[Federal Register Volume 85, Number 106 (Tuesday, June 2, 2020)]
[Notices]
[Pages 33712-33733]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-11857]
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DEPARTMENT OF JUSTICE
Antitrust Division
United States, et al. v. Dairy Farmers of America, Inc. and Dean
Foods Company; Proposed Final Judgment 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 Northern District of Illinois in
United States of America, et al. v. Dairy Farmers of America, Inc., et
al., Civil Action No. 1:20-cv-02658. On May 1, 2020, the United States
filed a Complaint alleging that Dairy Farmers of America, Inc.'s
(``DFA'') proposed acquisition of certain assets from Dean Foods
Company would violate Section 7 of the Clayton Act, 15 U.S.C. 18. The
proposed Final Judgment, filed at the same time as the Complaint,
requires DFA to divest three dairy processing plants and related
tangible and intangible assets.
Copies of the Complaint, proposed Final Judgment, Competitive
Impact Statement, and a letter the United States considered
determinative in formulating the proposed Final Judgment are available
for inspection on the Antitrust Division's website at http://www.justice.gov/atr and at the Office of the Clerk of the United States
District Court for the Northern District of Illinois. 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, including the name of the submitter, and
responses thereto, will be posted on the Antitrust Division's website,
filed with the Court, and, under certain circumstances, published in
the Federal Register. Comments should be directed to Eric D. Welsh,
Acting Chief, Healthcare and Consumer Products Section, Antitrust
Division, Department of Justice, 450 Fifth Street NW, Suite 4100,
Washington, DC 20530 (telephone: 202-598-8681).
Suzanne Morris,
Chief, Premerger and Division Statistics.
UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
UNITED STATES OF AMERICA, COMMONWEALTH OF MASSACHUSETTS, and STATE
OF WISCONSIN, Plaintiffs, v. DAIRY
[[Page 33713]]
FARMERS OF AMERICA, INC. and DEAN FOODS COMPANY, Defendants.
Case No. 1:20-cv-02658
Complaint
The United States of America, the Commonwealth of Massachusetts,
and the State of Wisconsin (``Plaintiff States''), bring this civil
antitrust action to prevent Dairy Farmers of America, Inc. (``DFA'')
from acquiring certain fluid milk processing plants from Dean Foods
Company (``Dean'').
I. Introduction
DFA's acquisition of most of Dean's fluid milk processing plants
would further consolidate two highly concentrated fluid milk markets:
(1) Northeastern Illinois and Wisconsin and (2) New England. The
acquisition would make DFA the largest player in each market, with
nearly 70% market share in northeastern Illinois and Wisconsin and over
50% in New England. DFA is the largest dairy cooperative in the United
States, with nearly 14,000 farmer-members located in dozens of states.
DFA also owns numerous fluid milk processing plants, including plants
in Cedarburg, Wisconsin; New Britain, Connecticut; and Portland, Maine.
Dean, the largest fluid milk processor in the nation, owns competing
plants in Harvard, Illinois; De Pere, Wisconsin; and Franklin,
Massachusetts.
DFA and Dean compete head-to-head to sell fluid milk to customers
in the geographic areas served by these plants, including supermarkets,
schools, convenience stores, and hospitals, among others. In these
areas, DFA and Dean are two of only three significant competitive
options for these customers. Competition between DFA and Dean has
benefitted these customers by lowering fluid milk prices and improving
service. The acquisition would eliminate competition between DFA and
Dean in these geographic areas, threatening to increase prices for
supermarkets, schools, and other fluid milk customers--price increases
that would ultimately be passed on to millions of individual consumers.
For these reasons and those set forth below, DFA's proposed
acquisition of assets from Dean threatens to lessen competition
substantially in violation of Section 7 of the Clayton Act, 15 U.S.C.
18.
II. Background
A. Fluid Milk Processing
1. Approximately 10 million dairy cows produce over 200 billion
pounds of raw milk in the United States each year. Dairy farmers sell
the raw milk that their cows produce to processing plants that convert
the raw milk into fluid milk, ice cream, cheese, and other dairy
products. Fluid milk is raw milk that has been processed for human
consumption. It is the ordinary fresh milk that can be found in
supermarket and convenience store refrigerators.
2. Fluid milk processing plants purchase raw milk from dairy
farmers, pasteurize and package the milk, and sell and distribute the
processed product. Processors sell fluid milk to supermarkets, schools,
convenience stores, hospitals, and others--sometimes through
distributors and sometimes directly. The demand for fluid milk in the
United States has declined, causing the closure of fluid milk
processing plants around the country and, among other factors, leading
to the pending bankruptcy of Dean and other fluid milk processors.
Despite this reduction in demand, a significant group of consumers
remains loyal to traditional fluid milk, and their demand for fluid
milk continues to be largely unaffected by changes in price.
3. Fluid milk customers pay different prices based on a variety of
factors, including the number of competitive alternatives available to
the customer. Large customers and school districts typically request
bids from fluid milk processors. The prices quoted by processors in
these bids depend on the number and strength of competing processors,
the processor's product, transportation and service costs, the
processor's capacity utilization, and the ability of the processor to
deliver directly to the customers' locations, among other factors.
Distance between processors and purchasers also affects fluid milk
pricing because fluid milk has a limited shelf life and is costly to
transport. As a result, most customers purchase fluid milk from nearby
processing plants.
B. The Defendants and the Merger
4. Dairy Farmers of America is the largest cooperative of dairy
farmers in the country, with nearly 14,000 members. In 2018, DFA
marketed 64.5 billion pounds of raw milk--approximately 30% of all raw
milk produced in the United States. DFA had 2018 revenues of $13.6
billion.
5. DFA is also vertically integrated through its ownership
interests in milk processing plants. DFA owns a number of dairy
processing plants around the country, including eight fluid milk
processing plants and a significant stake in a joint venture that owns
twelve additional fluid milk plants. In the northeastern Illinois and
Wisconsin area, DFA owns a fluid milk plant in Cedarburg, Wisconsin. In
the New England area, DFA owns fluid milk plants in New Britain,
Connecticut and Portland, Maine. These plants compete directly against
certain processing plants that DFA proposes to acquire from Dean.
6. Dean Foods is the largest fluid milk processor in the country.
It currently operates 57 fluid milk processing plants in 29 states.
Dean's fluid milk processing network includes plants in the
northeastern Illinois and Wisconsin area in Harvard, Illinois and De
Pere, Wisconsin, and in the New England area in Franklin,
Massachusetts. Dean had 2018 revenues of $7.75 billion.
7. Dean filed for Chapter 11 bankruptcy protection on November 12,
2019. Simultaneous with the bankruptcy filing, Dean announced that it
was in discussions to sell some or all of its fluid milk plants to DFA.
Dean's financial position continued to worsen in the months after its
bankruptcy filing and was exacerbated by the coronavirus pandemic,
which caused demand for milk by schools and restaurants to plummet. The
growing financial crisis caused the bankruptcy process to be
accelerated in order to find buyers for Dean's assets before the
company ran out of money to continue operating. By order of the
bankruptcy court, Dean accepted bids for its assets and selected
winning bidders on March 30, 2020. Dean selected DFA as the winning
bidder for the majority of Dean's assets.
8. On April 6, 2020, DFA and Dean entered into an asset purchase
agreement whereby DFA agreed to purchase 44 of Dean's 57 fluid milk
plants, along with various other assets, for a total value of $433
million. The purchase price consists of $325 million in cash and $108
million in forgiveness of debt owed by Dean to DFA.
III. Jurisdiction and Venue
9. The United States brings this action under Section 15 of the
Clayton Act, 15 U.S.C. 25, as amended, to prevent and restrain
Defendants from violating Section 7 of the Clayton Act, 15 U.S.C. 18.
10. The Plaintiff States bring this action under Section 16 of the
Clayton Act, 15 U.S.C. 26, to prevent and restrain Defendants from
violating Section 7 of the Clayton Act, 15 U.S.C. 18. The Plaintiff
States, by and through their respective Attorneys General, bring this
action as parens patriae on behalf of and to protect the health and
welfare of their citizens and the general economy of each of their
states.
11. DFA and Dean process, market, sell, and distribute fluid milk
in the flow of interstate commerce, and their
[[Page 33714]]
sale of fluid milk substantially affects interstate commerce. This
Court therefore has subject matter jurisdiction over this action
pursuant to Section 15 of the Clayton Act, 15 U.S.C. 25, and 28 U.S.C.
1331, 1337(a), and 1345.
12. DFA and Dean both transact business in this district, including
by selling fluid milk to customers in this district. Venue is therefore
proper in this district under Section 12 of the Clayton Act, 15 U.S.C.
22 and under 28 U.S.C. 1391(c).
IV. The Merger Would Substantially Lessen Competition in the Sale of
Fluid Milk
13. DFA's acquisition of Dean's plants in northeastern Illinois,
Wisconsin, and New England is likely to lessen competition
substantially for fluid milk customers. DFA and Dean are two of only
three significant fluid milk processors that can serve customers in
these areas. If the acquisition were permitted to proceed, DFA would
control nearly 70% of the fluid milk market in northeastern Illinois
and Wisconsin, and approximately 51% in New England. DFA and Dean
compete head-to-head to supply fluid milk customers in these areas
today, and those customers rely on competition between DFA and Dean to
get lower prices and better terms. The acquisition would eliminate this
competition and lead to higher prices and inferior service for
supermarkets, schools, and other fluid milk customers and, ultimately,
millions of individual consumers.
A. The processing and Sale of Fluid Milk Is a Relevant Product Market
14. The processing and sale of fluid milk is a relevant product
market and line of commerce under Section 7 of the Clayton Act.
Consumers have long-held cultural and taste preferences for fluid milk
over other beverages, and fluid milk has particular nutritional
benefits and qualities for use in cooking. Consequently, consumer
demand for fluid milk is relatively inelastic; that is, fluid milk
consumption does not decrease significantly in response to a price
increase. Fluid milk is distinct from extended shelf-life milk, ultra-
high temperature milk, and aseptic milk, which are produced by
different processes, have numerous significant differences, and
generally cost significantly more than fluid milk.
15. Retailers, supermarkets, distributors, and other fluid milk
customers are unlikely to substitute other products for fluid milk
because the individual consumers that they serve continue to demand
fluid milk. Schools are similarly unlikely to substitute away from
fluid milk in response to even a substantial price increase because
they are required by federal regulations to offer fluid milk to
students to receive federal reimbursements for meals served to lower-
income students.
16. For these reasons, the processing and sale of fluid milk
satisfies the well-accepted ``hypothetical monopolist'' test set forth
in the U.S. Department of Justice and Federal Trade Commission 2010
Horizontal Merger Guidelines (``Horizontal Merger Guidelines''). A
hypothetical monopolist processing and selling fluid milk likely would
impose a small but significant and non-transitory price increase (e.g.,
five percent) because an insufficient number of customers would switch
to alternatives to make that price increase unprofitable.
B. The Two Relevant Geographic Markets Are (1) Northeastern Illinois
and Wisconsin and (2) New England
17. Fluid milk processors charge different prices to buyers in
different areas. They negotiate prices individually, and fluid milk's
high transportation costs and limited shelf life mean that customers
cannot practically buy fluid milk from each other to avoid a higher
price charged by processors. In other words, fluid milk processors can
engage in ``price discrimination.'' When price discrimination is
possible, relevant geographic markets may be defined by reference to
the location of customers. In particular, a relevant geographic market
for the processing and sale of fluid milk is a region within which
customers can be targeted for a price increase. Most customers purchase
fluid milk from suppliers and processing plants located near them
because transportation costs and shelf life make sourcing from more
distant suppliers prohibitive.
18. Northeastern Illinois, which includes Chicago and its suburbs,
and the state of Wisconsin together comprise a relevant geographic
market and section of the country within the meaning of Section 7 of
the Clayton Act. Similarly, New England--including the states of
Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and
Vermont--is a relevant geographic market and section of the country
within the meaning of Section 7 of the Clayton Act. A hypothetical
monopolist selling fluid milk in either of these two areas likely would
find it profitable to impose a small but significant and non-transitory
price increase (e.g., five percent), because customers could not
economically switch their source of supply to more distant sources.
C. The Merger Is Presumptively Unlawful in Both Geographic Markets
19. DFA's acquisition of Dean's fluid milk processing plants would
result in a substantial increase in the concentration of processors
that compete to supply fluid milk to customers in the northeastern
Illinois and Wisconsin geographic market and the New England geographic
market. DFA and Dean are two of only three significant fluid milk
processors that sell into each of these geographic markets. In both
geographic markets the acquisition would eliminate one competitor,
leaving just two remaining competitive options for fluid milk
customers, with DFA controlling a significant majority of fluid milk
sales. Although there are small or fringe fluid milk processors in each
market, these processors are not competitive options for most fluid
milk customers because they are much smaller and lack the capabilities
necessary to compete against processors like DFA and Dean.
20. The Supreme Court has held that mergers that significantly
increase concentration in already concentrated markets are
presumptively anticompetitive and therefore presumptively unlawful. To
measure market concentration, courts often use the Herfindahl-Hirschman
Index (``HHI'') as described in the Horizontal Merger Guidelines. HHIs
range from 0 in markets with no concentration to 10,000 in markets
where one firm has a 100% market share. According to the Horizontal
Merger Guidelines, mergers that increase the HHI by more than 200 and
result in an HHI above 2,500 in any market are presumed to be
anticompetitive and, therefore, unlawful.
21. The acquisition of Dean's plants by DFA is presumptively
unlawful in northeastern Illinois and Wisconsin. For fluid milk
customers in this geographic market the combined market share of Dean's
processing plants in Harvard, Illinois, and De Pere, Wisconsin, and
DFA's processing plant in Cedarburg, Wisconsin is estimated to be
approximately 70%. The result is a highly concentrated market with an
HHI of nearly 5,200 and an increase in HHI of nearly 1,900.
22. The acquisition is also presumptively unlawful in the New
England geographic market. For fluid milk customers in New England, the
combined market share of Dean's processing plant in Franklin,
Massachusetts, and DFA's processing plants in New Britain, Connecticut,
and
[[Page 33715]]
Portland, Maine is estimated to be approximately 51%. The result is a
highly concentrated market with an HHI of approximately 3,300 and an
increase in HHI of over 1,000.
D. The Merger Would Reduce Competition That Benefits Fluid Milk
Customers in Northeastern Illinois and Wisconsin and in New England
1. The Merger Would Eliminate Head-to-Head Competition Between DFA and
Dean
23. DFA's acquisition of Dean's plants in northeastern Illinois and
Wisconsin and in New England would eliminate head-to-head competition
that has benefitted and would otherwise continue to benefit
supermarkets, schools, and other fluid milk customers in the relevant
geographic markets. Especially for large customers like supermarkets,
DFA and Dean are two of only three competitive fluid milk processors,
and they are often the two lowest-price options in these geographic
markets. For reasons related to service and delivery capabilities, some
fluid milk customers consider DFA and Dean to be their only practical
options.
24. Many customers solicit bids from fluid milk processors and
select the bidder that offers the lowest price. These customers often
leverage a lower-priced bid from one supplier to obtain improved offers
and lower prices from other bidders in individual negotiations. Even
customers who use less formal procurement processes benefit from the
presence of competitive alternatives, which constrain the prices that
fluid milk processors can charge. Fluid milk customers in the relevant
geographic markets have historically used competing bids from DFA and
Dean to obtain lower prices.
25. As described above, customers typically purchase fluid milk
from processing plants located near them because of shelf life and the
costs associated with transportation. These costs comprise a
significant portion of the prices that fluid milk processors offer to
customers. Therefore, the lowest-price fluid milk processors available
to customers typically are the processing plants located closest to
them. For many fluid milk customers in the relevant geographic markets,
DFA and Dean are two of the closest processing plants and, therefore,
two of the most competitive options. The only other significant
competitors selling fluid milk to customers in these markets are
unlikely to substantially mitigate the loss of competition between DFA
and Dean.
26. Many customers also have particular product and service
requirements that not all fluid milk processors can meet. Many
supermarkets, convenience stores, schools, and other customers require
processors to arrange direct-store delivery, or ``DSD,'' where the
processor delivers fluid milk to each of the customer's locations on a
set schedule--sometimes as often as daily. Schools typically require
milk to be packaged in small half-pint containers that require a
separate bottling line and dedicated equipment. DFA and Dean, along
with the third significant competitor in each of the relevant
geographic markets, can satisfy these complex product and service
requirements, while other smaller processors cannot.
2. The Merger Would Increase the Likelihood of Anticompetitive
Coordination
27. The acquisition would result in easier and more stable
coordinated interaction among DFA and the remaining fluid milk
competitors in northeastern Illinois and Wisconsin and in New England.
By reducing the number of significant fluid milk processors in these
areas from three to two, the acquisition would make it easier for the
remaining two processors to coordinate. Coordination is more likely to
occur where it would be particularly effective and profitable, as in
markets with few significant competitors, relatively homogenous
products, and where demand for the product is not significantly
affected by an increase in its price. Fluid milk markets exhibit each
of these characteristics.
28. There is a history of anticompetitive coordination, including
price-fixing, bid-rigging, and customer allocation in fluid milk
markets in the United States and, in particular, in the sale of milk to
schools. Numerous fluid milk processors, including Dean itself, have
engaged in criminal collusive activities at various times over the last
40 years. Given this history of coordination among fluid milk
processors and the reduction in the number of significant competitors,
DFA's acquisition of Dean's assets makes coordination more likely to
occur in these geographic markets.
E. Entry by Other Fluid Milk Processors Is Unlikely To Prevent an
Anticompetitive Price Increase
29. Entry by fluid milk processors outside the relevant geographic
markets is unlikely to be sufficient or timely enough to offset the
anticompetitive effects of the acquisition. Processors who do not
currently serve these markets are unlikely to begin shipping a
significant quantity of fluid milk into the relevant geographic markets
due to the same factors that make them uncompetitive in these markets
today, including transportation costs and the lack of necessary
capabilities or levels of service. Any milk that could be shipped into
the relevant geographic markets likely could not be competitively
priced because of high transportation costs, nor could it be
economically delivered to customers like schools without local
distribution networks.
30. The construction of a new fluid milk processing plant to serve
customers in either of the relevant geographic markets is very unlikely
because of the high costs of building a dairy processing plant--
especially as fluid milk consumption has declined. Numerous fluid milk
processing plants have closed in the last ten years across the United
States, while only a few new plants have been built, largely for
retailers to supply their own stores. The two largest fluid milk
processors in the country, Dean and Borden, have filed for bankruptcy.
V. Countervailing Factors Do Not Offset the Anticompetitive Effects of
the Merger
31. The proposed merger is unlikely to generate verifiable, merger-
specific efficiencies sufficient to outweigh the anticompetitive
effects that are likely to occur in the provision of fluid milk in the
relevant geographic markets.
VI. Violations Alleged
32. The acquisition by DFA of certain Dean assets likely would
lessen competition substantially for the processing and sale of fluid
milk in the two relevant geographic markets alleged above in violation
of Section 7 of the Clayton Act, 15 U.S.C. 18.
33. Unless enjoined, the acquisition likely would have the
following anticompetitive effects, among others, in the relevant
geographic markets:
(a) competition for the sale and processing of fluid milk between
DFA and Dean would be eliminated;
(b) prices for fluid milk would increase; and
(c) quality and service levels would decrease.
VII. Request for Relief
34. Plaintiffs request that the Court:
(a) adjudge and decree that DFA's proposed acquisition of assets
from Dean would be unlawful and violate Section 7 of the Clayton Act,
15 U.S.C. 18;
[[Page 33716]]
(b) preliminary and permanently enjoin and restrain Defendants and
all persons acting on their behalf from consummating the planned
acquisition or from entering into or carrying out any other contract,
agreement, plan, or understanding, the effect of which would be to
combine DFA and Dean in the relevant geographic markets alleged above;
(c) award Plaintiffs the costs of this action; and
(d) award Plaintiffs other relief that the Court deems just and
proper.
Dated: May 1, 2020
Respectfully submitted,
FOR PLAINTIFF UNITED STATES OF AMERICA:
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Makan Delrahim
Assistant Attorney General for Antitrust
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Bernard A. Nigro, Jr.
Principal Deputy Assistant Attorney General
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Kathleen S. O'Neill
Senior Director of Investigations and Litigation
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Eric D. Welsh
Acting Chief, Healthcare and Consumer Products Section
John R. Lausch, Jr.
United States Attorney, Northern District of Illinois
Thomas P. Walsh
Chief, Civil Division, United States Attorney's Office, Northern
District of Illinois, 219 South Dearborn Street, Chicago, IL 60604,
Tel.: 312-353-5312, Email: [email protected]
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Karl D. Knutsen
Justin T. Heipp
Nate Harris
Joseph Chandra Mazumdar
Christopher A. Wetzel
Attorneys for the United States, U.S. Department of Justice,
Antitrust Division, 450 Fifth Street NW, Suite 4100, Washington, DC
20530, Tel.: 202-514-0976, Fax: 202-307-5802, Email:
[email protected]
FOR PLAINTIFF COMMONWEALTH OF MASSACHUSETTS:
Maura Healy
Attorney General
By: Daniel H. Leff
Daniel H. Leff
Assistant Attorney General
Michael MacKenzie
Assistant Attorney General, Deputy Chief, Antitrust Division, One
Ashburton Place, 18th Floor Boston, MA 02108, Tel: (617) 962-2613,
Fax: (617) 722-0184, [email protected],
[email protected].
UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
UNITED STATES OF AMERICA, COMMONWEALTH OF MASSACHUSETTS, and STATE
OF WISCONSIN, Plaintiffs, v. DAIRY FARMERS OF AMERICA, INC. and DEAN
FOODS COMPANY, Defendants.
Case No. 1:20-cv-02658
[Proposed] Final Judgment
Whereas, Plaintiffs, United States of America and the State of
Wisconsin and the Commonwealth of Massachusetts (collectively, the
``Plaintiff States''), filed their Complaint on May 1, 2020, the United
States and Defendants, Dairy Farmers of America, Inc. and Dean Foods
Company, by their respective attorneys, have consented to entry of this
Final Judgment without trial or adjudication of any issue of fact or
law and without this Final Judgment constituting any evidence against
or admission by a party regarding any issue of fact or law;
And whereas, Defendants agree 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 Defendants to assure
that competition is not substantially lessened;
And whereas, Defendants agree to make certain divestitures for the
purpose of remedying the loss of competition alleged in the Complaint;
And whereas, Defendants represent that the divestitures and other
relief required by this Final Judgment can and will be made and that
Defendants will not later raise a claim of hardship or difficulty as
grounds for asking the Court to modify any provision of this Final
Judgment;
Now therefore, before any testimony is taken, without trial or
adjudication of any issue of fact or law, and upon consent of the
parties, it is ordered, adjudged, and decreed:
I. Jurisdiction
The Court has jurisdiction over the subject matter of and each of
the parties to this action. The Complaint states a claim upon which
relief may be granted against Defendants under Section 7 of the Clayton
Act, as amended (15 U.S.C. 18).
II. Definitions
As used in this Final Judgment:
A. ``Acquirer'' or ``Acquirers'' means the entity or entities to
whom Defendants divest any of the Divestiture Assets.
B. ``DFA'' means Defendant Dairy Farmers of America, Inc., a Kansas
cooperative marketing association with its headquarters in Kansas City,
Kansas, its successors and assigns, and its subsidiaries, divisions,
groups, affiliates, partnerships, and joint ventures, and their
directors, officers, managers, agents, and employees.
C. ``Dean'' 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.
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. ``De Pere Plant'' means Dean's dairy processing plant located at
3399 South Ridge Road, Ashwaubenon, Wisconsin 54115.
F. ``Franklin Plant'' means Dean's dairy processing plant located
at 1199 West Central Street, Franklin, Massachusetts 02038.
G. ``Franklin Purchase Option'' means Dean's non-assignable option
to purchase the real estate on which the Franklin Plant is located.
H. ``Harvard Plant'' means Dean's dairy processing plant located at
6303, 6306, and 6313 Maxon Road, Harvard, Illinois 60033.
I. ``Exclusive Territory'' means (1) the states of Illinois,
Wisconsin, and Indiana; and (2) the Upper Peninsula of Michigan.
J. ``Non-Exclusive Territory'' means (1) the states of Minnesota
and Iowa; and (2) the Lower Peninsula of Michigan.
K. ``Transitional Dean's Brand License'' means a non-exclusive,
royalty-free, paid-up, irrevocable, nationwide license to use the
``Dean's'' brand name (and all associated trademarks, service marks,
and service names) for all products for two (2) years from the date
that the De Pere Divestiture Assets are divested to an Acquirer.
L. ``Dean's Brand Licenses'' means:
1. An exclusive (subject only to the rights of the Acquirer of the
De Pere Divestiture Assets under the Transitional Dean's Brand License,
if applicable), royalty-free, paid-up, irrevocable, perpetual license
to use the ``Dean's'' brand name (and all associated trademarks,
service marks, and service names) for all products in the Exclusive
Territory; and
[[Page 33717]]
2. A non-exclusive, royalty-free, paid-up, irrevocable, perpetual
license to use the ``Dean's'' brand name (and all associated
trademarks, service marks, and service names) for all products in the
Non-Exclusive Territory.
M. ``Transitional Dairy Pure Brand License'' means a non-exclusive,
royalty-free, paid-up, irrevocable, nationwide license to use the
``Dairy Pure'' brand name (and all associated trademarks, service
marks, and service names) for all products for two (2) years from the
date that the relevant Divestiture Assets are divested to an Acquirer.
N. ``TruMoo Products'' means all products sold by Dean under the
TruMoo brand name at any time from January 1, 2019 to the date that the
relevant Divestiture Assets are divested to an Acquirer.
O. ``Transitional TruMoo Brand License'' means a non-exclusive,
royalty-free, paid-up, irrevocable, nationwide license to use the
``TruMoo'' brand name (and all associated trademarks, service marks,
and service names) for TruMoo Products for two (2) years from the date
that the relevant Divestiture Assets are divested to an Acquirer.
P. ``TruMoo IP'' means all intellectual property, product formulas,
technology, know-how, or other rights used in the manufacture or
formulation of any TruMoo Products.
Q. ``TruMoo IP License'' means a non-exclusive, royalty-free, paid-
up, irrevocable, perpetual, nationwide license to the TruMoo IP.
R. ``Divestiture Assets'' means the De Pere Divestiture Assets, the
Franklin Divestiture Assets, and the Harvard Divestiture Assets.
S. ``De Pere Divestiture Assets'' means:
1. All of Defendants' rights, title, and interests in the De Pere
Plant and the ancillary facilities listed in Appendix A;
2. All tangible assets related to or used in connection with the
processing, marketing, sale, or distribution of Fluid Milk and all
other products by the De Pere Plant or the ancillary facilities listed
in Appendix A, including, but not limited to: research and development
activities; all manufacturing and processing equipment, quality
assurance equipment, research and development equipment, machine
assembly equipment, tooling and fixed assets, personal property,
inventory, office furniture, materials, supplies, and other tangible
property; all licenses, permits, certifications, and authorizations
issued by any governmental organization; all contracts, teaming
arrangements, agreements, leases, commitments, certifications, and
understandings, including supply agreements; all customer lists,
contracts, accounts, and credit records; all repair and performance
records; and all other records;
3. All intangible assets related to or used in connection with the
processing, marketing, sale, or distribution of Fluid Milk and all
other products by the De Pere Plant or the ancillary facilities listed
in Appendix A, including, but not limited to: all patents; licenses and
sublicenses; intellectual property (except the TruMoo IP); copyrights;
trademarks, trade names, service marks, and service names (including
the ``Morning Glory'' and ``Farm Fresh'' brand names and all associated
trademarks, service marks, and service names), except the ``Dean's,''
``Jilbert,'' ``Dairy Pure,'' and ``TruMoo'' brand names; technical
information; computer software and related documentation; customer
relationships, agreements, and contracts (or portions of such
relationships, agreements, and contracts that relate to the De Pere
Plant or the ancillary facilities listed in Appendix A); know-how;
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 Dean provides to its
own employees, customers, suppliers, agents, or licensees; and all
research data concerning historic and current research and development
efforts, including but not limited to designs of experiments and the
results of successful and unsuccessful designs and experiments;
4. A Transitional TruMoo Brand License;
5. The Transitional Dean's Brand License;
6. A TruMoo IP License; and
7. A Transitional Dairy Pure Brand License;
Provided, however, that the assets specified in Paragraphs II(S)(1)-(7)
above do not include any rights, title, or interest in (i) Dean's
corporate headquarters located at 2711 North Haskell Avenue, Dallas,
Texas 75204 or (ii) Dean's dairy processing plant located at 1126
Kilburn Avenue, Rockford, Illinois 61101.
T. ``Franklin Divestiture Assets'' means:
1. All of Defendants' rights, title, and interests in the Franklin
Plant and the ancillary facilities listed in Appendix B, except the
Franklin Purchase Option;
2. All tangible assets related to or used in connection with the
processing, marketing, sale, or distribution of Fluid Milk and all
other products by the Franklin Plant or the ancillary facilities listed
in Appendix B, including, but not limited to: Research and development
activities; all manufacturing and processing equipment, quality
assurance equipment, research and development equipment, machine
assembly equipment, tooling and fixed assets, personal property,
inventory, office furniture, materials, supplies, and other tangible
property; all licenses, permits, certifications, and authorizations
issued by any governmental organization; all contracts, teaming
arrangements, agreements, leases, commitments, certifications, and
understandings, including supply agreements; all customer lists,
contracts, accounts, and credit records; all repair and performance
records; and all other records;
3. All intangible assets related to or used in connection with the
processing, marketing, sale, or distribution of Fluid Milk and all
other products by the Franklin Plant or the ancillary facilities listed
in Appendix B, including, but not limited to: all patents; licenses and
sublicenses; intellectual property (except the TruMoo IP); copyrights;
trademarks, trade names, service marks, and service names (including
the ``Garelick Farms'' brand name and all associated trademarks,
service marks, and service names), except the ``Dean's,'' ``Dairy
Pure,'' and ``TruMoo'' brand names; technical information; computer
software and related documentation; customer relationships, agreements,
and contracts (or portions of such relationships, agreements, and
contracts that relate to the Franklin Plant or the ancillary facilities
listed in Appendix B); know-how; 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 Dean
provides to its own employees, customers, suppliers, agents, or
licensees; and all research data concerning historic and current
research and development efforts, including but not limited to designs
of experiments and the results of successful and unsuccessful designs
and experiments;
4. A Transitional TruMoo Brand License;
5. A TruMoo IP License; and
6. A Transitional Dairy Pure Brand License;
[[Page 33718]]
Provided, however, that the assets specified in Paragraphs II(T)(1)-(6)
above do not include any rights, title, or interest in Dean's corporate
headquarters located at 2711 North Haskell Avenue, Dallas, Texas 75204.
U. ``Harvard Divestiture Assets'' means:
1. All of Defendants' rights, title, and interests in the Harvard
Plant and the ancillary facilities listed in Appendix C;
2. All tangible assets related to or used in connection with the
processing, marketing, sale, or distribution of Fluid Milk and all
other products by the Harvard Plant or the ancillary facilities listed
in Appendix C, including, but not limited to: research and development
activities; all manufacturing and processing equipment, quality
assurance equipment, research and development equipment, machine
assembly equipment, tooling and fixed assets, personal property,
inventory, office furniture, materials, supplies, and other tangible
property; all licenses, permits, certifications, and authorizations
issued by any governmental organization; all contracts, teaming
arrangements, agreements, leases, commitments, certifications, and
understandings, including supply agreements; all customer lists,
contracts, accounts, and credit records; all repair and performance
records; and all other records;
3. All intangible assets related to or used in connection with the
processing, marketing, sale, or distribution of Fluid Milk and all
other products by the Harvard Plant or the ancillary facilities listed
in Appendix C, including, but not limited to: all patents; licenses and
sublicenses; intellectual property (except the TruMoo IP); copyrights;
trademarks, trade names, service marks, and service names, except the
``Dean's,'' ``Dairy Pure,'' and ``TruMoo'' brand names; technical
information; computer software and related documentation; customer
relationships, agreements, and contracts (or portions of such
relationships, agreements, and contracts that relate to the Harvard
plant or the ancillary facilities listed in Appendix C); know-how;
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 Dean provides to its
own employees, customers, suppliers, agents, or licensees; and all
research data concerning historic and current research and development
efforts, including but not limited to designs of experiments and the
results of successful and unsuccessful designs and experiments;
4. The Dean's Brand Licenses;
5. A Transitional TruMoo Brand License;
6. A TruMoo IP License; and
7. A Transitional Dairy Pure Brand License;
Provided, however, that the assets specified in Paragraphs II(U)(1)-(7)
above do not include any rights, title, or interest in (i) Dean's
corporate headquarters located at 2711 North Haskell Avenue, Dallas,
Texas 75204 or (ii) Dean's dairy processing plant located at 1126
Kilburn Avenue, Rockford, Illinois 61101.
V. ``Relevant Personnel'' means all full-time, part-time, or
contract personnel whose job responsibilities related in any way to the
processing, marketing, sale, or distribution of Fluid Milk or any other
products by the Divestiture Assets, at any time between July 1, 2019
and the date on which the Divestiture Assets are divested to Acquirer.
III. Applicability
A. This Final Judgment applies to DFA and Dean, as defined above,
and all other persons, in active concert or participation with any
Defendant, who receive actual notice of this Final Judgment.
B. If, prior to complying with Section IV and Section V of this
Final Judgment, Defendants sell or otherwise dispose of all or
substantially all of their assets or of lesser business units that
include any of the Divestiture Assets, Defendants must require the
purchaser to be bound by the provisions of this Final Judgment.
Defendants need not obtain such an agreement from Acquirer(s).
IV. Divestitures
A. Defendants are ordered and directed, within 30 calendar days
after the Court's entry of the Asset Preservation and Hold Separate
Stipulation and Order in this matter, to divest the Divestiture Assets
in a manner consistent with this Final Judgment to an Acquirer or
Acquirers acceptable to the United States, in its sole discretion. The
United States, in its sole discretion, may agree to one or more
extensions of this time period not to exceed sixty (60) calendar days
in total and will notify the Court of any extensions. Defendants agree
to use their best efforts to divest the Divestiture Assets as
expeditiously as possible.
B. Defendants promptly must make known, by usual and customary
means, the availability of the Divestiture Assets. Defendants must
inform any person making an inquiry regarding a possible purchase of
some or all of the Divestiture Assets that the Divestiture Assets are
being divested in accordance with this Final Judgment and must provide
that person with a copy of this Final Judgment. Defendants must 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;
provided, however, that Defendants need not provide information or
documents subject to the attorney-client privilege or work-product
doctrine. Defendants must make this information available to Plaintiffs
at the same time that the information is made available to any other
person.
C. Defendants must cooperate with and assist each Acquirer in
identifying and hiring all Relevant Personnel associated with the
particular Divestiture Assets that each Acquirer is acquiring,
including:
1. Within ten (10) business days following receipt of a request by
Acquirer or the United States, Defendants must identify all Relevant
Personnel to Acquirer and Plaintiffs, including by providing
organization charts covering all Relevant Personnel.
2. Within ten (10) business days following receipt of a request by
Acquirer or the United States, Defendants must provide to Acquirer and
Plaintiffs the following additional information related to Relevant
Personnel: name; job title; current salary and benefits, including most
recent bonus paid, aggregate annual compensation, current target or
guaranteed bonus, if any, and any other payments due to or promises
made to the individual; descriptions of reporting relationships, past
experience, responsibilities, and training and educational histories;
lists of all certifications; and all job performance evaluations. If
Defendants are barred by any applicable laws from providing any of this
information, within ten (10) business days following receipt of the
request, Defendants must provide the requested information to the full
extent permitted by law and also must provide a written explanation of
Defendants' inability to provide the remaining information.
3. At the request of Acquirer, Defendants must promptly make
Relevant Personnel available for private interviews with Acquirer
during normal business hours at a mutually agreeable location.
[[Page 33719]]
4. Defendants must not interfere with any efforts by Acquirer to
employ any Relevant Personnel. Interference includes but is not limited
to offering to increase the salary or improve the benefits of Relevant
Personnel unless the offer is part of a company-wide increase in salary
or benefits that was announced prior to November 12, 2019 or has been
approved by the United States, in its sole discretion, after
consultation with the Plaintiff States. Defendants' obligations under
this paragraph will expire six (6) months after the divestiture of the
Divestiture Assets pursuant to this Final Judgment.
5. For Relevant Personnel who elect employment with Acquirer within
six (6) months of the date on which the Divestiture Assets are divested
to Acquirer, Defendants must waive all non-compete and non-disclosure
agreements, vest all unvested pension and other equity rights, and
provide all benefits that those Relevant Personnel otherwise would have
been provided had the Relevant Personnel continued employment with
Defendants, including but not limited to any retention bonuses or
payments. Defendants may maintain reasonable restrictions on disclosure
by Relevant Personnel of Defendants' proprietary non-public information
that is unrelated to the Divestiture Assets and not otherwise required
to be disclosed by this Final Judgment.
D. Defendants must permit prospective Acquirers of some or all of
the Divestiture Assets to have reasonable access to make inspections of
the Divestiture Assets for which they are prospective Acquirers and
access to all environmental, zoning, and other permit documents and
information, and all financial, operational, or other documents and
information customarily provided as part of a due diligence process.
E. Defendants must warrant to Acquirer(s) that each asset to be
divested will be fully operational and without material defect on the
date of sale.
F. Defendants must not take any action that will impede in any way
the permitting, operation, or divestiture of the Divestiture Assets.
G. Defendants must assign, subcontract, or otherwise transfer all
contracts, agreements, and customer relationships (or portions of such
contracts, agreements and customer relationships, including but not
limited to relevant portions of national contracts) related to the
Divestiture Assets, including all supply and sales contracts, to
Acquirer(s); provided however, that for any contracts or agreements
(including but not limited to customer contracts and supply contracts)
that require the consent of another party to assign, subcontract or
otherwise transfer, Defendants must use best efforts to accomplish the
assignment, subcontracting, or other transfer.
1. For any customer of the Divestiture Assets with which Dean does
not have a written contract, within five (5) business days of the
closing of the divestiture of each set of Divestiture Assets,
Defendants must send a letter, in a form approved by the United States
in its sole discretion and signed by representatives of Dean and of the
relevant Acquirer, to that customer, notifying the customer that the
Acquirer will be the customer's new supplier pursuant to this Final
Judgment.
2. Defendants must not interfere with any negotiations between
Acquirer(s) and a customer or other contracting party, and Defendants
must not encourage any customer of the Divestiture Assets to terminate
a contract that has been assigned or otherwise transferred to Acquirer.
3. Notwithstanding any other provision in this Paragraph IV(G),
Defendants must release each Acquirer from any of Dean's obligations to
purchase raw milk from DFA that would otherwise be assigned to that
Acquirer as part of the divestiture required by this Final Judgment.
H. For any governmental license, permit, registration,
authorization, approval, or the discontinuation of any obligation
thereunder that cannot be transferred to the relevant Acquirer
(collectively, the ``Non-Transferred Licenses''), Defendants must use
best efforts to assist Acquirer(s) in applying for and securing all
necessary government approvals for the issuance of the Non-Transferred
License(s) to Acquirer(s).
I. At the option of each Acquirer, and subject to approval by the
United States in its sole discretion, on or before the date on which
some or all of the Divestiture Assets are divested to that Acquirer,
DFA must enter into a supply contract or contracts for raw milk
sufficient to meet that Acquirer's needs, as determined by that
Acquirer, for a period of up to three (3) months, on terms and
conditions reasonably related to market conditions for the supply of
raw milk. The United States, in its sole discretion, may approve one or
more extensions of any supply contract, for a total of up to an
additional three (3) months. If Acquirer seeks an extension of the term
of a supply contract, Defendants must notify the United States in
writing at least one (1) month prior to the date the supply contract
expires. Acquirer may terminate a supply contract without cost or
penalty at any time upon commercially reasonable notice.
J. At the option of each Acquirer, and subject to approval by the
United States in its sole discretion, on or before the date on which
some or all of the Divestiture Assets are divested to that Acquirer,
Defendants must enter into a contract or contracts, on terms and
conditions reasonably related to market conditions, to provide
transition services (including but not limited to back office, human
resource, accounting, employee health and safety, and information
technology services and support) for a period of up to six (6) months
to facilitate the transfer of the relevant Divestiture Assets to that
Acquirer or to allow that Acquirer to operate the relevant Divestiture
Assets. The United States, in its sole discretion, after consultation
with the Plaintiff States, may approve one or more extensions of a
contract for transition services, for a total of up to an additional
six (6) months. If Acquirer seeks an extension of the term of a
contract for transition services, Defendants must notify the United
States in writing at least one (1) month prior to the date the contract
expires. Acquirer may terminate a contract for transition services
without cost or penalty at any time upon commercially reasonable
notice. The employee(s), contractors, or other personnel of Defendants
tasked with providing these transition services must not share any
competitively sensitive information of Acquirer with any other employee
of Defendants.
K. Defendants must warrant to Acquirer(s) that there are no
material defects in the environmental, zoning, or other permits
pertaining to the operation of the Divestiture Assets. Following the
sale of any of the Divestiture Assets, Defendants must not undertake,
directly or indirectly, any challenges to the environmental, zoning, or
other permits relating to the operation of the Divestiture Assets.
L. For a period of one (1) year following the divestiture of each
set of Divestiture Assets to the relevant Acquirer, Defendants must not
initiate customer-specific communications to solicit any customer for
the portion of that customer's business covered by the contract,
agreement or relationship (or portion thereof) that is included in the
Divestiture Assets; provided, however, that:
1. Defendants may respond to inquiries initiated by customers and
enter into negotiations at the request of customers (including
responding to
[[Page 33720]]
requests for quotation or proposal) to supply any business, whether or
not such business was included in the Divestiture Assets; and
2. Defendants must maintain a log of telephonic, electronic, in-
person, and other communications that constitute inquiries or requests
from customers within the meaning of Paragraph IV(L)(1) above and make
it available to the United States for inspection upon request.
M. DFA will not exercise the Franklin Purchase Option except that,
upon Acquirer's request, DFA will (1) exercise the Franklin Purchase
Option and (2) sell to Acquirer all of DFA's resulting rights, title,
and interest in the property covered by the Franklin Purchase Option at
the same price that DFA pays for that property under the Franklin
Purchase Option.
N. Unless the United States otherwise consents in writing, the
divestitures pursuant to Section IV or by a Divestiture Trustee
appointed pursuant to Section V of this Final Judgment must include (1)
the entirety of the De Pere Divestiture Assets and the entirety of the
Harvard Divestiture Assets to a single Acquirer and (2) the entirety of
the Franklin Divestiture Assets to a single Acquirer, and must 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 relevant Acquirer as
part of a viable, ongoing business of processing and selling Fluid Milk
and will remedy the competitive harm alleged in the Complaint.
Divestiture of the Divestiture Assets may be made to one or more
Acquirers, provided that in each instance it is demonstrated to the
sole satisfaction of the United States, after consultation with the
Plaintiff States, that the Divestiture Assets will remain viable and
that the divestiture will remedy the competitive harm alleged in the
Complaint. The divestiture(s), whether pursuant to Section IV or
Section V of this Final Judgment,
(1) must be made to Acquirer(s) that, in the United States' sole
judgment, 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 business of processing and selling Fluid Milk;
and
(2) must 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 Acquirer(s) and
Defendants give Defendants the ability unreasonably to raise the
costs of Acquirer(s), to lower the efficiency of Acquirer(s), or
otherwise to interfere in the ability of Acquirer(s) to compete
effectively.
O. If any of the terms of an agreement between Defendants and
Acquirer(s) to effectuate the divestiture required by this Final
Judgment varies from a term of this Final Judgment then, to the extent
that Defendants cannot fully comply with both, this Final Judgment
determines Defendants' obligations.
V. Appointment of Divestiture Trustee
A. If Defendants have not divested the Divestiture Assets within
the period specified in Paragraph IV(A), or if Defendants waive their
right to first attempt such divestiture of (1) the De Pere Divestiture
Assets and the Harvard Divestiture Assets or (2) the Franklin
Divestiture Assets, Defendants must immediately notify Plaintiffs of
that fact in writing. Upon application of the United States, the Court
will appoint a Divestiture Trustee selected by the United States and
approved by the Court to effect the divestiture(s) of any of the
Divestiture Assets that have not been sold during the period specified
in Paragraph IV(A).
B. After the appointment of a Divestiture Trustee by the Court,
only the Divestiture Trustee will have the right to sell the
Divestiture Assets that the Divestiture Trustee has been appointed to
sell. The Divestiture Trustee will have the power and authority to
accomplish the divestiture(s) to Acquirer(s) acceptable to the United
States, in its sole discretion, at a price and on terms that are then
obtainable upon reasonable effort by the Divestiture Trustee, subject
to the provisions of Sections IV, V, and VI of this Final Judgment, and
will have other powers as the Court deems appropriate. Subject to
Paragraph V(D) of this Final Judgment, the Divestiture Trustee may hire
at the cost and expense of Defendants any agents or consultants,
including, but not limited to, investment bankers, attorneys, and
accountants, who will be solely accountable to the Divestiture Trustee,
reasonably necessary in the Divestiture Trustee's judgment to assist in
the divestiture(s). Any such agents or consultants will serve on such
terms and conditions as the United States approves, including
confidentiality requirements and conflict of interest certifications.
C. Defendants may not object to a sale by the Divestiture Trustee
on any ground other than malfeasance by the Divestiture Trustee.
Objections by Defendants must be conveyed in writing to Plaintiffs and
the Divestiture Trustee within ten (10) calendar days after the
Divestiture Trustee has provided the notice required under Section VI.
D. The Divestiture Trustee will serve at the cost and expense of
Defendants pursuant to a written agreement, on such terms and
conditions as the United States approves, including confidentiality
requirements and conflict of interest certifications. The Divestiture
Trustee will account for all monies derived from the sale of the assets
sold by the Divestiture Trustee and all costs and expenses so incurred.
After approval by the Court of the Divestiture Trustee's accounting,
including fees for any of its services yet unpaid and those of agents
and consultants retained by the Divestiture Trustee, all remaining
money will be paid to Defendants and the trust will then be terminated.
The compensation of the Divestiture Trustee and any agents or
consultants retained by the Divestiture Trustee must be reasonable in
light of the value of the Divestiture Assets and based on a fee
arrangement that provides the Divestiture Trustee with incentives based
on the price and terms of the divestiture(s) and the speed with which
it is accomplished, but the timeliness of the divestiture(s) is
paramount. If the Divestiture Trustee and Defendants are unable to
reach agreement on the Divestiture Trustee's or any agents' or
consultants' compensation or other terms and conditions of engagement
within fourteen (14) calendar days of the appointment of the
Divestiture Trustee, the United States may, in its sole discretion,
take appropriate action, including making a recommendation to the
Court. Within three (3) business days of hiring any agent or
consultant, the Divestiture Trustee must provide written notice of the
hiring and rate of compensation to Defendants and the United States.
E. Defendants must use their best efforts to assist the Divestiture
Trustee in accomplishing the required divestiture(s). The Divestiture
Trustee and any agents or consultants retained by the Divestiture
Trustee must have full and complete access to the personnel, books,
records, and facilities of the Divestiture Assets the Divestiture
Trustee is responsible for selling, and Defendants must provide or
develop financial and other information relevant to the Divestiture
Assets as the Divestiture Trustee may reasonably request, subject to
reasonable protection for trade secrets; other confidential research,
development, or commercial information; or any applicable privileges.
Defendants may not take any action to interfere with or to impede the
[[Page 33721]]
Divestiture Trustee's accomplishment of the divestiture(s).
F. After appointment, the Divestiture Trustee will file monthly
reports with Plaintiffs, setting forth the Divestiture Trustee's
efforts to accomplish the divestiture(s) ordered by this Final
Judgment. Reports must 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 any of the Divestiture Assets and will describe in detail
each contact with any such person. The Divestiture Trustee will
maintain full records of all efforts made to divest the Divestiture
Assets.
G. If the Divestiture Trustee has not accomplished the
divestiture(s) ordered by this Final Judgment within sixty (60) days of
appointment, the Divestiture Trustee must promptly file with the Court
a report setting forth (1) the Divestiture Trustee's efforts to
accomplish the required divestiture; (2) the reasons, in the
Divestiture Trustee's judgment, why the required divestiture has not
been accomplished; and (3) the Divestiture Trustee's recommendations.
To the extent such report contains information that the Divestiture
Trustee deems confidential, such report will not be filed in the public
docket of the Court. The Divestiture Trustee will at the same time
furnish such report to Plaintiffs. Within five (5) days of receiving
the Divestiture Trustee's report, the United States, in its sole
discretion, may extend the period of the trust for no more than sixty
(60) additional days by written notice to the Divestiture Trustee and
the Court. If, at the expiration of the initial time period and any
extension thereof, the Divestiture Trustee has not secured a definitive
agreement for the sale of the Divestiture Assets consistent with this
Final Judgment and acceptable to the United States, in its sole
discretion, DFA may file a motion with the Court, which the United
States will not unreasonably oppose, requesting that, solely with
respect to any Divestiture Assets for which the Divestiture Trustee was
unable to secure a definitive divestiture agreement, (i) the Asset
Preservation and Hold Separate Stipulation and Order be terminated and
(ii) this Final Judgment be modified to permit DFA to retain those
assets.
H. If the United States determines that the Divestiture Trustee is
not acting diligently or in a reasonably cost-effective manner, the
United States may recommend that the Court appoint a substitute
Divestiture Trustee.
VI. Notice of Proposed Divestiture
A. Within two (2) business days following execution of a definitive
divestiture agreement, Defendants or the Divestiture Trustee, whichever
is then responsible for effecting any divestiture required herein, must
notify Plaintiffs of a proposed divestiture required by this Final
Judgment. If the Divestiture Trustee is responsible for effecting the
divestiture, the Divestiture Trustee also must notify Defendants. The
notice must 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 the United
States of this notice, the United States may request from Defendants,
the proposed Acquirer(s), other third parties, or the Divestiture
Trustee, if applicable, additional information concerning the proposed
divestiture, the proposed Acquirer(s), and other prospective
Acquirer(s). Defendants and the Divestiture Trustee must furnish the
additional information requested to Plaintiffs within fifteen (15)
calendar days of the receipt of the request, unless the United States
provides written agreement to a different period.
C. Within forty-five (45) 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 Defendants, the
proposed Acquirer(s), other third parties, and the Divestiture Trustee,
whichever is later, the United States will provide written notice to
Defendants and the Divestiture Trustee, if there is one, stating
whether or not the United States, in its sole discretion, after
consultation with the Plaintiff States, objects to the proposed
Acquirer(s) or any other aspect of the proposed divestiture. If the
United States provides written notice that it does not object, the
divestiture may be consummated, subject only to Defendants' limited
right to object to the sale under Paragraph V(C) of this Final
Judgment. Absent written notice that the United States does not object
or upon objection by the United States, a divestiture may not be
consummated. Upon objection by Defendants pursuant to Paragraph V(C), a
divestiture by the Divestiture Trustee may not be consummated unless
approved by the Court.
D. No information or documents obtained pursuant to Section VI may
be divulged by Plaintiffs to any person other than an authorized
representative of the executive branch of the United States or the
Plaintiff States, except in the course of legal proceedings to which
the United States is a party (including grand-jury proceedings), for
the purpose of evaluating a proposed Acquirer or securing compliance
with this Final Judgment, or as otherwise required by law.
E. In the event of a request by a third party for disclosure of
information under the Freedom of Information Act, 5 U.S.C. 552, the
Antitrust Division will act in accordance with that statute, and the
Department of Justice regulations at 28 CFR part 16, including the
provision on confidential commercial information, at 28 CFR 16.7.
Persons submitting information to the Antitrust Division should
designate the confidential commercial information portions of all
applicable documents and information under 28 CFR 16.7. Designations of
confidentiality expire ten years after submission, ``unless the
submitter requests and provides justification for a longer designation
period.'' See 28 CFR 16.7(b).
F. If at the time a person furnishes information or documents to
the United States pursuant to Section VI, that person represents and
identifies in writing information or documents for which a claim of
protection may be asserted under Rule 26(c)(1)(G) of the Federal Rules
of Civil Procedure, and 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,'' the United States must give that person ten
calendar days' notice before divulging the material in any legal
proceeding (other than a grand-jury proceeding).
VII. Financing
Defendants may not finance all or any part of Acquirers' purchase
of all or part of the Divestiture Assets made pursuant to this Final
Judgment.
VIII. Asset Preservation and Hold Separate
Until the divestiture(s) required by this Final Judgment have been
accomplished, Defendants must take all steps necessary to comply with
the Asset Preservation and Hold Separate Stipulation and Order entered
by the Court. Defendants will take no action that would jeopardize the
divestiture(s) ordered by the Court.
IX. Affidavits
A. Within twenty (20) calendar days of the filing of the Complaint
in this matter, and every thirty (30) calendar days thereafter until
the divestiture
[[Page 33722]]
required by this Final Judgment has been completed, Defendants must
deliver to Plaintiffs an affidavit, signed by each Defendant's Chief
Financial Officer, Dean's General Counsel, and DFA's Chief Legal
Officer, describing the fact and manner of Defendants' compliance with
this Final Judgment. Each affidavit must 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, an interest in some or all of the
Divestiture Assets, and must describe in detail each contact with such
persons during that period. Each affidavit also must include a
description of the efforts Defendants have taken to solicit buyers for
and complete the sale of the Divestiture Assets, and to provide
required information to prospective Acquirers. Each affidavit also must
include a description of any limitations placed by Defendants on
information provided to prospective Acquirers. If the information set
forth in the affidavit is true and complete, objection by the United
States to information provided by Defendants to prospective Acquirers
must be made within fourteen (14) calendar days of receipt of the
affidavit.
B. Within twenty (20) calendar days of the filing of the Complaint
in this matter, Defendants must deliver to Plaintiffs an affidavit that
describes in reasonable detail all actions Defendants have taken and
all steps Defendants have implemented on an ongoing basis to comply
with Section VIII of this Final Judgment. Defendants must deliver to
the United States an affidavit describing any changes to the efforts
and actions outlined in Defendants' earlier affidavits filed pursuant
to Section IX within fifteen (15) calendar days after the change is
implemented.
C. Defendants must keep all records of all efforts made to preserve
and divest the Divestiture Assets until one year after the divestiture
has been completed.
X. Compliance Inspection
A. For the purposes of determining or securing compliance with this
Final Judgment, or of related orders such as an Asset Preservation and
Hold Separate Stipulation and Order, or of determining whether this
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 agents retained by the
United States, must, upon written request of an authorized
representative of the Assistant Attorney General in charge of the
Antitrust Division, and reasonable notice to Defendants, be permitted:
(1) access during Defendants' office hours to inspect and copy
or, at the option of the United States, to require Defendants to
provide electronic copies of all books, ledgers, accounts, records,
data, and documents in the possession, custody, or control of
Defendants relating to any matters contained in this Final Judgment;
and
(2) to interview, either informally or on the record,
Defendants' officers, employees, or agents, who may have their
individual counsel present, regarding such matters. The interviews
must be subject to the reasonable convenience of the interviewee and
without restraint or interference by Defendants.
B. Upon the written request of an authorized representative of the
Assistant Attorney General in charge of the Antitrust Division,
Defendants must submit written reports or respond to written
interrogatories, under oath if requested, relating to any of the
matters contained in this Final Judgment.
C. No information or documents obtained pursuant to Section X may
be divulged by the United States to any person other than an authorized
representative of the executive branch of the United States or the
Plaintiff States, except in the course of legal proceedings to which
the United States is a party (including grand jury proceedings), for
the purpose of securing compliance with this Final Judgment, or as
otherwise required by law.
D. In the event of a request by a third party for disclosure of
information under the Freedom of Information Act, 5 U.S.C. 552, the
Antitrust Division will act in accordance with that statute, and the
Department of Justice regulations at 28 CFR part 16, including the
provision on confidential commercial information, at 28 CFR 16.7.
Defendants submitting information to the Antitrust Division should
designate the confidential commercial information portions of all
applicable documents and information under 28 CFR 16.7. Designations of
confidentiality expire ten years after submission, ``unless the
submitter requests and provides justification for a longer designation
period.'' See 28 CFR 16.7(b).
E. If at the time that Defendants furnish information or documents
to the United States pursuant to Section X, Defendants represent and
identify in writing information or documents for which a claim of
protection may be asserted under Rule 26(c)(1)(G) of the Federal Rules
of Civil Procedure, and Defendants mark each pertinent page of such
material, ``Subject to claim of protection under Rule 26(c)(1)(G) of
the Federal Rules of Civil Procedure,'' the United States must give
Defendants ten (10) calendar days' notice before divulging the material
in any legal proceeding (other than a grand jury proceeding).
XI. Notification
A. Unless a 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''),
Defendants may not, during the term of this Final Judgment, directly or
indirectly acquire any assets of or any interest, including any
financial, security, loan, equity, or management interest, in an entity
involved in Fluid Milk processing in the United States without
providing advance notification to the United States 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;
provided that notification will not be required pursuant to this
Section where the assets or interest being acquired generated less than
$1 million in revenue from the processing, marketing, sale, and
distribution of Fluid Milk in the most recent completed calendar year.
B. Defendants must provide the notification required by Section XI
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 8 of the instructions
must be provided only about Fluid Milk processing. Notification must be
provided at least thirty (30) calendar days before acquiring any such
interest, and must include, beyond the information required by the
instructions, the names of the principal representatives who negotiated
the agreement on behalf of each party, and all management or strategic
plans discussing the proposed transaction. If, within the 30-day period
following notification, representatives of the United States make a
written request for additional information, Defendants may not
consummate the proposed transaction or agreement until thirty (30)
calendar days after submitting all requested information. 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. Section XI will be broadly construed and any
ambiguity or uncertainty
[[Page 33723]]
regarding the filing of notice under Section XI will be resolved in
favor of filing notice.
XII. No Reacquisition, Limitations on Collaborations
Defendants may not reacquire any part of or any interest in the
Divestiture Assets during the term of this Final Judgment without the
prior written consent of the United States in its sole discretion,
after consultation with the Plaintiff States. In addition, Defendants
and Acquirer(s) may not, without the prior written consent of the
United States, enter into a new collaboration or expand the scope of an
existing collaboration involving any of the Divestiture Assets during
the term of this Final Judgment. The decision whether to consent to a
collaboration is within the sole discretion of the United States.
XIII. Retention of Jurisdiction
The Court retains jurisdiction to enable any party to this Final
Judgment to apply to the 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.
XIV. Enforcement of Final Judgment
A. The United States retains and reserves all rights to enforce the
provisions of this Final Judgment, including the right to seek an order
of contempt from the Court. Defendants agree that in a civil contempt
action, a motion to show cause, or a similar action brought by the
United States regarding an alleged violation of this Final Judgment,
the United States may establish a violation of this Final Judgment and
the appropriateness of a remedy therefor by a preponderance of the
evidence, and Defendants waive any argument that a different standard
of proof should apply.
B. This Final Judgment should be interpreted to give full effect to
the procompetitive purposes of the antitrust laws and to restore the
competition the United States alleged was harmed by the challenged
conduct. Defendants agree that they may be held in contempt of, and
that the Court may enforce, any provision of this Final Judgment that,
as interpreted by the Court in light of these procompetitive principles
and applying ordinary tools of interpretation, is stated specifically
and in reasonable detail, whether or not it is clear and unambiguous on
its face. In any such interpretation, the terms of this Final Judgment
should not be construed against either party as the drafter.
C. In an enforcement proceeding in which the Court finds that
Defendants have violated this Final Judgment, the United States may
apply to the Court for a one-time extension of this Final Judgment,
together with other relief that may be appropriate. In connection with
a successful effort by the United States to enforce this Final Judgment
against a Defendant, whether litigated or resolved before litigation,
that Defendant agrees to reimburse the United States for the fees and
expenses of its attorneys, as well as all other costs, including
experts' fees, incurred in connection with that enforcement effort,
including in the investigation of the potential violation.
D. For a period of four (4) years following the expiration of this
Final Judgment, if the United States has evidence that a Defendant
violated this Final Judgment before it expired, the United States may
file an action against that Defendant in this Court requesting that the
Court order: (1) Defendant to comply with the terms of this Final
Judgment for an additional term of at least four years following the
filing of the enforcement action; (2) all appropriate contempt
remedies; (3) additional relief needed to ensure the Defendant complies
with the terms of this Final Judgment; and (4) fees or expenses as
called for by this Section XIV.
XV. Expiration of Final Judgment
Unless the Court grants an extension, this Final Judgment will
expire ten (10) years from the date of its entry, except that after
five (5) years from the date of its entry, this Final Judgment may be
terminated upon notice by the United States to the Court and Defendants
that the divestitures have been completed and the continuation of this
Final Judgment no longer is necessary or in the public interest.
XVI. Public Interest Determination
Entry of this Final Judgment is in the public interest. The parties
have complied with the requirements of the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16, including by making available to the
public copies of this Final Judgment, the Competitive Impact Statement,
comments thereon, and the United States' responses to comments. Based
upon the record before the Court, which includes the Competitive Impact
Statement and any comments and responses to comments filed with the
Court, entry of this Final Judgment is in the public interest.
Date:------------------------------------------------------------------
[Court approval subject to procedures of Antitrust Procedures and
Penalties Act, 15 U.S.C. 16]
-----------------------------------------------------------------------
United States District Judge
Appendix A--DePere Ancillary Facilities
1. 1118 N. 17th Street, Sheboygan, Wisconsin 54115 (Garage/Parking)
2. 1233 Contract Drive, Ashwaubenon, Wisconsin 54304 (Warehouse)
Appendix B--Franklin Ancillary Facilities
1. 10 DiNunzio Road, Watertown, Connecticut 06795 (Cross-Dock/
Warehouse)
2. 1376 West Central Street, Franklin, Massachusetts 02038
(Warehouse/Sales Office)
3. 1701 Hammond Street, Hermon, Maine 04401 (Distribution Depot)
4. 131 Rand Road, Portland, Maine 04102 (Parking)
5. 10 Creek Brook Drive, Haverhill, Massachusetts 01832 (Warehouse)
Appendix C--Harvard Ancillary Facilities
1. 3600 River Road, Franklin Park, Illinois 60131 (Depot)
2. 23914 and 23916 Center Street, Harvard, Illinois 60033 (Parking/
Part of Plant)
3. 24114 Route 173, Harvard, Illinois 60033 (Part of Plant)
4. 965 S. Wyckles Road, Decatur, Illinois 62521 (Depot/Office)
5. 450 Comanche Circle, Harvard, Illinois 60033 (Warehouse)
6. Dry Storage, 6303 Maxon Road, Harvard, Illinois 60033
7. Sludge Site, 6303 Maxon Road, Harvard, Illinois 60033
8. Alco (Alders) Storage Area, 6303 Maxon Road, Harvard, Illinois
60033
9. Railroad Encroachment Area, 6303 Maxon Road, Harvard, Illinois
60033
UNITED STATES DISTRICT COURT FOR NORTHERN DISTRICT OF ILLINOIS EASTERN
DIVISION
UNITED STATES OF AMERICA, COMMONWEALTH OF MASSACHUSETTS, and STATE
OF WISCONSIN, Plaintiffs, v. DAIRY FARMERS OF AMERICA, INC. and DEAN
FOODS COMPANY, Defendants.
Case No. 1:20-cv-02658
Competitive Impact Statement
The United States of America, under Section 2(b) of the Antitrust
Procedures and Penalties Act, 15 U.S.C. 16(b)-(h) (the ``APPA'' or
``Tunney Act''), 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
Dean Foods Company (``Dean'') filed for bankruptcy on November 12,
2019, in the United States Bankruptcy Court for the Southern District
of Texas. The
[[Page 33724]]
bankruptcy court ordered an auction and then accelerated the auction
process because of Dean's liquidity condition. On March 30, 2020, Dairy
Farmers of America, Inc. (``DFA'') bid for 44 of Dean's plants for a
total value of $433 million. No other bidder submitted a bid for the 44
Dean plants, or anything even close to that number of plants, under the
bankruptcy court's schedule. The bid was accepted by Dean and was the
only transaction for those 44 plants approved by the bankruptcy court.
The United States, along with the state of Wisconsin and the
Commonwealth of Massachusetts (collectively, the ``Plaintiff States''),
filed a civil antitrust complaint on May 1, 2020, seeking to enjoin the
proposed transaction. Based on a comprehensive investigation, the
Complaint alleges that the likely effect of this transaction would be
to substantially lessen competition for the processing and sale of
Fluid Milk in areas encompassing (1) northeastern Illinois and
Wisconsin and (2) New England in violation of Section 7 of the Clayton
Act, 15 U.S.C. 18. ``Fluid Milk'' is 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.
At the same time the Complaint was filed, the United States filed
an Asset Preservation and Hold Separate Stipulation and Order
(``Stipulation and Order'') and proposed Final Judgment, which are
designed to address the anticompetitive effects of the acquisition.
Under the proposed Final Judgment, which is explained more fully below,
DFA is required to divest Dean's Fluid Milk processing plants,
ancillary facilities, and related tangible and intangible assets
located in Franklin, Massachusetts (``Franklin Plant''); De Pere,
Wisconsin (``De Pere Plant''); and Harvard, Illinois (``Harvard
Plant'') (collectively the ``Divestiture Plants''). Under the terms of
the Stipulation and Order, Defendants will take certain steps to ensure
that, during the pendency of the required divestitures, the Divestiture
Plants will remain independent and ongoing business concerns that will
remain uninfluenced by Defendants and the level of competition for the
processing and sale of Fluid Milk that existed between Defendants prior
to the transaction will be maintained.
The United States and Defendants have stipulated that the proposed
Final Judgment may be entered after compliance with the APPA. Entry of
the proposed Final Judgment will terminate this action, except that the
Court will retain jurisdiction to construe, modify, or enforce the
provisions of the Final Judgment and to punish violations thereof.
II. Description of Events Giving Rise to the Alleged Violation
(A) The Defendants and the Proposed Transaction
35. Dean is a Delaware corporation with its headquarters in Dallas,
Texas. Until its recent bankruptcy filing, Dean was the largest Fluid
Milk processor in the country, operating at that time 57 Fluid Milk
processing plants in 29 states. Dean had 2018 revenues of $7.75
billion.
36. DFA is organized under the laws of the State of Kansas and is
the largest cooperative of dairy farmers in the country, with nearly
14,000 members. In 2018, DFA marketed 64.5 billion pounds of raw milk--
an amount that accounted for approximately 30% of all raw milk produced
in the United States. DFA had 2018 revenues of $13.6 billion.
37. DFA is vertically integrated through its ownership interests in
milk processing plants. DFA owns eight Fluid Milk processing plants
around the country and has a significant stake in a joint venture that
owns twelve additional Fluid Milk processing plants. In the
northeastern Illinois and Wisconsin area, DFA owns a Fluid Milk
processing plant in Cedarburg, Wisconsin. In the New England area, DFA
owns Fluid Milk processing plants in New Britain, Connecticut and
Portland, Maine. These plants compete directly against the Harvard
Plant, De Pere Plant, and/or Franklin Plant that DFA proposes to
acquire from Dean.
38. Dean filed for Chapter 11 bankruptcy protection on November 12,
2019. Simultaneous with the bankruptcy filing, Dean announced that it
was in discussions to sell some or all of its Fluid Milk processing
plants to DFA. Dean's financial position continued to worsen in the
months after its bankruptcy filing and then was exacerbated by
shrinking school and restaurant demand for milk caused by the
coronavirus pandemic. Dean informed the bankruptcy court of its
worsening financial condition and that it would not be able to pay
farmers for raw milk or be certain that it could continue to process
Fluid Milk beyond May 2020. Dean's worsening financial condition caused
the bankruptcy court to accelerate the bankruptcy auction process to
allow Dean to find buyers for its assets before the company would have
to cease operations due to a lack of funds. By order of the bankruptcy
court, Dean accepted bids for its assets and selected winning bidders
on March 30, 2020. Dean selected DFA as the winning bidder for most of
Dean's assets and began the process of closing down some plants that no
one had sought to acquire during the bankruptcy process.
On March 31, 2020, DFA and Dean entered into an asset purchase
agreement whereby DFA agreed to purchase 44 of Dean's 57 Fluid Milk
processing plants, along with related assets, for $433 million. The
purchase price includes $325 million in cash and $108 million in
forgiveness of debt Dean owed DFA.
(B) The Competitive Effects of the Proposed Transaction
DFA's existing Fluid Milk processing plants overlap with two Dean
plants that it proposes to acquire in northeastern Illinois and
Wisconsin--the Harvard Plant and the De Pere Plant--and with Dean's
Franklin Plant in New England. The Complaint alleges that DFA and Dean
are two of only three significant Fluid Milk processors that can serve
customers, including supermarkets and schools, in each of these
geographic areas. If the acquisition were permitted to proceed, DFA
would control nearly 70% of the Fluid Milk market in northeastern
Illinois and Wisconsin and approximately 51% of the Fluid Milk market
in New England. DFA and Dean compete head-to-head to supply Fluid Milk
customers in these areas today, and those customers rely on competition
between DFA and Dean to get lower prices and better terms. If DFA's and
Dean's plants in these areas were owned by a single entity, this
competitive dynamic would no longer exist, leading to higher prices and
inferior service for supermarkets, schools, and other Fluid Milk
customers and ultimately, millions of individual consumers.
1. The Processing and Sale of Fluid Milk Is a Relevant Product Market
39. The Complaint alleges that the processing and sale of Fluid
Milk is a relevant product market and line of commerce under Section 7
of the Clayton Act. Consumers have long-held cultural and taste
preferences for Fluid Milk over other beverages, and Fluid Milk has
particular nutritional benefits and qualities for use in cooking.
Consequently, consumer demand for Fluid Milk is relatively inelastic,
which simply means that Fluid Milk consumption does not decrease
significantly in response to a price increase. Fluid Milk is distinct
from organic milk, soy milk, extended shelf-life milk, ultra-high
temperature milk, and aseptic milk, which are produced
[[Page 33725]]
by different processes, have numerous significant differences, and
generally cost much more than Fluid Milk.
40. The Complaint alleges that retailers, supermarkets,
distributors, and other Fluid Milk customers are unlikely to substitute
other products for Fluid Milk because the individual consumers that
they serve continue to demand Fluid Milk. This means, for example, that
a grocery store would not substitute to other beverages because its
customers will not buy other beverages as an alternative to Fluid Milk.
Schools are similarly unlikely to substitute away from Fluid Milk in
response to even a substantial price increase because they are required
by federal regulations to offer Fluid Milk to students in order to
qualify to receive federal reimbursements for meals served to lower-
income students.
41. For these reasons, the Complaint alleges that the processing
and sale of Fluid Milk satisfies the well-accepted ``hypothetical
monopolist'' test set forth in the U.S. Department of Justice and
Federal Trade Commission 2010 Horizontal Merger Guidelines
(``Horizontal Merger Guidelines''). This test asks whether a
hypothetical monopolist processing and selling Fluid Milk likely would
impose a small but significant and non-transitory price increase (e.g.,
five percent) because an insufficient number of customers would switch
to alternatives to make that price increase unprofitable. The Complaint
alleges that this test is satisfied.
2. The Two Relevant Geographic Markets Are Northeastern Illinois and
Wisconsin and New England
42. The Complaint also alleges two relevant geographic markets: (1)
northeastern Illinois and Wisconsin and (2) New England. Fluid Milk
processors charge different prices to buyers in different areas. Prices
are negotiated individually, and Fluid Milk's high transportation costs
and limited shelf life mean that customers cannot practically buy Fluid
Milk from each other to avoid a higher price charged by processors. In
other words, Fluid Milk processors can engage in ``price
discrimination,'' meaning that they can charge different prices to
different customers. When price discrimination is possible, relevant
geographic markets may be defined by reference to the location of the
customer. In particular, a relevant geographic market for the
processing and sale of Fluid Milk, as alleged in the Complaint, is a
region within which customers can be targeted for a price increase.
Most customers purchase Fluid Milk from suppliers and processing plants
located near them because transportation costs and shelf life make
sourcing from more distant suppliers prohibitive.
43. The Complaint alleges that northeastern Illinois, which
includes Chicago and its suburbs, and the state of Wisconsin together
comprise a relevant geographic market and section of the country within
the meaning of Section 7 of the Clayton Act. Similarly, New England--
including the states of Connecticut, Maine, Massachusetts, New
Hampshire, Rhode Island, and Vermont--is a relevant geographic market
and section of the country within the meaning of Section 7 of the
Clayton Act. A hypothetical monopolist processing and selling Fluid
Milk in either of these two areas likely would find it profitable to
impose a small but significant and non-transitory price increase (e.g.,
five percent) because customers could not economically switch their
source of supply to more distant sources.
3. The Acquisition Results in Large Combined Market Shares
44. DFA's acquisition of Dean's Fluid Milk processing plants would
result in a substantial increase in the concentration of processors
that compete to supply Fluid Milk to customers in the northeastern
Illinois and Wisconsin geographic market and the New England geographic
market. The Complaint alleges that DFA and Dean are two of only three
significant Fluid Milk processors that sell into each of these
geographic markets. In both geographic markets, the acquisition would
eliminate one competitor, leaving only two remaining competitive
options for Fluid Milk customers, with DFA controlling a significant
majority of the Fluid Milk sales. Although there are also small or
fringe Fluid Milk processors in each market, these processors are not
competitive options for most Fluid Milk customers because they are much
smaller and lack the capabilities necessary to compete against
processors like DFA and Dean.
45. The Supreme Court has held that mergers that significantly
increase concentration in already concentrated markets are
presumptively anticompetitive and therefore presumptively unlawful. To
measure market concentration, courts often use the Herfindahl-Hirschman
Index (``HHI'') as described in the Horizontal Merger Guidelines. HHIs
range from 0 in markets with no concentration to 10,000 in markets
where one firm has a 100% market share. According to the Horizontal
Merger Guidelines, mergers that increase the HHI by more than 200 and
result in an HHI above 2,500 in any market are presumed to be
anticompetitive and, therefore, unlawful.
46. The Complaint alleges that the acquisition of Dean's plants by
DFA is presumptively unlawful in northeastern Illinois and Wisconsin.
For Fluid Milk customers in this geographic market, a conservative
estimate of the combined market share of Dean's Harvard Plant and De
Pere Plant and DFA's processing plant in Cedarburg, Wisconsin is 70%.
The result is a highly concentrated market with an HHI of nearly 5,200
and an increase in HHI of almost 1,900.
47. As alleged in the Complaint, the acquisition is also
presumptively unlawful in the New England geographic market. For Fluid
Milk customers in the New England geographic market, a conservative
estimate of the combined market share of Dean's Franklin Plant and
DFA's processing plants in New Britain, Connecticut, and Portland,
Maine is 51%. The result is a highly concentrated market with an HHI of
approximately 3,300 and an increase in HHI of over 1,000.
4. The Merger Would Eliminate Head-to-Head Competition Between DFA and
Dean
48. The Complaint alleges that DFA's acquisition of Dean's plants
in northeastern Illinois and Wisconsin and in New England would
eliminate head-to-head competition that has benefitted and would
otherwise continue to benefit supermarkets, schools, and other Fluid
Milk customers in the relevant geographic markets. For reasons related
to service and delivery capabilities, some Fluid Milk customers
consider DFA and Dean to be their only practical options. Especially
for customers like large supermarket chains, DFA and Dean are two of
only three competitive Fluid Milk processors in these geographic
markets, and they are often the two lowest-price options in these
geographic markets.
49. Customers often solicit bids from Fluid Milk processors and
select the bidder that offers the lowest price. These customers often
leverage a lower-priced bid from one supplier to obtain improved offers
and lower prices from other bidders during individual negotiations.
Even customers who use less formal procurement processes benefit from
the presence of competitive alternatives, which constrain the prices
that all Fluid Milk processors can charge. The Complaint alleges that
Fluid Milk customers in the relevant geographic markets have
historically used competing bids from DFA and Dean to obtain lower
prices.
[[Page 33726]]
50. As described above, the Complaint alleges that customers
typically purchase Fluid Milk from processing plants located close to
them because of shelf-life restrictions and the costs associated with
transportation of the product. These transportation costs comprise a
significant portion of the prices that Fluid Milk processors charge
customers. Therefore, the lowest-price Fluid Milk processors available
to customers typically are the ones located closest to them. For many
Fluid Milk customers in the relevant geographic markets, DFA and Dean
are two of the closest processing plants and, as the Complaint alleges,
two of the most competitive or lowest-price options. The only other
significant competitors selling Fluid Milk to customers in these
markets are unlikely to substantially mitigate the loss of competition
between DFA and Dean that would result from the acquisition.
51. Many customers also have particular product and service
requirements that not all Fluid Milk processors can meet. Supermarkets,
convenience stores, schools, and other customers often require
processors to arrange direct-store delivery, or ``DSD,'' where the
processor delivers Fluid Milk to each of the customer's locations on a
set schedule--sometimes as often as daily. Schools typically require
milk to be packaged in small half-pint containers that require a
separate bottling line and dedicated equipment. Only DFA and Dean,
along with the third significant competitor in each of the relevant
geographic markets, can satisfy these complex product and service
requirements, while other smaller processors cannot.
5. The Acquisition Would Make It Easier for Competitors To Coordinate
52. The Complaint alleges that by reducing the number of
significant Fluid Milk processors in northeastern Illinois and
Wisconsin and in New England from three to two, the acquisition would
make it easier for the remaining two significant processors to
coordinate. Markets, such as Fluid Milk markets, with few significant
competitors, relatively homogenous products, and where demand for the
product is not significantly affected by an increase in its price are
susceptible to coordination because these features are among those that
make coordination more likely to be effective and profitable.
53. In addition, there is a history of anticompetitive
coordination, including price fixing, bid rigging, and customer
allocation in Fluid Milk markets in the United States and, in
particular, in the sale of milk to schools. Numerous Fluid Milk
processors, including Dean itself, have engaged in criminal collusive
activities at various times over the last 40 years. Given this history
of coordination among Fluid Milk processors and the reduction in the
number of significant competitors in each of the relevant geographic
markets, the acquisition makes coordination more likely to occur in
these markets.
6. Potential Entrants and Merger Efficiencies Do Not Offset Competitive
Harm From the Merger
54. As alleged in the Complaint, entry by Fluid Milk processors
outside the relevant geographic markets is unlikely to be sufficient or
timely enough to offset the anticompetitive effects of the acquisition.
Processors who do not currently serve these markets are unlikely to
begin shipping a significant quantity of Fluid Milk into the relevant
geographic markets due to the same factors that make them uncompetitive
in these markets today, including transportation costs and the lack of
necessary capabilities or levels of service. Any milk that could be
shipped into the relevant geographic markets likely could not be
competitively priced because of the high transportation costs. Nor
could these processors economically deliver Fluid Milk to customers
like schools because they lack local distribution networks.
55. The construction of a new Fluid Milk processing plant to serve
customers in either of the relevant geographic markets is very unlikely
because of the high costs of building a Fluid Milk processing plant--
especially as Fluid Milk consumption continues to decline. Numerous
Fluid Milk processing plants have closed in the last ten years across
the United States, while only a few new plants have been built, and
these newly-built plants were largely for retailers to supply their own
stores. Finally, the two largest Fluid Milk processors in the country,
Dean and Borden Dairy Company, have filed for bankruptcy.
The Complaint also alleges that potential harm from the proposed
merger is unlikely to generate verifiable, merger-specific efficiencies
sufficient to outweigh the anticompetitive effects that are likely to
occur in the provision of Fluid Milk in the relevant geographic
markets.
III. Explanation of the Proposed Final Judgment
The divestitures required by the proposed Final Judgment will
remedy the loss of competition alleged in the Complaint by establishing
independent Fluid Milk processing competitors in northeastern Illinois
and Wisconsin and in New England. The proposed Final Judgment requires
DFA to divest Dean's De Pere Plant, Franklin Plant, and Harvard Plant,
related ancillary facilities (such as warehouses and sales offices),
and tangible and intangible assets related to or used in connection
with the processing, marketing, sale, or distribution of Fluid Milk and
all other products by each of the Divestiture Plants. The divestitures
are to occur within 30 days (with extensions that may be granted in the
sole discretion of the United States not to exceed 60 days) after the
entry of the Stipulation and Order by the Court.
(A) The Divestiture Plants
The proposed Final Judgment defines three sets of divestiture
assets, one for each Divestiture Plant. Each set of assets must be
divested in such a way as to satisfy the United States in its sole
discretion, after consultation with the Plaintiff States, that they can
and will be operated by the purchaser as a viable, ongoing business
that can compete effectively in the market for the processing and sale
of Fluid Milk in the relevant geographic market. Defendants must use
their best efforts to accomplish the divestitures as expeditiously as
possible and must cooperate with potential divestiture buyers.
The proposed Final Judgment requires that a single divestiture
buyer acquire both the De Pere Plant and the Harvard Plant, unless the
United States exercises its discretion to permit separate purchasers.
The United States prefers that the Harvard Plant and De Pere Plant be
sold together because the plants will likely be able to more
successfully compete if operated jointly. Though the Harvard Plant and
De Pere Plant could each operate independently, divesting them to the
same buyer would more closely replicate for the buyer the advantages
that Dean held before the transaction, including, among others, the
ability for the plants to (1) assist each other with operations and
distribution, including the capability to serve as backup for each
other, (2) serve a contiguous set of customers, and (3) share the
regional ``Dean's'' brand. The United States maintains the sole
discretion to approve separate buyers for the Harvard Plant and De Pere
Plant under the proposed Final Judgment if it can be demonstrated to
the United States that separate buyers can restore the competition that
the Complaint alleges would have been lost by the transaction. The
Franklin Plant, which is in a different geographic market than the
Harvard and De Pere Plants, may be divested to a different purchaser.
[[Page 33727]]
(B) Brands and Licenses
Branded milk represents a distinct minority of total Fluid Milk
sales at the Divestiture Plants. The majority of Fluid Milk sales are
for private-label products--that is, products labeled with the brand of
the retailer rather than the manufacturer. Nevertheless, in order to
protect the viability of the Divestiture Plants and related businesses
that will be divested, the proposed Final Judgment requires a
combination of brand divestitures and brand licenses that are based
upon a fact-specific analysis of the historic sales by each individual
Divestiture Plant.
The brands used at each of the Divestiture Plants varies among a
combination of local or sub-regional, regional, and national brands.
The local or sub-regional brands include Garelick Farms, which is used
at the Franklin Plant, and Morning Glory and Farm Fresh, which are both
used at the De Pere Plant. The regional ``Dean's'' brand is used at the
De Pere Plant and the Harvard Plant. Dean's national brands--used at
all three Divestiture Plants--are Dairy Pure and Dean's chocolate milk
brand, TruMoo. Dean typically uses Dairy Pure as a cobrand with local
or sub-regional brands and regional brands, including the Garelick
Farms, Morning Glory, and Farm Fresh brands used at the Divestiture
Plants.
The local or sub-regional brands--Garelick Farms, Morning Glory,
and Farm Fresh--will transfer to the divestiture buyers of the plants
where the local or sub-regional branded products are sold. Garelick
Farms will transfer to the buyer of the Franklin Plant. Morning Glory
and Farm Fresh will transfer to the buyer of the De Pere Plant.
Transferring ownership of these brands will place the divestiture
buyers in the same position as Dean was before the transaction with
respect to these local or sub-regional brands.
The buyer(s) of the Divestiture Plants will receive licenses--
rather than ownership--to use the national and regional brands (i.e.,
Dairy Pure, TruMoo, and ``Dean's'') in geographic areas that cover
nearly all of each of the Divestiture Plants' existing sales
footprints. The proposed Final Judgment provides licenses rather than
ownership for these brands because the brands are used across the
United States. Most Dean plants sell at least some TruMoo, ``Dean's,''
and Dairy Pure brand products, and an overwhelming majority of the
sales for these brands come from Dean plants that DFA has acquired and
is retaining. In contrast, the local or sub-regional brands that are
being divested are used at a smaller number of Dean plants in smaller
areas surrounding the Divestiture Plants.
The divestiture buyer of each Divestiture Plant will receive
transitional licenses to the national brands, TruMoo and Dairy Pure.
Because Dairy Pure frequently is cobranded, the divestiture buyer will
be able to use the transitional license to continue to cobrand products
while it changes its packaging and rebrands its products. The TruMoo
brand makes up a small percentage of the sales at the Divestiture
Plants and is not necessary for the future viability of the Divestiture
Plants and related business. Therefore, the divestiture buyers will
each receive a transitional license for the TruMoo brand. They will
also receive a perpetual license to the intellectual property, product
formulas, technology, and know-how for TruMoo because consumers value
the taste of the TruMoo milk and the divestiture buyers will benefit
from the ability to perpetually offer chocolate milk with the same
taste. These TruMoo licenses will permit each buyer to transition
chocolate milk sales to its local or sub-regional brand, the ``Dean's''
brand, or another brand of its choice while continuing to use the same
chocolate milk formula perpetually.
If the buyer of the Harvard Plant and the De Pere Plant are the
same, as the proposed Final Judgment anticipates, the buyer will
receive a perpetual license to the ``Dean's'' brand that it could use
for sales within a multistate area set forth in the proposed Final
Judgment from either or both plants. If the buyers of the two plants
are different, the buyer of the Harvard Plant, and not the buyer of the
De Pere Plant, will receive a perpetual license to the ``Dean's''
brand. This accounts for the fact that the Harvard Plant sells more
than two times the amount of ``Dean's'' brand Fluid Milk as compared to
the De Pere Plant and the buyer of the Harvard Plant will not receive a
perpetual license or ownership of any other brand. If a separate buyer
acquires the De Pere Plant, it will receive a transitional license to
the ``Dean's'' brand. This transitional license will give the buyer the
opportunity to move sales to its local or sub-regional brands or
another brand.
The proposed Final Judgment requires these transfers and licenses
so that the divestiture buyers will be placed, to the greatest extent
possible, in the same position as Dean prior to the transaction and
will have the ability to operate the Divestiture Plants as independent
and ongoing business concerns.
1. Franklin Plant
Under the proposed Final Judgment, the divestiture buyer of the
Franklin Plant will own the local and sub-regional brands used at the
Franklin Plant and receive transitional licenses for the national
brands. The Franklin Plant currently uses the Garelick Farms brand and
the national brands Dairy Pure and TruMoo. Garelick Farms branded
products are sold throughout New England. Ownership of the Garelick
Farms brand will transfer to the buyer of the Franklin Plant. The buyer
of the Franklin Plant will also receive a non-exclusive, royalty-free,
paid-up, irrevocable, nationwide two-year transitional license for both
the Dairy Pure and TruMoo national brands. The Dairy Pure license
ensures that the buyer will have sufficient time to transition away
from the cobranding of Dairy Pure with Garelick Farms. Similarly, the
TruMoo license will permit the buyer time to transition its chocolate
milk to the Garelick Farms brand or develop its own chocolate milk
brand. In order to ensure consistency in the quality of the TruMoo
branded products and to allow the divestiture buyer to offer its own
chocolate milk brand without altering the taste that consumers may
prefer, the divestiture assets also include a non-exclusive, royalty-
free, paid-up, irrevocable, perpetual, nationwide license to the
intellectual property, including the formula and know-how, for the
TruMoo products.
2. Harvard Plant
Under the proposed Final Judgment, the divestiture buyer of the
Harvard Plant will receive perpetual licenses to the regional
``Dean's'' brand and transitional licenses for the national brands. The
Harvard Plant currently uses the regional ``Dean's'' brand and the
national brands Dairy Pure and TruMoo. Because the Harvard Plant relies
on the ``Dean's'' brand for its branded sales, the buyer will receive
an exclusive, royalty-free, paid-up, irrevocable, perpetual license to
use the ``Dean's'' brand in Illinois, Wisconsin, Indiana, and the Upper
Peninsula of Michigan. Further, the buyer will receive a non-exclusive,
royalty-free, paid-up, irrevocable, perpetual license to use the
``Dean's'' brand in Minnesota, Iowa, and the Lower Peninsula of
Michigan. The geographies where the buyer's license is exclusive
represents the primary area where the Harvard Plant sells its products.
The addition of the non-exclusive geographies ensures that the buyer
will be able to offer the same brand to more distant customers
[[Page 33728]]
and will not be hampered in its ability to compete in those more
distant geographies. The divestiture assets for the Harvard Plant also
include the same transitional licenses to Dairy Pure and TruMoo, as
well as the same perpetual license for the TruMoo intellectual
property, as the divestiture assets for the Franklin Plant.
3. De Pere Plant
Under the proposed Final Judgment, the divestiture buyer of the De
Pere Plant will own the local brands that are primarily used by the De
Pere plant and will receive transitional licenses for the national
brands and regional ``Dean's'' brand. The De Pere Plant currently uses
the local Morning Glory, Farm Fresh, and Jilbert brands, the national
brands Dairy Pure and TruMoo, and the regional ``Dean's'' brand.
Ownership of the Morning Glory and Farm Fresh brands, both of which are
strong local brands, will transfer to the buyer of the De Pere Plant.
The buyer of the De Pere Plant also will receive the same transitional
licenses to Dairy Pure and TruMoo, as well as the same perpetual
license for the TruMoo intellectual property, as the buyers of the
Franklin Plant and the Harvard Plant. In addition to ownership of the
local brands and licenses to the national brands, the De Pere Plant
buyer will receive a two-year non-exclusive, royalty-free, paid-up,
irrevocable, nationwide license to use the ``Dean's'' brand. This
transitional license will ensure that, in the event that the buyer of
the De Pere Plant is not the same as the buyer of the Harvard Plant,
the De Pere Plant buyer will have sufficient time to transition away
from cobranding. If, as expected, the buyer of the De Pere Plant is
also the buyer of the Harvard Plant, the buyer will also be able to use
the perpetual ``Dean's'' license from the Harvard Plant divestiture to
cover sales from the De Pere Plant within the applicable geography.
Though the De Pere Plant also sells some products under the local
Jilbert brand, those sales are de minimis. Because of the very limited
use of that brand, which is used primarily by a plant that is not
subject to divestiture, the Jilbert brand is not a part of the De Pere
divestiture assets.
(C) Other Provisions
In order to preserve competition and facilitate the success of the
potential divestiture buyers, the proposed Final Judgment contains
additional obligations for Defendants. Paragraph IV(C) of the proposed
Final Judgment requires Defendants to facilitate each buyer's hiring of
employees whose jobs relate to the processing, marketing, sale, or
distribution of Fluid Milk or any other products by the Divestiture
Plants. In particular, the proposed Final Judgment requires that
Defendants provide each buyer, the United States, and the Plaintiff
States, with organization charts and information relating to the
employees and make employees available for interviews. It also provides
that Defendants must not interfere with any negotiations to hire these
employees by a buyer of these assets. In addition, for employees who
elect employment with a buyer, Defendants must waive all non-compete
and non-disclosure agreements, vest all unvested pension and other
equity rights, and provide all benefits that the employees would
generally have been provided if the employees had continued employment
with Defendants. This provision will help to ensure that the buyers
will be able to hire qualified employees for the Divestiture Plants and
related businesses.
Paragraph IV(G) of the proposed Final Judgment facilitates the
transfer of customers and other contractual relationships from
Defendants to each buyer. Defendants must transfer all contracts,
agreements, and customer relationships. For those contracts,
agreements, or customer relationships that extend beyond the
Divestiture Plants, Defendants must transfer the relevant portions of
those contracts, agreements, or customer relationships. For contracts
or agreements that require another party's consent to transfer,
Defendants must use their best efforts to accomplish the transfer. The
paragraph also requires Defendants to send a letter to any customer of
a Divestiture Plant that does not have a written contract within five
business days of the closing of the divestiture of the relevant
Divestiture Plant. The letter, which is subject to the prior approval
of the United States, must notify each such customer that the buyer of
the Divestiture Plant will be the customer's new supplier. This
provision will help initiate contact between the buyer and the customer
so that a relationship can be immediately established. Defendants may
not interfere with any negotiations between a buyer and a customer or
another contracting party. Finally, Defendants must release each buyer
from any of Dean's obligations to purchase raw milk from DFA, allowing
the buyer to seek its own suppliers for raw milk and not be beholden to
DFA. Defendants are, however, required to enter into a supply contract
for raw milk for a transitional period at the option of each buyer, as
described below, to ensure that the buyer has an adequate supply as it
takes over operations.
Paragraph IV(H) of the proposed Final Judgment requires Defendants
to use best efforts to help each buyer apply for and secure any
necessary governmental approval for any governmental license or
authorization that cannot be transferred to the buyer. This provision
will help to facilitate the transition of the business to the buyer
without disruption due to any issues involving governmental licensures
or authorizations.
Paragraph IV(I) of the proposed Final Judgment requires Defendants,
at the option of each buyer, to enter raw milk supply agreements
sufficient to meet each buyer's needs for up to three months. The
United States, in its sole discretion, and upon the buyer's request,
may approve an extension for up to an additional three months. This
provision will help to ensure that the buyers will not face disruption
to their supply of raw milk during this important transitional period.
Paragraph IV(J) of the proposed Final Judgment requires Defendants,
at the option of each buyer, to enter agreements to provide transition
services for a period of up to six months (with an option for the
United States, after consultation with the Plaintiff States, to extend
the period for an additional six months, in its sole discretion) to
facilitate the transfer and operation of the relevant divestiture
assets. This paragraph further provides that employees of Defendants
tasked with supporting these agreements must not share any
competitively sensitive information of the buyers with any other
employees of Defendants.
Paragraph IV(L) of the proposed Final Judgment prohibits, for a
period of one year, Defendants from soliciting business from customers
supplied from a Divestiture Plant by initiating customer-specific
communications for the portion of that customer's business that is
covered by a contract, agreement, or relationship that is included in
the divestiture assets. This prohibition will help each buyer establish
and maintain important customer relationships.
Paragraph IV(M) addresses the fact that the Franklin Plant is
located on leased property. Dean had an unassignable option to acquire
the land, which it had not exercised. Through the bankruptcy process,
the otherwise unassignable option was assigned to DFA but cannot be
further assigned to the divestiture buyer of the Franklin Plant.
Paragraph IV(M) requires DFA, at the Franklin Plant buyer's request, to
(1) exercise DFA's non-assignable option to purchase the real estate on
which the
[[Page 33729]]
Franklin Plant is located, and (2) sell to the buyer of the Franklin
Plant the real estate at the same price that DFA pays for the property
under DFA's non-assignable option to purchase. This provision puts the
buyer of the Franklin Plant in the same position as Dean before DFA
acquired the Dean assets by providing the buyer with the same option to
acquire the real estate that Dean had, even though the option is non-
assignable and therefore cannot be included in the Franklin Plant
divestiture assets.
If Defendants do not accomplish the divestitures within the period
prescribed in the proposed Final Judgment, or if Defendants waive their
right to first attempt to divest the Franklin Plant and related assets,
or the Harvard Plant and De Pere Plant and their related assets, as
permitted by Paragraph V(A) of the proposed Final Judgment, the
proposed Final Judgment provides that the Court will appoint a
divestiture trustee selected by the United States to effect the
divestitures, or a portion thereof. If a divestiture trustee is
appointed, the proposed Final Judgment provides that Defendants will
pay all costs and expenses of the trustee. The divestiture 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 the divestiture trustee's
appointment becomes effective, the trustee will provide monthly reports
to the United States and Plaintiff States setting forth his or her
efforts to accomplish the divestiture.
At the end of an initial term of 60 days (with extensions that may
be granted in the sole discretion of the United States not to exceed an
additional 60 days), if the divestiture of the Divestiture Plants and
other divestiture assets has not been accomplished, DFA can file a
motion with the Court requesting that the Stipulation and Order be
terminated and the Final Judgment be modified to allow DFA to retain
those divestiture assets. This option for the divestiture assets to
potentially revert back to DFA is included because of Dean's dire
financial circumstance, the distressed condition of the Fluid Milk
industry, the likelihood of additional Fluid Milk processing plant
closures, and the desire to keep the plants operating, rather than
shutting them down if buyers cannot be found. This will allow customers
to continue having an adequate supply of Fluid Milk.
The proposed Final Judgment contains a notification provision in
Section XI designed to give the United States the opportunity to review
all of Defendants' future acquisitions, including acquisitions of
partial or indirect interests, that involve entities that have
generated more than $1 million in revenue from the processing,
marketing, sale, and distribution of Fluid Milk in the prior completed
calendar year. Section XI requires DFA to notify the United States, and
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, in the same form, with some modifications, as it would for a
Hart-Scott-Rodino Antitrust Improvements Act (the ``HSR Act'') filing,
as specified in the Appendix to Part 803 of Title 16 of the Code of
Federal Regulations. Notice must be made 30 calendar days before the
acquisition. Section XI further provides for waiting periods and
opportunities for the United States to obtain additional information
similar to the provisions of the HSR Act before such acquisitions can
be consummated. This provision ensures that the United States and
relevant Plaintiff States will have the opportunity to review, for
example, any future acquisitions of additional Dean assets by DFA. In
particular, this provision would require advance notice of any attempt
by DFA to acquire the Land O'Lakes plants in Woodbury, Minnesota; Sioux
Falls, South Dakota; and Bismarck, North Dakota, which DFA did not
include in its present acquisition due to the competitive concerns
expressed to DFA by the United States.
Section XII of the proposed Final Judgment prevents Defendants from
reacquiring any part of or interest in the divestiture assets without
prior consent from the United States, after consultation with the
Plaintiff States. It also prevents Defendants from entering new
collaborations or expanding existing collaborations involving the
divestiture assets without prior consent.
The proposed Final Judgment also contains provisions designed to
promote compliance and make the enforcement of the Final Judgment as
effective as possible. Paragraph XIV(A) provides that the United States
retains and reserves all rights to enforce the provisions of the Final
Judgment, including its rights to seek an order of contempt from the
Court. Under the terms of this paragraph, Defendants have agreed that
in any civil contempt action, any motion to show cause, or any similar
action brought by the United States regarding an alleged violation of
the Final Judgment, the United States may establish the violation and
the appropriateness of any remedy by a preponderance of the evidence
and that Defendants have waived any argument that a different standard
of proof should apply. This provision aligns the standard for
compliance obligations with the standard of proof that applies to the
underlying offense that the compliance commitments address.
Paragraph XIV(B) provides additional clarification regarding the
interpretation of the provisions of the proposed Final Judgment. The
proposed Final Judgment is intended to restore competition that the
United States alleged would otherwise be harmed by the transaction.
Defendants agree that they will abide by the proposed Final Judgment,
and that they may be held in contempt of this Court for failing to
comply with any provision of the proposed Final Judgment that is stated
specifically and in reasonable detail, as interpreted in light of this
procompetitive purpose.
Paragraph XIV(C) of the proposed Final Judgment provides that if
the Court finds in an enforcement proceeding that Defendants have
violated the Final Judgment, the United States may apply to the Court
for a one-time extension of the Final Judgment, together with such
other relief as may be appropriate. In addition, to compensate American
taxpayers for any costs associated with investigating and enforcing
violations of the Final Judgment, Paragraph XIV(C) provides that in any
successful effort by the United States to enforce the Final Judgment
against a Defendant, whether litigated or resolved before litigation,
that Defendant will reimburse the United States for attorneys' fees,
experts' fees, and other costs incurred in connection with any
enforcement effort, including the investigation of the potential
violation.
Paragraph XIV(D) states that the United States may file an action
against a Defendant for violating the Final Judgment for up to four
years after the Final Judgment has expired or been terminated. This
provision is meant to address circumstances such as when evidence that
a violation of the Final Judgment occurred during the term of the Final
Judgment is not discovered until after the Final Judgment has expired
or been terminated or when there is not sufficient time for the United
States to complete an investigation of an alleged violation until after
the Final Judgment has expired or been terminated. This provision,
therefore, makes clear that, for four years after the Final Judgment
has expired or been terminated, the United States may still challenge a
violation that occurred during the term of the Final Judgment.
[[Page 33730]]
Finally, Section XV of the proposed Final Judgment provides that
the Final Judgment will expire ten years from the date of its entry,
except that after five years from the date of its entry, the Final
Judgment may be terminated upon notice by the United States to the
Court and Defendants that the divestiture has been completed and that
the continuation of the Final Judgment is no longer necessary or in the
public interest.
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 neither impairs
nor assists 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 Defendants.
V. Procedures Available for Modification of the Proposed Final Judgment
The United States and Defendants 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 U.S.
Department of Justice, which remains free to withdraw its consent to
the proposed Final Judgment at any time before the Court's entry of the
Final Judgment. The comments and the response of the United States will
be filed with the Court. In addition, comments will be posted on the
U.S. Department of Justice, Antitrust Division's internet website and,
under certain circumstances, published in the Federal Register.
Written comments should be submitted to: Eric D. Welsh, Acting
Chief, Healthcare and Consumer Products Section, Antitrust Division,
U.S. 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
As an alternative to the proposed Final Judgment, the United States
considered a full trial on the merits against Defendants. The United
States could have continued the litigation and sought preliminary and
permanent injunctions against DFA's acquisition of certain assets from
Dean. The United States is satisfied, however, that the divestiture of
assets described in the proposed Final Judgment will remedy the
anticompetitive effects alleged in the Complaint, preserving
competition for the processing and sale of Fluid Milk in northeastern
Illinois and Wisconsin and in New England. Thus, the proposed Final
Judgment achieves all or substantially all of the relief the United
States would have obtained through litigation, but avoids the time,
expense, and uncertainty of a full trial on the merits of the
Complaint.
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); United States v. U.S. Airways Grp.,
Inc., 38 F. Supp. 3d 69, 75 (D.D.C. 2014) (explaining that the
``court's inquiry is limited'' in Tunney Act settlements); United
States v. InBev N.V./S.A., No. 08-1965 (JR), 2009 U.S. Dist. LEXIS
84787, at *3 (D.D.C. Aug. 11, 2009) (noting that a 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 mechanism to enforce the final judgment are clear and
manageable'').
As the U.S. 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 specific allegations in
the government's complaint, whether the proposed Final Judgment is
sufficiently clear, whether its enforcement mechanisms are sufficient,
and whether it may positively harm third parties. See Microsoft, 56
F.3d at 1458-62. With respect to the adequacy of the relief secured by
the proposed Final Judgment, a court may not ``make de novo
determination of facts and issues.'' United States v. W. Elec. Co., 993
F.2d 1572, 1577 (D.C. Cir. 1993) (quotation marks omitted); see also
Microsoft, 56 F.3d at 1460-62; United States v. Alcoa, Inc., 152 F.
Supp. 2d 37, 40 (D.D.C. 2001); United States v. Enova Corp., 107 F.
Supp. 2d 10, 16 (D.D.C. 2000); InBev, 2009 U.S. Dist. LEXIS 84787, at
*3. Instead, ``[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.'' W.
Elec. Co., 993 F.2d at 1577 (quotation marks omitted). ``The court
should bear in mind the flexibility of the public interest inquiry: the
court's function is not to determine whether the resulting array of
rights and liabilities is one that will best serve society, but only to
confirm that the resulting settlement is within the
[[Page 33731]]
reaches of the public interest.'' Microsoft, 56 F.3d at 1460 (quotation
marks omitted); see also United States v. Deutsche Telekom AG, No. 19-
2232 (TJK), 2020 WL 1873555, at *7 (D.D.C. Apr. 14, 2020). More
demanding requirements would ``have enormous practical consequences for
the government's ability to negotiate future settlements,'' contrary to
congressional intent. Id. at 1456. ``The Tunney Act was not intended to
create a disincentive to the use of the consent decree.'' Id.
The United States' predictions about the efficacy of the remedy are
to be afforded deference by the Court. See, e.g., Microsoft, 56 F.3d at
1461 (recognizing courts should give ``due respect to the Justice
Department's . . . view of the nature of its case''); United States v.
Iron Mountain, Inc., 217 F. Supp. 3d 146, 152-53 (D.D.C. 2016) (``In
evaluating objections to settlement agreements under the Tunney Act, a
court must be mindful that [t]he government need not prove that the
settlements will perfectly remedy the alleged antitrust harms[;] it
need only provide a factual basis for concluding that the settlements
are reasonably adequate remedies for the alleged harms.'') (internal
citations omitted); United States v. Republic Servs., Inc., 723 F.
Supp. 2d 157, 160 (D.D.C. 2010) (noting ``the deferential review to
which the government's proposed remedy is accorded''); United States v.
Archer-Daniels-Midland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) (``A
district court must accord due respect to the government's prediction
as to the effect of proposed remedies, its perception of the market
structure, and its view of the nature of the case.''). The ultimate
question is whether ``the remedies [obtained by the Final Judgment are]
so inconsonant with the allegations charged as to fall outside of the
`reaches of the public interest.''' Microsoft, 56 F.3d at 1461 (quoting
W. Elec. Co., 900 F.2d at 309).
Moreover, the Court's role under the APPA is limited to reviewing
the remedy in relationship to the violations that the United States has
alleged in its complaint, and does not authorize the Court to
``construct [its] own hypothetical case and then evaluate the decree
against that case.'' Microsoft, 56 F.3d at 1459; see also U.S. Airways,
38 F. Supp. 3d at 75 (noting that the court must simply determine
whether there is a factual foundation for the government's decisions
such that its conclusions regarding the proposed settlements are
reasonable); InBev, 2009 U.S. Dist. LEXIS 84787, at *20 (``[T]he
`public interest' is not to be measured by comparing the violations
alleged in the complaint against those the court believes could have,
or even should have, been alleged.''). Because the ``court's authority
to review the decree depends entirely on the government's exercising
its prosecutorial discretion by bringing a case in the first place,''
it follows that ``the court is only authorized to review the decree
itself,'' and not to ``effectively redraft the complaint'' to inquire
into other matters that the United States did not pursue. Microsoft, 56
F.3d at 1459-60.
In its 2004 amendments to the APPA, Congress made clear its intent
to preserve the practical benefits of using consent judgments proposed
by the United States in antitrust enforcement, Public Law 108-237 Sec.
221, and added the unambiguous instruction that ``[n]othing in this
section shall be 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); see also U.S. Airways, 38 F. Supp. 3d
at 76 (indicating that a court is not required to hold an evidentiary
hearing or to permit intervenors as part of its review under the Tunney
Act). This language explicitly wrote into the statute what Congress
intended when it first 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
Sen. Tunney). ``A court can make its public interest determination
based on the competitive impact statement and response to public
comments alone.'' U.S. Airways, 38 F. Supp. 3d at 76 (citing Enova
Corp., 107 F. Supp. 2d at 17).
VIII. Determinative Documents
In formulating the proposed Final Judgment, the United States has
considered one determinative document within the meaning of the APPA, a
May 1, 2020 letter from Richard P. Smith, President and Chief Executive
Officer of DFA, to the United States Department of Justice, Antitrust
Division and to the Capper-Volstead Act Committee, United States
Department of Agriculture (``Letter''). The Letter is included as
Attachment 1 to this Competitive Impact Statement.
DFA has previously asserted that the Capper-Volstead Act, 7 U.S.C.
291-292, permits farmers and cooperatives collectively to market not
only raw milk, but also processed Fluid Milk. The United States,
however, does not agree with DFA's categorical assertion, which raises
questions of fact and of unsettled law.
Through the Letter, DFA has committed not to jointly process,
market, or sell Fluid Milk with agricultural cooperatives or producers
(other than its own farmer members) and has waived any right to assert
in any legal, regulatory, administrative, or adjudicative proceeding
that such conduct is exempt from the antitrust laws or otherwise
permissible under Section 6 of the Clayton Act or the Capper-Volstead
Act. The Letter, which provides additional detail, decreases the
likelihood that DFA would harm competition through coordination on
output and prices of Fluid Milk.
Dated: May 26, 2020
Respectfully submitted,
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Karl D. Knutsen
Nathaniel J. Harris
U.S. Department of Justice, Antitrust Division, Healthcare and
Consumer Products Section, 450 Fifth Street NW, Suite 4100,
Washington, DC 20530, 202-514-0976, karl.knutsen@usdoj
Attachment 1
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