A recent lawsuit by the US Department of Justice’s Antitrust Division and three states is the latest example of the antitrust authorities’ willingness to attack consummated transactions — even ones that are too small to be reported pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act).
On January 22, 2010, the Antitrust Division filed a complaint in federal court challenging Dean Foods Company’s acquisition of two milk processing plants from Foremost Farms USA. Joining the complaint were the attorneys general of Wisconsin, Illinois and Michigan. United States v. Dean Foods Company, No. 10-C-0059 (E.D. Wis. Jan. 22, 2010). The complaint alleged that Dean Foods’ acquisition of Foremost’s milk processing plants in Waukesah and DePere, Wisconsin would substantially lessen competition in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18.
The acquisition was completed on April 1, 2009. Because the purchase price for the plants was $35 million, well below the $65.2 million threshold for reporting acquisitions under the HSR Act, no prior notification or regulatory antitrust review was required. The complaint sought, among other things, an order compelling Dean Foods “to divest all of the assets and interests it acquired as part of the Acquisition.”
The complaint alleged that the acquisition would lead to reduced competition in the markets for the sale of school milk to individual school districts and processed milk ready for consumption in Wisconsin, the Upper Peninsula of Michigan and northeastern Illinois. Of particular importance to the Antitrust Division was the fact that Foremost had been pricing aggressively in an attempt to fill up underutilized processing capacity. The complaint cited several Dean Foods internal documents that described Foremost as an “irrational” and “dangerous” competitor because of its willingness to increase volume through lower prices.
The complaint also alleged that the Foremost acquisition was actually motivated by Dean Foods’ desire to eliminate aggressive competitors from the market. This would leave only “good competitors,” as Dean Foods dubbed those that avoided starting price wars by not aggressively bidding on other processors’ customers. As a consequence, fluid milk purchasers and school districts would be denied the benefit of competition from Foremost, and coordination between the remaining milk processors would become easier and more durable.
This case raises several important issues:
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