On April 3, 2017, the Department of Justice (“DOJ”) announced that that it forced Danone to divest its Stonyfield Farms business in order for Danone to proceed with its $12.5 billion acquisition of WhiteWave.
Prior to the merger, Danone did not produce or sell organic milk in the United States, however, it produced and sold organic yogurt through its United States subsidiary, Stonyfield Farms. WhiteWave produces and sells organic milk and yogurt in the United States.
According to the DOJ’s complaint, however, as a result of Danone’s long-term strategic partnership and supply and licensing agreements with CROPP Cooperative (“CROPP”), WhiteWave’s primary competitor, the proposed acquisition would have provided incentives and opportunities for cooperative behavior between the two leading purchasers of raw organic milk in the northeast (CROPP and WhiteWave”), which likely would have resulted in farmers receiving less favorable contract terms for the purchase of their raw organic milk. So, the DOJ had buyer power concerns.
The DOJ’s complaint also alleged that the proposed acquisition would have aligned the interests of the producers and sellers of Stonyfield, Horizon and Organic Valley, the only three national fluid organic milk brands, and risked higher prices and fewer choices for U.S consumers.
In other words, the proposed acquisition would reduce competition between the two leading buyers of raw and fluid organic milk, potentially harming dairy farmers in the northeast and between the two primary sellers of organic milk brands to U.S. consumers.
To resolve the monopsony concerns and the U.S. consumer concerns, the DOJ required Danone to divest its Stonyfield Farms business to an independent buyer. The divestiture will completely separate Danone’s and CROPP’s strategic partnership which would eliminate the entanglements between CROPP and the merged firm. As a result, the divestiture should preserve competition for the purchase of raw organic milk from northeast dairy farmers and the sale of fluid organic milk to consumers.
The DOJ’s settlement is a complete win for northeastern organic dairy farmers and U.S. consumers. The DOJ’s complaint confirms that organic milk and conventional milk are separate markets and that the Antitrust Division will aggressively pursue monopsony concerns in agricultural markets. The DOJ’s settlement will ensure competitive marketplaces for both farmers in the northeast that sell raw organic milk and consumers who purchase fluid organic milk in stores nationwide. Because the DOJ is requiring the divestiture of a complete business, the DOJ did not require an upfront buyer.