Ruling in Dean Foods Puts Regulators on Notice
By Aruna Viswanatha | April 14, 2022 4:38 pm

A less-than-sympathetic ruling in the Justice Department’s case against Dean Foods last week might hold a few lessons for regulators, antitrust lawyers said.

Last Wednesday, a federal judge in Wisconsin, J.P. Stadtmueller, rejected Dean Foods’ bid to dismiss the case, but criticized the Justice Department for what he considered a weak complaint. “In today’s world, structural issues, together with a lack of specificity in content associated with the underlying complaint, simply do not measure up to that which any court would reasonably expect in draftsmanship from an experienced litigator,” the former U.S. Attorney wrote.

Dean Foods

Dean Foods paid $35 million last year to acquire some assets from a rival. (iStock)

The Justice Department sued Dean Foods in January, saying that when the company bought processing plants from Foremost Farms last year it removed competition in the dairy industry and raised milk prices for schools and retailers in several Midwestern states.

Dean Foods asked the court to throw out the case and argued that the Justice Department did not adequately describe the relevant geographic market, a necessary step in building an antitrust case.

To some antitrust litigators, the harsh language in the ruling was intended to put regulators on notice that they need to pay closer attention to two recent Supreme Court decisions — Bell Atlantic Corp. v. Twombly and Ashcroft v. Iqbal — which nudged higher the bar for plaintiffs to bring a case.

A 2007 antitrust case, the Supreme Court ruled in Twombly that plaintiffs must include enough facts in their complaint to make their case plausible, and not just possible. In Iqbal, which was decided last May, the Supreme Court applied Twombly on a broader scale.

The opinions from both Twombly and Iqbal have already been cited in thousands of lower court decisions. The Dean Foods lawsuit is a closely watched one since so few government challenges to mergers actually go to trial.

Twombly, I don’t think was mentioned at all, and Iqbal was mentioned only once in passing, but in my mind clearly the court was thinking about the principles expressed in those decisions,” said Peter Sullivan, an antitrust litigator at Gibson, Dunn & Crutcher LLP. “It shows that the government is not immune from the reach of  those decisions.”

“I do think the lines are drawn in terms of where the fight may be,” he added. “DOJ is going to have to prove the relevant market, and Dean is going to fight that tooth and nail.”

The Justice Department has long-argued merger cases in a similar way, but the ruling may prompt some rethinking.

“I’m not sure Justice will feel an obligation to do anything about it,”  said Donald Kaplan, a partner at K&L Gates LLP who worked as special litigation counsel for the Antitrust Division in the 1980s. ”But it could be that judges are starting to take a look at the form more closely as opposed to simply accepting  it for what it is.”

Justice Department spokeswoman Gina Talamona declined to comment but did repeat a statement from last week: “We’re pleased the court denied the motion to dismiss and we’re prepared to litigate the case in court.” A lawyer for Dean Foods did not respond to a call seeking comment.

For some observers, the ruling also reinforced a  growing importance to courts of the guidelines the agency uses in reviewing mergers.

“What is interesting to me, is that the judge is continuing a trend: there are not many litigated merger cases, and merger law is becoming more disconnected from case law,” said Spencer Waller a professor at Loyola University who previously worked in the Antitrust Division. “The judge is citing the government’s guidelines as much as older decisions.”

“The guidelines are supposed to be just an attempt to be more transparent about how the agencies would decide to bring a case,” he continued. They weren’t supposed to be a road-map once you got to litigation.”

The DOJ and the Federal Trade Commission are currently reviewing the guidelines, and the agencies are expected to announce possible revisions to them at a trade conference next week.

But some argue the Justice Department may have made its case harder for itself by not relying on older decisions, including a standard previously outlined by the D.C. Circuit and the Supreme Court. That standard, from Philadelphia National Bank, requires the government only to prove the company’s share of the market after a merger is beyond a certain level, and then shifts the burden to the companies.

In its complaint against Dean Foods, the Justice Department  included a detailed analysis of how the transaction forced prices to go up.

“Rather than going into the level of detail they do in their analysis of the case,” said University of Tennessee professor Maurice Stucke who worked as a trial attorney in the Antitrust Division, why not say “under the prevailing legal standard we are entitled to a presumption that the merger will substantially lessen competition, and here it is satisfied?”

“If as part of your prima facie case you have to not only prove a high market share in a highly concentrated market, but also establish a very detailed competitive effects story,” Stucke said, “then the burden never shifts to the defendant.”

The idea of regulators tying their own hands also surfaced in commentary published by the American Antitrust Institute last week. Antitrust Division veteran Bernard Hollander argued that when Assistant Attorney General Christine Varney described to a Senate panel last month how courts view challenges to mergers, she left out an important word.

In her testimony, Varney said the law “prohibits transactions that result in a substantial lessening of competition.” Hollander said she left out the world “may,” which made the standard a more difficult one for the Justice Department than it needed to.


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