FOR IMMEDIATE RELEASE: March 31, 2004
Schumer Urges Feds To Gauge How Potential Sale Of Parmalat Would Impact New York's Dairy Farmers
If one of the big New York milk suppliers acquires Parmalat, competition to buy milk from farmers would be greatly reduced; With fewer suppliers buying the milk, NY farmers could potentially get lower prices and lose profits
Schumer: Antitrust Division of the Justice Dept should closely follow the proposed sale, ensure that there is no sizeable reduction in competition in dairy industr
US Senator Charles E. Schumer today warned that the proposed sale of Parmalat to one of the existing large New York milk suppliers could yield lower farm prices for New York's dairy farmers. Because the sale could result in less competition among suppliers buying the farmers' milk, Schumer urged the Department of Justice to assess the potential impact of the transaction on New York farm prices before approving any deal.
"It's a simple law of economics that if you have one big supplier looking to buy most of the milk from our farmers, it will be harder for the farmers to get a good price," Schumer said. "The Antitrust division of the Justice Department exists to ensure that there's fair competition in our markets and I expect them to look at any potential Parmalat transaction very carefully."
Parmalat, which has 30 subsidiaries around the world, has been embroiled in an accounting scandal since it revealed last year that a bank account that supposedly contained $5 billion did not really exist. Auditors had used the fake account to certify the company's books, leading several Parmalat executives to resign while others are under investigation for fraud. Following the accounting scandal, Parmalat USA filed for bankruptcy February 25 and is now in the process of being sold. Recent media accounts have indicated that Parmalat is already involved in negotiations with one, if not more, companies to acquire its US subsidiaries.
Schumer said he is concerned that an acquisition by one of the existing New York milk suppliers such as Dean Foods, HP Hood or National Dairy Holdings (NDH) may reduce competition and raise prices for consumers in an already concentrated market. For example, if Dean Foods acquired Parmalat USA, the combined company would control as much as 85-90% of the New York City market, which has 20 million customers. "I am concerned that an acquisition by one of the existing processing companies that purchases milk from New York dairy farmers and supplies retail milk products in New York may reduce competition and raise prices for consumers in an already concentrated market," Schumer wrote today in a letter to R. Hewitt Pate, the Assistant Attorney General for the Justice Department's antitrust division. "As prescribed by federal antitrust statutes, it is imperative that the Department of Justice assures that any such merger does not reduce competition."
Schumer today urged the Antitrust Division of the Department of Justice to closely follow the potential sale and ensure there is no reduction in competition in New York's dairy industry. Schumer said it is in the vital interest of both New York's dairy farmers and consumers that the Department of Justice remain vigilant and fully protect New Yorkers as the Parmalat sale proceeds. The Department of Justice has authority under Section 7 of the Clayton act to prevent mergers from substantially lessening competition in a market.
"Our dairy farmers aren't looking for special treatment. All they want is a decent farm price on their milk so that they can stay in business," Schumer said. "If you slant the market in such a way so that there's basically just one or two companies competing to buy milk, the farmers selling that milk have no leverage. New York's dairy farmers have enough to worry about like weather and their harvests. The last thing they should have to worry about is an unfair market."
Even before the proposed sale of Parmalat USA, Schumer called for a General Accounting Office (GAO) investigation last year into the apparent farm-retail price disparity caused by the existing lack of competition in the processing sector. The GAO agreed to conduct the study which is expected to be completed by the end of the year.