Jan 3 (Reuters) - A U.S. federal appeals court has reinstated an antitrust case against Dean Foods Co alleging it conspired to restrict competition for bottled milk in the southeast United States.
The Cincinnati-based U.S. 6th Circuit Court of Appeals found on Friday that a lower court erred when it ruled a class of retailers could not establish proof of their injuries or the relevant geographic antitrust market.
The court remanded the case to the district court for further proceedings.
The case stems from the 2001 merger between Suiza Foods Corp, then the largest U.S. milk processor, and Dean Foods, the second largest. As part of the agreement, the merged company known as Dean Foods, divested assets to steer clear of antitrust concerns by the U.S. Justice Department. Those assets helped create a new competitor called National Dairy Holdings.
But a class action, led by Food Lion and Fidel Breto, alleged that Dean Foods and National Dairy Holdings entered into a conspiracy not to compete in states throughout the Southeast.
The plaintiffs alleged the two companies were linked by the Dairy Farmers of America, a large marketing cooperative. Before the merger, DFA was Suiza's main provider, while Dean obtained its milk from independent producers.
After the merger, DFA took a 50 percent stake in National Dairy Holdings. But according to the plaintiffs, DFA also obtained guarantees from Dean Foods to supply milk to all of its bottling plants, including those supplied by independent producers before the merger.
U.S. District Judge J. Ronnie Greer of Greeneville, Tenn., dismissed all five counts of the retailers' complaint.
The retailers appealed one of the counts of violating the Sherman Antitrust Act to the 6th Circuit.
A spokesman for Deans Foods said in a statement the company was disappointed with the court decision.
"We remain confident that we have operated lawfully and fairly at all times in the Southeast," he said.
Neil Gilman, an attorney for the retailers, said he was pleased with the decision and looked forward to going to trial.
Dean Foods previously paid $140 million to settle a separate antitrust case over raw milk in the Southeast brought by a group of dairy farmers.
The appeal is Food Lion, et al v. Dean Foods Co, et al, U.S. 6th Circuit Court of Appeals, No. 12-5457.