(Host) The U.S. Justice Department has extended its review of a proposed merger between two large dairy companies.
Last month, the H.P. Hood company of Massachusetts and Dallas-based National Dairy Holdings announced they’d join forces to become the nation’s second largest dairy processor.
The Justice Department has now told state officials that it needs more time to investigate the impact of the merger on farmers and consumers.
VPR’s John Dillon reports.
(Dillon) The merger would create a dairy industry powerhouse with 3 billion dollars a year in sales.
H.P. Hood is a venerable New England brand that has bottling plants in six states. National Dairy Holdings has 33 plants around the country and is half owned by Dairy Farmers of America, the nation’s largest dairy cooperative.
Both Vermont and the U.S. Justice Department are looking at the deal. Michael Duane is an assistant attorney general who represents the state Department of Agriculture. He says the Justice Department recently told the state that it’s extended its investigation.
(Duane) “At this point, as we understand it, the U.S. Justice Department has done a second request, which means they are now gathering additional information from the companies that are involved in this acquisition and merger to look at it more carefully.”
(Dillon) According to Duane, the state wants to know if the merger will result in higher prices for consumers. The state also questions whether the new company would leave farmers with fewer places to market their product.
(Duane) “We’re looking at whether there will be a lessening of options for farmers to be able to sell their milk and if there is will it have any negative impact of them. It may not, it may; we don’t know. We’re gathering information right now.”
(Dillon) Officials at the Justice Department anti-trust division couldn’t be reached for an interview.
But they’re under pressure to investigate the deal. Ten U.S. senators – including Vermont’s – have asked for the probe.
The senators say they’re concerned that the merger would allow one company to control 90 percent of the region’s fluid milk supply.
Pete Hardin is the editor of a Wisconsin-based newspaper that tracks the milk industry. He thinks the senators are asking good questions.
Hardin says that National Dairy Holdings is half owned by the nation’s largest dairy co-op, Dairy Farmers of America ,based in Kansas City.
And he points out that the new company could require exclusive supply contracts that could force farmers in New England to sell their milk to just one buyer.
(Hardin) “Farmers do best when there’s honest competition among milk buyers for their milk…I would suspect that the power grab by Dairy Farmers of America to try to control flow of New England Milk to fluid bottlers is what the biggest concerns are.”
(Dillon) National Dairy Holdings was itself born of an earlier merger in the milk industry. When Texas-based Suiza Foods merged with Dean Foods last year, the Justice Department required them to sell off 11 processing plants. Those plants were then bought by the newly formed National Dairy Holdings.
Lynne Bohan is a spokeswoman for H.P. Hood. She says the merger between Hood and National Dairy Holdings will create more competition, not less. Bohan sees the new company as a counter-balance to the power now held by Dean Foods.
(Bohan) “The combined operations of both National Dairy Holdings and Hood complement each other very well geographically and with very little overlap, and the combined operations also complement each other very well in terms of product mix. So we think that again combining these companies will put this newly merged company into a position to better compete with Dean Foods nationally.”
(Dillon) The Hood spokeswoman says the new company will continue to buy milk from New England co-ops and independent farmers in Vermont.
For Vermont Public Radio, I’m John Dillon.