Dean Foods has said it "vigorously" contests a lawsuit that claims the company's purchase of two dairy processing plants from Foremost Farms breached competition regulations.

The US Justice Department filed a lawsuit on Friday (22 January), arguing that the acquisition resulted in a "substantial" lessening of competition in Illinois, Michigan and Wisconsin.

The Justice Department, along with state attorneys general from Illinois, Michigan and Wisconsin, asked a District Court in Milwaukee to order Dean Foods to sell the dairy processing plants it acquired from Foremost Farms in April last year.

According to the competition regulator, Dean Foods' acquisition of Foremost Farms' two plants in De Pere and Waukesha, Wisconsin, eliminated an "aggressive competitor".

"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," said Christine Varney, assistant attorney general in charge of the Justice Department's antitrust division.

The Justice Department also wants Dean Foods to notify it at least 30 days prior to any future acquisition involving milk processing operations.

However, the company has rebuffed the allegation, arguing that the deal was "fully  compliant" with antitrust laws.

In a statement, Dean Foods said that the acquisition had benefited local farmers and would generate cost-savings that would benefit local consumers and increase competition in the markets.

"The company believes an objective judicial review of the facts will reveal that competition is alive and flourishing in Wisconsin," the group said.