[Federal Register Volume 85, Number 182 (Friday, September 18, 2020)]
[Notices]
[Pages 58387-58390]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-20642]



[[Page 58387]]

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DEPARTMENT OF JUSTICE

Antitrust Division


United States, et al. v. Dairy Farmers of America, Inc. and Dean 
Foods Company; Response to Public Comments

    Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. 
16(b)-(h), the United States hereby publishes below the Response to 
Public Comments on the Proposed Final Judgment in United States, et al. 
v. Dairy Farmers of America, Inc., et al., Civil Action No. 1:cv-02658, 
which was filed in the United States District Court for the Northern 
District of Illinois on September 14, 2020, together with a copy of the 
comment received by the United States.
    A copy of the comment and the United States' response to the 
comment is available at https://www.justice.gov/atr/case-document/file/1316656/download. A copy of the comment and the United States' response 
is also available for inspection at the Office of the Clerk of the 
United States District Court for the Northern District of Illinois. 
Copies of these materials may also be obtained from the Antitrust 
Division upon request and payment of the copying fee set by Department 
of Justice regulations.

Suzanne Morris,
Chief, Antitrust Division, Premerger and Division Statistics.

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.

No. 20 C 2658
Judge Feinerman

Response of Plaintiff United States to Public Comments on the Proposed 
Final Judgment

    Pursuant to the requirements of the Antitrust Procedures and 
Penalties Act (the ``APPA'' or ``Tunney Act''), 15 U.S.C. 16(b)-(h), 
the United States submits this response to the one public comment 
received regarding the proposed Final Judgment in this case. After 
careful consideration of the submitted comment, the United States 
continues to believe that the proposed Final Judgment will provide an 
effective and appropriate remedy for the antitrust violations alleged 
in the Complaint. The United States will move the Court for entry of 
the proposed Final Judgment after the public comment and this response 
have been published pursuant to 15 U.S.C Sec.  16(d).

I. Procedural History

    Dean Foods Company (``Dean'') filed for bankruptcy on November 12, 
2019, in the United States Bankruptcy Court for the Southern District 
of Texas. The 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.\1\ No other bidder submitted 
a bid for all of 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.
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    \1\ During its investigation, the Department also expressed 
concerns to DFA and Dean about the potential loss of competition for 
the sale and processing of fluid milk if DFA were to acquire Dean's 
fluid milk processing plants in Minnesota, South Dakota, and North 
Dakota. DFA subsequently ceased its efforts to acquire those plants.
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    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 (Docket No. 1) 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. The Complaint alleges that 
DFA and Dean compete head-to-head to sell fluid milk to customers in 
these geographic areas, including supermarkets, schools, convenience 
stores, and hospitals.
    Simultaneously with the filing of the Complaint, the United States 
filed a proposed Final Judgment (Docket No. 4-2) and an Asset 
Preservation and Hold Separate Stipulation and Order (``Stipulation and 
Order'') (Docket No. 4), signed by the parties that consents to entry 
of the proposed Final Judgment after compliance with the requirements 
of the Tunney Act, 15 U.S.C. 16. Pursuant to requirements under the 
Tunney Act, the United States filed the Competitive Impact Statement 
with this Court on May 26, 2020 (Docket No. 16), describing the 
transaction and the proposed Final Judgment. The United States then 
published the Complaint, proposed Final Judgment, and Competitive 
Impact Statement in the Federal Register on June 2, 2020, see 15 U.S.C. 
16(b)-(c); 85 FR 33,712 (June 2, 2020), and caused notice regarding the 
same, together with directions for the submission of written comments 
relating to the proposed Final Judgment, to be published in the 
Washington Post, Chicago Tribune, and Boston Globe on June 1-4 and June 
8-10, 2020. The 60-day period for public comment ended on August 10, 
2020. The United States received one comment concerning the allegations 
in the Complaint (Exhibit 1).

II. The Complaint and the Proposed Final Judgment

    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 (1) northeastern Illinois and Wisconsin and (2) 
New England in violation of Section 7 of the Clayton Act, 15 U.S.C. 18. 
Under the proposed Final Judgment and Stipulation and Order, which are 
designed to address the anticompetitive effects of the acquisition, 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'').
    As the Complaint alleges, northeastern Illinois and Wisconsin and 
New England each represent a relevant market where the merger would 
reduce the number of competitors from three to two. DFA's existing 
fluid milk processing plants overlap with two Dean plants that it 
proposed 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 further 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 
competed head-to-head to supply fluid milk customers in these areas 
before the merger, and customers have relied 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

[[Page 58388]]

and ultimately, millions of individual consumers.
    The proposed Final Judgment requires DFA to divest the Franklin 
Plant, De Pere Plant, and Harvard Plant. It defines three sets of 
divestiture assets, one for each Divestiture Plant, that include assets 
necessary to process, market, sell, and distribute fluid milk and other 
products by each of the Divestiture Plants. The divestiture assets also 
include brands and/or brand licenses which will allow the buyer of each 
Divestiture Plant to successfully market its milk. 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 (1) northeastern Illinois and Wisconsin or 
(2) New England.
    Plaintiffs 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.

III. Standard of Judicial Review

    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).\2\ In making that determination, 
the Court, in accordance with the statute as amended in 2004, is 
required to consider:
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    \2\ The United States District Court for the Northern District 
of Illinois has entered a number of antitrust consent decrees. See, 
e.g., United States v. National Association of Realtors, 2008 WL 
5411637 (N.D. Ill. Nov. 18, 2008) (Kennelly, J.); United States v. 
Earthgrains Co., 2000 WL 33115003 (N.D. Ill. July 3, 2000) (Bucklo, 
J.).

    (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 (D.C. 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''); United States v. Keyspan Corp., 763 F. Supp. 2d 633, 
637-38 (S.D.N.Y. 2011); see SEC v. Citigroup Global Markets Inc., 673 
F.3d 158, 168 (2d Cir. 2012) (``We are bound in such matters to give 
deference to an executive agency's assessment of the public 
interest.'').
    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; United States v. Apple, Inc., 889 F. Supp. 2d 623, 631 
(S.D.N.Y. 2012) (citing Microsoft, 56 F.3d at 1458, 1461-62). 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 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. 
Microsoft, 56 F.3d at 1456. ``The Tunney Act was not intended to create 
a disincentive to the use of the consent decree.'' Id.\3\
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    \3\ See also BNS, 858 F.2d at 464 (holding that the court's 
``ultimate authority under the [APPA] is limited to approving or 
disapproving the consent decree''); United States v. Gillette Co., 
406 F. Supp. 713, 716 (D. Mass. 1975) (noting that, in this way, the 
court is constrained to ``look at the overall picture not 
hypercritically, nor with a microscope, but with an artist's 
reducing glass'').
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    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''). In determining 
whether a proposed settlement is in the public interest, a district 
court ``is not permitted to reject the proposed remedies merely because 
the court believes other remedies are preferable.'' United States v. 
Morgan Stanley, 881 F. Supp. 2d 563, 567 (S.D.N.Y. 2012) (quoting 
United States v. Abitibi-Consol. Inc., 584 F. Supp. 2d 162, 165 (D.D.C. 
2008)). The ultimate question is whether ``the remedies [obtained by 
the

[[Page 58389]]

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); United States v. Keyspan Corp., 763 F. Supp. 2d 633 637-38 
(S.D.N.Y. 2011) (``The Court's function is not to determine whether the 
proposed [d]ecree results in the balance of rights and liabilities that 
is the one that will best serve society, but only to ensure that the 
resulting settlement is `within the reaches of the public interest.''' 
(quoting United States v. Alex. Brown & Sons, Inc., 963 F. Supp. 235, 
238 (S.D.N.Y. 1997)); InBev, 2009 U.S. Dist. LEXIS 84787, at *20 (``the 
`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. See also, Heckler v. Chaney, 470 U.S. 821, 832 (1985) 
(quoting U.S. Const. art. II, Sec.  3) (recognizing that the decision 
about which claims to bring ``has long been regarded as the special 
province of the Executive Branch.'').
    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).

IV. Public Comment and the United States' Response

    During the 60-day comment period, the United States received a 
single comment. The comment is from Martin T. Petroski, a dairy farmer 
in Pennsylvania. Upon review, the United States believes that nothing 
in the comment warrants a change to the proposed Final Judgment or 
supports a conclusion that the proposed Final Judgment is not in the 
public interest. As required by the APPA, the comment, with the 
author's address and phone number removed, and this response will be 
published in the Federal Register.
    The comment expresses criticism of DFA, claiming that DFA is too 
large and engages in anticompetitive conduct in general. The comment, 
however, does not appear to be in any way critical of the merger. The 
comment, for example, does not refer to any of the allegations in the 
Complaint nor to the impact of the proposed Final Judgment.
    The proposed Final Judgment addresses each alleged competitive harm 
that the merger presented. As Plaintiffs allege in the Complaint and 
the United States explains in the Competitive Impact Statement, the 
proposed merger, without the remedy in the proposed Final Judgment, 
would have substantially lessened competition for the processing and 
sale of fluid milk in two geographic markets--northeastern Illinois and 
Wisconsin and New England--in violation of Section 7 of the Clayton 
Act, 15 U.S.C. 18.
    The proposed Final Judgment addresses the harm that the Complaint 
alleges by preventing an increase in concentration in these two fluid 
milk processing markets. The proposed Final Judgment maintains 
competition at pre-merger levels in both markets in which the Complaint 
alleges that the merger would substantially reduce competition. The 
proposed Final Judgment requires DFA to divest the Dean plants in 
northeastern Illinois and northern Wisconsin which compete with a DFA 
fluid milk processing plant. Similarly, the proposed Final Judgment 
requires DFA to divest the Dean plant near Boston which competes 
against other DFA fluid milk processing plants.
    The comment also states that DFA is the ``only market,'' without 
identifying any specific geographic location or clearly describing the 
market to which it refers. From the context in which the commenter uses 
this phrase, the United States understands this part of the comment to 
relate to DFA's actions as a dairy cooperative, buying raw milk from 
its farmer members and coordinating the sale of milk from independent 
farmers. To the extent this comment advances a claim about DFA's 
purchase of raw milk from farmers, the comment is discussing the sale 
of raw milk from farmers or cooperatives to processors, not the sale of 
processed fluid milk from dairy processors to retailers and schools 
that the Complaint addresses. Because the United States did not make 
any claims relating to any raw milk markets in its Complaint, this part 
of the comment is outside the scope of what this Court is asked to 
review under the Tunney Act.
    The comment closes by raising concerns about farmers dumping raw 
milk rather than selling it to processors. But farmers began dumping 
raw milk as a result of conditions caused by the COVID-19 pandemic 
before the merger was consummated on May 1, 2020, making it clear that 
the merger did not cause farmers to dump milk. See e.g., Jesse Newman & 
Jacob Bunge, Farmers Dump Milk, Break Eggs, as Restaurant Closings 
Destroy Demand, Wall Street J. (April 9, 2020). The COVID-19 pandemic 
and consequent closing of schools also complicated the dairy supply 
chain and reduced demand. See, e.g., David Yaffe-Bellany & Michael 
Corkery, Dumped Milk, Smashed Eggs, and Plowed Vegetables: Food Waste 
of the Pandemic, N.Y. Times (April 11, 2020) (``Major consumers of 
dairy, like public schools and coffee shops, have all but vanished, 
leaving milk processing plants with fewer customers at a time of year 
when cows produce milk at their fastest rate.''). Finally, concerns 
relating to raw milk are in any event outside the scope of the harm 
alleged in the Complaint and, therefore, outside the scope of what this 
Court is asked to review under the Tunney Act.
    In summary, while the commenter appears to criticize several 
aspects or actions of DFA, the commenter does not appear to be in any 
way critical of the merger or to provide any criticism of any part of 
the remedy that the United States and Defendants have agreed to in

[[Page 58390]]

the proposed Final Judgment. For these reasons, the United States 
believes that nothing in the comment warrants a change to the proposed 
Final Judgment or supports a conclusion that the proposed Final 
Judgment is not in the public interest

V. Conclusion

    After reviewing the public comment, the United States continues to 
believe that the proposed Final Judgment, as drafted, provides an 
effective and appropriate remedy for the antitrust violations alleged 
in the Complaint, and is therefore in the public interest. The United 
States will move this Court to enter the proposed Final Judgment after 
the comment and this response are published in the Federal Register.

Dated: September 14, 2020
Respectfully submitted,

Karl D. Knutsen--------------------------------------------------------
Karl D. Knutsen,
Justin Heipp,
Nathaniel J. Harris,
Christopher A. Wetzel,
U.S. Department of Justice,
Antitrust Division,
Healthcare and Consumer Products Section,
450 Fifth Street NW, Suite 4100,
Washington, DC 20530,
202-514-0976,
[email protected]

Martin T. Petroski
May 20, 2020
Eric Welsh Acting Chief

A comment on the Dean Food--DFA Merger--It Should not happen

DFA is coming into control of the milk market--what has all the 
expansion did for the farmer? The farmer has got no major return but 
more cost. Dean food should be restricted and DFA broken up like Ma 
Bell became Baby Bells. The system needs to compete not be 
control(l)ed. DFA is the ``milk mob''--there is legal actions in 
courts at present. No one should have more than 49% of a market--at 
places they are the only market. Interesting in the East less milk 
but yet one has dumping--what did they buy Deans for?

Food for Thought

Martin Petroski

[FR Doc. 2020-20642 Filed 9-17-20; 8:45 am]
BILLING CODE 4410-11-P