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Schumer Urges Feds To Gauge How Sale Of Parmalat Would Impact Metro Ny Milk Prices

On the eve of historic milk price hikes in New York, Schumer asks Antitrust Division of the Justice Dept to closely follow the proposed sale and ensure that there is no sizeable reduction in competition in NY's dairy industry

If one of the big New York milk suppliers acquires Parmalat, competition to buy milk from farmers would be greatly reduced resulting in even higher prices in NYC

On the eve of historic milk price increases that could make New Yorkers pay as much as $3.15 for a gallon of whole milk, US Senator Charles E. Schumer today warned that the proposed sale of Parmalat to one of the existing large New York milk suppliers could reduce competition and further increase milk prices in New York City and the suburbs. Schumer today urged the US Department of Justice Antitrust Division to assess the potential impact of the transaction on New York milk 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. "New Yorkers are already facing record-high milk prices this week. 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. Starting tomorrow, milk prices in the New York metro area will already be increasing 30 cents a gallon because of higher prices for raw milk.

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.

"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."

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.


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