$220 million settlement stems from lawsuit alleging a conspiracy to reduce milk output and raise prices on dairy products
A $220 million settlement has been reached in a class action lawsuit brought against National Milk Producers Federation (NMPF), Agri-Mark, Inc., Dairy Farmers of America, Inc., and Land O’Lakes, Inc. (collectively “Defendants”). The lawsuit claimed that an effort known as Cooperatives Working Together (CWT) operated a Herd Retirement Program, which was a conspiracy to reduce milk output in violation of the law. The Defendants deny doing anything wrong. The Court has not decided who is right.
“There is no way to sugarcoat a settlement of this size, especially given that the Herd Retirement Program was a well-publicized effort designed to serve dairy producers in difficult times and was praised by two Secretaries of Agriculture as well as leading members of Congress,” says Jim Mulhern, president and CEO of NMPF. “Given the potential damages and the uncertainties surrounding any jury trial, resolving this case eliminates the possibility of a truly crippling outcome. Lifting this cloud will aid us in our work advancing the well-being of U.S. dairy producers, which includes the current robust CWT export assistance program.”
The plaintiffs’ litigation sought damages relating to the so-called Herd Retirement Program operated under Cooperatives Working Together, according to a December 2019 statement from NMPF. The program offered dairy farmers financial incentives to market their milking herds for beef. It operated between 2003 to 2010 and was openly lauded by USDA secretaries and congressional agriculture committee chairmen from both parties at the time as an important, appropriate way to help struggling dairy farmers.
The Court decided that the Class includes all persons and entities in the United States that purchased butter and/or cheese directly from one or more Members of Defendant, Cooperatives Working Together and/or their subsidiaries, during the period from December 6, 2008 to July 31, 2013 who did not timely opt-out of the Class. Those that are included are called “Class Members.” To be eligible for a payment, a Class Member must have purchased butter or cheese made by a CWT Member. Class Members who are consumers must have purchased butter or cheese made by a CWT Member at one of the dairy co-op stores. Go to www.ButterandCheeseClassAction.com for a list of CWT Members along with their store names and locations.
NMPF’s decision to enter into this settlement recognized the uncertainties inherent in any jury trial, the very large damages sought by the plaintiffs and the fact that the successful Export Assistance Program is entirely unaffected by the settlement. In 2018, CWT assistance aided 57 percent of American-type cheese exports, 44 percent of butter exports, and 39 percent of whole-milk powder shipments, helping U.S. dairy producers expand trade relationships in an extremely challenging world trade environment, according to the NMPF statement.
According to an article from The New Food Economy, there was little precedent for this case, and the Capper-Volstead Act—while it gives coops the ability to fix prices among members—doesn’t necessarily pertain to production issues, such as how many dairies and dairy cows should be in the business equation.
What is CWT?
To borrow directly from CWT’s website, Cooperatives Working Together (CWT) is a program designed exclusively by America’s dairy farmers for the benefit of America’s dairy farmers. It is a voluntary, producer-funded, marketing-focused, national program developed by the National Milk Producers Federation (NMPF), to assist family farmers. Launched in July 2003, CWT is, in effect, a federation of cooperatives and producers formed in accordance with the Capper-Volstead Act. CWT operates as an entity within the NMPF structure so that administrative costs and direct program (operational) costs can be kept to an absolute minimum.
There is no government involvement in CWT, and the organization is supported by dairy farmers producing a majority of the milk in the U.S. This includes the producer-owners of about 30 cooperatives, as well as independent dairy farmers in most states. CWT primarily helps member cooperatives set prices for dairy exports, especially cheese and butter.
What is the Capper-Volstead Act?
The Capper-Volstead Act, aka the Cooperative Marketing Associations Act, was adopted by the U.S. Congress in 1922 to protect agricultural associations from certain parts of the Sherman Act. That is, the Capper-Volstead Act exempted agricultural associations from being addressed as monopolies, and allowed the Secretary of Agriculture to intervene and prevent farm cooperative monopolies, should the situation arise.
A USDA document entitled “Understanding Capper-Volstead” published in 1985 describes the workings of the Act as: “The Capper-Volstead Act provides limited antitrust exemption to associations of producers; such limited exemption comes about by legally permitting reduction of competition among farmers when they join and act in the marketplace, in effect, as one farmer.”
However, the document also warns that should a cooperative organization be found to engage in predatory practices or price discrimination, restricts agricultural output, coerces competitors or customers, colludes with third parties to fix prices, conspires with third parties to fix prices and/or combines with other firms to substantially lessen competition (engages in boycotts), then it may find itself just as subject to prosecution for being in violation of the antitrust laws as would any other firm that engaged in such practices.