10.27.06

Justice Dept Agrees To Schumer's Parmalat Probe; Will Gauge How Sale Of Company Could Impact New York's Dairy Farmers

Schumer warned in March that if one of the big NY milk suppliers acquires Parmalat, the 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 In response, Schumer asked Antitrust Division of the Justice Dept to closely follow the proposed sale, ensure that there is no sizeable

US Senator Charles E. Schumer today announced that the US Department of Justice has agreed to a request he made six weeks ago and has already launched an antitrust investigation into the proposed sale of milk giant Parmalat. Schumer had asked the Justice Department in late March to closely monitor the potential impact on New York farm prices of a sale of Parmalat to one of the existing large New York milk suppliers before approving any deal. Schumer was concerned that if Parmalat were sold to one of the big suppliers the sale could result in less competition among suppliers buying the farmers' milk and would yield lower farm prices for New York's dairy farmers.

"This is a good day for dairy farmers in upstate New York," Schumer said. "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. The Antitrust division of the Justice Department exists to ensure that there's fair competition in our markets and I'm glad they've agreed to look at all potential Parmalat transactions 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 was particularly 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 8590% 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 in his March 31 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."

At that time, Schumer 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.

In response, William E. Moschella, the Assistant US Attorney General, today told Schumer that the Justice Department would study the impact of potential transactions on dairy farmers in upstate New York and "will take enforcement action as may be warranted to protect competition in the affected markets."

Even before the proposed sale of Parmalat USA, Schumer called for a General Accounting Office (GAO) investigation last year into the apparent farmretail 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.

"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."



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