The bankruptcy of Dean Foods, the largest milk processor in the country, was big news in Wisconsin. The dairy giant filed for Chapter 11 bankruptcy last November, and has just recently sold off the remainder of its assets. The liquidation took a bit longer than expected because the federal Department of Justice (DOJ) was concerned that the purchase of certain Dean assets by the Dairy Farmers of America Inc. (DFA) and Prairie Farms Dairy would violate antitrust laws.
Dean Foods Bankruptcy
When Dean Foods filed for bankruptcy there was significant concern that some of Wisconsin’s already-hurting dairy farmers would be put out of business themselves if Dean plants in the state shut down. As we have discussed on this blog multiple times, the bankruptcy of one company in a supply chain can often break other links in the chain as well.
Fortunately, Dean’s now-former plants have stayed open because Dean was able to secure financing to continue operations until it was able to sell off its assets. However, the sale of those assets took a bit longer than expected when the federal Department of Justice (DOJ) and the Wisconsin Attorney General filed a “civil antitrust lawsuit… to block DFA’s proposed acquisition of three fluid milk processing plants from Dean, which are located in northeastern Illinois, Wisconsin, and New England.”
The DOJ offered to settle the suit on the same day it filed its case if the court would approve Dairy Farmers of America Inc.’s (DFA’s) “divestiture of plants located in Harvard, Illinois; De Pere, Wisconsin; and Franklin, Massachusetts, as well as associated equipment and other assets related to fluid milk production…” The court approved of these terms, and DFA took appropriate action.
“During its investigation, the [DOJ] also expressed concerns to DFA and Dean about the potential loss of competition if DFA were to acquire a number of Dean’s fluid milk processing plants in the Upper Midwest, and DFA subsequently ceased its efforts to acquire those plants.”
The DOJ also investigated the sale of some other milk processing plants to Prairie Farms, but decided not to oppose those sales because it concluded that the plants in question would probably shut down if Prairie Farms didn’t buy them.
The DOJ’s interference in this bankruptcy is not unprecedented, but it is somewhat unusual. Most bankruptcy cases do not attract the DOJ’s attention. Those that do are ones where the value of the assets in question is in the millions of dollars, and their sale to a competitor would significantly decrease competition in the marketplace, or even create a monopoly.
If you are considering filing for bankruptcy, and you are concerned there may be antitrust implications, let’s talk. Hanson & Payne is a business-minded firm that business owners and commercial lenders in Milwaukee and across the state rely on to counsel them and guide them through the bankruptcy process. We would be honored to assist you during your time of need.