States District Court Chief Judge Karl Forester.

In a 2003 antitrust complaint, the US Justice Department and the state of Kentucky contended that DFA’s owning half of Southern Belle Dairy Co and half of Flav-O-Rich recreated effects of a bid-rigging conspiracy by the two companies from the 1970s to 1989. Southern Belle and Flav-O-Rich pleaded guilty in 1992 to hiking the price of school milk by agreeing which dairy firm would bid lower.

According to the government, from then until February 2002, Flav-O-Rich and Southern Belle “competed vigorously” for school milk contracts.

DFA acquired control of Flav-O-Rich in December 2001 and bought half of Southern Belle in February 2002, asserting control over both firms, the government contended.

After an unsuccessful attempt to settle the lawsuit, DFA restructured its ownership of Southern Belle, giving total control to co-owner Bob Allen, DFA said in a July memorandum. “Now, DFA has only a completely passive, non-voting capital interest in Southern Belle,” the memo said.