The Dairy Farmers of America (DFA) co-operative has announced that it has reached a settlement agreement in a portion of a class action alleging price fixing activities. DFA has not admitted any wrongdoing but has agreed to pay US$46m to the plaintiff class.
The facts in brie-f
DFA is a cooperative of more than 13,000 dairy farmers in the US. It buys raw milk from its members and sells milk and derivative products to wholesale buyers.
The class action was filed in the US District Court in Vermont in February 2013 by five lead plaintiffs who purchased products made by DFA members during the relevant period. The plaintiffs alleged that in 2004 DFA manipulated the Chicago Mercantile Exchange (CME) in order to fix the prices of milk and cheese.
Specifically, the plaintiffs allege that DFA bought cheese on the CME Cheese Spot market despite having an ‘inordinate supply of cheddar cheese, and no conceivable use for the cheese it was purchasing.’ The plaintiffs then allege that DFA later sold the cheese outside of the CME at a loss. According to the plaintiffs, DFA’s goal was to sustain higher cheese prices.
This class action follows on from regulatory action in December 2008. The Commodity Futures Trading Commission (CFTC) ordered DFA to pay a fine of US$12m following an investigation into its trading activity on the CME markets.
Also, in January this year DFA settled another class action commenced in 2007 and agreed to pay US$159m in respect of allegations that DFA conspired with others to suppress raw milk prices across 14 southeast US states.
Moo-ving forward
This case is part of common pattern in the US where class actions follow on from regulatory actions into anti-competitive conduct.
Whilst we haven’t seen much of this type of action in Australia yet, the cardboard box class action that followed the ACCC’s investigation into cartel conduct by Amcor and Visy is one example. On the consumer law front, the planned “Voda-fail” class action may be a sign of things to come for consumer class actions.
Claire Bridge and Natasha Cox
Photo credit: Suat Eman/FreeDigitalPhotos.net
