Vertical Foreclosure:The Impact of the Proposed Reduction in Diversion Limits on theExercise of Market Power and the Economic Performance of MilkMarketing Channels in the Mideast Federal Milk Marketing Area.

Statement ofRonald W. Cotterill*

Hearing to Amend Certain Provisions of theMideast Federal Milk Marketing Order (FMO33)

March 7-10, 2005Wooster, Ohio

* Professor of Agriculture and Resource Economics and Director of theFood Marketing Policy Center, University of Connecticut, Storrs, CT 06269

Email: Ronald.Cotterill@uconn. eduWebsite: http://www.finpc.uconn.edu/

Tel: (860) 486-2742Fax: (860) 486-2461

I. Introduction

My name is Ronald Cotterill. I am a Professor of A~ricultural and Resource Economics

at the University of Connecticut, and Director of University of Connecticut’s Food Marketing

Policy Center. My curriculum vitae has been marked as Exhibit No. 1. I have been asked by

John Vane, attorney for White Eagle Milk Marketing Federation and other interested parties, to

analyze the impact of proposed changes to pool qualification rules on pricing conduct and the

economic performance of markets in Midwestern milk marketing channels. Proposal Number 2

at this Hearing would tighten pool performance standards by reducing the diversion limits for

See 9c. cooperatives and other handlers from 60% to 50% in each of the months of August

through February and from 70% to 60% in each of the months of March through July (Federal

Register, 2/17/2005, p. 8045). Pool supply and cooperative plants would also experience

tightening of pooling standards, but the burden of these changes would fall more heavily on

supply plants because supply plants qualify for pool participation on the merits of the individual

plant’s conduct while cooperative plants qualify by paper designation based on the cooperatives

system-wide performance. Dean Foods has proposed additional, and more restrictive, pool

qualification rules.

Milk cooperatives and proprietary handlers have expressed concern throughout the U.S.

federal milk market order system about the impact of "paper pooling," and of depooling in

response to milk and commodity price volatility, on the stability, fairness, and logistical

efficiency of the order system. In response to these concerns, USDA has entertained a series of

proposals to tighten milk pool qualification standards in the federal milk marketing order system.

Leading proponents of these changes are Dairy Farmers of America, (DFA) the nation’s largest

milk cooperative, and Dean Foods, the nation’s largest fluid milk processor.

As I reviewed the hearings and arguments of parties leading up to this hearing, I have

come to understand that "paper pooling" is an elusive concept. It is both an esoteric term of art

urfique to the federal milk order system, and a term of derision employed to describe someone

else’s milk marketing practices. It always applies to milk used to make manufactured products

produced by dairy farmers that participate in the federal order milk pool by paper designation of

the reporting handler - usually a Section 9c cooperative association. However, only milk that is

delivered to a pool distributing plant must be pooled. All other milk is pooled by paper

designation, whether it is a paper reporting diverted milk, a paper designating a cooperative plant

as a pool plant, or a paper agreement between a manufacturer and a cooperative in Order 33

allowing the Section 7e manufacturer’s plant to be pooled without plant-specific performance

(i.e., shipments to distributors). I see no functional difference between milk that is diverted day

alter day to a nonpool cheese plant, and milk that is delivered day after day to Leprino’s 9e plant

or a cooperative’s 9d plant. The 9d and 9e plants have a great advantage of form over substance,

however. Milk delivered to those plants gets credit for producer "touch base" purposes, and does

not count against the diversion limits of the cooperative. Therefore, I use "paper pooling" to

refer to all milk that participates in the pool but is not delivered to a distributing plant. The

objective of proposals in this hearing, and predecessor hearings, is to reduce the volume of milk

that is pooled on paper for some but not all market participants. As discussed below, this would

have the effect of foreclosing pool access to some milk, and enhance the value of "paper" held

by those who remain on the pool.

Vetne (2005) and others, on behalf of several cooperatives with a minor share

regulated markets to the west, have criticized these proposed changes in prior hearings from the

perspective of producer equity, the legislative intent of the 1937 Aglicultural Marketing

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Agreement Act that established market orders, the Nourse Commission (1962) study of market

orders, and the relevant case law. The essence of that argument is that federal market orders are

not intended to limit access of non-fluid use milk to a market order pool by non-economic means

such as diversion limits. Even under market orders, transportation economics, plant location, and

location of raw milk determine the farm gate value of milk (Vetne 2002b,, Black 1935, Cassels

1937, Pratt et al. 1998). All farmers are to share in the pooled value of milk sales across fluid and

manufacturing classes of use on an equitable basis based upon the components of their milk and

the location of their market or their customer’s market.

To date there has been relatively little discussion in the hearings or post-hearing briefs

about the impact of the proposed reductions in division limits upon the allocative efficiency of

milk marketing channels. That is the issue I will address in this paper. Federal market orders

were never intended to conUibute to the monopolization of milk market channels either by

cooperatives or proprietary firms or by such firms acting in concert, although orders have been

used to create and maintain monopolies in the past CU.S. DOJ, 1977), and continue to provide

powerful tools to stifle competition by increasing costs or reducing revenue for competitors.

The unique potential for federal milk order pooling rules to be used by a dominant

cooperative to disadvantage a competitor was recently illustrated when DFA’s National Daffy

Holdings processing company proposed a merger with lip Hood in New England, with DFA or

its designee to provide the full supply of milk to the merged Hood plants. If the merger had

gone through as NDI-FDFA intended, Agri-Mark cooperative would have lost its primary

distributing plant outlet and therefore its primary source of federal order pooling base for

member milk used to produce Cabot cheese and other manufactured products, as explained in

testimony for the House Judiciary Committee by Robert Wellington, Agri-Mark’s economist,

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attached hereto as Exhibit 3. Faced with loss of pool access for much of its milk supply, Agri-

Mark would probably have joined forces with DFA, as did its sister cooperatives, Dairylea and

St. Albans, in the marketing agency in common, Dairy Marketing Services (DMS). This incident

is an example of vertical foreclosure. The merger in the processing market created competitive

problems in the milk assembly market.1

At this hearing, as in prior proceedings, I submit that one of USDA’s most important

decision making functions in addressing "paper pooling issues" is to consider the competitive

impact of proposed rules. If at all possible, USDA should avoid rule amendments that would

contribute to the acquisition or exercise of market power by dominant milk assembly

cooperatives and dominant milk processors. Such fn-ms may acquire market power through

competition on the merits and/or economies of scale and scope; however, they should not acquire

it via violation of antitrust law or by administrative fiat in a regulatory process such as this one.

1/. Impact Analysis

I have read several post hearing briefs from the recent Central Market Order hearing

(Vetne 2005a, Vetne 2005b, Beshore, English) and have read the factual documentation

requested fi-om the Mideast Market Administrator by the parties participating in tlfis hearing

(DFA/MMPA, White Eagle, Dean). In response to a request from Dairy Farmers of America

(DFA) and Michigan Milk Producers Association (MMPA) and a request from White Eagle

Federation et al. the Mideast Order Market Administrator completed an impact analysis of the

proposed reduction in diversion limits for October 2003 (DFA/MMPA) and for all months

1 Hood allayed Agri-Mark’s concerns by agreeing to continue to procure fluid from them alter the merger.However, vertical foreclosure and its impacts on an independent cooperative such as Agfi-Mark remainsan issue. Read on and see Cottefill in attached Exhibit 2.

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2003-2004 (White Eagle). Table 1 reproduces the quantitative impact analysis of the reduction

diversion limitations for October 2004.2

Table 1: Mideast Market Administrator’sEstimated Impact onPPD of 10 Percent Reduction in Diversion Limitations: October 2004

Pooled PoundsEstimated Overdi~e~tcd Adjusted Pooled

Pounds @ 50% Limitation Pounds

1,545,776,665 63,800,000

Producer Price DifferentialAs Pooled Ad’,msted Change

1,481,976,665 $0.73 $0.75 $0.02

Source: Mideast Market AdminLcaatofs Office, DFA/MMPA Reqoest No. 21

The market pool was 1.545 billion pounds and the 10% reduction in diversion limits

would have reduced that pool by 63.8 million pounds. This 4,1% reduction would increase the

producer price differential (and "blend" or statistical uniform price) only 2 cents per

hundredweight. This suggests that the policy change is trivial. Proponents should then be

relatively unconcerned about this proposal. However, the projected 2 cent impact on producer

prices ignores the competitive consequences of the proposed changes on the performance of raw

milk assembly, fluid milk processing and ultimately retail fluid milk markets. Proponent’s

competifive benefit from their proposal, and co~responding disbenefit to competitors, is more

profound than a 2-cent impact on the producer blend price.

Precise quantitative analysis of these competitive impacts is not possible because the

necessary data are not currently in the public domain. I requested market share data for fluid

bottlers and the handlers that supply them in the Mideast Market Area from the Market

Administrator. Such information is confidential and unavailable from USDA sources for

hearings such as this one. Industry sources, however, suggest that Dairy Farmers of America

(DFA) and its partner cooperatives in Capper-Volstead sanctioned marketing-agencies-in-

2 Depooling did not occur during October 2004 so this analysis is not affected by that issue.

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common or cooperative federations dominate raw milk sales in the Mideast Order. These

agencies are: (1) Dairy Marketing Services ("DMS"), a Section 9e cooperative federation

dominated by DFA with fluid milk sales throughout the Mideast; (2) the Mideast Marketing

Agency (MEMA), a combination of DFA/DMS, Foremost Farms, Land O’ Lakes, and NFO

the Mideast area other than Michigan, and (3) the Producer Equalization Committee (PEC)

consisting primarily of DFA and Michigan Milk Producers Association (MMPA) for sales in the

state of Michigan.. For example, in September 2004 the three largest cooperatives marketed

1.095 billion pounds of raw milk, fully 82% of the Mideast (Federal Order 33) milk pool (PMO

Statistical Response to White Eagle Federation Request, this Hearing, Table 17). One of the top

three is White Eagle Federation~ with pooled milk of about 145 million pounds, as explained in

testimony by Jeff Leeman, leaving DFA/DMS and MMPA with 950 million pounds. The

remaining cooperatives pooled 154 million pounds. However, the testimony at this hearing

reveals that of the remaining cooperatives on the handler list (Exhibit 6, Table 1), Dairylea,

Foremost Farms, NFO, Prairie Farms, and Upstate all marketed their milk through one of the

DFA/DMS-dominated agencies in common. Their reported 9(c) milk, therefore, should

added to the total of 950 million pounds of DFA/DMS/MIVIPA, bringing the pooled milk within

the control of these dominant suppliers to about 82% of the market. Only Lance and Steamburg

cooperatives are not accounted for, and I understand that they pool a negligible volume of milk

in Order 33.

At the fluid processing level, large consolidated processors dominate the fluid milk

industry. These include: (1) Dean Foods, which has a long term strategic alliance (full supply

contracts) with DFA, and operates I2 plants in the Mideast and processes an estimated 250-300

million pounds of milk per month at these plants, (2) National Dai~ Holdings (2 plants) which

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50*/, owned by DFA, and (3) Kroger, the region’s largest grocery retailer, with Mideast

distributing plants and an estimated 120 million pounds of receipts per month. Kroger is also

fully supplied by the DFA/DMS and MMPA or their marketing agencies in common.

Map-Tables 8a through 8e of Exhibits 7 and 11 show 41 pool distribut’mg plants

remaining in Order 33 and their locations. Twelve of the plants on the Market Administrator’s

list are very small, having an average of 2 million pounds per month of milk receipts. (White

Eagle Requested Data, Table 1). DFA/DMS and its marketing agencies in common provide full

supplies to about 23 of the remaining 29 larger and vet~j large Order 33 distributing plants

according to testimony by witnesses at this hearing on March 8, 2005 The White Eagle

Federation provides supplies milk to 4 distributing plants. The total receipts of milk by all

distributing plants, in million pounds, were 637 during December 2003, 630 in May 2004, and

659 in December 2004, including 22 - 25 million pounds of"other source" (nonpool) bulk milk

(Id. Table 3). Producer milk received at distributing plants during October 2004 was 610 million

pounds. (Id. Table 7). These receipts represent the aggregate pooling base for all market

participants.

The largest cooperatives, DFA/DMS and MMPA, and their agency in common partners

have sufficient pooling base to be unaffected by the proposed 10 points reduction in the

diversion limit, as I understand the testimony of Mr. Gallagher and Mr. Raseh. Yet if 63.8

million pounds of manufacturing milk to nonpool plants is cut out of the pool, the corresponding

amount of distributing plant receipts affected is 127.6 million pounds of milk. Currently, 127.6

pounds of distributing plant receipts would allow 1.5x127.6= 191.4 million pounds of

manufacturing milk into the pool. As proposed, that same fluid milk base would allow only

127.6 million pounds of milk into the pool (assumes a reduction of the diversion limit from 60 to

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50%, i.e. manufacturing milk pooled can only be 60 or post change 50% of the pool). This

reduction in ability to pool milk makes it more costly for any supplier with a limited share of the

fluid market to supply Mideast fluid plants. Since distributing plant r~ceipts for the October 2004

pool was 610 million pounds, the proposed change in the diversion limit potentially affects

127.6/610= 20.9% oftbe fluid market. Note that this is just a bit more than the market share of

small cooperatives and independent producers not represented by the DFA led marketing

agencies (100 - 82 = 18%). These are the suppliers who are targeted by proposal two and who

will be short of pooling base to meet the proposed change.

Plants supplied by White Eagle will also be disadvantaged by the lowering of the

diversion limits because the ability to pool diverted milk has value to the plant that provides

pooling base and to the producers who negotiate to supply the plant and thereby gain pooling

base. Producers that would supply the 68 million pounds of milk withdrawn from the pool under

Proposal No. 2 are economically disadvantaged in a direct fashion. Moreover, farmers who are

part of the DFA led supply system may be also be disadvantaged because of a reduction in

competition for their raw milk, i.e. a reduction in milk marketing alternatives.

Let’s address the impact on farmers first. Salop recently described a phenomenon that he

labds "predatory overbuying" as follows:

Predatory overbuying consists of overbuying inputs as a predatory strategy tocause buyer-side competitors in the input market to exit from the market orpermanently shrink their capacity in order to gain monopsony power in the inputmarket (Salop, 2005).

The reduction in diversion limits is not necessarily predatory, but it may be employed as a

predatory tool and has a similar impact on the buying structure of the raw milk assembly market

in the Mideast milkshed. The DFA-led buying combinations in this market already are the

8

dominant buyers and the change in the rule limits the ability of other milk assemblers in the

milkshed to compete for farmer’s milk because it reduces their ability to qualify for the pool.

Now examining the impact on milk assemblers competition in the sale of milk to fluid

bottlers in this market area, Salop describes a second consequence from an increase in buyers

market power such as that arising from the proposed reduction in diversion limits.

Raising Rivals" Costs (RRC) overbuying consists of overbuying inputs as anexclusionary strategy to raise rivals’ input costs and thereby gain market powerin the output market (Salop, 2005)

The impact on milk assemblers of reducing the diversion limits is equivalent to overbuying.

Assemblers that are not in the DFA sphere of influence have higher costs to qualify for the pool.

This suggests that they must charge fluid bottlers higher prices. Consider the experience of

Central Equity Cooperatives in the Central Marketing Order.

The absence of fluid milk marketing opportunities is illustrated by Central EquityCoop, whose producer-members are clustered near the intersection of Oklahoma,Missouri, and Kansas state boundaries. In order to pool its member milk, CentralEquity sells milk to Wells Dairy in Iowa, about 400 miles away. This longdistance hauling, obviously, would not take place ifa closer distributing plant (orcooperative pool plant) were made available to Central Equity Oretne, 2005b).

The primary strategic alternatives for cooperative assemblers such as Central Equity in the

Central order and for White Eagle in the Mideast order are to merge with DFA or to affiliate with

their agency-in common and pay for access to the’tr dominant raw fluid supply system.

Fluid milk bottlers [distributors] who are not in the DFA sphere of influence also face

these higher costs and their ability to compete in the packaged fluid milk market is reduced.

Moreover, switching to the DFA led supply system may not be a viable alternative. This is true

to the extent that the web of vertical strategic alliances favors the largest firms at each level of

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the milk market channel. This insight also suggests that smaller fluid processors currently

supplied by the DFA led system may not be receiving the same terms as larger processors.

Vertical strategic alliances between large milk cooperatives and the nation’s largest fluid

processors are often touted as enhancing logistic efficiency. If that is indeed the case then they

should compete on the merits and not seek advantages by changing market order regulations.

A~ain recall the estimated 2 cent per hundred weight advantage of this proposed 10% point

change in the diversion limit. Clearly if the large coops and distributors want this change it must

be more important to them then 2 cents.

There is another side to vertical strategic alliances that suggests it is. Vertical strategic

alliances between milk cooperatives and fluid processors and between processors and leading

supermarket retailers in many regions of the country lead to vertical foreclosure games that

benefit the dominant partners at each stage of the system {Wdlingtorg (attached Exlfibit 3)i

Cotterill (Extfibit 2) Cotterill, et al., 2003, and Miyakawa, 2004}.

These foreclosure games are of two general types. The dominant players at each stage

can use their power to benefit their vertical alliance partners by imposing costs on their partners’

rivals -- for example DFA/DMS, MEMA and DFA/MMPA and PEC at the milk assembly stage

in the Mideast Market Area, Dean Foods and NDH (DFA) at the fluid processing stage, and

Kroger or other dominant supermarket chains at retail in local retail market areas. Processors

can, for example, benefit dominant retailers by making only high cost milk available to would be

retail competitors forcing them "out" of the retail market.

Alternatively, as we have seen in the New England Market Area, a system of vertical

alliances can impose higher costs on rivals and implement a price leadership scheme at retail

(Cottefill 2005, relevant sections attached here as Exhibit 2). The result is higher retail prices

~0

that are shared by all key players in the channel. Smaller fluid processors and smaller retailers

that have higher costs are not about to challenge the dominant firms’ price leadership because

these firms have the ability to discipline them in a price war or in the non-price dimension.

Recall dominant firms have lower costs throughout the system due to their buying power (and if

approved in this hearing due to regulatory impacts). As Wellington (Exhibit 3), Miyakawa 2004,

and Cotterill (Exba~bit 2) explain it is entirely possible that vertical foreclosure games can

played against farmers in raw milk markets.

DFA and its agencies-in-common most likely claim superior milk assembly efficiencies

as the source of their competitive advantage.3 On their point, the Dairy Marketing Services

(DMS) website states:

"Dairy Marketing Services (DMS) is a milk marketing organization formed forthe purpose of creating efflciencies and reducing costs of milk assembly, fieldservices, and transport~on. It serves farmers by working to streamline the milkmarketing system, and serves processors by being better able to meet theirneeds." {http://www.dairymarketingservices.com}

It also, however, is entirely possible that their dominant position is based upon their vertical

contracts, and their participation in vertical collusion schemes such as those contemplated and

observed in New England milk markets.

Conclusion

If large milk assemblers and fluid processors are efficient in a spatial milk economy why

do they need this regulatory change to benefit them and the farmers that they serve? The answer,

as implied in testimony by Mr. Gallagher, lies not in the benefit of a 2-cent gain to DFA/DMS

members, but rather in the harm caused by the proposed nges to DFA’s small competitors who

stand to loose $0.73 per hundredweight PPD on 63.8 million pounds of milk forced to exit the

~ See Cottedll (1989) for analysis of commodity bargaining cooperatives as opposed to efficiency ddvenintegrated cooperatives.

11

market if the proposals are adopted. I remain skeptical and would recommend that the Secretary

not approve Proposal 2 until a more careful analysis of the competitive impact demonstrates that

anti-competitive consequences - upon nondominant and small business processors, upon the

small cooperatives who assemble milk and small business farmers that supply them, and upon

nondominant retailers and consumers -- do not offset the two cent per hundred weight gain to

producers remaining in the pool as a result of this proposed change.

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References

Beshore, M. Brief for DahT Farmers of America, Inc. ("DFA") and Prairie Farms Dairy, Inc.(Prairie Farms"). In the Matter of Milk In The Cemral Marketing Area Docket Nos. AO-313-A48 and DA-04-06 February 18, 2005.

Bhck, J.D. 1935. The Dairy Industry and the A/M. Brookings Institution, Washington, D.C.

Cassels, J.M. 1937. A Study of Fluid Milk Prices. Harvard University Press, Cambridge,Massachusetts.

Cotterill, R.W. 2005. Antitrust Analysis of Supermarket Retailing: Common Global Concernsthat Play Out in Local Markets, Invited Paper, Australian Agricultural and ResourceEeonornics Society, 10 February 2005, Coifs Harbour, New South Wales.

Cottefill, R.W. 1984. "The Compefifive Yardstick School of Cooperafive Thought," AmericanCooperation, American Institute of Cooperation, Washington, D.C., p. 41-56.

Cotterill, R.W., Rabinowitz, A.N., and Tian, L. 2003. Milk Market Channel Structure: ItsImpact on Farmers and Consumers, and the Inadequacies of Antitrust Enforcement as aFoundation for Dairy Policies: Evidence from the Northeast Dairy Industry, U.S. SenateJudiciary Committee Hearing on Monopsony Issues in Agriculture: Buying Power ofProcessors in our Nation’s Agrienitural Markets, 10 October 2003, Washington, D.C.,USA. Available: http://www.fmpc.uconn.edu/milk/Testimonvl03003.pdf

English, C. and W. M. Yoviene. Post-Heating Brief Submitted by Dean Foods Company. Milkin the Central Marketing Area: Hearing on Proposed Amendments to TentativeMarketing Agreement and Order, Docket No. AO-313-A48; D A-04-06.

Miyakawa, H. 2004. Competitive Issues in the Dairy Industry: The Pending DFA/NI)H/HoodTransaction, The American Araitmst Institute, 17 February.Available: http://www.anthrustinsthute.org/recent2/299.pdf

Mideast Market Administrator’s Office, Compilation of Statistical Data As Requested byDFA/MMPA, Prepared for Public Hearing, Docket No. Ao-166-A72; DA-05-01,Wooster, Ohio March 7, 2005.

Mideast Market Administrator’s Office, Compilation of Statistical Data As Requested by DeanFoods, Prepared for Public Hearing Docket No. Ao-166-A72; DA-05-01, Wooster, OhioMarch 7, 2005.

Mideast Market Administrator’s Office, Compilation of Statistical Data As Requested by WhiteEagle Federation et al., Prepared for Public Hearing Docket No. Ao-166-A72; DA-05-01,Wooster, Ohio March 7, 2005.

Nours¢, E.G. 1962. Report to the Secretary of Agriculture by the Federal Milk Order StudyCommittee, U.S. Department of Agriculture, April, Washington, D.C., USA. Availableat http://www.cpdmp.cornell.edu.

Pratt, J.E., P.M. Bishop, E. M. Erba, A~ M. Novakovic, and M. W. Stephenson. 1998."Normative Estimates of Class I Prices Across U.S. Milk Markets." A Publication of theCoruell Program on Dairy Markets and Policy, Dept. of Agricultural, Resource andManagerial Economics, College of Agriculture and Life Sciences, ComelI University,Ithaca, NY, R.B. 98-05, July 1998. Available at http://www.cpdmp.cornell.edu.

Salop,S.C. 2005. Anticompetitive Overbuying By Power buyers. Antitrust Law Journal 72:669-715.

U.S. Department of Justice. 1977. Milk Marketing, A Report of the U.S. Department of Justiceto the Task Group on Antitrust Immunities, January, Washington, D.C., USA.

Vetne, J. 2005. E-mail communication with the author. 2 March 2005.

2005a. Vetne Post-Hearing Motion to Reopen Hearing or Refer for Investigation andBrief on Depooling-Repooling Proposals, Milk in the Central Marketing Area 7 C.F.RPart 1032, Dkt AO 313-A48, DA 04-06, February 18, 2005.

2005b. Post-Heating Brief on ’Pooling Standard’ Proposals. Milk in the CentralMarketing Area 7C.F.R. Part 1032, Dkt AO 313-A48, DA 04-06, U. S. Department ofAgriculture, Agricultural Marketing Service (Da’Lry Programs), February 18, 2005.

2002a. On Behalf of Friendship Dairies, Milk in the Northeast Marketing Areas;Hearing on Proposed Amendments to Tentative Marketing Agreements and Orders,Docket Nos. AO-14-A-70; DA-02-01 Hearing September 10-13, 2002, Alexandria,Virginia.

2002b. Post-Hearing Brief on behalf of Glanbia Foods and Jerome Cheese Co. inOpposition to Pooling Proposals 3 through 7, In Re: Milk in the Western and PacificNorthwest/Vfilk Marketing Areas, Docket Nos. AO 380-A18, 368-A30, DA-01-08, U.S.Department of Agriculture Agricultural Marketing Service (Dairy Programs), Hearing:Salt Lake City, Utah, April 16-19, 2002.

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NAME:

CURRENT POSITION:

BUSINESS ADDRESS:

BUSINESS PHONE:

EMAILS:

WEBSITES:

HOME ADDRESS:

BIRTHDATE:

EXHIBIT 1

CURRICULUM VITA

Ronald W~ Cotterill

Director of Food Marketing Policy CenterProfessor of Agricultural Economics, University of Cormecticut.

1376 Storrs Road Unit 4021, University of CormecticutStorrs, Connecticut 06269-4021

(860) 486-2742FAX (860) 486-2461

Ronald.Cotterill@uconn.eduRWCECON@CHARTER.NET

Personal Web Page:FMPC:

412 Browns RoadStorrs, Connecticut 06268(860) 423-1950

April 5, 1948

http://www.sp.ueorm.edu/-~cotteril/http://www, fmpc.ueonn.edu

March 2005

ACADEMIC BACKGROUND

Visiting Scholar, School of ManagementJoint Ph.D. in Economics andAgricultural Economics

M.A., EconomiesM.S., Agricultural EconomicsGeorge C. Marshall Fellow (Economies)B.S., With Honors and Distinction,Agricultural Economies

Yale University 1997

University of Wisconsin, 1977University of Wisconsin, 1976University of Wisconsin, 1974University of Coperdaagen, 1971-72

Cornell University, 1970

AREAS OF SPECIALIZATION

Economics Major Field: Industrial OrganizationAgricultural Economics Major Field: MarketingEconomics Minor Field: Quantitative MethodsAgricultural Economics Minor Field: Public Finance

ADMINISTRATIVE ASSIGNMENTS/EDITORIAL DUTIES

Editor, Agribusiness 1998 to present, http://www.interscience.wiley.com/jpages/0742-4477

Editor, NE-165 Working Paper Series, 1986 to 2002.

Editorial Board Member, Journal of Supply Chain Management, 1996 to present.

Director, Food Marketing Policy Center at the University of ConneCticut: 1988 to present.Executive Director, 1986 to 2002, NE-165 Private Strategies, Public Policies, and Food SystemPerformance, an international research consortium (regional research project with participants fromover 35 universities in U.S., Canada, UK, France, Italy, Turkey, Australia, Japan, USDA, FDA, EPA,GAO, and Agriculture Canada.

Chairman, NE-165 Private Strategies, Public Policies, and Food System Performance of the U. S. FoodSystem, 1986 to 1989.

Director, Michigan State University Program for Consumer Food Cooperatives: 1981

SELECTED PUBLICATIONS

Books and Research Monographs

Cotterill, Ronald W. and Andrew W. Franklin. The Public Interest and Private Economie Power: A CaseStudy of the Northeast Dairy Compact. University of Connecticut, Food Marketing Policy CenterResearch Monograph No. 1, May 2, 2001.

Cotterill, Ronald W., guest editor, Agribusiness, "Special Issue: Proceedings of the June 1995 Conferenceon the Future Directions of the World Food System, held in Reading, England" Vol. 13, No. 2, NewYork: John Wiley, May/April 1997.

Caswell, Julie and Ronald W. Cotterill, eds. Strategy and Policy in the Food System, Storrs: FoodMarketing Policy Center, Conference Proceedings, Washington, D.C., June 1996.

Franklin, Andrew W. and Ronald W. Cotterill. Pricing and Market Strategies in the National BrandedCheese Industry. Food Marketing Policy Center Research Report No. 26. University ofCormeeticut. September 1994, 94 pgs.

Cotterill, Ronald W. ed., Competitive Strategy Analysis for Agricultural Marketing Cooperatives. WestviewPress: Boulder. 1994, 231 pgs.

Cotterill, Ronald W. ed. Competitive Strategy Analysis in the Food System, Westview Press:Boulder, 1993, 388 pgs.

CoRer’ill, Ronald W. and Don Pinkertnn. Changing Connecticut’s Dairy Regulations: Implications forPerformance in the Northeast Dairy Industry, Food Marketing Policy Center Research Report No.6, Sept. 1989, 59 pgs.

Cotterill, Ronald. Agricultural Cooperatives: A Unified Theory of Pricing, Finance and Investment,research monograph in Cooperative Theory: New Approaches, ACS Service Report No. 18,Agricultural Cooperative Service, USDA, 1987, p. 171-258.

Cotterill, Ronald, Effects of Electronic Information Technology on Employment and Economic Performancein the Food Manufacturing and Food Distribution ~rndustries, Research Monograph in fulfillment ofOffice of Technology Assessment Contract No. 533-0635 U. S. Congress, 1985, 146 pgs.

2

Cotterfll, Ronald. The Food Retailing Industry in Arkansas: A Study of Price and Service Levels, A reportto the Attorney General, State of Arkansas, January 5, 1983, 126 pgs. plus appendices.

Cotterill, Ronald, ed. Consumer Food Cooperatives, Interstate Publisher, Danville, Illinois, 1982.

Marion,B., W, Mueller, R. Cotterill, F. Geithrnan, and J. Schmelzer, The Food Retailing Industry: MarketStructure, Profits and Prices, Praeger Publishers, New York, 1979.

Mueller, W., G. Marion, R. Cotterill, F. Geithman, and J. Schmelzer, The Profit and Price Performance ofLeading Food Chains, 1970-1974, U.S.Govemment Printing Office, Washington, D. C. April 1977.

Journal Artides

Cotterill, Ronald W. "Antitrust Astalysis of Supermarket Retailing: Common Global Concerns that PlayOut in Local Markets." Invited Paper, Australian Agricultural and Resource Economics Society,Coifs Harbour, New South Wales, Australia, February 10, 2005. Submitted to the AustralianJournal of Agricultural and Resource Economics.

Tian, Li and Ronald W. Cotterill. "The Theory of Price Collars: Lirfldng of Prices in a Market Channel toRedress the Exercise of Market Power." Submitted to the Journal of Publie Policy and Marketing.

Cotterill, Ronald W. and Tirtha P. Dhar. "Oligopoly Pricing with Differentiated Products: The BostonFluid Milk Market Channel." American Journal of Agricultural Economics. (Revise andresubmit).

Dhar, Tirtha P., Jean-Paul Chavas, Ronald W. Cotterill, and Brian W. Gould. "An Econometric Analysisof Brand Level Strategic Pricing Between Coca Cola and Pepsi Inc. Journal of Economics andManagement Strategy. (Revised and resubmitted).

Tian, Li and Ronald W. Cotter’ill. "Estimation of Brand Level Demand Systems and Elasticities withPrivate Label Products: Fluid Milk." Agritmsiness. Forthcoming 2005.

Chidmi, Benaissa, Rigoberto Lopez and Ronald W. Cotterill. "The Dairy Compact, Market Power, andMilkPrices inBostun." Agritmsiness. Forthcoming2005.

Cotterill, Ronald W. "Dynamic Explanations of Industry Structure and Performance," British FoodJournal, 103(10): p. 679-714, 2002.

Cotterill, Ronald W. and Pierre O. Samson. "Estimating a Brand Level Demand System for AmericanCheese Products to Evaluate Unilateral and Coordinated Market Power Stratel-~es," AmericanJournal of AgriculturalEconomics, 84:3, p. 817-823, August 2002.

Cotterill, Ronald W. "Cooperative and Membership Commitment: Discussion," American Journal ofAgricultural Economies, 83:5, p. 1278-1279, 2001.

Lubatkin, Michael, William Schulze, Avinash Mainkar, and Ronald W. Cottefill, "An EcologicalInvestigation of Firm Effects in Horizontal Mergers," The Strategic Management Journal, 22:335-357, 2001.

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Cotterill, Ronald W. and William P. Putsis, Jr., "Testing the Theory: Assumptions on Vertical StrategicInteraction and Demand Functional Form," Journal of Retailing, 77(2001) p. 83-109.

Cotterill, Ronald W. "Neoclassical Explanations of Vertical Organization and Performance of FoodIndustries," Agribusiness: An International Journal, 17:1, Winter 2001, p. 33-57.

Cotterill, Ronald W., Leonard Egan, and William Buckhold. "Beyond Illinois Brick: The Law andEconomics of Cost Pass Through in the ADM Price Fixing Case," Review of IndustrialOrganization, 18(1):45-52, February 2001.

Cotterill, Ronald W. and William P. Putsis, Jr. "Market Share and Price Setting Behavior for Private Labelsand National Brands," Review of Industrial Organization, 17:1, August 2000, p. 17-39.

Cotterill, Ronald W., Ravi Dhar and William Putsis. "Assessing the Competitive Interaction BetweenPrivate Labels and National Brands," Journal of Business, 73:1, January 2000, p. 109-137.

Putsis, William P. and Ronald W. Cotterill. "Share, Price and Catego~ Expenditure-Geographic MarketEffects and Private Labels," Managerial and Decision Economics, 20:175-187, 1999.

Cotterill, Ronald W. "Jawboning Cereal: The Campaign to Lower Cereal Prices" Agribusiness: AnInternational Journal, 15:2, 1999, p. 197-205.

Cotterill, Ronald W. and Andrew Franklin. "An Estimation of Consumer Benefits from the PublicCampaign to Louver Cereal Prices," Agribusiness: An International Journal, 15:2, 1999, p. 273-287.

Cotterill, Ronald W. "High Cereal Prices and the Prospects for Relief by Expansion of Private Label andAntitrust Enforcement," Agribusiness: An International Journal, 15:2, 1999, p. 229-245.

Cotterill, Ronald W. "Measuring Market Power in the Demsetz Quality Critique in the Retail FoodIndustry" Agribusiness: An International Journal, 15:1, 1999, p. 101-118.

Cotterill, Ronald W. "The Performance of Agricultural Marketing Cooperatives in Differentiated ProductMarkets", Journal of Cooperatives, Vol. 12, 23-34, 1997.

Cotterill, Ronald W. "The Food Distribution System of the Future: Convergence Towards the U.S. or U,K.Model?" Agribusiness VoL 13, No. 2., 123-135, March/April 1997.

Hailer, Lawrence and Ronald Cotterill. "Evaluating Traditional Share-Price and Residual DemandMeasures of Market Power in the Catsup Industry" Review of Industrial Organization Vol. 11, No.3, 293-306, 1996.

Cotterill, Ronald W. "Scanner Data: New Opportunities for Demand and Competitive StrategyAnalysis" Agricultural and Resource Economics Review 23(2): 125-139, 1994.

Cotterill, Ronald W. and Randall Westgren. "Strategic Marketing in Food Industries"Vol. 10, No. 5, 431-441, 1994.

Agribusiness,

Cotterill, Ronald W. and Lawrence E. Haller. "Barrier and Queue Effects: A Study of Leading U.S.Supermarket Chain Entry Patterns" Journal of Industrial Economics, Vol. 40, No. 4, December1992, pp. 1-14.

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Cotterill, Ronald. "Grocery Mergers: Implications for Performance and Policy," Review of IndustrialOrganization, Voh 5, No. 2, Summer, 1990, pp. 189-202.

Khan, Munir and Ronald W. Cotterill. "Analysis of Milk Marketing Channels in Thatta (Sind)," SarbadJournal of Agriculture, (Pakistan), Vol. 6, No. 4, 1990, pp. 349-353.

Caswell, Julie and Ronald W. Cotterill. "Two New Theoretical Approaches to Measuring Industry and FirmPerformance," Agribusiness, Vol. 4, No. 6 p. 511-520, 1988.

Cotterill, Ronald W. "The Design and Impact of Strategic Management Information Systems," AmericanJournal ofAgriculturalEconomics, Vol. 70, No. 2, May 1988 p. 475-479.

Cotterill, Ronald W. "Strategic Management in Agribusiness Firms," American Journal of AgriculturalEconomies, Vol. 69, No. 5, Dec. 1987, p. 1064-1065.

Cotterill, Ronald. "Market Power in the Retail Food Industry: Evidence from Vermont," Review ofEconomics and Statistics, Vol. LXVI~, No. 3, August 1986, p. 379-386.

Cotterill, Ronald. "Retail Food Cooperatives: Testing the Small is Beautiful Hypothesis," American Journalof Agricultural Economics, Vol. 65, No. 1, February, 1983, pp. 125-130.

Cotterill, Ronald, "Economics of Size and Performance in Preorder Food Cooperatives," Journal ofRetailing, Vol 57, No. I, Spring 1981, pp. 43-64.

Cotterill, Ronald, and Willard Mueller, "The Impact of Firm Conglomeration on Market Structure: Evidencefor the Food Retailing Industry," The Antitrust Bulletin, Vol. XXV, No. 3, Fall, 1980. pp. 557-582.

Marion, B., W. Mueller, R. Cotterill, F. Geithman, and J. Schmelzer, "Performance of Food Chains,"American Journal ofAgriculturalEconomies, Vol. 61, No. 3, August 1979, pp. 420-433.

Cotterill, Ronald, "Declining Competition in Food Retailing: An Opportunity for Consumer FoodCooperatives?" The Journal of Consumer Affairs, Vol. 12 No. 2, Winter1978, pp. 250-265.

Cotterill, Ronald, "Market Structure and Profit Performance in the Food Retailing Industry: 1970-74," TheJournal of Economics, Vol. 4, (Missouri Valley Economic Association, Columbia, MO), 1978.

Chapters in Books

Tian, Li and Ronald W. Cotterill. "The Theory of Price Collars: The Linking of Prices in a Market Channelto Redress the Exercise of Market Power." Proceedings of conference titled, "IndustrialOrganization and The Food-Processing Industry, " Institute for Industrial Economics, and I.N.R.A,University of Toulouse, France, June 4-5, 2004http://www.toulouse.inra.fr/centre/esr/eonf.htm.

Chavas,J.P., Ronald W. Cotterill, and Tirtha P. Dhar. "An Economic Analysis of Product Differenfiatonunder Latent Separability." Proceedings of conference titled, "Industrial Organization and TheFood-Processing /ndustry, " Institute for Industrial Economics, and I.N.R.A, University ofToulouse, France, June 4-5, 2004htlp:llwww.toulouse.inra.fr/cent~elesrlconf.htm.

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Cotterill, Ronald W. "Dairy Farming: A Connecticut Perspective." ha "Connecticut Agriculture andResources: 21st Century Issues and Challenges," Department of Agricultural and ResourceEconomics University of Connecticut Cooperative Extension System, College of Agriculture andNatural Resources. Edited by Linda K. Lee, Chair, Connecticut Ag & Resource Committee, April2004.

Tian, Li and Ronald W. Cotterill. ’q’he Theory of Price Collars: The Linking of Prices in a Market Channelto Redress the Exercise of Market Power." Proceedings of conference titled, "IndustrialOrganization and the Food Processing Industry," Institute for Industrial Economics, and I.N.R.A,University of Toulouse, France, June 4-5, 2004. http://www.toulouse.inra.fr/centre/esr/conf.htm

Tian, Li and Ronald W. Cotterill. "Alternative Models and Estimation Strategies for Branded and PrivateLabel Demand Systems in Differentiated Product Oligopolies: Fluid Milk." Proceedings, 88th

European Agricultural Economics Seminar, "Retailing and Producer-Retailer Relationships in theFood Chains," Paris, France. May 5-6, 2004.

Dhar, Tirtha P., Jean-Paul Chavas, and gonald W. Cottefill. "An Economic Analysis of ProductDifferentiation Under Latent Separability," 25th Marketing Science Conference Proceedings,University of Maryland, June 15, 2003.

Cotterill, Ronald W. "Perspectives on Global Concentration and Public Policy" in Global Markets forHigh-Value Food, Workshop Proceedings, ERS, USDA, February 14, 2003, Washington, D.C.

Cotterill, Ronald W. "Who Benefits from Deregulated Milk Prices: The Missing Link is the MarketingChannel" in John Kennelley, editor, Advances in Dairy Technology, Vol. 14. University of Alberta:Alberta, ~002. P. 111-126. Download as University of Connecticut, Food Marketing Policy IssuePaper No. 26 at www.are.uconn.edu/fmktc.html.

Cotterill, Ronald W. "A Critique of the Current Food System" in Stumo, Michael C. A Food andAgriculture Policy for the 21st Century, Organization for Competitive Markets(http://www.eompetitivemarkets.eom0 Download as University of Connecticut, Food MarketingPolicy Issue Paper No. 20 at www.are.uconn.edu/frnktc.htmi.

Plato, Gerald and Ronald W. Cot~erill. "Consumer Prices for Breakfast Cereals After the 1996Manufacturer Price Reductions" in The American Consumer and the Changing Structure of theFood System, Conference Proceedings, ERSFOSDA, Washington, DC, May 4-5, 2000.

Dhar, Tirtha and Ronald W. Cotterill. "Structural Approaches to Price Transmission in NoncompetitiveMarket Channels: A Study of the Fluid Milk Industry" in The American Consumer and theChanging Structure of the Food System, Conference Proceedings, ERS/USDA, Washington, DC,May 4-5, 2000.

Cotterill, Ronald. W. "Continuing Concentration in the US: Strategic Challenges to an Unstable Status Quo"in W. Ramsay ed., The Global Food Industry: Strategic Directions." Financial Times Mono~’aphSeries, London. 2000.

Cotterill, Ronald W. "Continuing Concentration in Food Industries Globally: Strategic Challenges to anUnstable Status Quo" in Gomes and da Costa, eds., (Des)Equilibrio Eeonomico & Agronegoeio,University of Vicosa, Brazil, 1999.

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Cotterill, Ronald W. "The Economies of Private Label Pricing and Channel Coordination," in G. Galizziand L. Venturini Vertical Relationships and Coordination in the Food System, Physiea-Verlag:Herdelberg 1999, p. 39-60.

Cotterill, Ronald W. and Lawrence E. Haller. "An Econometric Analysis of Brand Level Demand forBreakfast Cereal: Product Market Definition in Unilateral Market Power Effects," invited paperdelivered at Third Annual INRA-IDEI Conference on Industrial Organization in the FoodProcessing Industry, Toulouse, France, November, 1998. University of Cotmecticut, FoodMarketing Policy Center Research Report No. 35.

Cotterill, Ronald W. "The Dairy Industry: A Connecticut Perspective" in Connecticut Agriculture andResources 2000, Dept. of Agricultural and Resource Economics, University of Connecticut, pp. 1-10, October 1995.

Cotterill, Ronald W. and Lawrence E. Hailer. "Market Positions of Cooperatives in Branded Dairy ProductMarkets," in R.W. Cotterill ed. Competitive Strategy Analysis for Agricultural MarketingCooperatives. Boulder: Westview Press, 1994, pp. 99-144.

Cotterill, Ronald W. "A Response to the Federal Trade Commission/Anderson Critique of Structure-Performance Studies in Grocery Retailing," in R.W. Cotterill ed. Competitive Strategy Analysis inthe Food System, Westview Press:Bonlder, 1993, pp. 221-252.

Cotterill, Ronald W. and Clement W. Iton. "A PIMS Analysis of the Structure Profit Relationship in FoodManufacturing" in R.W. Cotterill ed. Competitive Strategy Analysis in the Food System, WestviewPress:Boulder, 1993, pp. 25-44.

Cotterill, Ronald W. "Introduction and Methodological Overview" in R.W. Cotterill, ed CompetitiveStrategy Analysis in the Food System, Westview Press:Boulder, 1993, pp. 3-24.

Cotterill, Ronald W. "Food Retailing:Mergers, Leveraged Buyouts and Performance" in L. Duetsch ed.Industry Studies, Prentice Hall, Englewood Cliffs, 1993.

Cotterill, Ronald and Lawrence Haller, "Entry Patterns and Strategic Interaction in Food Retailing" inRobert Wills, Julie Caswell, John Culbertson eds. Issues After a Century of Competitive Policy,Lexington Books: Lexington, 1987, p. 324-358.

Cotterill, Ronald. "Economic Efficiency of Alternative Forms of Business Enterprise," in R. Kilmer and W.Armbruster, eds. Economic Efficiency in Agricultural and Food Marketing, Iowa State UniversityPress: Ames, 1987.

Cotterill, Ronald. "The Competitive Yardstick School of Cooperative Thought," American Cooperation,American Institute of Cooperation, Washington, D. C., 1984, p. 41-56.

Cotterill, Ronald. "Changing Structure of Mass Media Markets; Relevance for Policy Initiatives onAdvertising in the Food System," in J. Connor and R. Ward, eds. Advertising and the Food System,Department of Agricultttral Economics, University of Wisconsin-Madison, 1983, p. 437-456.

Cotterill, Ronald. "Structures and Strategies in the Food Industry" in R. Cotterill, ed., Consumer FoodCooperatives, Interstate Printers and Publishers, Inc., Danville, IL, 1982 p. 33--75.

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Cotterill, Ronald. "Marketing Organizational Strategies for Retail Cooperatives" in R. Cotterill, ed.,Consumer Food Cooperatives, Interstate Printers and Publishers, Danville, IL, 1982, p. 77-118.

Cotterill, Ronald. "Cooperative Wholesaling Systems", in R. Cotterill, ed., Consumer Food Cooperatives,Interstate Printers and Publishers, Inc., 1982, p. 139-174.

Cotterill, Ronald and John Gherty. "How to Organize a Cooperative: Incolporation, Merger, andDissolution", in R. Cotterill, ed., C~nsumer Food Cooperatives, Interstate Printers and Publishers,Inc., Danville, EL., 1982, p. 175-199.

Keegin, S. W. and R. W. Cotterill. "Complying with Securities Laws: Nemesis for ConsumerCooperatives", in R. Cotterill, ed., Consumer Food Cooperatives, Interstate Printers and Publishers,Inc., Danville, IL., 1982, p. 201-225.

Cotterill, R. "Basic Legal and Economic Aspects of Cooperative Finance", in R. Cotterill, ed., ConsumerFood Cooperatives, Interstate Printers and Publishers, Inc., Danville, IL., 1982, p. 227-251.

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Invited Papers/Testimony

Cotterill, Ronald W., Adam N. Rabinowitz, and Li Tian. "Milk Market Channel Structure: Its Impact onFarmers and Consumers, and the Inadequacies of Antitrust Enforcement as a Foundation forDairy Policies: Evidence from the Northeast Dairy Industry." Testimony before the United StatesSenate Committee on the Judiciary. Hearing titled, "Monopsony Issues in Agriculture: BuyingPower of Processors in Our Nation’s Agricultural Markets," October 30, 2003.

Cotterill, Ronald W., Adam N. Rabinowitz, and Matthew Schwane. "Testimony on the MassachusettsMilk Price Situation and the Proposed Massachusetts Milk Price Gouging Law." Committee onthe Environment, Massachusetts Legislature, Boston, MA. September 4, 2003.

Cotterill, Ronald W., Adam N. Rabinowitz, and Li Tian. "A Law to Promote Efficient and Fair Pricing ofMilk in Connecticut." Invited report to Committee on the Environment, Connecticut House ofRepresentatives. April 23, 2003.

Cotterill, Ronald W. "Dairy Policy for New England: Options at the State and Regional Level." Testimonybefore the Joint Committee on the Environment, Connecticut Legislature. February, 2003.

Cotterill, Ronald W. "The Impact of the Northeast Dairy Compact and Market Channel Pricing Strategieson the Performance of the New England Dairy Industry." Testimony to the Senate JudiciaryCommittee, Washington, D.C., July 25, 2001. Food Marketing Policy Issue Paper No. 24,Downloadable at www.fmpc.uconn.edu.

.Cotterill, Runald W. "The Role of Cooperatives in Differential Product Markets" presented at the NE-165Conference "Strategy and Policy in the Food System: Emerging Issues", Washington, D.C., June21, 1996.

Cotterill Ronald W. "Cheese Pricing in a Market Driven Environment", Testimony before Subcommittee onLivestock, Dairy, and Poultry and Subcommittee on Risk Management and Specialty Crops, U.S.House of Representatives, hi Joint Hearings, Serial No. 104-30, U.S.G.P.O., 226-230, Washington,D.C., May 16, 1996. University of Connecticut, Food Marketing Policy Issue Paper No. 15.

Cotterill, Ronald W., Andrew Franklin, and Li Yu Ma. "Measuring Market Power Effects inDifferentiated Product Industries: An Application to the Soft Drink Industry", University ofConnecticut, F.M.P.C. Research Report No. 32, July 1996. Delivered at Industrial organizationSeminar Series, Dept. of Economies, Harvard University, April 1996.

Cotterill, Ronald W. "High Cereal Prices and the Prospects for Relief by Expansion of Private Label andAntitrust Enforcement." Presented at the Congressional Forum on Cereal Prices, Washington, D.C.,March 12, 1996. University of Connecticut, Food Marketing Policy Issue Paper No. 11.

Cotterill, Ronald W. and Andrew Franklin. "The Urban Grocery Store Gap" Food Marketing Policy CenterIssue Paper NO. 8, April 1995. Presented at Public Voice, Inner City Supermarket Task Forcemeeting, Washington, DC May 15, 1995.

Cotterill, Ronald W. "Performance Consequences of the Agricultural Cooperative Exemption," invitedpaper at the American Bar Association Meetings, New York, NY, August 10, 1993.

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Cotterill, Ronald. "The Changing Structure and Performance of the Food Distribution System: Implicationsfor Low Income Urban Consumers," Testimony before the House Select Committee on Hunger,Washington, DC, September 30, 1992.

Cotterill, Ronald, "What Roles can Private Institutions Play in the Rural Development Process" in Toward ARural Development Policy for the 1990’s: Enhancing Income and Employment Opportunities,Proceedings of a Symposium sponsored by the Congressional Research Service at the Request ofthe Joint Economic Committee, Washington, D.C., Sept. 29 and 30, 1988. Reprinted as Universityof Connecticut FMPC Research Report No. 3, February 1989.

Cotterill, Ronald W. "Mergers and Concentration in Food Retailing: Implications for Performance andMerger Policy." Testimony before Subcommittee on Monopolies and Commercial Law,Committee on the Judiciary, U. S. House of Representatives, May 11, 1988. Serial No. 67,USGPO, Reprinted as University of Connecticut Food Marketing Policy Center Research ReportNo. 2, January 1989.

Delivered Papers and Reports

Criner,George, Ronald W. Cotterill and Maurice Doyon. "Multifunctionality and Fluid Milk MarketChannel Pricing Efficiency: Convergent Rationales for Policies to Increase Dairy Farm Share ofConsumer Milk Expenditure in New England." Northeast Agricultural Economies AssociationMeetings, Halifax, June 2004.

Cotterill, Ronald W. "Supermarkets, Stop the Gouging - Milk Prices Should Tumble $1 ." TheProvidence Journal. Food Marketing Policy Center Issue Paper No. 32, November 2002.Cotterill, Ronald W. "Supermarket Milk Prices Need to Come Down." The Hartford Courant.Food Marketing Policy Center Issue Paper No. 31. November, 2002.

Cotterill, Ronald W. "Comments on the Food Marketing Institutes’ Submission to the FTC WorkshopTitled, ’Supermarket Merger Investigations and Remedies.’" Food Marketing Policy CenterIssue Paper No. 27, August 2002.

Cotterill, Ronald W. and Andrew W. Franklin, "A PowerPoint Deconstmcfion of the Farm and RetailPrice Analysis" Presented in "The Public Interest and Private Economic Power: A Case Study ofthe Northeast Dairy Compact." May 31, 2001. Food Marketing Policy Center Issue Paper No.22. Seminar presented at the Northeast Dairy Compact Commission meeting, Newport, RhodeIsland, May 11, 2001.

Dhar, Tirtha and Ronald W. Cotterill, "Cost Pass Through in the Case of Sequential Oligopoly: AnEmpirical Study of the Fluid Milk Market." December 1999. University of Connecticut ResearchReport No. 54.

Putsis, William P. and Ronald W. Cotterill, "Share, Price and Category Expenditure-Geographic MarketEffects and Private Labels," 1999. University of Connecticut Research Report No. 50.

Cotterill, Ronald W. "Continuing Concentration in Food Industries Globally: Strategic Challenges to anUnstable Status Quo," October 1999. University of Connecticut Reseamh Report No. 49.

Cotterill, Ronald W. "Continuing Concentration in the US: Strategic Challenges to an Unstable StatusQuo," August 1999. University of Connecticut Research Report No. 48.

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Cotterill, Ronald W. "Post Merger Price Conduct: A Case Study of Pricing in Connecticut Markets Afterthe 1996 Royal Ahold Stop & Shop Merger," October 1999. University of Connecticut ResearchReport No. 47.

Dhar, Tirtha and Ronald W. Cottedll , "Cost Pass Through in the Case of Sequential Oligopoly: AnEmpirical Study of the Fluid Milk Market." Presented at 1999 American Agricultural EconomicsAssociation Annual Meeting, Nashville, Tennessee, August.

Cotterill, Ronald W. "An Antitrust Economic Analysis of the Proposed Acquisition of SupermarketsGeneral Holdings Corporation by Ahold Acquisition Inc." Presented to Bureau of Competition,FTC; Antitrust Section, New York Attorney General, and Antitrust Section, New Jersey AttorneyGeneral, April 1999. University of Connecticut Research Report No. 46.

Cotterill, Ronald W. "Commodity Check Off Programs: Are They a Help to Farmers?" Paper presented atNew England New York Poultry Management Conference, Andover, Massachusetts. September 7,1994.

Haller, Lawrence E. and Ronald W. Cotterill. 1994. "The Determinants of Brand Price in the CatsupIndustry: Market Share and Local Market Effects." Presented at 1994 American AgriculturalEconomics Association Annual Meeting, San Diego.

Langan, Glenn E. and Ronald W. Cotterill. 1994. "Estimating Brand Level Demand Elasticities andMeasuring Market Power for Regular Carbonated Soft Drinks." Presented at 1994 AmericanAgricultural Economics Association Annual Meeting, San Diego.

Bhuyan,Sanjib and Ronald W. Cottedll. 1994. "Countervailing Power and Seller Performance in U.S. Foodand Tobacco Manufacturing Indus~es." Presented at 1994 American Agricultural EconorrficsAssociation Annual Meeting, San Diego.

Cotterill, Ronald W. and Don Pinkerton. 1993. "Motives for Mergers in Food Manufacturing," Delivered at1993 AAEA selected paper competition. Orlando, FL, August.

Cottefill, Ronald W. and James Brock."Antitmst Policy" paper presented at Food Marketing ConsortiumWorkshop, Orlando, FL, January 14-15, 1993.

Cotterill, Ronald W. and Randall Westgren. "Strategic Market Behavior of Large Food Manufacturing andDistribution Firms," Paper presented at Food Marketing Consortium Workshop, Orlando, FL,January 14-15, 1993.

Cotterill, Ronald W. 1992, "Intermediate Term Milk Price Forecasts for Connecticut" a report toHonorable John Blum, Commissioner, CT Dept. of Agriculture, December.

Cotterill, Ronald W. and Hachim Salih, "Testing for Risk Premiums in the Wheat-Flour Subsector,"Presented as a selected paper, American Association of Agricultural Economics Annual Meeting,Baltimore, MD, August 7, 1992.

Cotterill, Ronald W. and Lawrence Haller, "Market Positions of Cooperatives in Branded Dairy ProductMarkets," Delivered at national workshop New Strategic Directions for Agricultural MarketingCooperatives, Boston, MA, June 24-25, 1992, 40 pages.

Cotterill, Ronald W., Don C. Pinkerton, and Lawrence E. Hallcr "Economic Analysis of the Proposed DairyIncome Enhancement Program," A report to the Environment Committee, Connecticut House ofRepresentatives, February 1989, 28 pages.

Cotterill, Ronald and Don Iron. "New Horizons in Apple Marketing: Vertical Coordination Strategies toImprove Connecticut Apple Grower Profits," A report to Connecticut Apple Marketing Board,November 1987, 53 pages.

Caswell, Julie and Ronald Cotterill. "New Theoretical Approaches to Measuring Industry Performance,"NE-165 Working Paper No. 7, Presented at the Symposium on Industry Performance at theAmerican Association of Agricultural Economics Annual Meeting, Michigan State University,August 1987, 15 pages.

Cotteritl, Ronald. "An Agenda for Research on Competition Policy in the Food System," Invited paper atNortheast Agricultural and Resource Eeonnmics Association Annual Meeting, University of WestVirginia, June 1986, 19 pages.

Cotterill, Ronald W., "A Strategic, Long Run Outlook for Apple Production in Connecticut," University ofConnecticut A.E.R.S. StaffPaper No. 86-1.

Public Policy Extension Papers

Schwane, Matthew, Adam N. Rabinowitz and Ronald W. Cotterill. "Analysis of the May 2004 MilkPrice Survey with a Comparison to June 2003." Food Marketing Policy Issue Paper No.47,September 2004.

Cotterill, Ronald W. "Milk Pricing Problems and Solutions: An Essay on the Need for New State LevelMilk Price Regulation in the Northeast, with Special Attention to Connectic~ Substitute Bill No.5642. Food Marketing Policy Issue Paper No. 45, April 12, 2004.

Cotterill, Ronald W. "What is the Value of Milk?" Food Marketing Policy Issue Paper No. 44, February9, 2004.

Cotterill, Ronald W. "The Northeast Dairy Policy and Prices Summit Meeting. Post ConferenceComments: A Comparison of the Milk Marketing Board and Price Collar Approaches." FoodMarketing Policy Issue Paper No. 43, November 22, 2003.

Cotterill, Ronald W. "Criticisms Answered on Northeast Milk Price Policies." Cheese Reporter, Vol128, No. 16, October 24, 2003, page 2.

Cotterill, Ronald W. "A Preliminary Response to the Report Prepared for the Massachusetts FoodAssociation by John Schnittker titled, ’An Analysis of the Cotterill Proposal’. Food MarketingPolicy Issue Paper No. 42, September 4, 2003.

Rabinowitz, Adam N., Matthew Schwane, and Ronald W. Cotterill. "Retail Milk Prices in New England,New York, and Seattle: An Unresolved Issue." Food Marketing Policy Research Report No. 79,September 23, 2003.

Cotterill, Ronald W., Adam N. Rabinowitz, and Li Tian. "A Law to Promote Efficient and Fair Pricing ofMilk in Connecticut." Food Marketing Policy Research Report No. 78, April 2003.

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Cotterill, Ronald W. "The Impact of the Northeast Dairy Compact on New England Consumers: AReport from the Milk Policy Wars." Food Marketing Policy Research Report No. 77, March2003.

Cotterill, Ronald W. "An Act Concerning the Fair Pricing of Milk." Food Marketing Policy Issue PaperNo. 39, May 2003.

Cotterill, Ronald W. "Drafting a Connecticut Fair Milk Pricing Law: A Meeting the Competition Clausethat Enhances the Competitive Position of Connecticut Processors and a Small Account Rule thatRecognizes the Higher Cost of Supplying Such Accounts?’ Food Marketing Policy Center IssuePaper No. 38,

Cotterill, Ronald W. "Answers to Questions that Often Surface When Discussing the ProposedConnecticut Fair Pricing Milk Law." Food Marketing Policy Center Issue Paper No. 37, May2003.

Cotterill, Ronald W. "Explanation of Farmer Benefits of the Proposed Connecticut Milk Pricing Laws."Food Marketing Policy Center Issue Paper No. 36, April, 2003.

Cotterill, Ronald W. "Drafl~ing of Connecticut Fair Milk Pricing Law: Further Thoughts on the RetailPrice Collar." Food Marketing Policy Center Issue Paper No. 35, April 2003.

Cotterill, Ronald W. "Fair Pricing Mechanics." Food Marketing Policy Center Issue Paper No. 34, "March 2003.

Cotterill, Ronald W. and Adam N. Rabinowitz. "An Old and New Cooperative Alternative: Integrationby Farmers Into Fluid Processing to Develop Local Brands to Capture Some of the ChannelMargin." Food Marketing Policy Center Issue Paper No. 33, March 2003.

Cotterill, Ronald W. and Adam N. Rabinowitz. "Analysis of Two Related Milk Price Approaches toAddress the Noncompetitive Pricing Problem in the Milk Industry: The 40-40 ConsumerApproach and the Farmer and Consumer Fair Share Approach." Food Marketing Policy CenterIssue Paper No. 30, December 2002.

Cotterill, Ronald W. "A Fair Share Law for Connecticut and Other Northeast Dairy States: A State LevelSolution to Retail Milk Price Gouging and the Dairy Farm Crisis." Food Marketing PolicyCenter Issue Paper No. 29, December 2002.

Cotterill, Ronald W. "A Northeast Dairy Compact Post Mortem." Food Marketing Policy Center IssuePaper No. 28, October 2002.

Cotterill, Ronald W. "University Research on Dairy Compacts and Fluid Milk Pricing: ExecutiveSummaries, Fact Sheets, and Price Charts." Food Marketing Policy Center Issue Paper No. 25,August 2001.

Cotterill, Ronald W., and Andrew W. Franklin, ’q’he Impact of the Northeast Dairy Compact: AComparative Evaluation of Two Studies." Food Marketing Policy Center Issue Paper No. 23.July 2001.

Cotterill, Ronald W. and Michael F. Brundage, "Competition, or the Lack Thereof in Local Fluid MilkMarkets: San Francisco, Seattle, Chicago, Miami and Dallas-Fort Worth." Food MarketingPolicy Center Issue Paper No. 21. May 2001.

Sako, Bafotigui, and Ronald Cotterill, "An Econometric Analysis of Supply Responsiveness in TraditionalAgriculture: Millet Sorghum and Rice Farmers in Mali," African Rural Economy Program WorkingPaper No. 36, Michigan State University, 1981, 85 pgs.

Cotterill, Ronald. "Embargoes and Cartels as Instruments of Foreign Policy," M.S.U. AgriculturalEconomics Report 370, February 1980, 80 pgs.

Cotterill, Ronald. "The Social Economics of Participatory Consumer Cooperatives," M.S.U. AgriculturalEconomics Report No. 369, December 1979, 42 pgs.

Cotterill, Ronald. "Market Structure and Profit Performance in the Food Retailing Industry," 1970-1974M.S.U. Agricultural Economics Report No. 334, October 1978, 41 pgs.

Reviews and Abstracts

Cotterill, Ronald. "A Review of Antitrust Economics on Trial," The American Economist, Vol 36, No. 2,Fall 1992, pp. 94-95.

Cotterill, Ronald W. "E.G. Nourses Place in Contemporary Cooperative Theory and Practice," Journal ofAgricultural Cooperation, Vol. 7, 1992, pp. 115-118.

Cotterill, Ronald "Mergers in the Food System: Motives and Impacts", Abstract of symposium held atAmerican Agricultural Eonnomics Association Meeting, Baton Rouge, LA., August 1989,American Journal of Agricultural Economics, Vol. 71, No. 5, (in press).

SYMPOSIUMS/SEMINARS DELIVERED

Invited Speaker, "Milk Pricing and State Level Regulation in the Northeast". Dairylea, and DairyMarketing Services Board of Directors Meeting, Syracuse, New York, June 16, 2004.

Invited Symposium Speaker, "Retail Competition and Consumer Choice," Lancaster UniversityManagement School, Canada House, Trafalgar Square, London, June 8, 2004.

Seminar Speaker, "Estimating a Brand Level Demand System to Evaluate Unilateral and CoordinatedMarket Power Strategies." Department of Agricultural Economics, University of Reading,Reading, UK, June 7. 2004.

Seminar Speaker, ’q’he Theory of Price Collars: The Linking of Prices in a Market Channel to Redress theExercise of Market Power." Sauder School of Business, University of British Columbia,Vancouver, March I 1, 2004.

Speaker, "The Proposed Connecticut Price Collar Approach." Presented at the Northeast Dairy PolicySummit Meeting, University of Connecticut, November 17-18, 2003.

Speaker, "Recent Retail, Wholesale, and Farm Prices in New England and New York: Analysis ofExcessive Retail Margins in New England." Presented at the Northeast Dairy Policy SummitMeeting, University of Connecticut, November 17-18, 2003.

Seminar Speaker, "Structural Models of Price Tlansmission in Imperfectly Competitive Market Channels."Department of Agicultural Economics, University of Alberta, March 7, 2002.

Invited Speaker, "Speakers’ Closed Door Meeting for Representatives on Dairy Compact and Milk Pricing,"U.S. House of Represeotatives, August 1, 2001.

Invited Speaker, "Consolidation in the Processing and Retailing Sectors: Implications for ProductionAgriculture." American Farm Bureau Convention, Orlando, Florida, January 8, 2001.

Seminar Speaker, "Antitrust Policy in Food Industries." Consumer Federation of America, Washington,DC. June 13, 2000.

Seminar Speaker, "The WiSconsin Approach to Industrial Organization Analysis: Past, Present, and Future"Department of Agricultural Economics, Univerisity of Wisconsin, Madison. June 1, 2000.

Seminar Speaker, "Structural Approaches to Price Transmission in Noncompetitive Market Channels: AStudy of the Fluid Milk Industry," Department of Economics, Yale University. March 23, 2000.

Invited Speaker, conference titled, "Economic (DES)Equilibrium & Agribusiness" Federal University Vicosa, Brazil, October 19-21, 1999.

Invited ~peaker, "Use of Scanner Dat~ for Industrial Organization Research" National Bureau ofEconomic Research Induslrial Organization Summer Workshop, Cambridge, Massachusetts,August 4, 1999.

Seminar Speaker, "Measuring Market Power: The Shift from Models of Collusion to Models of UnilateralMarket Power." London Business School, London, UK, June 1, 1998.

SeminarSpeaker, "Jawboning Cereal" Department of Agricultural Economics, Comell University, April 21,1997.

Invited Speaker, Policy Research Roundtable "Measuring Market Power and Efficiency in Food Industries"NE-165 Conference "Strategy and Policy in the Food System: Emerging Issues", Washington, D.C.June 20, 1996.

Seminar Speaker, Measuring Market Power Effects in Differential Product Industries: an Application to theSoft Drink Industry" Department of Econornics, Harvard University, April 26, 1996.

Seminar Speaker, "Market Power and Mergers in Food Industries: The Breakfast Cereal Case Example."Univ. of Connecticut, Dept. of Agricultural and Resource Economics, Dec. 6, 1995.

Seminar Speaker, "Performance and Public Policy Alternatives in the Breakfast Cereal Industry." Univ. ofConnecticut, Dept. of Nutritional Sciences, Oct. 5, 1995.

TEACIHNG EXPERIENCE

Agricultural and Resource Economics 358, Industrial Organization Empirical Analysis--a graduate courseat the University of Couneeticut. 1982-1988, 1990 to 2000, 2002, 2003, 2004, 2005.

Agricultural and Resource Economics 275, Agribusiness Management and Entrepreneurship, anundergraduate course at the University of Counecticut. 1996 to present.

Agricultural and Resource Economics 221, Organization and Strategies in the Food System - anundergraduate course at the University of Connecticut. 1996, 1998, 2001.

Agricultural Economics 220, Cooperatives--an undergraduate course at the University of Connecticut.1982-1989, 1994, 1995.

Agricultural Economics 225, Marketing and Price Formation--an undergraduate course at the University ofConnecticut. 1982-1986.

Economics/Agricultural Economics 811--a graduate course in applied public finance and public programanalysis at Michigan State University.

Food Systems Management 421--an undergraduate course on public policy in the food system includingfederal farm commodity programs, regulation and antitrust in food industries at Michigan StateUniversity.

PUBLIC SERVICE/CONSULTING

Expert economic analysis on behalf of a direct purchases class action alleging monopolization of the fi-eshpineapple market by Del Monte, American Banana Co. et al. v. Del Monte Fresh Produce Co. et al.No 03-CV-10230(RMB), 2005.

Expert economic witness for Pueblo International,/nc., San Juan, Puerto Rico, in a breach of contract case,1999, 2001, 2004.

Expert economic analysis on Milk Pricing, Connecticut Representative George Wilber, 2003, 2004.

Expert economic analysis and assistance to the Vermont Dept; of Agriculture, and Steve Kerr the VermontCommissioner of Agriculture in January and February 2003.

Economic analysis and assistance to Representative Bernie Sanders, Vermont and Senator Patrick Leahy,Vermont on dairy pricing issues including the dairy compact movement, 2003, 2004.

Expert economic analysis to attorneys representing Ocean Spray Cranberry, Inc., 2003.

Expert economic analysis to attorneys representing Rainbow Foods, attempted monopolization, 2003.

Expert economic analysis for the Department of Justice, State of California, in the investigation ofwholesale gasoline prices, 2002- 2004.

Expert economic analysis of the proposed acquisition of Big V Supermarkets by Royal Ahold/Stop & Shopfor Wakefern Food Corporation, 2002.

Expert economic analysis of price transmission and the downstream impact of price fixing in vitamins forBASF, Hoffmann LaRoche, Aventis, and Takeda, December 2001.

16

Expert economic witness for Arisa Realty and Morel Operating Company in MayfairSupermarkets/Edwards v. Arisa, Morel, American Store Proprieties and Acme Markets. SuperiorCourt of New Jersey Chancery Division: Middlesex Connty Docket No. MID-C-92-00. RoyalAhold through its Mayfair/Edwards division sued Arisa and Morel, the owner of Ryder CrossingShopping Center, Milltown, New Jersey, for violating an alleged restrictive covenant anddeveloping a supermarket for Acme supermarkets a division of Albertons/American Stores. Acmeand American stores were also defendants. January 2001.

Expert economic analysis for the Attorneys General of Vermont, Connecticut and Massachusetts in theacquisition of the Stop & Shop milk plant by Suiza GTL. 2000.

Expert economic analysis for plaintiff in Augusta News v. Hudson News et al., Augusta, Maine. ASherman Act section 1 and R-P case on slotting allowances. 1999.

Expert witness for Tops/Royal Ahold, plaintiff in Tops v. Quality Foods et al, Tops is suing Quality forattempted monopolization of the Jamestown, New York market, 1999.

Expert economic analysis for Wakefern Food Corp. of the Royal Ahold-Pathrnark merger, 1999.

Expert economic m~alysis for plaintiff in J. Servais et at. v. P. Morris/Kraft et al., a class action law suit onbehalf of Lr.S. dairy farmers against Kraft, the National Cheese Exchange and others allegingdownward manipulation of U. S. cheese and milk prices, 1998.

Expert economic analysis for New York City/Northern New Jersey milk workers unions in amonopolization lawsuit wherein Farmland Dairies alleged that the other milk processors in NewYork City/Northern New Jersey conspired with the unions to drive Farmland out of business, 1997.

Expert economic analysis for Retail Marketing Network in Retail Marketing Network v. Actmedia, Inc.This is a Sherman Act monopolization case. KMN claims Actmedia has monopolized certain instore retail promotion markets. 1997.

Expert economic analysis for Wilcox in Wilcox v. Archer Daniels Midland et al. Analyzed the impact onconsumers of price fixing in the corn wet milling industry (citric acid and high fructose corn syrup).This is a class action lawsuit on behalf of consumers to recover damages under state law inMichigan. A sister suit was also filed ander state law in Kansas, 1997.

Co-Chair, Connecticut Legislative Task Force to Rename and Expand the Scope of the Connecticut StateDepartment of Agriculture. 1996-1997.

Expert witness for Waremart, Inc. Boise, Idaho, at Boise City Council review of proposed Waremartsuperstore zoning permit. August 1996.

Expert economic analysis for Vons Grocery, Inc. in the matter of Harley S. Tropin et al. v. Vons Grocery, "Inc. Malone and Hyde, Inc. and Public Supermarkets, Inc. and others. This was a class actionlawsuit by investors defrauded in a ponzi scheme by a bogus grocery products diverting companythat had bribed buyers/agents for the above major supermarkets as part of the scheme. This casewas settled before trial, 1996.

Expert economic analysis for Attorneys General of Connecticut, Massachusetts, and Rhode Island, assistedin the negotiation of a consent decree jointly with FTC staff that resulted in the divestiture of 30stores and 2 sites (over $600 million annual sales) from the merging A_hold/Edwards and Stop andShop Supermarket chains June/July 1996.

Economic consultant for the International Center for Study of Mediterranean Agriculture, Zaragoza, Spain,in cooperation with a marketing professor from Urbs University, Denmark, planned a two weekconference/course titled "Development of New Products in the Agro-Food Sector," June 1996.

Expert economic analysis for National DHIA, Vermont, Pennsylvania, Ohio and Northeast DHIA inAgritronics v. all of these DHIAS, U.S. Federal Court, Northern District of New York ,Binghamton, NY, 1996.

Expert economic analysis for Alcott Estates in the matter of Alcott Estates versus Vons Grocery Inc. SanDiego, California, 1995. This was a breach of lease case with antitrust claims. It was settled priorto trial

Expert economic analysis for New York Farm Bureau in Farmland Dairies Inc. v. RCMA and New YorkFarm Bureau, Northern District of New York Federal Court, Syracuse, NY, 1995.

Economic expert witness for National Association of State Attorney General in State of New York v. R.£Nabisco and Phillip Morris (a horizontal acquisition of Nabisco Shredded Wheat by PhillipMorris/Kraft General Foods, Post Cereals), Southern District of New York Federal Court, 1993-1994.

Consultant, Federal Trade Commission, Line of Business Research, 1991-92.

Member, Conngcticut Dept. of Agriculture Dairy Pricing Task Force, 1992 to present.

Economic Consultant to Daniel Smith, P.C., and Vermont Department of Agriculture on economicorganization and performance of the New England fluid milk marketing system, 1992.

Economic expert witness for Michael Tolokan in the matter of M. Tolokan ;¢. Mobil Oil Company, FederalDistrict Court, Hartford, 1991. This was a price discrimination case involving retail gasolinestations.

Economic counsel for Attorney General, State of Vermont, May 1989. (Provided economic analysis ofP&C/Grand Union merger and assisted in designs of a consent decree that orders divestiture of 13supermarkets to promote competition in Vermont grocery markets).

Economic counsel for S. Danou Supermarkets Inc., Detroit, Michigan, March 1988. (Provided economicanalysis of the A&P and Borman’s merger and its impact of S. Danou Supermarkets Inc.).

Economic counsel, Wachtell, Lipton, Rose and Katz for DelChamps Inc. 1988. (Provided economic analysisfor an antitrust defense for successful resistance of hostile takeover bid from A&P).

Expert economic witness for Allied Supermarkets in the matter of Albert Semaan et al. and BelairSupermarket Inc. et al. v. Allied Supermarkets Inc. (Testified on behalf of defendant that the city ofDetroit is a distinct submarket for the analysis of competition among supermarket chains, that thecity of Detroit submarket is competitively structured, and thus plaintiff could not raise prices toincrease profits.)

18

Expert economic counsel, Allied Supermarkets, Inc. 1986, (Evaluated the potential impact on competitionof a proposed acquisition of nine supermarkets by Borman’s Inc., the market leader in Detroit, fromNu-Trax Inc.)

Economic counsel, Union Tire and Rubber Co. v. Dunlop Tire and Rubber Co., 1985. (Working for theplaintiff, Union, in a Robinson Patman, price discrimination case, estimated damages and analyzedthe impact of price discrimination on competition, the case was settled first day of trial.)

Strategic Marketing Consultant to Textile Fibers Division, Dupont Chemical Corporation, Wilmington,Delaware, 1985.

Member &State of Connecticut Futures Commission Food Policy Task Force, 1984, 1985.

Expert economic witness, in the matter of Phillip Olender & Co. v. International Multifoods, 1984.(Estimated damages and analyzed the impact of price discrimination on competition. Work on thisRobinson-Patman Act case was done for the plaintiff, P. Olender & Co.)

Economic counsel, Paul, Weiss, Rilkind, Wharton and Garrison, New York in Allied Supermarkets v.TENGELMANN WAREHANDELGESELLSCHAFT, United States District Court, Eastern District ofMichigan, Southern Division, 1983 (Analyzed competitive impact for Allied ~upermarkets whosuccessfully challenged a horizontal merger between A&P (Tengelmann) and ChathamsSupermarkets Inc. in Detroit, Michigan.)

Director, University of Connecticut Cooperative Bookstore, Inc. 1983.

Member, Financial Advisory Board, National Consumer Cooperative Bank, Washington, D. C., 1983.

Expert economic witness, in the matter of Borman’s Supermarkets Inc. v. Allied Supermarkets, Inc.Bankruptcy Court of the United States for the Eastern District of Michigan, Southern Division,1982. (A bankruptcy case wherein Borman’s sought damages from Allied, a oh. 11 competitor forwage concessions it received from unions in order to exit viably from ch. 11. I represented AlliedSupermarkets Inc. and analyzed the antilrust aspects oft,he case.)

Evaluation consultant to Inter-America Foundation for their rural cooperative development programs inSouth America, 1982.

Economic consultant to Attorney General, State of Arkansas. Analyzed the price and service levelperformance of the grocery industry in Arkansas, 1982.

Member of selection panel, Cooperative League of the USA, annual contest to select outstanding Mastersthesis and Ph.D. dissertation on cooperatives, 1980, 1981, 1982, 1983.

Member of selection panel, Cooperative League of the USA, annual contest to select outstanding Mastersthesis and Ph.D. dissertation on cooperatives, 1980, 1981, 1982, 1983.

Expert economic witness, State of Vermont v. Grand Union et al. Washington Superior Court, Docket No.S187-81 Wne. Analyzed market structure, pricing, and performance of the retail grocery industryas a component of the state’s defense of the Vermont blue law, 1981.

19

Consultant to Harmony Village, community development corporation in Detroit. Provided an extensivefeasibility analysis of a proposed inner city supermarket, 1981.

Economic counsel, Michigan Natural Resources Commission v. Lloyd ~lrends and Sons, Inc. Estimateddamages in a point source pollution case, 1981.

Economic counsel, State of Tennessee v. Bi-Rite Food lnc. Assisted Attorney General in analysis of ahorizontal price fixing case, 1981.

Expert economic witness for the Federal Trade Commission in Federal Trade Commission v. National TeaCo. andApplebaum’s Food Markets, Inc. 1979. (A horizontal merger in the Minneapolis-St. PaulMarket.)

Governor’s Task Force on Consumer Cooperatives, 1979, 1980.

Michigan House of Representatives Agricultural Advisory Council, 1979,1980.

Director, East Lansing Food Cooperatives, 1977-78.

Director, Cooperatives Services, Inc., Detroit, Michigan. (manages 2000 units of low income senior citizenhousing, a construction company and a chain of 9 optical offices), 1979, 1980.

GRANTS RECEIVED

USDA/CSREES Special Research Grant for Support of Food Marketing Policy Center at the University ofConnecticut, $543,249, August 2004.

USDAICSREES Special Research Grant for Support of Food Marketing Policy Center at the University ofConnecticut, $455,071, August 2003.

USDA/CSREES Special Research Grant for Support of Food Marketing Policy Center at the

University of Connecticut, $452,715, August 2002.

USDA/CSREES Special Research Grant for Support of Food Marketing Policy Center at the Universityof Connecticut, $462,009, July 2001.

USDA/CSREES Special Research Grant for Support of Food Marketing Policy Center at the University ofConnecticut, $374,200, June 2000.

USDAICSREES Special Research Grant for Support of Food Marketing Policy Center at the University ofConnecticut, $380,460, August 1999.

USDA/CSREES Special Research Grant for Support of Food Marketing Policy Center at the University ofConnecticut, $310,344, January 1998.

USDA/CSRS Special Research Grant for Support of Food Marketing Policy Center at the University ofConnecticut, $310,289, March 1997.

20

USDA~CSRS Special Research Grant for Support of Food Marketing Policy Center at the University ofConnecticut, $311,878, November 1995.

Farm Foundation, support for Reading, England Conference "Food Retailer-Manufacturer CompetitiveRelationships in the EU and USA: Emerging Research Issues" March 1995, $5,000.

Farm Foundation, support for NE-165 conferences June 5-7, 1995, Washington, DC titled "VerticalCoordination in the Food System" and "Economics of Reducing Health Risk from Food," April1995, $6,100.

USDA/CSRS Special Research Grant for Support of Food Marketing Policy Center at the University ofConnecticut, $311,000, November 1994.

USDA Nat’l Research Initiative Grant for the organization of a conference in Reading England titled "FoodRetailer-Manufacturer Competitive Relationships in the EU and USA: Emerging Research Issues,"August 1994, $9,177.

USDA/CSRS Special Research Grant for Support of Food Marketing Policy Center at the University ofConnecticut, $348,371, December 1993.

USDA National Research Initiative Grant, "Global Competitors in the U.S. Beer and Bottled WaterIndustries." September 1993, $95,431.

Cooperative State Research Service/USDA, Grant for Support of Conference "Valuing Food Safety andNutrition" Alexandria, VA June 1993, $2,500.

Farm Foundation Grant for support of conference "Valuing Food Safety and Nutrition," Alexandria, VA,June 1993, $5,000.

USDA/CSRS Special Research Grant for support of Food Marketing Policy Center at the University ofConnecticut, $371,999, November 1992.

Cooperative Agreement with Agricultural Cooperative Service/USDA, "Development of the Theory ofAgricultural Cooperation in Noncompetitive Markets," 1992, $26,629.

Cooperative Agreement with CSRS/USDA in support of a national workshop, "New Strategic Directionsfor Agricultural Marketing Cooperatives," Boston, MA, June 24-25, 1992. $3,000.

USDA/CSRS Special Research Grant for support of Food Marketing Policy Center at the University ofConnecticut, $393,000, October 1991.

Cooperative Agreement with CSRS/USDA in support of national conference tiffed, "Competitive StrategyAnalysis in the Food System", $5,000, April 1991.

Grant from Farm Foundation in support of national conference titled, "Competitive Strategy Analysis in theFood System, $3,000, April 1991.

UConn Research Foundation support for An Analysis of Business Unit Strategies and TheirPerformance in the Food Manufacturing Sector, $750, November 1990.

21

USDAJCSRS Special Research Grant for support of Food Marketing Policy Center at the University ofConnecticut, $393,000, November 1990.

Farm Foundation, Chicago, Illinois, a grant of $2,500 for support of Economics of Food Safety Workshop,March 1990.

Grant from Farm Foundation in support of Economics of Food Safety Workshop, $3,000, April 1990.

Cooperative Agreement with ERS/USDA in support of Economics of Food Safety Workshop,May 1990.

$1,000,

Cooper~ive AgreementwithCSRS/USDA in support ofEconornics ofFood SafetyWorkshopMay1990.

$3,000,

CSRS Special Research Grant for support of Food Marketing Policy Canter at the University ofCormecticut, $378,000, December 1989.

UConnResearch Foundation support for Evaluating the Motives and Impacts of Mergers and Acquisitionsin the Food System, $750, April 1989.

Cooperative agreement with the Agricultural Cooperative Service, USDA for research on competitivestrategy analysis for cooperatives engaged in food processing. $49,747, March 1989.

CSRS special research grant for support of Food Marketing Policy Center at the University of Connecticut$285,000, October 1988.

A grant of $34,955 to evaluate the Connecticut dairy inspection program and recommend reforms, from theConnecticut Department of Agriculture, March 1988.

Regional research funds from six universities in the Northeast totaling $15,500 for support of FoodMarketing Policy Center, February 1988.

CSRS special research grant to establish a National Food Marketing Policy Center at the University ofConnecticut, $150,000, December 1987.

Cooperative agreement with the Agricultural Cooperative Service, USDA, to support Food MarketingPolicy Center, $7,000, September 1987.

Grant from University of Connecticut Research foundation for support of research on mergers in the foodsystem via acquisition of data, University of Connecticut Research Foundation, $750, Sept. 1987.

Apple Marketing Research, Connecticut Apple Marketing Board via State Department of Agriculture,$7,315, July 6, 1987.

Regional research funds from six universities in the Northeast totaling $16,000 for support of NE-165research project core research group, February 1987.

A contract of $8,000 from the Office of Technology Assessment, U. S. Congress to analyze the effects ofelectronic information technology on employment and economic performance in the FoodManufacturing and Distribution Industries, 1985.

22

A ~ontract of $2,500 from the Hartford, Connecticut Local Initiative Support Corporation (Ford Foundation)to analyze the feasibility of a community-based food buying service for urban day care and seniorcitizen centers, 1985.

A grant of $21,667 from the Agricultural Cooperative Service, USDA to review and expand the theory ofagricultural cooperation, 1982.

A grant of $16,590 for a 15 month project from the National Consumer Cooperative Bank, Washington,D.C. The project title is: "Evaluating Alternative Cooperative Capitalization and Ownership Plansfor Consumer Food Cooperative Federations," 1981.

A grant of $50,025 from the Michigan Department of Education, Title I of the Higher Education Act of1965 program. The project title is: "Michigan State University Extension Service Consumer FoodCooperative Education Initiative," 1981.

A grant of $7,790 for first year of a two year project under the auspices of Title V of the Rural DevelopmentAct of 1972. The project title is: "An Economic Analysis of Warehousing, Transport, andManagement Services Provided by Consumer Cooperative Federations," 1980.

PRIOR EMPLOYMENT RECORD

Assistant Professor of Agricultural Economics, Michigan State University, 1977-81.

Research Assistant, Dept. of Agricultural Economics, University of Wisconsin, 1972-1977.

Member of Intemational Voluntary Services agricultural development team, Zaire, 1970.

Congressional intern in the office of Representative Samuel S. Stratton, (D-New York), summer, 1968.

OTHER PROFESSIONAL ACTIVITIES AND AFFILIATIONS

Editorial board, Northeastern Journal of Agricultural and Resource Economics, (1987-1989)

Member, American Economies Association

Member, Industrial Organization Society

Member, Food Industry Committee, American Antitrust Institute

Member, American Bar Association’s Clayton Act Committee, 1992 to present

Member, American Bar Association’s Federal Trade Commission Subcommittee on Competition, 1992to present

Member, American Bar Association’s Agricultural Trade Regulation Committee, 1990-1992

Phi Eta Sigma academic honorary

Phi Kappa Phi academic honorary

23

24

EXHIBIT 3

Testimony to the United States Senate JudiciaryCommittee

Regarding the Competitive EnvironmentFor Dairy and Livestock Producers

by Robert Wellington

July 23, 2003

TESTIMONY TO THE UNITED STATES SENATE JUDICIARYCOMMITTEE

REGARDING THE COMPETITIVE ENVIRONMENTFOR DAIRY AND LIVESTOCK PRODUCERS

JULY 23, 2003

Introduction

My name is Robert D. Wellington and I serve as Senior Vice-President forEconomies, Communications and Legislative Affairs for Agfi-Mark Dairy Cooperative.Agfi-Mark is a farmer*owned and controlled Capper-Volstend cooperative withapproximately 1450 member dairy farms located throughout New York and the six NewEngland states. We market about three billion pounds of farm milk annually. Thisrepresents slightly less than two percent of U.S. milk production.

Agri-Mark is extremely concerned about the changes in the competitiveenvironment for its members’ milk production. A deende ago, Agri-Mark could competeto sell its milk to any or all of more than a dozen major purchasers of fresh, Class Idrinking milk. This would allow its member farms to fully share in the obligations andbenefits of pooling milk under a Federal Milk Marketing Order. However, most of theClass I bottling plants in New England have been bought (and in several easessubsequently dosed) by one handler, Suiza Foods. It has been estimated that they havemore than 70% of the Class I market in New England alone. Sniza Foods, also thelargest seller of Class I fresh drinking milk in the country, subsequently merged withDean Foods, the second largest Class I seller. The resulting mega-company retained thename Dean Foods. Dean Foods currently has a full milk supply arrangement with DairyFarmers of America.

Dairy Farmers of America (DFA)

Dairy Farmers of America ("DFA") is the result of the mergers of a number large cooperatives, including Dairymen, l.ne., Mid-America Dairymen, the SouthernRegion of Associated Milk Producers, Inc. and others. These constituent groups have apedigree of antitrust violations dating back over sixty years} Despite having been sued

1 Reported decisions and decrees include:

United States v. Borden, 1940-1943 Trade Cas. (~2CH) ¶ 56,062 (N.D. Ill. 1940);United States of America v. Associated Milk Producers, Inc., 394 F. Supp. 29 (W.D. Mo. 1975);

United States y. Mid-America Dairymen, Inc., 1977-1 Trade Cas. (CCH) ~ 61,508 (W.D. Mo. 1977);United States v. Dairymen, Inc., 1983-2 Trade Cas. (CCH) ¶ 65,651 (W.D. Ky. 1983);

Alexander v. National Farmers’ Organization, 645 F. Supp. 1146 (W.D. Mo. 1986).

repeatedly by the Department of Justice, various state agencies and private parties, anddespite being subject to numerous permanent injunctions prohibiting predatory and anti-competitive behavior, DFA has persisted in flouting these injunctions and employing.predatory tactics to gain a stranglehold on dairy production and producers throughout theMid-West. DFA is probably the most blatant antitrust recidivist in the history of this

The First Proposed NDH/Hood Merger

Last fall, Agd-Mark’s largest remaining customer, the H.P. Hood Company,announced that it was merging with National Dairy Holdings (NDH). NDH is owned andcontrolled by DFA. DFA was to have a full milk supply arrangement with the newHCOd/NDH company. This would have leit Agd-Mark with insufficient Class I sales tomcct Federal Order Class I pooling requirements throughout the year and could havelowered the annual farm income of our members by more than $50 million dollars. Agd-Mark’s average size member farm would have lost about $30,000 annually if it was notsharing in the Federal Order pool. As has happened in the past, Agri-Mark and/or itsmembers likely would have been forced to join or affiliate with DFA.

We protested this proposed transaction to the Department of Justice. The concernwe expressed was that DFA, which is far and away the largest dairy cooperative in theUnited States, intended to use this transaction to increase its market share at the expenseof independent dairy producers, including Agfi-Mark. Wc dcscfibed DFA’s history ofpredatory conduct, and demonstrated that the proposed merger was merely one more step- different in scope but not in kind - in DFA’s pailvm of driving out competing milkcooperatives and independent producers.

We also pointed to the experience of small cooperatives and independentproducers who formerly supplied plants acquired by DFA, Dean or NDH in Nashville,Somerset (Kentucky), Idaho, New England, Dairylea in New York, and St. Alban’s New England. These cooperatives were given a Hobson’s choice - market through DFAto your former customer or cease dairy operations - after being acquired by DFA. Mostrecently,on May 1, 2003, DFA struck again. Its affiliate, Lone Star, displaced theindependent producers who had historically supplied Mid-Statas Dairy in St. Louis. Mid-States "encouraged" the displaced producers to join DFA’s affiliate or lose their market.

The "New And Improved" NDH/HoodfDFA Transaclton

In late April of this year, we received reports that the NDH/Hood deal had beenabandoned. At the same time, however, DFA announcad that it intended to "restructure"the NDH/Hood transaction as an exchange in stock and CEOs (in effect, a "virtualmerger") and go forward with it. On May 13, 2003, the press reported that the partiesintanded to consummate the deal, albeit in a slightly alterad form.

.The NDH/IIood/DFATransaction May Be Different~ But It’s No Better

RumOrs in the industry have suggested that the "new" NDHAIood/DFA deal mayhave been structured to make it non-reportable for Hart-Seott-Rodino purposes.Obviously, DFA cyr6cally believes that it can thumb its nose at the Antitrust Divisionand "slam" this deal through with only some cosmetic changes. This cannot be permittedto happen. The proposed restructuting of the deal may be a more subtle tactic than theoriginally-proposed merger, but it will be no less harmful to DFA’s competitors. All thestatements by the principals involved, including the principal architect of the transaction,Gary Hanman, CEO of DFA, indicate that they will accomplish the very same goalssought by the orlginally-propused merger.

The DFA press release did not refer to any supply arrangemefits, as pa~ of thetransaction or otherwise, except for these two comments:

There was a brief and unexplained statement that Agri-Mark would not be(immediately?) displaced as a supplier to Hood; and

It was indicated that DFA would become the new supplier to the Hoodplant at Winchester, Virginia.

However, Agri-Mark has heard in the field that Land O’Lakes ("LOL") has beenoffered a deal by DFA: If LOL agreed to join DMS - a marketing agency in theNortheast controlled by DFA - DFA would not take over tha supply at the Hood-Winchester plant in Virginia but would permit LOL to oontinue its historical supplyarrangement at Winchester. Otherwise, DFA would, under the "restructured" transaetinn,oust LOL as supplier of the Hood plant at Winchester. LOL has now agreed to marketthrough DMS.

It is plain that the contemplated three-way federation between and among DFA,NDH and Hood is inherently and inescapably fraught with anti-competitive dangers. Asa result of the transaction, Hood, which is the prize DFA is pursuing,2 will be 15% ownedby DFA. This will represent a substantial degree ofDFA eonl~ol over Hood. Moreover,Hood in turn will acquire a 30% interest in NDH, thus becoming a co-venturer with DFAin NDH. There is no ambiguity as to what is going on here: DFA, NDH and Hood willbe fused into a single, coordinated economic unit. To cement the relationship, Hood’spresident and chief executive, John Kaneb, will become ehnirman and chief executive ofNDH and NDH’s current president, Traey Nell, will move over to become Hood’spresident. In sho~t, the proposed transaction is a "virtual merger" ofDFA, NDH and

2 Because DFA already controls NDH, it has no need to extend its conlrol over NDH. We do notknow the details of the W, msaction but we assume that Hood’s "minority investment" in HDH will likelytake the form of a purchase of some of DFA’s interest in NDH, perhaps to help bail DFA out of theliquidity problerm DFA has incun’ed in the course of its "buying up the world" campaign. If so, there willbe no dilution of DFA’s control over NDH because post-transaction DFA will own 15% of Hood’s shares.

Hood. This virtual merger is consistent with DFA’s pattern of predatory conduct, andshould be ag~’essively investigated, regardless of its reportability under Hart-Scott-Rodino.

DFA’s Use of Federal Order Rules to Achieve Monopoly

The anti-competitive effect of the proposed NDHAIood/DFA transaction ismagnified by DFA’s history of exploiting monopoly-building opportunities underUSDA’s Federal Milk Order m. arket access ("pooling") roles. A prime example of thisexploitation can be seen in the recent regulatory "reform" of Milk Order rules andUSDA’s receptiveness to new regulatory limits on market access, limits fashioned andproposed by DFA, the largest cooperative constituent of USDA programs.

As described in the Justice Department’s 1977 publlcation~ Milk Marketing (aReport to the Task Group on Antitrust Immunities) at 292-393, many anti-competitivepractices in the milk business are dependent upon the existence and structure of FederalMilk Marketing Orders. This enntinu~s to be hue under USDA’s new regulatorystructure. The creation of larger federal milk markets no longer serves to preservecompetition because the trend toward consolidation of processing plants and cooperativesseverely limits market options for dairy farmers.

The most visible anti-competitive Milk Order practice in the 1970’s was ’’poolloading"- use of Federal Order roles to load smplus milk onto the market of competitorsfor the purpose of depressing the pooled blend price to coerce non-member farmers tojoin the dominant cooperative. Current practices are less transparent, but no lesseffective, in their enereive result. Ironically, these practices are designed to "unload"milk of competitors from a pool. DFA’s favored tactic has been to acquire the Class Iprocessors in a market, thus capturing their attendant supply needs and as a result: (1)force competitors to shift to an alternative market with a lower blend price, (2) leavecompetitors with no aeeass to a regulated federal market pool, or (3) require competitorsto pay a market access tribute to DFA for the "service" of associating milk with a federalmilk pool, reducing non-member revenue while enhancing DFA revenue. In other words,the injury to independent cooperatives and producers is not confined to the lost sales toClass I customers; it also includes the independents’ loss of the ability to pool their milkon Federal Orders because sales to Class I customers are the "gateway" to Federal Orderpooling.

DFA’s strategy of denying access to markets has been structured around this nowUSDA regulatory environment. Federal Order market access is gnvemed by poolqualification roles, which entitle dairy farmers to a revenue stream above the surplus(Class 11-1) price in the form of a "Producer Price Differential" ("PPD"). qualification entitles the dairy farmer (or his cooperative) to market milk and draw thePPD on a volume of milk equal to the volume of distributing (Class I fluid milk) plantsales, times a multiple. In section 1032.13 of the Central Market, for example, the

multiple is five -- i.e., for each hundredweight of mill sold to a Class I fluid mill plant,500 pounds of milk may be pooled and draw the PPD. The fight to an enhanced revenuestream to the holder of pool qualification thus has clear economic value. Market aeeessgained by milk supply to fluid distributing plants also has, by its function of denyingpooling and participation in the PPD, negative or exclusionary effects on competitors.

In the Northeast, there is currently no absolute limit, but proposals are pendingand likely to be adopted (with the urging of DFA and allies) to limit pooled milk to multiple of 5 (i.e., 80% of the milk supply may be diverted). Thus, DFA’s aequisitiun HP Hood or a supply contract for Hood’s monthly distributing plant receipts of 60million pounds (est. for 6 plants) will lock up 300 million pounds per month or 10 millionpounds per day in pool access, and deny pooling opportunity for 300 million pounds permonth of its competitors’ milk.

DFA’s Monopolizing of Local Milk Markets

It is crucial to dairy farmers to have regular, committed and nearby outlets for themilk they produce on their farm. Farm milk is bulky and highly perishable and is pickedup at farms either every day or every other day. That milk must find a marketimmediately as it can not be stored in its raw form for more than a day or two; moreoverthe milk tanker itself is needed to pick up the next load of milk either that same day or thenext. Agri-Mark members produce a 50,000-pound trailer load of mill every nineminutes of every day, 365 days a year. This includes weekends and holidays too.

In addition to its mergertaeties and manipulation of the Federal Order system,DFA simply used its economic muscle to buy up market outlets for milk even though itdoes not have the local milk supply to service that milk. If need be, they transport milkinto their new customer at great expense while local farmers struggle with what to dowith their own milk. Usually, local farmers quieldy reeogrtize that they have no ehnieebut to capitulate to and join DFA in order to have a market for their milk. DFAeffectively removes both competition and choice for these producers. Instead of gainingmembership through farmer choice as we and most other cooperatives do, DFA gains itby eliminating choice. We believe this is wrong for farmers, cooperatives and themarketplace.

Farmers have the opportunity to market their milk together through cooperativesunder the Capper-Volstead Act. Cooperatives can also work together to jointly marketmilk under that Act. We strongly support the abifity of farmers and cooperatives to do soand have done so ourselves. However we also believe it should be a choice for bothfarmers and their cooperatives to work together. It should not be forced upon themthough the elimination of choice and competition as has oRen been the ease involvingDFA. Agri-Mark believes that cooperation amongst farmers and their cooperatives canbenefit farmers but farmers must also have enmpetition for their milk at the farm level.One large milk buying entity, be it cooperative or private company, invariably forces

farmers to be strictly price takers for their milk and minimizes their income. It alsoallows that organization, even if it is a cooperative, to ignore the local needs of thei~members and transfer income from those farmers to other areas of the country where theyare seeking td expand there influence and economic power.

Conelusio~n

In summary, Agri-Mark and its farmer-members believe that the elimination ofcompetition for farm milk supplies is bad for farmers, consumers and the marketplace.Th~s is pa.~ticularly the case when companies such as Dean Foods obtain such a hugemajority of the Class I marketplace in a region and cooperatives such as DFA effectivelybuy a near monopoly on the ability to supply Dean Foods as well as other Class I outlets.These activities arc plainly anti-competitive and the appropriate law enforcementagencies should take the appropriate steps necessary to address these issues.

5

EXHIBIT 2

AN EXCERPT ON VERTICAL FORECLOSURE FROM

Antitrust Analysis of Supermarket Retailing:Common Global Concerns that Play Out in

Local Markets

by

Ronald W. Cotterill

An Invited Paper Delivered at the Australian Agricultural and ResourceEconomics Association Annual Meeting

Coifs Harbour

February 11, 2005

25

4. Vertical market power

The sequence of markets and industries between farmers and consumers, also has

important implications for performance. As in the horizontal dimension the two primary

dimensions of performance are efficiency and market power. Here, we retreat from the new

Institutional Economics of contracts and focus squarely on open market pricing in a channel that

has oligopostie manufacturing and retailing industries.

4.1. Vertical pric’mg games [DELETED]

4.2. Private label pricing strategy: competitive retailers [DELETED]

4.3. Countervailing or coalescing power

With his countervailing power hypotheses J. K. Galbraith posed a different solution to

manufacturer power. He argued that the solution to power on one side of the market was to

develop power to develop on the other side. The obvious examples of his time were labor unions

that sought to countervail powerful large corporate employers, and agricultural bargaining

cooperatives. Inthe resulting bilateral monopoly situation price and other terms of trade are

indeterminant but for bargaining. Walter Adams and others, however, argued that concentration

on both sides of a market would produce coalescing power, i.e. the adversaries would combine to

affectively increase the exercise of power against others in markets up or down the market

channel.

Dobson and Waterson analyze these two competing hypotheses for the UK supermarket

industry. Their theoretical analysis begins with the premise that manufacturers and supermarkets

are locked in a bilateral monopoly situation in the wholesale market, i.e. countervailing power

exists. They demonstrate that coalescing power is the outcome and consumers pay higher prices

when supermarkets also have market power in the retail market (Dobson and Waterson, 1997 p.

428). Dobson and Waterson did not analyze the symmetric issue for the raw product market,

however if manufacturers have buyer power there one would expect a symmetric result.

Coalescing power between retailers and manufacturers would lower raw product prices to

farmers.

4.4. Vertical market foreclosure and price leadership

There also is an important dynamic dimension to the exercise of market power in a

vertical channel by retailers and manufacturers. The growth of supermarket chains to market

dominance can reinforce anti-competitive conduct in the retail market via strategic moves in the

vertical dimension. For example in Toys R Us v. FTC, 221F3d 928 (7t~ Circuit, 2000) the court

found that this leading toy retailer was able to require toy manufacturers to offer less favorable

terms of trade to other toy retailers, thereby hurting its rivals and reinforcing its market power at

retail.

Consider a second vertical strategic game that may be more pernicious because it shares

power gains with rival firms in the ehaunel, and thus may more likely escape detection and

persistently damage consumers. A dominant retail firm can extract cost concessions from a food

processor that effectively force a dominant processor to charge other retailers higher wholesale

prices. Yet now rather than use its cost advantage to start a price war at retail to damage

competitors, the advantaged dominant retailer elevates prices so that competitors, whose costs

are higher, make more not less profits than before. The dominant firm’s price leadership

27

scheme, also increases its own profits and the profits of the processor profits (from higher priced

sale to the retail fringe firms). The result is coalescing power against consumers.

This situation has existed in the New England fluid milk market since 2000 (Cotterill

2003 et al.) Royal Ahold via its Stop and Shop supermarket chain has had a dominant market

share at retail (50 per cent) due primarily to horizontal mergers during the 1990’s. In 2000

closed its milk plant and negotiated a 20 year strategic alliance with the Dean Foods milk

processing company that thereafler supplied over 80 per cent of New England supermarket milk.

In 2003 Stop and Shop paid the raw market price plus 53 cents per gallon for milk

delivered into its stores. Competing supermarket chains pay 10 cents per gallon more for the

same supply. Stop and Shop has led prices up so that retail margins over the past five years are

$1.50 per gallon. In store marginal costs are 20-25 cents per gallon and fully allocated costs are

40-50 centsper gallon. Therefore all supermarket chains are capturing approximately $1 per

gallon as a power premium and the processor earns a share as well. This vertical collusion game

escapes Robinson-Patman prosecution in the U.S. because the cost discount granted to the

powerful buyer does not damage other retailers.

Although not perfectly verified many market observers believe this coalescing power was

also used against farmers. Big Y, a large regional supermarket chain that initially opted to

receive its milk from the number three fluid processor recently threatened to switch to the

dominant processor if it could not pay a lower wholesale price. The demand was so substantial

that the processor went to its farmer cooperative supplier and demanded a lower raw milk price,

otherwise it claimed it would lose the retail account and go out of business. A4vi-Mark, the

threatened regional co-op with annual sales of over $500 million and over 1,400 members could

not sell to Dean Foods because a competing national cooperative has a nationwide full supply

28

contract with that dominant processor. To keep their fluid market, in this situation, farmers in

the regional cooperative cut price. This is positive proof that when it comes to the exercise of

buyer power against farmers, the truth is often found in analysis of the institutional details in

relevant antitrust markets rather than aggregate national analysis.

29

References:

Cotterill, R.W., Rabinowitz, A.N. and Tian, L. (2003)Milk Market Charmel Structure: Its Impacton Farmers and Consumers, and the Inadequacies of Antitrust Enforcement as aFoundation for Dairy Policies: Evidence from the Northeast Dairy Industry, U.S. SenateJudiciary Committee Hearing on Monopsony Issues in Agriculture: Buying Power ofProcessors in our Nation’ s Agricultural Markets, 10 October 2003, Washington, D.C.,USA.

Dobson, P.W. and Waterson, M. (1997) Countervailing Power and Consumer Prices, theEconomic Journal 107, 418-430.

3O