[Federal Register Volume 76, Number 65 (Tuesday, April 5, 2011)]
[Notices]
[Pages 18783-18796]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-7938]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States et al. v. Dean Foods Company; Proposed Final 
Judgment, Stipulation and Competitive Impact Statement

    Notice is hereby given pursuant to the Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment, 
Stipulation and Competitive Impact Statement have been filed with the 
United States District Court for the Eastern District of Wisconsin in 
United States of America, et al. v. Dean Foods Company, Civil Action 
No. 2:10-cv-00059 (JPS). On January 22, 2010, the United States and its 
co-plaintiffs filed a Complaint alleging that Dean Foods Company's 
acquisition of the Consumer Products Division of Foremost Farms USA 
would likely violate Section 7 of the Clayton Act, 15 U.S.C. 18. The 
proposed Final Judgment requires Dean Foods Company to divest its 
Waukesha, Wisconsin fluid milk plant, along with certain tangible and 
intangible assets.
    Copies of the Complaint, proposed Final Judgment and Competitive 
Impact Statement are available for inspection at the Department of 
Justice, Antitrust Division, Antitrust Documents Group, 450 Fifth 
Street, NW., Suite 1010, Washington, DC 20530 (telephone: 202-514-
2481), on the Department of Justice's Web site at http://www.usdoj.gov/atr, and at the Office of the Clerk of the United States District Court 
for the Eastern District of Wisconsin. Copies of these materials may be 
obtained from the Antitrust Division upon request and payment of the 
copying fee set by Department of Justice regulations.
    Public comment is invited within 60 days of the date of this 
notice. Such comments, and responses thereto, will be published in the 
Federal Register and filed with the Court. Comments should be directed 
to Joshua H. Soven, Chief, Litigation I, Antitrust Division, Department 
of Justice, Washington DC, 20530.

Patricia A. Brink,
Director of Civil Enforcement.

In the United States District Court for the Eastern District of 
Wisconsin Milwaukee Division

United States of America, State of Wisconsin, State of Illinois, and 
State of Michigan,

Plaintiffs,

v.

Dean Foods Company,

Defendant.

10-C-0059 FILED: January 22, 2010; 1:40PM

Complaint

    The United States of America, acting under the direction of the 
Attorney General of the United States, and the States of Wisconsin, 
Illinois, and Michigan, by and through their respective Attorneys 
General (``Plaintiff States''), bring this civil action for equitable 
relief against Defendant Dean Foods Company (``Dean'') for violating 
Section 7 of the Clayton Act, 15 U.S.C. 18. The United States and the 
Plaintiff States allege as follows:

I. Introduction

    1. This lawsuit challenges Dean's acquisition of the Consumer 
Products Division of Foremost Farms USA, consummated April 1, 2009 (the 
``Acquisition''). Foremost Farms USA (``Foremost'') is a dairy 
cooperative owned by approximately 2,300 dairy farms located in seven 
states, including Wisconsin. Through the Acquisition, Dean acquired two 
dairy processing plants owned by Foremost, located in Waukesha and 
DePere, Wisconsin. Dean's acquisition of these plants violates Section 
7 of the Clayton Act because ``the effect of such acquisition may be 
substantially to lessen competition.'' 15 U.S.C. 18.
    2. The Acquisition adversely affects two types of markets. The 
first are the markets for the sale of school milk to individual school 
districts located throughout the State of Wisconsin and the Upper 
Peninsula of Michigan (the ``UP''). The second is the market for the 
sale of fluid milk to purchasers located in Wisconsin, the UP, and 
northeastern Illinois.\1\
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    \1\ ``Northeastern Illinois'' is defined as the following 
counties in the State of Illinois: Cook County, DeKalb County, 
DuPage County, Grundy County, Kane County, Kendall County, Lake 
County, McHenry County, and Will County.
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    3. The Acquisition eliminates one of Dean's most aggressive 
competitors--a competitor that engaged in pricing that Dean considered 
``dangerous'' and ``irrational.'' In recent years, Dean and Foremost 
have been the first and fourth largest sellers of school milk and fluid 
milk in Wisconsin, the UP, and northeastern Illinois. With the 
Acquisition, Dean will account for more than 57 percent of fluid milk 
sales in the region. In the most recent school year, Dean and the two 
plants it acquired sold more than 50 percent of the school milk 
purchased in Wisconsin and the UP.
    4. Numerous school districts have benefitted from vigorous 
competition between Dean and Foremost. Dean and Foremost have 
frequently been the two lowest bidders for school milk contracts at 
numerous school districts in Wisconsin and the UP and, in some school 
districts, have been the only two bidders for those contracts.
    5. Grocery stores, convenience stores, and other purchasers have 
also benefitted from vigorous competition between Dean and Foremost for 
fluid milk contracts. Dean and Foremost have been the only two bidders 
for some contracts and two of only three bidders for other contracts. 
The aggressive competition between them has lowered purchasers' costs. 
For example, in 2006, a retailer with hundreds of stores in 
northeastern Illinois held an auction for its fluid milk business in 
which the competition between Dean and Foremost saved the retailer 
approximately $1.5 million.
    6. The Acquisition's elimination of head-to-head competition 
between Dean and Foremost will hurt school milk and fluid milk 
purchasers. The loss of this head-to-head competition leads directly

[[Page 18784]]

to what are referred to as anticompetitive ``unilateral effects.''
    7. In the fluid milk market, the Acquisition is also likely to 
produce coordination among the remaining competitors. This coordination 
gives rise to what are referred to as anticompetitive ``coordinated 
effects.'' The fluid milk business in this region is already conducive 
to coordination among competitors. Notably, when deciding whether and 
how much to bid for an account, Dean and other dairy processors often 
consider the reactions of their competitors. Eliminating Foremost, 
which Dean describes as an ``irrational'' pricing competitor, will 
leave only a few remaining competitors, whose competitive decision-
making Dean has described as ``more predictable'' and ``rational.'' 
Consequently, the Acquisition will make coordination easier and more 
durable.
    8. As further described below, the Acquisition is likely to 
substantially lessen competition in the school milk and fluid milk 
markets at issue here in violation of Section 7 of the Clayton Act, 15 
U.S.C. 18. Entry is unlikely to restore competition in a timely or 
sufficient manner. To date, Dean has not integrated Foremost's plants 
into its operations in light of the pendency of the United States' 
investigation. The United States and Plaintiff States ask this Court to 
declare this Acquisition unlawful and require Dean to divest the 
acquired assets to restore competition in the markets at issue.

II. Jurisdiction & Venue

    9. The United States brings this action under Section 15 of the 
Clayton Act, as amended, 15 U.S.C. 4 and 25. The Plaintiff States bring 
this action under Section 16 of the Clayton Act, 15 U.S.C. 26. 
Plaintiff State of Wisconsin brings this action under its authority in 
Wis. Stat. Sec.  165.065.
    10. Dean and the assets it obtained through the Acquisition produce 
dairy products for sale in interstate commerce. Accordingly, Dean and 
the Acquisition assets are engaged in activities affecting interstate 
commerce under Section 7 of the Clayton Act. The Court has subject 
matter jurisdiction over this action pursuant to Section 15 of the 
Clayton Act, as amended, 15 U.S.C. 25, and 28 U.S.C. 1331, 1337(a) and 
1345.
    11. Dean is present in the State of Wisconsin, and it transacts 
substantial business and commerce in the State. Accordingly, Dean is 
subject to personal jurisdiction. Venue is also proper in this District 
pursuant to Section 12 of the Clayton Act, 15 U.S.C. 22, and 28 U.S.C. 
1391(b)(1), (b)(2) & (c). The acquired dairy processing plant in 
Waukesha is located within the territory of the Milwaukee Division of 
this Court.

III. Background

A. The Milk Business in Wisconsin, the UP, and Northeastern Illinois

    12. Dairy processors purchase raw milk from dairy farms and 
agricultural cooperatives, pasteurize and package the milk, and 
distribute and sell the processed product. Fluid milk is raw milk that 
has been processed for human consumption. It does not include extended 
shelf life milk, ultra high temperature milk or aseptic milk, which are 
produced by different processes, generally cost significantly more than 
fluid milk, and have numerous significant physical differences that, 
compared with fluid milk, affect shelf stability and taste.
1. Fluid Milk
    13. Dairy processors supply fluid milk directly to retailers, 
distributors, broad-line food service companies, and institutions such 
as hospitals and nursing homes. The vast majority of fluid milk is sold 
directly by processors to retailers. The balance of sales is made to 
distributors, food service companies, and institutions. Distributors 
and food service companies resell the milk that they purchase from 
processors to small retailers, restaurants, and institutions. Retailers 
in Wisconsin, the UP, and northeastern Illinois do not resell fluid 
milk to other retailers or institutions in any substantial quantity. 
Retail demand for fluid milk is based directly on consumer demand.
    14. Milk processors charge different prices to different purchasers 
for the same product based on a variety of factors, including the 
number of competitive alternatives available to the purchaser. Large 
retailers typically request bids from milk processors. Distributors, 
institutions, and small retailers generally purchase their milk from 
price lists that dairy processors issue. However, these customers 
sometimes obtain rebates, discounts, or other forms of price relief, so 
that two customers covered by the same price list may pay different 
prices. Bid prices are based on the processor's product, 
transportation, and service costs, the processor's capacity 
utilization, and the number and strength of processors likely to offer 
competing bids, among other factors.
    15. Distance between processors and purchasers is an important 
consideration in fluid milk pricing because fluid milk has a limited 
shelf life and is costly to transport. These costs result in most 
customers purchasing fluid milk from nearby processing plants. For 
example, more than 90 percent of the milk sold to customers in 
Wisconsin and the UP traveled less than 150 miles from the plant in 
which it was processed.
2. School Milk
    16. School milk is fluid milk packaged and distributed for sale to 
school districts, typically in half-pint containers. Dean, Foremost, 
and other school milk suppliers often use distributors to supply and 
service school districts. Dairy processors generally use one 
distributor per service area. While school milk contracts occasionally 
include other products, school milk accounts for the vast majority of 
the dollar value of these contracts.
    17. School milk delivery is not just a matter of dropping product 
off at the curb. Different school districts specify their 
individualized service requirements in contracts with processors. For 
example, some school districts require multiple deliveries per week 
because they have limited refrigerated storage space; some require 
guaranteed emergency deliveries. Most school districts require the 
capability to deliver to all of the schools in the district. Many 
require early morning or other specific delivery times to avoid 
conflicts with the arrival of schoolchildren and buses. Other services 
can include milk reordering, cooler supply, cooler restocking, cooler 
cleaning and maintenance, carton rotation, retrieval of spoiled and 
damaged product, and automatic allotment of credit for retrieved 
product.
    18. The number of processors from which a school district can 
successfully solicit competitive bids is often very small. Given the 
limited volume of milk delivered to each school, the extensive and 
highly individualized service requirements, and the seasonal nature of 
school milk demand, among other considerations, it is almost always 
uneconomic for a dairy processor to supply a new contract unless the 
processor already has significant fluid milk distribution in or near 
the school district's area. Dairy processors that do not already 
distribute fluid milk locally can rarely bid competitively. This is 
particularly relevant in sparsely populated areas such as northern 
Wisconsin and the UP.
    19. Individual school districts solicit bids for school milk, 
although groups of school districts will occasionally solicit bids 
collectively. However, even school districts involved in collective

[[Page 18785]]

solicitations typically award their contracts separately. Consequently, 
dairy processors tailor their bids to each school district or school 
district group that solicits collectively. Bid prices are based on the 
processor's product, transportation, and service costs, the processor's 
capacity utilization, and the number and competitiveness of processors 
likely to offer competing bids, among other factors.

B. The Acquisition

    20. Dean is one of the largest food and beverage producers in this 
country, with revenues of $12.5 billion in 2008. Dean's Dairy Group is 
the country's largest processor and distributor of milk and other dairy 
products. Dean is a corporation organized under Delaware state law, 
with its principal place of business in Dallas, Texas.
    21. The Acquisition is the latest in a series of acquisitions by 
Dean of smaller dairy processors across the United States. Since 1996, 
Dean has made more than 100 acquisitions, which have added to Dean's 
market share and increased its size substantially.
    22. Foremost is a dairy cooperative headquartered in Baraboo, 
Wisconsin, and formed under Wisconsin state law. Like other 
agricultural cooperatives, Foremost is a member-owned business 
association. Foremost is governed by a 21-member Board of dairy 
farmers. Prior to the Acquisition, Foremost processed its members' raw 
milk at its DePere and Waukesha plants, as well as at other facilities. 
The DePere and Waukesha plants were owned and operated by Foremost's 
Consumer Products Division. On or about April 1, 2009, Dean bought 
substantially all of the Consumer Products Division's assets for $35 
million. The Acquisition was not required to be reported beforehand to 
Federal antitrust authorities under the Federal antitrust notification 
statute.

C. Dean's Rationale for the Acquisition

    23. While Dean's fortunes have been rising, the same has not been 
true for Foremost. In 2006 and 2007, Foremost lost some fluid milk 
customers that preferred a processor with a broader geographic reach. 
Consequently, Foremost's Waukesha and DePere plants were operating at 
less than two-thirds of their fluid milk capacity, giving Foremost the 
most excess capacity in Wisconsin, the UP, and northeastern Illinois.
    24. Excess capacity creates an incentive to bid more aggressively 
for fluid and school milk contracts. Because of its substantial excess 
capacity, Foremost was pricing aggressively to secure new business. 
Unlike Foremost, Dean did not have substantial excess capacity and so 
did not have the same economic incentives as Foremost. As a result of 
Foremost's aggressive pricing, Dean faced the choice of losing business 
or cutting its margins. Neither approach was attractive to Dean.
    25. The problem that Foremost posed was not unique. Dean saw 
competitors such as Foremost and other local competitors with excess 
capacity as posing a serious problem for Dean's profitability. Dean's 
Chief Executive Officer, Gregg Engles, articulated the competitive 
issue facing Dean in a September 2008 speech to Dean's top executives:
    26.

    ``Every one of you has an irrational local competitor story. * * 
* Why do we have irrational local competitors? Because we have too 
much capacity in this industry * * * these guys are losing share, * 
* * they have less volume in their plants, * * * so they default to 
the same game that gets played in industries that have little volume 
growth and too much capacity everywhere around the world. People 
play for share, and in this category, you play for share with 
price.''

    27. Dean's own internal documents confirm that Dean viewed Foremost 
as one of those ``irrational'' local competitors because of Foremost's 
excess capacity, among other reasons. In 2008, as part of an effort to 
develop a strategic growth plan for its fluid milk business, Dean's 
corporate headquarters asked the group vice presidents in each region 
to prioritize their key competitive issues. The Vice President for the 
North Central region (which includes Wisconsin) identified his key 
concern as ``Midwest excess capacity lies with cooperatives with 
staying power.'' Cooperatives, such as Foremost, were competitive 
threats because their ``earnings expectations [are] lower than Deans,'' 
because the ``co-op goal is to move Member milk,'' and because ``their 
plants are under utilized.''
    28. The problem this created for Dean was obvious. Competition with 
these cooperatives was predicted to ``lower margins and condition 
clients [to] the benefits of shopping their business.'' Along with one 
other cooperative in the region, Foremost was identified as a 
particularly ``dangerous'' competitor because ``they need to add volume 
to maintain their lo[w] cost strategy.'' In other words, according to 
Dean, Foremost was more willing to accept lower prices for processed 
fluid and school milk than Dean found acceptable.
    29. In 2007, the general manager at Dean's Verifine plant in 
Sheboygan, Wisconsin, reported to his boss that he was ``seeing alot 
[sic] of off the wall pricing coming from [Foremost]'' and that he was 
``worried about them coming at us again at [WalMart] not to mention the 
rest of the market.'' In 2009, after receiving reports of very low 
Foremost prices in several grocery and convenience stores in the UP, 
the general manager of Dean's Marquette, Michigan, plant complained to 
his boss that ``[t]his is the most aggressive pricing the UP has seen 
since probably the 60's. Our volume is off roughly 15 percent as the 
effects of this onslaught really kick in * * * I know you're with me on 
this, so how can we cease/desist and regain some sanity?''
    30. As part of Dean's 2008 Strategic Growth Plan, Dean proposed 
future acquisitions, which included problematic local processors. Ed 
Fugger, Dean's acquisitions chief, highlighted that fragmentation 
``[d]rives margin compression,'' and that a significant part of the 
fluid milk market ``remains highly fragmented.'' In handwritten notes 
he wrote in preparation for his speech to Dean's senior management, and 
later, Dean's Board of Directors, Fugger wrote that the ``benefit of 
acquisition in these m[ar]k[e]ts is margin expansion'' (emphasis 
added). In other words, by eliminating this fragmentation Dean could 
increase its profits.
    31. The Strategic Growth Plan included ``Potential Acquisition 
Targets'' for each of Dean's regions. The targets for the North Central 
Region included Foremost, which Dean had identified as one of two 
``irrational competitors'' that are ``significantly short on volume.''
    32. Dean eliminated the competitive threat posed by Foremost by 
acquiring its two milk processing plants. Any efficiencies Dean may 
realize from acquiring the two plants are not likely to reverse the 
anticompetitive impact of eliminating a competitor responsible for the 
``most aggressive pricing'' Dean had seen in 40 years. There was an 
alternative to this outcome. At the time Foremost accepted Dean's offer 
to acquire these plants, another potential buyer was pursuing 
Foremost's plants.

IV. The Competitive Harm in School Milk Markets

A. School Milk Is a Relevant Market

    33. School milk is a relevant product market and line of commerce 
under Section 7 of the Clayton Act. School districts have no reasonable 
product alternatives to school milk.
    34. The United States Department of Agriculture sponsors several 
programs to reimburse schools for meals served to students from lower-
income families. To qualify, schools must offer milk to every student, 
regardless of family income.

[[Page 18786]]

Schools will not substitute other products for school milk even at 
substantially higher milk prices because they would lose their Federal 
meal reimbursement.

B. The Relevant Geographic Markets

    35. Each school district in Wisconsin and the UP constitutes a 
relevant geographic market or section of the country within the meaning 
of Section 7 of the Clayton Act. As alleged in paragraph 19, individual 
school districts solicit school milk contract bids from processors. In 
response, processors engage in ``price discrimination,'' i.e., charging 
different prices to different customers. Processors develop 
individualized bids based on both cost and non-cost factors (see e.g., 
paragraph 14). School districts are unlikely to engage in arbitrage, 
i.e., reselling among customers, to offset the processors' ability to 
engage in price discrimination among school districts. Therefore, a 
hypothetical monopolist supplying school milk to any particular 
district would impose (at least) a small but significant non-transitory 
price increase (e.g., five percent).

C. The Acquisition Will Result in Anticompetitive Unilateral Effects

    36. School districts in Wisconsin and the UP have only a few 
choices for school milk suppliers. There are numerous school districts, 
particularly in northeastern Wisconsin and the western UP, for which 
the Acquisition merged the two processors that were best situated to 
serve the district. In many cases, the Acquisition created a ``merger 
to monopoly,'' leaving Dean as the only likely bidder. These school 
districts include those where Dean and Foremost were the only two dairy 
processors to bid in recent years. The elimination of head-to-head 
competition between Dean and Foremost will likely substantially lessen 
competition in these school milk markets and enable Dean to raise 
prices and/or reduce services.
    37. In addition, in a separate set of school districts, either Dean 
or Foremost was the only bidder and the other processor was the next-
lowest-cost supplier because of factors such as distance from the 
processing plant or the presence of an established distribution 
network. It is likely that prices will rise and/or services will be 
reduced in these school milk markets, regardless of whether both Dean 
and Foremost submitted formal bids before the Acquisition. There is 
also a substantial number of school districts in Wisconsin and the UP 
for which Dean and Foremost were two of only three recent or likely 
future bidders. For these school districts, the Acquisition represents 
a ``merger to duopoly.''
    38. In addition, Foremost was an especially aggressive bidder. This 
forced its rivals to keep their bid prices as low as possible or risk 
losing substantial amounts of school milk business.

V. The Competitive Harm in the Fluid Milk Market

A. Fluid Milk Is a Relevant Product Market

    39. Fluid milk is a relevant product market and line of commerce 
under Section 7 of the Clayton Act. Fluid milk is a product with 
special nutritional characteristics and has no practical substitutes.
    40. Consumer demand for fluid milk is relatively inelastic, i.e., 
fluid milk consumption does not decrease significantly in response to a 
price increase. Demand by retailers, distributors, and other purchasers 
of fluid milk is also inelastic because it is based on consumer demand. 
As a result, a hypothetical monopolist over fluid milk would profitably 
impose at least a small but significant and non-transitory price 
increase (e.g., five percent).

B. The Relevant Geographic Market

    41. Fluid milk processors are able to charge different prices to 
buyers in different areas, i.e., they can price discriminate. In the 
presence of price discrimination, relevant geographic markets may be 
defined by reference to the location of buyers. In particular, a 
relevant geographic market for fluid milk refers to a region within 
which purchasers can be targeted for a price increase. A portion of the 
fluid milk supplied to the relevant geographic market comes from plants 
located outside of Wisconsin, the UP, and northeastern Illinois.
    42. Wisconsin, the UP, and northeastern Illinois constitute a 
relevant geographic market and section of the country under Section 7 
of the Clayton Act. As discussed in paragraph 15, most customers 
purchase fluid milk from suppliers with processing plants located near 
them because of the costs associated with transportation and shelf 
life. Prior to the Acquisition, Foremost sold virtually all of its 
fluid milk to purchasers located in the relevant geographic market. 
Dean competed to supply fluid milk to purchasers throughout this same 
area.

C. Market Concentration

    43. The Acquisition will result in a substantial increase in the 
concentration of processors that compete to supply fluid milk to 
purchasers located in the relevant geographic market. Some of these 
processors are located outside of Wisconsin, the UP, and northeastern 
Illinois. Prior to the Acquisition, Dean had the largest share of sales 
to purchasers within the relevant geographic market. Dean accounted for 
44.6 percent of fluid milk sales; Foremost accounted for another 12.6 
percent. As a result of the Acquisition, Dean now has more than 57 
percent of all fluid milk sales in the relevant geographic market. 
There are only two other competitors with more than five percent of 
fluid milk sales in the relevant geographic market, Kemps LLC (a 
subsidiary of Hood LLC) (``Kemps'') and Prairie Farms Dairy, Inc., 
which have 17 and 15 percent, respectively. Moreover, Dean's post-
Acquisition shares are even higher in certain areas within the relevant 
geographic market: over 85 percent in the UP and over 60 percent in 
Green Bay, Wisconsin, and in northeastern Illinois (including Chicago).
    44. As articulated in the Horizontal Merger Guidelines issued by 
the Department of Justice and the Federal Trade Commission, the 
Herfindahl-Hirschman Index (``HHI'') is a measure of market 
concentration.\2\ The Acquisition increases the HHI by 1,127 points to 
3,830, indicating a substantial increase in concentration. The change 
in the HHI is even more pronounced in certain areas within the relevant 
geographic area. For example, in the UP, the HHI increased by 2,814 
points to 7,510, and in Green Bay, the HHI increased by 1,728 to 4,777.
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    \2\ See U.S. Dep't of Justice, Horizontal Merger Guidelines 
Sec.  1.51 (1997), available at http://www.justice.gov/atr/public/guidelines/horiz_book/hmg1.html. The HHI is calculated by squaring 
the market share of each firm competing in the market and then 
summing the resulting numbers. For example, for a market consisting 
of four firms with shares of 30, 30, 20, and 20 percent, the HHI is 
2,600 (30\2\ + 30\2\ + 20\2\ + 20\2\ = 2,600). It approaches zero 
when a market is occupied by a large number of firms of relatively 
equal size and reaches a maximum of 10,000 points when a market is 
controlled by a single firm. The HHI increases both as the number of 
firms in the market decreases and as the disparity in size between 
those firms increases.
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D. The Acquisition Will Result in Competitive Harm

    45. The Acquisition will likely substantially lessen competition 
among fluid milk producers in the relevant geographic market, resulting 
in higher fluid milk prices to purchasers than would exist in the 
absence of the Acquisition. The Acquisition will eliminate head-to-head 
competition that has benefitted and would otherwise continue to benefit 
purchasers and final

[[Page 18787]]

consumers. The Acquisition will also result in easier and more durable 
coordinated interaction among Dean and its few remaining competitors.
1. The Anticompetitive Effects From the Loss of Head-to-Head 
Competition
    46. Dean and Foremost often competed head-to-head to win fluid milk 
contracts because they were the nearest fluid milk processors to many 
of the purchasers in the relevant geographic market. As discussed in 
paragraph 15, proximity to the purchaser is an important factor in a 
processor's competitiveness. Prior to the Acquisition, Foremost 
competed with Dean throughout the relevant geographic market. The head-
to-head competition between Dean and Foremost was most pronounced and 
pervasive in the UP and northeast and southeast Wisconsin, where the 
Dean and Foremost plants were the two closest plants to many fluid milk 
purchasers.
    47. As discussed in paragraph 23, Foremost had substantial excess 
capacity, and as a result, was pricing aggressively to secure new 
business. The presence of Foremost as an aggressive pricing competitor 
to Dean and a constraining force on Dean's pricing is reflected in the 
internal Dean documents discussed in paragraphs 25 to 29. The 
elimination of this head-to-head competition likely will produce higher 
prices and/or reduced services for many purchasers in the relevant 
geographic market. These effects will vary among purchasers because, as 
discussed previously, different purchasers have different competitive 
options. Thus, the prices paid and services received will continue to 
differ among purchasers after the Acquisition, but for many purchasers 
the prices they pay and/or the services they receive will be adversely 
affected by the Acquisition.
2. The Acquisition Will Facilitate Anticompetitive Coordination
    48. By eliminating Foremost, a significant, disruptive, and 
aggressive competitor, the Acquisition also will likely substantially 
lessen competition among the remaining competitors selling fluid milk 
in the relevant geographic market by facilitating coordination among 
them. Dean and its few remaining competitors will be more likely to 
decline to bid aggressively for one another's established customers out 
of concern for retaliation, thereby allocating customers among one 
another based on a mutual recognition of what supplier serves what 
customers. This form of coordination is easier when there are fewer 
competitors and they can identify one another's customers. With the 
elimination of Foremost, purchasers in many areas of the relevant 
geographic market will have only two or three significant suppliers of 
fluid milk. For example, in Wisconsin, Dean and Kemps, its next-largest 
competitor, now account for more than 80 percent of sales.
    49. Even before the Acquisition, Dean and other dairy processors 
besides Foremost were at times content not to attack one another's 
large accounts. In a recent bidding event, Dean refused to bid 
aggressively for a major supermarket chain that was Kemps's largest 
account, despite the purchaser's complaint to Dean that Dean's bid was 
too high. A Dean executive testified that stealing the account from 
Kemps would have put a Kemps plant ``out of business or to its knees'' 
and that ``we're not going to do that right now. You pick your 
fights.'' In contrast, Foremost was not content to pick its fights. 
When Foremost was bidding for the same large supermarket chain, it 
submitted a competitive bid, even though Foremost realized that the 
``cost'' of winning that business could be high, due to the potential 
for retaliation. The general manager of Foremost's Morning Glory plant 
estimated that retaliation at five of his larger accounts could cost 
almost $500,000 per year.
    50. Whereas Foremost was routinely labeled as an ``irrational'' 
competitor by Dean executives, the Group Vice President for Dean's 
North Central region labeled two other processors ``good competitors'' 
in his 2008 strategic growth planning document. By ``good competitor,'' 
Dean's Vice President admitted he meant that, unlike Foremost, these 
competitors were ``more predictable'' in terms of ``where they're going 
to poke you in the eye and where they're not, whereas the other * * * 
fellows [are] poking all the time.'' With this Acquisition, only the 
so-called ``good competitors'' will remain.
    51. In at least one instance, Dean successfully sent price signals 
to its competitors. In 2008, Dean announced an upcoming fuel surcharge 
price increase, and one of its competitors followed suit. In reporting 
this to his boss, the Group Vice President for the region in which this 
occurred wrote, ``[our competitor] followed us this week with a similar 
increase. The strategy paid off.'' His boss then declared that it is a 
good practice ``to signal your intentions early and often.'' The Vice 
President for the North Central region, which includes Wisconsin, then 
instructed his staff to ``get out early for July and signal the 
marketplace.''
    52. By reducing the number of competitors serving the relevant 
geographic market and eliminating an aggressive competitor with large 
amounts of excess capacity, the Acquisition makes coordination easier 
and more durable.

VI. Entry Is Unlikely

    53. Entry is unlikely to be sufficient or timely enough to offset 
the anticompetitive effects of the Acquisition. Firms currently serving 
the fluid milk and school milk markets in Wisconsin, the UP, and 
northeastern Illinois are unlikely to expand their service area or 
presence sufficiently to substantially mitigate the loss of Foremost's 
head-to-head competition with Dean in the fluid milk and school milk 
markets, or to disrupt coordinated interaction by Dean and its 
remaining competitors in the fluid milk market. Firms not currently 
serving these markets are unlikely to enter in the foreseeable future.

VII. Violations Alleged

    54. The United States and the Plaintiff States hereby incorporate 
the allegations of paragraphs 1 through 52 above.

A. Count 1

    55. The Acquisition likely will substantially lessen competition in 
interstate trade and commerce, in violation of Section 7 of the Clayton 
Act, 15 U.S.C. 18, in that:
    a. Actual and potential competition between Foremost and Dean in 
the State of Wisconsin and the UP in the sale of school milk will be 
eliminated; and
    b. competition in the State of Wisconsin and the UP in the sale of 
school milk will be substantially lessened.

B. Count 2

    56. The Acquisition likely will substantially lessen competition in 
interstate trade and commerce, in violation of Section 7 of the Clayton 
Act, 15 U.S.C. 18, in that:
    a. Actual and potential competition between Foremost and Dean in 
the State of Wisconsin, the UP, and northeastern Illinois in the sale 
of fluid milk will be eliminated; and
    b. competition in the State of Wisconsin, the UP, and northeastern 
Illinois in the sale of fluid milk will be substantially lessened.

VIII. Relief Requested

    57. The United States and the Plaintiff States request that this 
Honorable Court:
    a. Adjudge and decree that the Acquisition violates Section 7 of 
the Clayton Act, 15 U.S.C. 18;
    b. compel Dean to divest all of the assets and interests it 
acquired as part of the Acquisition;

[[Page 18788]]

    c. permanently enjoin Dean from further ownership and operation of 
the assets acquired as part of the Acquisition;
    d. compel Dean, including any of its subsidiaries, joint ventures, 
successors or assigns, and all persons acting on behalf of any of the 
foregoing, to provide the United States (and any Plaintiff State(s) if 
commerce in that state(s) is potentially affected) with notification at 
least 30 calendar days prior to any acquisition, in whole or in part, 
of any school milk or fluid milk processing operation, notwithstanding 
the consideration Dean intends to pay for such acquisition; and
    e. award to each plaintiff its costs for this action and such other 
and further relief as may be appropriate and as the Court may deem just 
and proper.

    Dated: January 22, 2010.

    Respectfully submitted,

FOR PLAINTIFF UNITED STATES OF AMERICA

/s/--------------------------------------------------------------------

Christine A. Varney,
Assistant Attorney General, Antitrust Division.

/s/--------------------------------------------------------------------

William F. Cavanaugh,
Deputy Assistant Attorney General, Antitrust Division.

/s/--------------------------------------------------------------------

Joshua H. Soven, Chief,
Joseph M. Miller, Assistant Chief,
Litigation I Section, Antitrust Division.

/s/--------------------------------------------------------------------

Patricia A. Brink,
Deputy Director of Operations, Antitrust Division.

/s/--------------------------------------------------------------------

Karl D. Knutsen,
Ryan M. Kantor,
Jon B. Jacobs.
Scott I. Fitzgerald,
Adam Gitlin,
Mitchell H. Glende,
Tiffany C. Joseph,
Barry J. Joyce,
David C. Kelly,
Richard S. Martin,
Richard D. Mosier,
Peter J. Mucchetti,
Julie A. Tenney,
Paul J. Torzilli,
Trial Attorneys, U.S. Department of Justice, Antitrust Division, 
Litigation I Section, 450 5th Street, Suite 4100, Washington, DC 
20530.

Dated: January 21, 2010.

Respectfully submitted,

FOR PLAINTIFF UNITED STATES OF AMERICA

James L. Santelle,
United States Attorney.

By:

/s/--------------------------------------------------------------------

Matthew V. Richmond,
Chief, Civil Division, United States Attorney's Office, Eastern 
District of Wisconsin, 517 East Wisconsin Ave., Room 530, Milwaukee, 
Wisconsin 53202, (414) 297-1747 (direct), (414) 297-1700 (office), 
(414) 297-4394 (fax), [email protected].

    Dated: January 22, 2010.
    Respectfully submitted,

FOR PLAINTIFF STATE OF WISCONSIN

J.B. Van Hollen,
Attorney General.

By:

/s/--------------------------------------------------------------------

Steven P. Means, Bar Number: 1011355,
Attorney for Plaintiff State of Wisconsin, Wisconsin Department of 
Justice, 17 West Main Street, Madison, WI 53703, Telephone: (608) 
266-3860, Fax: (608) 266-1656, E-mail: [email protected].

By:

/s/--------------------------------------------------------------------

Gwendolyn J. Cooley, Bar Number: 1053856
Attorney for Plaintiff State of Wisconsin, Wisconsin Department of 
Justice, 17 West Main Street, Madison, WI 53703, Telephone: (608) 
261-5810, Fax: (608) 267-2778, E-mail: [email protected].

Dated: January 22, 2010.

Respectfully submitted,

FOR PLAINTIFF STATE OF ILLINOIS

Lisa Madigan,
Attorney General

By:

/s/--------------------------------------------------------------------

Robert W. Pratt,
Chief, Antitrust Bureau, Office of the Attorney General, State of 
Illinois 100 West Randolph Street, Chicago, Illinois 60601, (312) 
814-3722.

    Dated: January 22, 2010.

    Respectfully submitted,

FOR PLAINTIFF STATE OF MICHIGAN

Michael A. Cox,
Attorney General.

By:

/s/--------------------------------------------------------------------

D.J. Pascoe,
Assistant Attorney General, Corporate Oversight Division, Attorney 
for the State of Michigan, G. Mennen Williams Building, 6th Floor, 
525 W. Ottawa Street, Lansing, Michigan 48933, Telephone: (517) 373-
1160.

United States District Court for the Eastern District of Wisconsin 
Milwaukee Division
United States of America, State of Wisconsin, State of Illinois, and 
State of Michigan,  Plaintiffs,
v.
Dean Foods Company, Defendant.

Civil Action No. 2:10-cv-00059 (JPS)

Competitive Impact Statement

    Plaintiff United States of America (``United States''), pursuant to 
Section 2(b) of the Antitrust Procedures and Penalties Act (``APPA'' or 
``Tunney Act''), 15 U.S.C. 16(b)-(h), files this Competitive Impact 
Statement relating to the proposed Final Judgment submitted for entry 
in this civil antitrust proceeding.

I. Nature and Purpose of the Proceeding

    The United States filed a civil antitrust Complaint under Section 
15 of the Clayton Act, 15 U.S.C. 25, on January 22, 2010, alleging that 
the acquisition by Dean Foods Company (``Dean'') of two fluid milk 
processing plants in Wisconsin from Foremost Farms USA (``Foremost'') 
violated Section 7 of the Clayton Act (``Section 7''), 15 U.S.C. 18. 
The Complaint alleges that Dean's acquisition of the Foremost plants 
(the ``Acquisition'') likely would substantially lessen competition in 
two types of markets: (1) The sale of fluid milk to customers (e.g., 
retailers and distributors) located in Wisconsin, northeastern 
Illinois; \1\ and the Upper Peninsula of Michigan (the ``UP''); and (2) 
the sale of school milk to school districts located throughout 
Wisconsin and the UP. On March 29, 2011, the United States filed a 
proposed Final Judgment designed to remedy the competitive harm caused 
by the Acquisition. Under the proposed Final Judgment, which is 
explained more fully below, Dean is required to divest the Waukesha 
milk processing plant and related assets.
---------------------------------------------------------------------------

    \1\ ``Northeastern Illinois'' is defined as the following 
counties in the State of Illinois: Cook County, DeKalb County, 
DuPage County, Grundy County, Kane County, Kendall County, Lake 
County, McHenry County, and Will County.
---------------------------------------------------------------------------

    The United States and Dean have stipulated that the proposed Final 
Judgment may be entered after compliance with the APPA. Entry of the 
proposed Final Judgment would terminate this action, except that the 
Court would retain jurisdiction to construe, modify, or enforce the 
provisions of the proposed Final Judgment and to punish violations 
thereof.

II. Events Giving Rise to the Alleged Violation

A. Defendant and the Acquisition

    Dean is one of the largest food and beverage producers in this 
country, with revenues of approximately $12 billion in 2010. Dean's 
Dairy Group is the country's largest processor and distributor of milk 
and other dairy products. Dean is a corporation organized under 
Delaware state law, with its principal place of business in Dallas, 
Texas.
    Foremost is a dairy cooperative headquartered in Baraboo, 
Wisconsin, and formed under Wisconsin state law.

[[Page 18789]]

Like other agricultural cooperatives, Foremost is a member-owned 
business association. Prior to Dean's acquisition of the Foremost 
plants, Foremost processed its members' raw milk at its De Pere and 
Waukesha plants, as well as at other facilities. On April 1, 2009, Dean 
acquired the De Pere and Waukesha plants, along with related assets, 
from Foremost for $35 million. This Acquisition was not required to be 
reported to Federal antitrust authorities under the Hart-Scott-Rodino 
Antitrust Improvements Act of 1976, as amended, 15 U.S.C. 18a (the 
``HSR Act'').

B. Competitive Effects of the Acquisition

1. Fluid Milk
a. Fluid Milk Is a Relevant Product Market
    The Complaint alleges that fluid milk is a relevant product market. 
Fluid milk is a product with special nutritional characteristics and 
has no practical substitutes. Consumer demand for fluid milk is 
relatively inelastic, i.e., fluid milk consumption does not decrease 
significantly in response to a price increase. Demand by retailers, 
distributors, and other customers of fluid milk is also inelastic 
because it is based on consumer demand.
b. Wisconsin, Northeastern Illinois, and the Upper Peninsula of 
Michigan Constitute a Relevant Geographic Market
    The Complaint alleges that Wisconsin, northeastern Illinois, and 
the UP constitute a relevant geographic market for the sale of fluid 
milk. The Plaintiffs defined this geographic market with respect to the 
locations of the customers (e.g., grocery stores), rather than the 
location of the competitors (i.e., fluid milk processing plants) 
because, as the Complaint alleges, fluid milk processors can price 
discriminate, in other words, they can charge different fluid milk 
prices (net of transportation cost) to customers in different areas. 
This price discrimination is possible because processors individually 
negotiate prices with many customers, deliver the fluid milk to their 
customers' locations, and customers cannot eliminate price disparities 
through arbitrage, due in part to high transportation costs.\2\
---------------------------------------------------------------------------

    \2\ Arbitrage occurs when purchasers protect themselves by 
buying the same product from favored purchasers in other areas.
---------------------------------------------------------------------------

    The price discrimination analysis underlying the geographic market 
definition set forth in the Complaint is thus consistent with the 2010 
Horizontal Merger Guidelines, which explain that ``[f]or price 
discrimination to be feasible, two conditions typically must be met: 
differential pricing and limited arbitrage.'' U.S. Dept. of Justice & 
FTC, Horizontal Merger Guidelines Sec.  3 (2010). More specifically, 
when suppliers can profitably charge different prices (net of costs) to 
different customers in different locations, competition does not occur 
at the point of production but at the customers' locations. 
Consequently, the relevant analysis focuses on how much a hypothetical 
monopolist would want to raise price at various points of consumption, 
and the relevant geographic market is defined around the location of 
those customers vulnerable to a price increase.\3\ If a hypothetical 
monopolist can identify and price differently to buyers in certain 
areas (``targeted buyers''), and if arbitrage is unlikely, then a 
hypothetical monopolist would profitably impose a discriminatory price 
increase on buyers in that area.
---------------------------------------------------------------------------

    \3\ See U.S. Dept. of Justice & FTC, Horizontal Merger 
Guidelines Sec.  4.2.2 (2010).
---------------------------------------------------------------------------

    Applying this analysis, the evidence in this case satisfies the 
conditions necessary to show price discrimination. The evidence shows 
that fluid milk processors negotiate prices for delivery of fluid milk 
to individual customers in Wisconsin, northeastern Illinois, and the UP 
and that prices vary among the customers. The evidence also shows that 
customers cannot arbitrage because of significant loading and shipping 
costs incurred in reselling. Moreover, the customers lack the coolers 
necessary to act as arbitrageurs on a significant scale and could not 
arbitrage fluid milk labeled with their own trademarks to other 
customers. Thus, fluid milk customers in Wisconsin, northeastern 
Illinois and the UP are vulnerable to anticompetitive effects flowing 
from Dean's acquisition of the Foremost plants. As the Complaint 
alleges, prior to the Acquisition, Foremost sold virtually all of its 
fluid milk to customers located in these locations, and Dean competed 
to supply fluid milk to customers throughout this same area. Fluid milk 
customers located in Wisconsin, northeastern Illinois, and the UP would 
not defeat a price increase by a hypothetical monopolist of fluid milk 
by substituting to other products or by taking advantage of arbitrage.
c. The Acquisition Will Likely Substantially Lessen Competition in the 
Sale of Fluid Milk to Customers Located in Wisconsin, Northeastern 
Illinois, and the Upper Peninsula of Michigan
    The Complaint alleges that the Acquisition will likely 
substantially lessen competition in the sale of fluid milk in the 
relevant geographic market. Indicative of this are the effects of the 
Acquisition on market shares. In a geographic market defined on the 
basis of price discrimination, the participants in the relevant market 
are firms that currently supply customers in the market and firms that 
could economically begin doing so in the event of a small price 
increase. Market shares typically are assigned to these firms on the 
basis of their current (or projected) sales to customers within the 
geographic market, without regard to the location of the processing 
plant from which the product is supplied.\4\
---------------------------------------------------------------------------

    \4\ U.S. Dept. of Justice & FTC, Horizontal Merger Guidelines 
Sec. Sec.  5.1, 5.2.
---------------------------------------------------------------------------

    Based on current sales, as a result of the Acquisition, Dean 
increased its share of fluid milk sold to customers in the relevant 
geographic market from approximately 45 percent to more than 57 
percent. There are only two other competitors with more than five 
percent of fluid milk sales in the relevant geographic market--Kemps 
LLC (a subsidiary of Hood LLC) accounts for approximately 17 percent of 
sales and Prairie Farms Dairy, Inc. accounts for approximately 15 
percent of sales. The Acquisition will eliminate head-to-head 
competition that has benefitted, and would otherwise continue to 
benefit, customers and final consumers. The Acquisition will also 
likely facilitate easier and more durable coordinated interaction among 
Dean and its few remaining competitors.
    Dean and Foremost often competed head-to-head to serve fluid milk 
customers. Prior to the Acquisition, Foremost competed with Dean 
throughout the relevant geographic market. Foremost had substantial 
excess capacity, and as a result, competed aggressively to secure new 
business. The presence of Foremost as an aggressive pricing competitor 
to Dean served as a constraining force on Dean's pricing. The 
elimination of this head-to-head competition likely will produce higher 
prices for many customers of fluid milk in the relevant geographic 
market. By eliminating Foremost, a significant, disruptive, and 
aggressive competitor, the Acquisition also will likely substantially 
lessen competition among the remaining competitors selling fluid milk 
in the relevant

[[Page 18790]]

geographic market by facilitating coordination among them. The 
Acquisition will result in a substantial increase in the concentration 
of processors that compete to supply fluid milk to customers located in 
the relevant geographic market. With the elimination of Foremost, fluid 
milk customers in many areas of the relevant geographic market will 
have only two or three significant suppliers of fluid milk. This 
increased market concentration and the elimination of Foremost as an 
aggressive competitor make it more likely that Dean and its remaining 
competitors will decline to bid aggressively for each other's existing 
customers to prevent retaliatory bidding. The practical effect of such 
a strategy likely will be to allocate customers based on existing 
supplier-customer relationships.
d. Neither Supply Responses Nor Entry Would Prevent the Likely 
Anticompetitive Effects of the Acquisition in the Fluid Milk Market
    The Complaint alleges that neither supply responses from market 
participants nor entry would likely prevent the anticompetitive effects 
of the Acquisition in the fluid milk market. Firms not currently 
serving these markets are unlikely to enter in response to a small, 
durable price increase. Firms currently selling fluid milk into the 
relevant geographic market are unlikely to expand their sales 
sufficiently to substantially mitigate the loss of Foremost's head-to-
head competition with Dean or to disrupt potential coordination by Dean 
and its remaining competitors in the fluid milk market.
2. School Milk
a. School Milk Is a Relevant Product Market
    The Complaint alleges that school milk (i.e., fluid milk packaged 
and distributed for sale to school districts, typically in half-pint 
containers) is a relevant product market. School districts must provide 
milk in order to receive substantial funds under Federal school meal 
subsidy programs. Schools will not substitute other products for school 
milk even at substantially higher school milk prices because they would 
lose their Federal meal reimbursement.
b. School Districts Constitute Relevant Geographic Markets
    The Complaint alleges that each school district in Wisconsin and 
the UP constitutes a relevant geographic market. A hypothetical 
monopolist of school milk could identify and individually target 
vulnerable school districts in Wisconsin and the UP as school districts 
solicit school milk contract bids directly from processors. It would 
not be feasible for an individual school district to defeat a price 
increase by substituting to other products or by engaging in arbitrage 
(i.e., by purchasing school milk from favored school districts). A 
hypothetical monopolist could easily detect and thwart such an attempt 
to arbitrage, and the attempt, in any event, would be greatly hindered 
by the significant loading and delivery costs incurred in reselling. 
Moreover, school districts lack the coolers necessary to act as 
arbitrageurs on a significant scale. Since the hypothetical monopolist 
could identify and individually target vulnerable school districts and 
arbitrage is infeasible, it is appropriate to define geographic markets 
around the locations of the school districts. Because sellers can price 
discriminate against individual school districts, it is appropriate to 
define the geographic markets as individual school districts.\5\
---------------------------------------------------------------------------

    \5\ U.S. Dept. of Justice & FTC, Horizontal Merger Guidelines 
Sec.  4.2.2 (2010).
---------------------------------------------------------------------------

c. The Acquisition Will Likely Substantially Lessen Competition in the 
Sale of School Milk to Certain School Districts Located in Wisconsin 
and the Upper Peninsula of Michigan
    The Complaint alleges that the Acquisition will likely 
substantially lessen competition in the sale of school milk to school 
districts located in Wisconsin and the UP. School districts in 
Wisconsin and the UP have only a few choices for school milk suppliers. 
Prior to the Acquisition, Dean and Foremost were the two processors 
best situated to serve certain districts in Wisconsin and the UP. In 
many districts, the Acquisition created a ``merger to monopoly,'' 
leaving Dean as the only likely bidder. These school districts include 
those where Dean and Foremost were the only two dairy processors to bid 
in recent years. There are also a substantial number of school 
districts in Wisconsin and the UP for which Dean and Foremost were two 
of only three recent or likely future bidders. For these school 
districts, the Acquisition represents a ``merger to duopoly.'' The 
elimination of head-to-head competition between Dean and Foremost will 
likely substantially lessen competition in these school milk markets 
and enable Dean to raise prices and/or reduce services.
d. Entry Would Not Prevent the Likely Anticompetitive Effects of the 
Acquisition in the School Milk Markets
    The Complaint alleges that entry into school milk markets is not 
likely to prevent the anticompetitive effects of the Acquisition. Firms 
not currently serving school districts in Wisconsin and the UP are 
unlikely to begin to do so in the foreseeable future.

III. Explanation of the Proposed Final Judgment

A. Divestiture of the Waukesha Plant

    The proposed Final Judgment requires Dean, within 90 days after the 
filing of the proposed Final Judgment, or 5 days after entry of the 
Final Judgment by the Court, whichever is later, to divest the Waukesha 
plant it acquired from Foremost. The divestiture required by the 
proposed Final Judgment will establish an independent and economically 
viable competitor to Dean.
    The proposed Final Judgment is in the public interest because the 
divestiture of the Waukesha plant will enable the buyer to compete for 
business in an area that includes the vast majority of the population 
in the relevant geographic market. Of the De Pere and Waukesha plants 
acquired by Dean through the Acquisition, the Waukesha plant currently 
produces more milk, has a larger capacity to process milk, and is 
located closer to major population centers, including Chicago, Green 
Bay, and Milwaukee. Distance between processors and customers is an 
important consideration in fluid milk pricing because fluid milk has a 
limited shelf life and is costly to transport. These costs result in 
most customers purchasing fluid milk from nearby processing plants. For 
example, more than 90 percent of the milk sold to customers in 
Wisconsin and the UP travels less than 150 miles from the plant in 
which it was processed. Ninety-two percent of the population of the 
relevant fluid milk geographic market is located within 150 miles of 
the Waukesha plant, and 80% of public school children in Wisconsin and 
the UP are enrolled in school districts within 150 miles of the 
Waukesha plant.\6\ The Waukesha plant currently serves some of the 
largest fluid milk customers in Chicago and other areas of the relevant 
geographic market.
---------------------------------------------------------------------------

    \6\ The State of Michigan and Dean have entered into a separate 
settlement agreement with respect to school milk sales in the UP. 
That agreement includes a pricing mechanism that sets a maximum 
school milk bid price based on prices Dean charged for school milk 
during 2010.
---------------------------------------------------------------------------

    In addition, the Waukesha plant has significant excess capacity. 
This excess

[[Page 18791]]

capacity will allow it to serve additional customers of all sizes and 
will give the purchaser of the plant the incentive to compete 
aggressively for new business.
    The proposed Final Judgment requires Dean to divest all tangible 
assets that comprise the Waukesha plant business and all intangible 
assets used in the development, production, servicing, and sale of 
fluid milk and other dairy products for the Waukesha plant. These 
assets will give the acquirer a distribution network, an established 
customer base, and a brand (Golden Guernsey) with strong brand equity. 
The assets must be divested in such a way as to satisfy the United 
States in its sole discretion that the divested assets can and will be 
operated by the purchaser as a viable, ongoing business that can 
compete effectively in the relevant market. Dean must take all 
reasonable steps necessary to accomplish the divestiture quickly and 
shall cooperate with prospective purchasers.
    In the event that Dean does not accomplish the divestiture within 
the period prescribed in the proposed Final Judgment, the proposed 
Final Judgment provides that the Court will appoint a trustee selected 
by the United States to effect the divestiture. If a trustee is 
appointed, the proposed Final Judgment provides that Dean will pay all 
costs and expenses of the trustee. The trustee's commission will be 
structured so as to provide an incentive for the trustee based on the 
price obtained and the speed with which the divestiture is 
accomplished. After his or her appointment becomes effective, the 
trustee will file monthly reports with the Court and the United States 
setting forth his or her efforts to accomplish the divestiture. At the 
end of six months, if the divestiture has not been accomplished, the 
trustee and the United States will make recommendations to the Court, 
which shall enter such orders as appropriate, in order to carry out the 
purpose of the trust, including extending the trust or the term of the 
trustee's appointment.

B. Notification of Future Acquisitions

    In addition to the divestiture of the Waukesha plant, the proposed 
Final Judgment requires Dean to provide advance notification of certain 
future acquisitions of fluid milk processing plants to the Antitrust 
Division. The notification provision of the proposed Final Judgment is 
intended to avoid the difficulties associated with remedying the harms 
of a consummated anticompetitive acquisition by permitting the United 
States to assess the competitive effects of Dean's future acquisitions 
before the acquisitions are consummated, and if necessary, to seek to 
enjoin any transaction pursuant to Section 7.
    The proposed Final Judgment provides that Dean shall not directly 
or indirectly acquire any assets of or interest in any fluid milk 
processing plant located in the United States, where the value of the 
acquisition is $3 million or greater, without prior notification to the 
United States. Transactions otherwise subject to the reporting and 
waiting period requirements of the HSR Act are excepted from the 
notification provision of the proposed Final Judgment. This provision 
will significantly broaden Dean's pre-merger reporting requirements 
because the $3 million amount is significantly less than the HSR Act's 
``size of the transaction'' reporting threshold.
    The proposed Final Judgment requires that such notification shall 
be provided to the Antitrust Division in the same format as, and in 
accordance with the instructions relating to the Notification and 
Report Form set forth in the Appendix to Part 803 of Title 16 of the 
Code of Federal Regulations as amended, except that the information 
requested in Items 5 through 9 of the instructions must be provided 
only about fluid and school milk processing. Notification shall be 
provided at least 30 calendar days prior to acquiring any such 
interest. If within the 30-day period after notification, 
representatives of the Antitrust Division make a written request for 
additional information, Dean shall not consummate the proposed 
transaction or agreement until 30 calendar days after responding 
consistent with 15 U.S.C. 18a(e)(2). Early termination of the waiting 
periods in this paragraph may be requested and, where appropriate, 
granted in the same manner as is applicable under the requirements and 
provisions of the HSR Act and rules promulgated thereunder.

IV. Remedies Available to Potential Private Litigants

    Section 4 of the Clayton Act, 15 U.S.C. 15, provides that any 
person who has been injured as a result of conduct prohibited by the 
antitrust laws may bring suit in Federal court to recover three times 
the damages the person has suffered, as well as costs and reasonable 
attorneys' fees. Entry of the proposed Final Judgment will neither 
impair nor assist the bringing of any private antitrust damage action. 
Under the provisions of Section 5(a) of the Clayton Act, 15 U.S.C. 
16(a), the proposed Final Judgment has no prima facie effect in any 
subsequent private lawsuit that may be brought against Dean.

V. Procedures Available for Modification of the Proposed Final Judgment

    The United States and Dean have stipulated that the proposed Final 
Judgment may be entered by the Court after compliance with the 
provisions of the APPA, provided that the United States has not 
withdrawn its consent. The APPA conditions entry upon the Court's 
determination that the proposed Final Judgment is in the public 
interest.
    The APPA provides a period of at least 60 days preceding the 
effective date of the proposed Final Judgment within which any person 
may submit to the United States written comments regarding the proposed 
Final Judgment. Any person who wishes to comment should do so within 60 
days of the date of publication of this Competitive Impact Statement in 
the Federal Register, or the last date of publication in a newspaper of 
the summary of this Competitive Impact Statement, whichever is later. 
All comments received during this period will be considered by the 
United States Department of Justice, which remains free to withdraw its 
consent to the proposed Final Judgment at any time prior to the Court's 
entry of judgment. The comments and the response of the United States 
will be filed with the Court and published in the Federal Register.
    Written comments should be submitted to:

Joshua H. Soven, Chief, Litigation I Section, Antitrust Division, 
United States Department of Justice, 450 Fifth Street, NW., Suite 4100, 
Washington, DC 20530.

    The proposed Final Judgment provides that the Court retains 
jurisdiction over this action, and the parties may apply to the Court 
for any order necessary or appropriate for the modification, 
interpretation, or enforcement of the Final Judgment.

VI. Alternatives to the Proposed Final Judgment

    The United States considered various proposals for settlement 
offered by Dean that would have provided less relief than is contained 
in the proposed Final Judgment. Those proposals involved the 
divestiture of a single dairy with less capacity and a smaller service 
area than the Waukesha dairy. The United States determined that the 
divestiture of the Waukesha dairy was far superior given its location, 
size, and excess capacity.
    The United States also considered, as an alternative to the 
proposed Final Judgment, incurring the time, expense, and risk of a 
full trial on the merits in

[[Page 18792]]

order to attempt to force Dean to divest both of the plants that it 
acquired. The United States is concerned that the competitive harm from 
the Acquisition will be ongoing, and may become harder to remedy, as 
time passes.\7\ The proposed Final Judgment will provide immediate 
relief and will avoid possible degradation of the Waukesha plant's 
business or the Golden Guernsey brand. The United States recognizes 
that the divestiture of the Waukesha plant, while addressing the vast 
majority of harm alleged in the Complaint, likely will have little 
effect on competition for fluid milk and school milk consumers in the 
northernmost section of the affected region. However, the proposed 
Final Judgment avoids the time, expense, and uncertainty of a full 
trial on the merits. Moreover, the United States is satisfied that the 
divestiture of the Waukesha plant described in the proposed Final 
Judgment is in the public interest because it will create an 
independent competitor able to compete for business in an area that 
includes the vast majority of the population in the relevant geographic 
market.
---------------------------------------------------------------------------

    \7\ Plaintiffs have been concerned about the deterioration of 
the Foremost assets since filing the action. See Joint Rule 26(f) 
Conference Report (Docket No. 31, filed May 21, 2010). This 
settlement eliminates the risk of asset deterioration that would 
have occurred prior to the entry of a judgment after trial.
---------------------------------------------------------------------------

VII. Standard of Review Under the APPA for the Proposed Final Judgment

    The Clayton Act, as amended by the APPA, requires that proposed 
consent judgments in antitrust cases brought by the United States be 
subject to a 60-day comment period, after which the court shall 
determine whether entry of the proposed Final Judgment ``is in the 
public interest.'' 15 U.S.C. 16(e)(1). In making that determination, 
the court, in accordance with the statute as amended in 2004, is 
required to consider:

    (A) The competitive impact of such judgment, including 
termination of alleged violations, provisions for enforcement and 
modification, duration of relief sought, anticipated effects of 
alternative remedies actually considered, whether its terms are 
ambiguous, and any other competitive considerations bearing upon the 
adequacy of such judgment that the court deems necessary to a 
determination of whether the consent judgment is in the public 
interest; and
    (B) the impact of entry of such judgment upon competition in the 
relevant market or markets, upon the public generally and 
individuals alleging specific injury from the violations set forth 
in the complaint including consideration of the public benefit, if 
any, to be derived from a determination of the issues at trial.

    15 U.S.C. 16(e)(1)(A) & (B). In considering these statutory 
factors, the court's inquiry is necessarily a limited one as the 
government is entitled to ``broad discretion to settle with the 
defendant within the reaches of the public interest.'' United States v. 
Microsoft Corp., 56 F.3d 1448, 1461 (DC Cir. 1995); see generally 
United States v. SBC Commc'ns, Inc., 489 F. Supp. 2d 1 (D.DC 2007) 
(assessing public interest standard under the Tunney Act); United 
States v. InBev N.V./S.A., 2009-2 Trade Cas. (CCH) ] 76,736, 2009 U.S. 
Dist. LEXIS 84787, No. 08-1965 (JR), at *3, (D.DC Aug. 11, 2009) 
(noting that the court's review of a consent judgment is limited and 
only inquires ``into whether the government's determination that the 
proposed remedies will cure the antitrust violations alleged in the 
complaint was reasonable, and whether the mechanisms to enforce the 
final judgment are clear and manageable'').\8\
---------------------------------------------------------------------------

    \8\ The 2004 amendments substituted ``shall'' for ``may'' in 
directing relevant factors for a court to consider and amended the 
list of factors to focus on competitive considerations and to 
address potentially ambiguous judgment terms. Compare 15 U.S.C. 
16(e) (2004), with 15 U.S.C. 16(e)(1) (2006); see also SBC Commc'ns, 
489 F. Supp. 2d at 11 (concluding that the 2004 amendments 
``effected minimal changes'' to Tunney Act review).
---------------------------------------------------------------------------

    As the United States Court of Appeals for the District of Columbia 
Circuit has held, under the APPA a court considers, among other things, 
the relationship between the remedy secured and the allegations set 
forth in the government's complaint, whether the decree is sufficiently 
clear, whether enforcement mechanisms are sufficient, and whether the 
decree may positively harm third parties. See Microsoft, 56 F.3d at 
1458-62. With respect to the adequacy of the relief secured by the 
decree, a court may not ``engage in an unrestricted evaluation of what 
relief would best serve the public.'' United States v. BNS, Inc., 858 
F.2d 456, 462 (9th Cir. 1988) (citing United States v. Bechtel Corp., 
648 F.2d 660, 666 (9th Cir. 1981)); see also Microsoft, 56 F.3d at 
1460-62; United States v. Alcoa, Inc., 152 F. Supp. 2d 37, 40 (D.D.C. 
2001); InBev, 2009 U.S. Dist. LEXIS 84787, at *3. Courts have held 
that:

    [t]he balancing of competing social and political interests 
affected by a proposed antitrust consent decree must be left, in the 
first instance, to the discretion of the Attorney General. The 
court's role in protecting the public interest is one of insuring 
that the government has not breached its duty to the public in 
consenting to the decree. The court is required to determine not 
whether a particular decree is the one that will best serve society, 
but whether the settlement is ``within the reaches of the public 
interest.'' More elaborate requirements might undermine the 
effectiveness of antitrust enforcement by consent decree.

    Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).\9\ 
In determining whether a proposed settlement is in the public interest, 
a district court ``must accord deference to the government's 
predictions about the efficacy of its remedies, and may not require 
that the remedies perfectly match the alleged violations.'' SBC 
Commc'ns, 489 F. Supp. 2d at 17; see also Microsoft, 56 F.3d at 1461 
(noting the need for courts to be ``deferential to the government's 
predictions as to the effect of the proposed remedies''); United States 
v. Archer-Daniels-Midland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) 
(noting that the court should grant due respect to the United States' 
prediction as to the effect of proposed remedies, its perception of the 
market structure, and its views of the nature of the case).
---------------------------------------------------------------------------

    \9\ Cf. BNS, 858 F.2d at 464 (holding that the court's 
``ultimate authority under the [APPA] is limited to approving or 
disapproving the consent decree''); United States v. Gillette Co., 
406 F. Supp. 713, 716 (D. Mass. 1975) (noting that, in this way, the 
court is constrained to ``look at the overall picture not 
hypercritically, nor with a microscope, but with an artist's 
reducing glass''). See generally Microsoft, 56 F.3d at 1461 
(discussing whether ``the remedies [obtained in the decree are] so 
inconsonant with the allegations charged as to fall outside of the 
`reaches of the public interest''').
---------------------------------------------------------------------------

    Courts have greater flexibility in approving proposed consent 
decrees than in crafting their own decrees following a finding of 
liability in a litigated matter. ``[A] proposed decree must be approved 
even if it falls short of the remedy the court would impose on its own, 
as long as it falls within the range of acceptability or is `within the 
reaches of public interest.''' United States v. Am. Tel. & Tel. Co., 
552 F. Supp. 131, 151 (D.D.C. 1982) (citations omitted) (quoting United 
States v. Gillette Co., 406 F. Supp. 713, 716 (D. Mass. 1975)), aff'd 
sub nom. Maryland v. United States, 460 U.S. 1001 (1983); see also 
United States v. Alcan Aluminum Ltd., 605 F. Supp. 619, 622 (W.D. Ky. 
1985) (approving the consent decree even though the court would have 
imposed a greater remedy). To meet this standard, the United States 
``need only provide a factual basis for concluding that the settlements 
are reasonably adequate remedies for the alleged harms.'' SBC Commc'ns, 
489 F. Supp. 2d at 17.
    In its 2004 amendments, Congress made clear its intent to preserve 
the practical benefits of utilizing consent decrees in antitrust 
enforcement, adding the unambiguous instruction that ``[n]othing in 
this section shall be

[[Page 18793]]

construed to require the court to conduct an evidentiary hearing or to 
require the court to permit anyone to intervene.'' 15 U.S.C. 16(e)(2). 
The language wrote into the statute what Congress intended when it 
enacted the Tunney Act in 1974, as Senator Tunney explained: ``[t]he 
court is nowhere compelled to go to trial or to engage in extended 
proceedings which might have the effect of vitiating the benefits of 
prompt and less costly settlement through the consent decree process.'' 
119 Cong. Rec. 24,598 (1973) (statement of Senator Tunney). Rather, the 
procedure for the public interest determination is left to the 
discretion of the court, with the recognition that the court's ``scope 
of review remains sharply proscribed by precedent and the nature of 
Tunney Act proceedings.'' SBC Commc'ns, 489 F. Supp. 2d at 11.\10\
---------------------------------------------------------------------------

    \10\ See United States v. Enova Corp., 107 F. Supp. 2d 10, 17 
(D.D.C. 2000) (noting that the ``Tunney Act expressly allows the 
court to make its public interest determination on the basis of the 
competitive impact statement and response to comments alone''); 
United States v. Mid-Am. Dairymen, Inc., 1977-1 Trade Cas. (CCH) ] 
61,508, at 71,980 (W.D. Mo. 1977) (``Absent a showing of corrupt 
failure of the government to discharge its duty, the Court, in 
making its public interest finding, should * * * carefully consider 
the explanations of the government in the competitive impact 
statement and its responses to comments in order to determine 
whether those explanations are reasonable under the 
circumstances.''); S. Rep. No. 93-298, 93d Cong., 1st Sess., at 6 
(1973) (``Where the public interest can be meaningfully evaluated 
simply on the basis of briefs and oral arguments, that is the 
approach that should be utilized.'').
---------------------------------------------------------------------------

VIII. Determinative Documents

    There are no determinative materials or documents within the 
meaning of the APPA that were considered by the United States in 
formulating the proposed Final Judgment.

Dated: March 29, 2011.

Respectfully submitted,

s/ Mitchell H. Glende,
Jon B. Jacobs,
Karl D. Knutsen,
Ryan M. Kantor,
Mitchell H. Glende,
Paul J. Torzilli,
United States Department of Justice, Antitrust Division, 450 Fifth 
St., NW., Suite 4100, Washington, DC 20530, Telephone: (202) 514-
5012, E-mail: [email protected].

s/ Gregory J. Haanstad,
for James L. Santelle,
    James L. Santelle,
United States Attorney.

Susan M. Knepel,

Assistant United States Attorney, State Bar Number: 1016482, 530 
Federal Courthouse, 517 E. Wisconsin Avenue, Milwaukee, WI 53202, 
Telephone: (414) 297-1700, E-mail: [email protected].
United States District Court for the Eastern District of Wisconsin 
Milwaukee Division
United States of America, State of Wisconsin, State of Illinois, and) 
State of Michigan, Civil Action No. 2:10-cv-00059 (JPS) Plaintiffs,
v.
Dean Foods Company, Defendant.

[Proposed] Final Judgment

    Whereas, Plaintiffs filed their Complaint on January 22, 2010, and 
Plaintiffs and Defendant, by their respective attorneys, have consented 
to the entry of this Final Judgment without trial of any issue of fact 
or law, and without this Final Judgment constituting any evidence 
against or admission by any party regarding any issue of fact or law;
    And Whereas, Defendant agrees to be bound by the provisions of this 
Final Judgment pending its approval by the Court;
    And Whereas, the essence of this Final Judgment is the prompt and 
certain divestiture of certain rights or assets by Defendant to assure 
that competition is not substantially lessened;
    And Whereas, Plaintiffs require Defendant to make certain 
divestitures for the purpose of remedying the loss of competition 
alleged in the Complaint;
    And Whereas, Defendant has represented to Plaintiffs that the 
divestitures required below can and will be made and that Defendant 
will later raise no claim of hardship or difficulty as grounds for 
asking the Court to modify any of the divestiture provisions contained 
below;
    Now Therefore, before any testimony is taken, without trial of any 
issue of fact or law, and upon consent of the parties, it is Ordered, 
Adjudged and Decreed:

I. Jurisdiction

    This Court has jurisdiction over the subject matter of and each of 
the parties to this action. The Complaint states claims upon which 
relief may be granted against Defendant under Section 7 of the Clayton 
Act, as amended (15 U.S.C. 18).

II. Definitions

    As used in this Final Judgment:
    (A) ``Acquirer'' means the person or entity to whom Defendant 
divests the Divestiture Assets.
    (B) ``Dean Foods'' means Defendant Dean Foods Company, a Delaware 
corporation with its headquarters in Dallas, Texas, its successors and 
assigns, and its subsidiaries, divisions, groups, affiliates, 
partnerships and joint ventures, and their directors, officers, 
managers, agents, and employees.
    (C) ``Divestiture Assets'' means the Waukesha Plant, as defined 
below, and all related assets for the Waukesha Plant (except for those 
specified in Section II(C)(3) below), including:
    (1) All tangible assets that comprise the Waukesha Plant business, 
including all property and contract rights, research and development 
activities; all manufacturing equipment, tooling and fixed assets, 
personal property, inventory, office furniture, materials, supplies, 
vehicles and other rolling stock, and other tangible property and all 
assets used in connection with the plant; all licenses, permits and 
authorizations issued by any governmental organization relating to the 
plant; all contracts, teaming arrangements, agreements, leases, 
commitments, certifications, and understandings, relating to the plant, 
including agreements with suppliers and with distributors; all customer 
lists and related customer information, contracts, accounts (including 
accounts receivable), and credit records; and all repair and 
performance records and all other records relating to the plant; and
    (2) All intangible assets used in the development, production, 
servicing, and sale of Fluid Milk and other dairy products for the 
Waukesha Plant, including, but not limited to, all patents, licenses 
and sublicenses, copyrights, trademarks, trade names (including the 
Golden Guernsey and La Vaca Bonita brands and all related materials), 
service marks, service names, and other intellectual property; 
technical information, computer software and related documentation; 
know-how and recipes; trade secrets; drawings, blueprints, designs, 
design protocols, specifications for materials, specifications for 
parts and devices, safety procedures for the handling of materials and 
substances; quality assurance and control procedures; design tools and 
simulation capability; all manuals and technical information Defendant 
provides to its own employees, customers, suppliers, agents, or 
licensees; and all research data concerning historic and current 
research and development efforts relating to the Divestiture Assets, 
including, but not limited to, designs of experiments, and the results 
of successful and unsuccessful designs and experiments.
    (3) The term ``Divestiture Assets'' does not include: (a) The right 
to purchase raw milk from Foremost Farms USA Cooperative for processing 
at the Waukesha Plant obtained under the Milk Supply Agreement entered 
into on April 1, 2009 between Foremost Farms

[[Page 18794]]

USA Cooperative and GG Acquisition, LLC; (b) any ice cream mix filler 
equipment used at the Waukesha Plant or any other equipment at that 
Plant dedicated solely to the manufacturing of ice cream mix; or (c) 
the Dean and Farm Fresh brands and all related materials.
    (D) ``Fluid Milk'' means raw milk that has been processed for human 
consumption as a beverage, but does not include organic milk, soy milk, 
extended shelf life milk, ultra-high temperature milk, or aseptic milk.
    (E) ``Plaintiff States'' means the States of Wisconsin, Illinois, 
and Michigan.
    (F) ``School Milk'' means Fluid Milk produced, marketed, 
distributed, or sold for use by schools.
    (G) ``Waukesha Plant'' means Defendant's dairy processing plant 
located at 2101 Delafield Street, Waukesha, Wisconsin 53188-2299.

III. Applicability

    (A) This Final Judgment applies to Dean Foods, as defined above, 
and all other persons in active concert or participation with Dean 
Foods who receive actual notice of this Final Judgment by personal 
service or otherwise.
    (B) If, prior to complying with Section IV or V of this Final 
Judgment, Defendant sells or otherwise disposes of all or substantially 
all of its assets or of lesser business units that include the 
Divestiture Assets, it shall require the purchaser to be bound by the 
provisions of this Final Judgment. Defendant does not need to obtain 
such an agreement from the Acquirer of the assets divested pursuant to 
this Final Judgment.

IV. Divestitures

    (A) Defendant is ordered and directed, within ninety (90) calendar 
days after the filing of the Proposed Final Judgment or five (5) 
calendar days after entry of this Final Judgment by the Court, 
whichever is later, to divest the Divestiture Assets in a manner 
consistent with this Final Judgment to an Acquirer acceptable to the 
United States in its sole discretion, after consultation with the 
Plaintiff States. The United States in its sole discretion, after 
consultation with the Plaintiff States, may agree to one or more 
extensions of this time period not to exceed thirty (30) calendar days 
in total, and shall notify the Court in such circumstances. Defendant 
agrees to use its best efforts to divest the Divestiture Assets as 
expeditiously as possible.
    (B) In accomplishing the divestiture ordered by this Final 
Judgment, Defendant promptly shall make known, by usual and customary 
means, the availability of the Divestiture Assets. Defendant shall 
inform any person making inquiry regarding a possible purchase of the 
Divestiture Assets that they are being divested pursuant to this Final 
Judgment and provide that person with a copy of this Final Judgment. 
Defendant shall offer to furnish to all prospective Acquirers, subject 
to customary confidentiality assurances, all information and documents 
relating to the Divestiture Assets customarily provided in a due 
diligence process except such information or documents subject to the 
attorney-client privilege or work-product doctrine. Defendant shall 
make available such information to Plaintiffs at the same time that 
such information is made available to any other person.
    (C) Defendant shall provide the Acquirer and Plaintiffs with 
information relating to the personnel involved in the operation and 
sale of the Divestiture Assets to enable the Acquirer to make offers of 
employment. Defendant will not interfere with any negotiations by the 
Acquirer to employ any Defendant employee whose primary responsibility 
relates to the Divestiture Assets.
    (D) Defendant shall permit prospective Acquirers of the Divestiture 
Assets to have reasonable (1) access to personnel and to make 
inspections of the physical facilities of the Waukesha Plant; (2) 
access to any and all environmental, zoning, and other permit documents 
and information; and (3) access to any and all financial, operational, 
or other documents and information customarily provided as part of a 
due diligence process.
    (E) Defendant shall warrant to the Acquirer that the Divestiture 
Assets will be operational on the date of sale.
    (F) Defendant shall not take any action that will impede in any way 
the permitting, operation, or divestiture of the Divestiture Assets.
    (G) Defendant shall warrant to the Acquirer that there are no 
material defects in the environmental, zoning, or other permits 
pertaining to the operation of each asset, and that following the sale 
of the Divestiture Assets, Defendant will not undertake, directly or 
indirectly, any challenges to the environmental, zoning, or other 
permits relating to the operation of the Divestiture Assets.
    (H) Unless the United States in its sole discretion, after 
consultation with the Plaintiff States, otherwise consents in writing, 
the divestiture pursuant to Section IV, or by trustee appointed 
pursuant to Section V of this Final Judgment, shall include the entire 
Divestiture Assets, and shall be accomplished in such a way as to 
satisfy the United States in its sole discretion, after consultation 
with the Plaintiff States, that the Divestiture Assets can and will be 
used by the Acquirer as part of viable, ongoing Fluid Milk and School 
Milk processing businesses. The divestitures, whether pursuant to 
Section IV or Section V of this Final Judgment:
    (1) Shall be made to an Acquirer that, in the sole judgment of the 
United States, after consultation with the Plaintiff States, has the 
intent and capability (including the necessary managerial, operational, 
technical, and financial capability) of competing effectively in the 
sale of Fluid Milk and School Milk; and
    (2) shall be accomplished so as to satisfy the United States in its 
sole discretion, after consultation with the Plaintiff States, that 
none of the terms of any agreement between an Acquirer and Defendant 
give Defendant the ability unreasonably to raise the Acquirer's costs, 
to lower the Acquirer's efficiency, or otherwise to interfere in the 
ability of the Acquirer to compete effectively.

V. Appointment of Trustee

    (A) If Defendant has not divested the Divestiture Assets within the 
time period specified in Section IV(A), Defendant shall notify 
Plaintiffs of that fact in writing. Upon application of the United 
States in its sole discretion, after consultation with the Plaintiff 
States, the Court shall appoint a trustee selected by the United 
States, after consultation with the Plaintiff States, and approved by 
the Court to effect the divestiture of the Divestiture Assets.
    (B) After the appointment of a trustee becomes effective, only the 
trustee shall have the right to sell the Divestiture Assets. The 
trustee shall have the power and authority to accomplish the 
divestiture to an Acquirer acceptable to the United States in its sole 
discretion, after consultation with the Plaintiff States, at such price 
and on such terms as are then obtainable upon reasonable effort by the 
trustee, subject to the provisions of Sections IV, V, and VI of this 
Final Judgment, and shall have such other powers as this Court deems 
appropriate. Subject to Section V(D) of this Final Judgment, the 
trustee may hire at the cost and expense of Defendant any investment 
bankers, attorneys, or other agents, who shall be solely accountable to 
the trustee, reasonably necessary in the trustee's judgment to assist 
in the divestiture.
    (C) Defendant shall not object to a sale by the trustee on any 
ground other than the trustee's malfeasance. Any such objections by 
Defendant must be conveyed in writing to Plaintiffs and the trustee 
within ten (10) calendar days

[[Page 18795]]

after the trustee has provided the notice required under Section VI.
    (D) The trustee shall serve at the cost and expense of Defendant, 
on such terms and conditions as the United States in its sole 
discretion, after consultation with the Plaintiff States, approves, and 
shall account for all monies derived from the sale of the assets sold 
by the trustee and all costs and expenses so incurred. After approval 
by the Court of the trustee's accounting, including fees for its 
services and those of any professionals and agents retained by the 
trustee, all remaining money shall be paid to Defendant and the trust 
shall then be terminated. The compensation of the trustee and any 
professionals and agents retained by the trustee shall be reasonable in 
light of the value of the Divestiture Assets and based on a fee 
arrangement providing the trustee with an incentive based on the price 
and terms of the divestiture and the speed with which it is 
accomplished, but timeliness is paramount.
    (E) Defendant shall use its best efforts to assist the trustee in 
accomplishing the required divestiture. The trustee and any 
consultants, accountants, attorneys, and other persons retained by the 
trustee shall have full and complete access to the personnel, books, 
records, and facilities of the business to be divested, and Defendant 
shall develop financial and other information relevant to such business 
as the trustee may reasonably request, subject to reasonable protection 
for trade secret or other confidential research, development, or 
commercial information. Defendant shall take no action to interfere 
with or to impede the trustee's accomplishment of the divestiture.
    (F) After its appointment, the trustee shall file monthly reports 
with Plaintiffs and the Court setting forth the trustee's efforts to 
accomplish the divestiture ordered under this Final Judgment. To the 
extent such reports contain information that the trustee deems 
confidential, such reports shall not be filed in the public docket of 
the Court. Such reports shall include the name, address, and telephone 
number of each person who, during the preceding month, made an offer to 
acquire, expressed an interest in acquiring, entered into negotiations 
to acquire, or was contacted or made an inquiry about acquiring, any 
interest in the Divestiture Assets, and shall describe in detail each 
contact with any such person. The trustee shall maintain full records 
of all efforts made to divest the Divestiture Assets.
    (G) If the trustee has not accomplished the divestiture ordered 
under this Final Judgment within six (6) months after its appointment, 
the trustee shall promptly file with the Court a report setting forth 
(1) the trustee's efforts to accomplish the required divestiture, (2) 
the reasons, in the trustee's judgment, why the required divestiture 
has not been accomplished, and (3) the trustee's recommendations. To 
the extent the report contains information that the trustee deems 
confidential, the report shall not be filed in the public docket of the 
Court. The trustee shall at the same time furnish such report to 
Plaintiffs, which shall have the right to make additional 
recommendations consistent with the purpose of the trust. The Court 
thereafter shall enter such orders as it shall deem appropriate to 
carry out the purpose of the Final Judgment, which may, if necessary, 
include extending the trust and the term of the trustee's appointment 
by a period requested by the United States in its sole discretion, 
after consultation with the Plaintiff States.

VI. Notice of Proposed Divestiture

    (A) Within two (2) business days following execution of a 
definitive divestiture agreement, Defendant or the trustee, whichever 
is then responsible for effecting the divestiture required herein, 
shall notify Plaintiffs of any proposed divestiture required by Section 
IV or V of this Final Judgment. If the trustee is responsible, it shall 
similarly notify Defendant. The notice shall set forth the details of 
the proposed divestiture and list the name, address, and telephone 
number of each person not previously identified who offered or 
expressed an interest in or desire to acquire any ownership interest in 
the Divestiture Assets, together with full details of the same.
    (B) Within fifteen (15) calendar days of receipt by Plaintiffs of 
such notice, the United States, after consultation with the Plaintiff 
States, may request from Defendant, the proposed Acquirer, any other 
third party, or the trustee, if applicable, additional information 
concerning the proposed divestiture, the proposed Acquirer, and any 
other potential Acquirer. Defendant and the trustee shall furnish to 
the United States, which will share that information with the Plaintiff 
States upon any Plaintiff State's request, any additional information 
requested within fifteen (15) calendar days of the receipt of the 
request, unless the parties shall otherwise agree.
    (C) Within thirty (30) calendar days after receipt of the notice or 
within twenty (20) calendar days after the United States has been 
provided the additional information requested from Defendant, the 
proposed Acquirer, any third party, and the trustee, whichever is 
later, the United States in its sole discretion, after consultation 
with the Plaintiff States, shall provide written notice to Defendant 
and the trustee, if there is one, stating whether or not it objects to 
the proposed divestiture. If the United States provides written notice 
that it does not object, the divestiture may be consummated, subject 
only to Defendant's limited right to object to the sale under Section 
V(C) of this Final Judgment. Absent written notice that the United 
States does not object to the proposed Acquirer or upon objection by 
the United States, a divestiture proposed under Section IV or Section V 
shall not be consummated. Upon objection by Defendant under Section 
V(C), a divestiture proposed under Section V shall not be consummated 
unless approved by the Court.

VII. Financing

    Defendant shall not finance all or any part of any purchase made 
pursuant to Section IV or V of this Final Judgment.

VIII. Asset Preservation

    Until the divestiture required by this Final Judgment has been 
accomplished, Defendant shall take all steps necessary to comply with 
the Asset Preservation Stipulation and Order entered by this Court. 
Defendant shall take no action that would jeopardize the divestiture 
ordered by this Court.

IX. Affidavits

    (A) Within twenty (20) calendar days of the filing of the Proposed 
Final Judgment in this matter, and every thirty (30) calendar days 
thereafter until the divestiture has been completed under Section IV or 
V, Defendant shall deliver to Plaintiffs an affidavit as to the fact 
and manner of its compliance with Section IV or V of this Final 
Judgment. Each such affidavit shall include the name, address, and 
telephone number of each person who, during the preceding thirty (30) 
calendar days, made an offer to acquire, expressed an interest in 
acquiring, entered into negotiations to acquire, or was contacted or 
made an inquiry about acquiring, any interest in the Divestiture 
Assets, and shall describe in detail each contact with any such person 
during that period. Each such affidavit shall also include a 
description of the efforts Defendant has taken to solicit buyers for 
the Divestiture Assets and to provide required information to 
prospective Acquirers, including the limitations, if any, on such 
information. Provided that

[[Page 18796]]

the information set forth in the affidavit is true and complete, any 
objection by the United States in its sole discretion, after 
consultation with the Plaintiff States, to information provided by 
Defendant, including any limitation on information, shall be made 
within fourteen (14) calendar days of receipt of such affidavit.
    (B) Defendant shall keep all records of all efforts made to 
preserve and divest the Divestiture Assets until one year after such 
divestiture has been completed.

X. Compliance Inspection

    (A) For the purposes of determining or securing compliance with 
this Final Judgment, or of determining whether the Final Judgment 
should be modified or vacated, and subject to any legally recognized 
privilege, from time to time authorized representatives of the United 
States, including consultants and other persons retained by the United 
States, shall, upon written request of an authorized representative of 
the Assistant Attorney General in charge of the Antitrust Division, and 
on reasonable notice to Defendant, be permitted:
    (1) Access during Defendant's office hours to inspect and copy, or 
at the option of the United States, to require Defendant to provide 
hard copy or electronic copies of, all books, ledgers, accounts, 
records, data, and documents in the possession, custody, or control of 
Defendant, relating to any matters contained in this Final Judgment; 
and
    (2) to interview, either informally or on the record, Defendant's 
officers, employees, or agents, who may have their individual counsel 
present, regarding such matters. The interviews shall be subject to the 
reasonable convenience of the interviewee and without restraint or 
interference by Defendant.
    (B) Upon the written request of an authorized representative of the 
Assistant Attorney General in charge of the Antitrust Division, 
Defendant shall submit written reports or responses to written 
interrogatories, under oath if requested, relating to any of the 
matters contained in this Final Judgment as may be requested.
    (C) If at the time information or documents are furnished by 
Defendant to the United States, Defendant represents and identifies in 
writing the material in any such information or documents to which a 
claim of protection may be asserted under Rule 26(c)(1)(G) of the 
Federal Rules of Civil Procedure, and Defendant marks each pertinent 
page of such material, ``Subject to claim of protection under Rule 
26(c)(1)(G) of the Federal Rules of Civil Procedure,'' then the United 
States shall give Defendant ten (10) calendar days notice prior to 
divulging such material in any legal proceeding (other than a grand 
jury proceeding).
    (D) The United States may share information or documents obtained 
under Section X with the Plaintiff States.

XI. Treatment of Confidential Information

    No information or documents obtained by the means provided in this 
Final Judgment shall be divulged by the United States or the Attorney 
General of Wisconsin, Illinois, or Michigan to any person other than an 
authorized representative of the executive branch of the United States, 
except in the course of legal proceedings to which the United States or 
the Attorney General of Wisconsin, Illinois, or Michigan is a party 
(including grand jury proceedings), or for the purpose of securing 
compliance with this Final Judgment, or as otherwise required by law.

XII. Notification of Future Transactions

    Unless such transaction is otherwise subject to the reporting and 
waiting period requirements of the Hart-Scott-Rodino Antitrust 
Improvements Act of 1976, as amended, 15 U.S.C. 18a (the ``HSR Act''), 
Defendant, without providing advance notification to the Antitrust 
Division and to any Plaintiff State in which any of the assets or 
interests are located or whose border is less than 150 miles from any 
such assets or interests, shall not directly or indirectly acquire any 
assets of or interest, including any financial, security, loan, equity 
or management interest, in any Fluid Milk processing plant located in 
the United States, where the value of the acquisition is $3 million or 
greater.
    Such notification shall be provided to the Antitrust Division in 
the same format as, and per the instructions relating to the 
Notification and Report Form set forth in the Appendix to Part 803 of 
Title 16 of the Code of Federal Regulations as amended, except that the 
information requested in Items 5 through 9 of the instructions must be 
provided only about Fluid Milk and School Milk processing. Notification 
shall be provided at least thirty (30) calendar days prior to acquiring 
any such interest. Within the 30-day period after notification, 
representatives of the Antitrust Division may make a written request 
for additional information or documentary material relevant to the 
proposed acquisition as though 15 U.S.C. 18a(e) were applicable 
(``Second Request''). In the event of a Second Request, Defendant shall 
not consummate the proposed transaction or agreement until thirty (30) 
calendar days after responding consistent with 15 U.S.C. 18a(e)(2). 
Early termination of the waiting periods in this paragraph may be 
requested and, where appropriate, granted in the same manner as is 
applicable under the requirements and provisions of the HSR Act and 
rules promulgated thereunder.
    All references to the HSR Act in the proposed Final Judgment refer 
to the HSR Act as it exists at the time of the transaction or agreement 
and incorporate any subsequent amendments to the Act.

XIII. No Reacquisition

    Defendant shall not reacquire any part of the Divestiture Assets 
during the term of this Final Judgment.

XIV. Retention of Jurisdiction

    This Court retains jurisdiction to enable any party to this Final 
Judgment to apply to this Court at any time for further orders and 
directions as may be necessary or appropriate to carry out or construe 
this Final Judgment, to modify any of its provisions, to enforce 
compliance, and to punish violations of its provisions.

XV. Expiration of Final Judgment

    Unless this Court grants an extension, this Final Judgment shall 
expire ten (10) years from the date of its entry.

XVI. Public Interest Determination

    The parties have complied with the requirements of the Antitrust 
Procedures and Penalties Act, 15 U.S.C. 16, including making copies 
available to the public of this Final Judgment, the Competitive Impact 
Statement, and any comments thereon and the United States's responses 
to those comments. Based upon the record before the Court, which 
includes the Competitive Impact Statement and any comments and response 
to comments filed with the Court, entry of this Final Judgment is in 
the public interest.
    Court approval subject to procedures of Antitrust Procedures and 
Penalties Act, 15 U.S.C. 16.

Dated at Milwaukee, Wisconsin, this ----th day of ----, 2011.

By the Court:
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J.P. Stadtmueller,

U.S. District Judge.

[FR Doc. 2011-7938 Filed 4-04-11; 8:45 am]
BILLING CODE 4410-11-P