Justice Department: DFA expansion could hike school milk prices in Ky.

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WASHINGTON – The Department of Justice filed a civil antitrust lawsuit April 24 against Dairy Farmers of America Inc. (DFA) and Southern Belle Dairy Co. to compel DFA to divest its interests in Southern Belle Dairy.

In February 2002, DFA acquired a 50 percent common equity interest and 100 percent credit interest in Southern Belle.

Creates monopoly. The department said DFA’s acquisition eliminates the only other independent bidder for school milk – resulting in a monopoly – in 47 school districts, and reduces the number of independent bidders from three to two in 54 school districts, in Kentucky and Tennessee.

The Commonwealth of Kentucky joined the federal government in bringing the lawsuit.

Prior to the 2002 acquisition, DFA, through its subsidiaries, operated the Flav-O-Rich Dairy based in London, Ky., and competed head-to-head against Southern Belle, located 30 miles away in Somerset, Ky., to supply school milk to school districts in the eastern two-thirds of Kentucky and in Tennessee.

Previous wrongdoing. Many school districts in this region of the country had to pay higher prices when they were victims of a criminal conspiracy between Southern Belle and Flav-O-Rich, both under prior owners.

In 1992, Southern Belle and Flav-O-Rich pleaded guilty to criminal antitrust bid rigging charges involving milk sold to schools in Kentucky and admitted to a 10-year bid allocation conspiracy.

Corporate background. DFA, based in Kansas City, Mo., controls more than 40 dairies in the United States, according to the justice department.

DFA owns a 50 percent common equity interest and a 92 percent preferred equity interest in National Dairy Holdings, which owns the Flav-O-Rich Dairy.

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