Milk Producers Pay Back Millions In Price-Fixing Settlement
ARI SHAPIRO, HOST:
If you've bought milk since 2003, you might be entitled to part of a $52 million class action lawsuit. It's the result of a battle between an animal rights group and the dairy industry over price fixing. Here's Elizabeth Kulas of our Planet Money podcast.
ELIZABETH KULAS, BYLINE: Joe Soenneker was born into dairy farming.
JOE SOENNEKER: I took over from my dad. I think 1889 - that's when Grandpa came here.
KULAS: His farm is in Minnesota, and for 40 years, Joe made a steady living selling milk. Then in 2009, the price of milk fell - like, really fell. That year was the toughest year for dairy farmers since the Depression. Joe is coming on 62, and he started to think about getting out of the business. And then one morning in early spring, Joe was out milking, and he heard something on the radio.
SOENNEKER: Well, I think it was one of them dairy programs that they were coming out with another whole-herd buyout.
KULAS: A whole-herd buyout - a dairy organization was going to pay farmers like Joe to stop producing milk. They were going to pay him to take his 40 dairy cows and sell them for beef.
SOENNEKER: And it just gave me an extra opportunity to get some extra money.
KULAS: The group behind the buyout is called Cooperatives Working Together. It's an umbrella group whose members produce around 70 percent of U.S. milk. Between 2003 and 2010, when the price of milk got too low, they offer another round of the buyout program. They figured by cutting the supply, they'd drive up the price.
For the dairy industry, this was no secret. It was just part of a larger effort to stabilize milk prices in times of oversupply. But on the other side of the country, there was a woman who heard about this program and thought, this is a terrible deal for consumers and for cows.
CHERYL LEAHY: My name is Cheryl Leahy. I am general counsel at Compassion Over Killing.
KULAS: As the name suggests, Compassion Over Killing is an animal advocacy nonprofit. Cheryl spends a lot of time trying to get the dairy industry to be nicer to cows. When she found out about the herd buyout program, she thought, hey, by paying to kill these cows, they're reducing the supply of milk and raising prices. That sounds a lot like price-fixing.
LEAHY: It raised questions for us about antitrust laws. And the especially outrageous part to us was that this was all done by killing over 500,000 young cows.
KULAS: Which might sound like a lot to Cheryl, but to dairy farmers, that's almost nothing.
BOB CROPP: There is anywhere from 50,000 to 55,000 dairy cows removed from the dairy herd every given week.
KULAS: Bob Cropp is a professor emeritus of dairy marketing. He was also an expert witness for the dairy industry in this case.
CROPP: And when that dairy cow's milk production drops to a certain level, it's more profitable to sell that cow for meat than to retain it in the herd for producing milk.
KULAS: Bob says the dairy industry relies on killing cows. About 30 percent are retired each year. Animal activists might not like it, but it's totally legal. The basis for this class action was that the killing was being used to restrict supply, not to increase it. So when Cheryl brought her suit against the dairy farmers, they decided, you know what? It's not worth the legal battle. Let's settle up.
And with that, they agreed to cut checks to milk drinkers all over America. Anyone who's bought milk or yogurt or cream cheese in 15 states since 2003 can apply for a rebate - 3 and a half million people already have. Milk drinkers have until the end of the month to file a claim. Elizabeth Kulas, NPR News.
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