In re Southeastern Milk Antitrust Litigation, 2:08-MD-1000 (E.D. Tenn.)

On March 27, 2012, the federal district court granted the defendants’ motion for summary judgment in Food Lion, et al. v. Dean Foods Co., et al., No. 2:07-CV-188, one of the cases in the above-referenced MDL, and dismissed the Plaintiffs’ two remaining Sherman Act section 1 and 2 claims.  Those claims alleged respectively a horizontal agreement not to compete among defendants Dean Foods (Dean), Dairy Farmers of America (DFA) and National Dairy Holdings (NDH) and a conspiracy to monopolize among Dean, DFA and NDH.  Food Lion and the other Plaintiffs are retail sellers of processed milk who purchase milk directly from Dean and/or DFA.

The district court’s ruling rested on two ultimate conclusions.  First, since the court found the Plaintiffs’ economic damages model flawed, they could not establish the required element of antitrust injury.  According to the court, the model measured at least in part price increases from a 2001 merger between Dean and Suiza — not challenged in this case — rather than the anticompetitive conduct alleged in this case.  (Slip op. 10)

Second, the court concluded that both remaining Sherman Act claims required proof of a relevant geographic market.  This conclusion independently required summary judgment on both claims, since the Court had ruled previously that the Plaintiffs could not prove a relevant geographic market.

The court ruled on several interesting legal issues in its 21-page opinion.  These included: (1) how Monsanto Co. v. Spray Rite Service Corp., 465 U.S. 752, 764 (1984)  — requiring “evidence that tends to exclude the possibility” that challenged conduct resulted from independent action — applies on a motion for summary judgment; (2) whether a court may properly consider the “cumulative effect” of evidence in deciding whether a genuine issue of fact is presented; (3) whether Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447 (1993) and Sixth Circuit precedent require proof of a relevant geographic market in an action under Sherman Act s. 2 for conspiracy to monopolize; and (4) whether the proper Sherman Act s. 1 characterization of an agreement as vertical (rule of reason analysis) or horizontal (per se analysis) is a question of law for the court or a question of fact for the jury.

The court concluded, after surveying authorities, that the horizontal/vertical characterization is a question of law for the court, but found the proper characterization of the challenged agreement in this case “difficult.”  According to the opinion, “the essence of Plaintiffs’ conspiracy claim is a quid pro quo agreement beween competitors at the same level of the distribution chain (Dean and NDH) almost totally carried out through the use of agreements involving the supply of raw milk among a group of firms at other levels of the distribution chain (Dean and DFA, NDH and DFA). . . .  Plaintiffs suggest that two horizontal competitors, Dean and NDH, ‘are central to the argument’ while at the same time arguing that it is the full supply agreements for raw milk between vertical actors that are ‘at the heart’ of their claims.”  Distinguishing In re Pressure Sensitive Label Stock Antitrust Litigation, 2007 WL 4150666 (M.D. Pa. 2007), relied on by the Plaintiffs, the Court decided that “the essence of the agreement alleged by the Plaintiffs is one between Dean in its role as a processor of bottled milk and DFA in its role as a supplier of raw milk and that the milk supply agreements for raw milk are central to the completion of the alleged conspiracy.”  (Slip op. 21)  Since this agreement has “substantial vertical elements,” the Court concluded that it was subject to rule of reason analysis, thus requiring the Plaintiffs to establish a relevant geographic market.  Since as mentioned above, the court had already concluded that the Plaintiffs could not establish such a market, summary judgment dismissing the remaining Sherman Act s. 1 claim was required.

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