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The co-op faced a new round of bad news last week when the Commodity Futures Trading Commission slapped $12 million in penalties on DFA and two former executives for trying to manipulate the dairy futures market at the Chicago Mercantile Exchange. A farm group critical of DFA said the case ought to convince the Justice Department to take a closer look at DFA's efforts to squelch competition.
"We'd like this to open the eyes of the Justice Department" to DFA and its ties to Dean Foods, the nation's biggest dairy processing company, said Paul Rozwadowski, a Wisconsin dairy farmer and member of the National Family Farm Coalition, in a conference call with agriculture reporters Friday.
Justice Department lawyers have been watching DFA for several years, but an investigation of the co-op's activities fizzled after reaching higher levels at the department last year.
Critics allege that DFA, which is owned by farmers, has snuffed out competition by merging with other cooperatives and forming other business relationships that force farmers to sell their milk through DFA. In the north country, for instance, DFA has formed such a wide net that farmers have few other choices for selling their milk.
In addition, some of the largest dairy plants in the region have exclusive supply contracts with DFA or its affiliate, Syracuse-based Dairylea Cooperative Inc.
But cooperatives also have a limited exemption from anti-trust laws, and DFA has said its aggressive business approach does not reach the level of a monopoly.
An economist who participated in Friday's conference call, Peter Carstensen of the University of Wisconsin, said scandals in the financial markets, including the DFA case, ought to translate into greater anti-trust enforcement as well. President-elect Obama was one of only two presidential candidates to respond to a survey by the Anti-Trust Institute during the campaign, he said.
On the other hand, anti-trust experts say agriculture, and dairy in particular, receive far less anti-trust attention than other industries.
"I'm hopeful, but I'm not going to hold my breath either," Mr. Carstensen said.
In the CFTC case, officials said former DFA chief executive officer Gary Hanman and its chief financial officer, Gerald Bos, tried to manipulate the market by buying more than $23 million worth of block cheddar cheese on the CME's spot market in May and June 2004 -- a move that would ripple through the dairy markets and eventually raise prices paid to DFA members for milk.
Two executives of DFA subsidiaries will also pay penalties, for making purchases in cooperation with Mr. Hanman's and Mr. Bos's efforts.
The cooperative and the former executives neither admitted nor denied the charges as part of the settlement.
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