In the late 1980s, the Department of Justice began a campaign of prosecuting dairy companies and individuals associated with these companies for colluding on contract bids to supply milk to schools and military installations. Data were derived from: (1) interviews with officials from the Departments of Defense, Agriculture, and Justice; (2) a review of laws, executive orders, and regulations; and (3) historical data on the dairy industry. Findings indicate that the extent to which the milk marketing and price support programs influence milk contract bid-rigging is unclear. Department of Justice officials said that marketing orders and price supports may foster improper collusion, and that the Capper-Volstead Act's exemption of cooperatives from antitrust statutes may complicate prosecution of bid-rigging cases. Recommendations are made to develop a formal, systematic process for sharing information on cooperatives' pricing; suspend or debar individuals and companies convicted of or indicted for bid-rigging; and provide awareness training to school procurement officials. Appendices contain comments from the Departments of Agriculture and Justice, and the General Accounting Office; and a list of major contributors to the report. (LMI)