ST. LOUIS (AP) — The Justice Department filed an antitrust lawsuit against the nation's largest dairy company Friday, alleging that Dean Foods Co. purchased a smaller dairy company in Wisconsin to quash competition and drive up milk prices.

The lawsuit — filed in concert with attorneys general from Illinois, Michigan, and Wisconsin — seeks to undo Dean Foods' 2009 purchase of Foremost Farms USA's Consumer Products Division and to require Dean to give 30 days notice before all future acquisitions of milk-processing operations.

The suit signals a shift of antitrust policy in Washington, where regulators have promised to take more aggressive action in an agricultural sector dominated by big firms that have consolidated market share over the last two decades.

Dallas-based Dean Foods says it contests the complaint. 

According to a statement released by Dean Foods, it believes that, from the time of the acquisition almost a year ago this transaction has benefitted Wisconsin dairy farmers by providing a stable and growing outlet for their milk. “In addition, the transaction already has produced important cost savings that will benefit customers and spur competition in and around Wisconsin,” the statement says.

The company says it believes its acquisition of the DePere and Waukesha, Wis., fluid milk-processing plants from Foremost is fully compliant with antitrust laws, and will defend itself vigorously against the complaint.

The company says it believes an objective judicial review of the facts will reveal that competition is alive and flourishing in Wisconsin.

The deal gave Dean two dairy processing plants in Wisconsin, and left many school districts with only one milk supplier, according to the lawsuit. Dean gained 57 percent market share in parts of Michigan, Illinois and Wisconsin through the deal.

The lawsuit portrays the acquisition as a strategic move to eliminate a strong competitor.

Dean's purchase was completed April 1, according to the suit. On April 20, the Department of Justice installed Christine Varney as attorney general over the antitrust division. She has since identified agricultural firms as a focus of antitrust enforcement, and the department is holding a series of public workshops this spring and summer to examine competition issues in the meat, dairy and grain sectors.

Varney was not available for comment Friday, but said in a statement that the "purpose of the department's lawsuit is to restore competition so that schools, grocery stores and other retailers in Illinois, Michigan and Wisconsin, will pay lower prices for their milk."

Foremost Farms said in a statement the company wouldn't comment because only Dean Foods is named in the lawsuit. The statement said Foremost will continue to supply Dean with milk under their agreement.

Copyright 2010 The Associated Press.