Milking Profits - The Dairy Monopolies That Are Hurting Farmers
Born of a noble idea, dairy cooperatives let farmers join forces to get a good price for their milk and stand up to powerful interests. Now the coops are powerful, huge, and squeezing the farmers that ostensibly own them.
Earlier this summer, the Justice Department filed a legal brief to support Northeastern dairy farmers. More than 115 farmers are suing mammoth milk processor Dairy Farmers of America (DFA) for conspiring to hold down milk prices. The farmers argue that DFA violated antitrust laws by colluding with other milk buyers and striking exclusive deals with processors. The sad irony is that many of these farmers are owners of DFA, which isn’t a publicly traded agribusiness giant but rather a cooperative.
And there’s the problem. Cooperatives are meant to be a democratic and producer-owned alternative to corporations. Farmers have long used cooperatives to join forces and bargain with dominant agribusiness. Instead of selling their milk solo to Big Butter, Inc. farmers can form a cooperative that helps market their products to larger buyers or even build a farmer-owned butter factory.
The problem is some cooperatives have started to resemble the giant agricultural businesses they were meant to reign in. Under pressure to get big or get out, co-ops such as DFA have developed perverse incentives to squeeze their own members. Growing business hierarchies make cooperative managers less accountable to farmer-owners.
The dairy showdown has lessons for us all no matter where we work. The struggles of family farmers to build power together against giant agribusinesses parallel the struggles of Uber drivers and third-party vendors on Amazon to organize and bargain collectively. Ensuring healthy cooperative governance is critical for all independent contractors, workers, and small business owners who need rights to cooperate with one another in increasingly monopolized markets. Together, greater antitrust enforcement and healthy cooperative enterprise have massive potential to lessen structural inequalities and build an economy based on more than just short-term profits for investors.
A recent report by the Open Markets Institute, an anti-monopoly think tank where I work, argues that proper antitrust enforcement is critical to both level the playing field for cooperatives and to rein in cooperatives that no longer serve their members. By arguing that DFA’s exclusionary conduct and buyer power over dairy farmers could violate antitrust laws, the DOJ’s recent brief marks a step in the right direction.
But bolder action is needed. To truly rebalance power in agricultural markets and ensure that co-ops serve their members’ interests lawmakers and antitrust enforcers need to break up dominant agribusinesses and institute stronger guidelines ensuring healthy, democratic cooperative governance.
Read the full article on The Washington Monthly here.