Antitrust Report a Wake-Up Call for Co-Ops to Defend Marketing Rights

By Frederick, Donald | Rural Cooperatives, May-June 2007 | Go to article overview

Antitrust Report a Wake-Up Call for Co-Ops to Defend Marketing Rights


Frederick, Donald, Rural Cooperatives


In 2002, Congress created the Antitrust Modernization Commission (AMC) to examine whether the antitrust laws should be "modernized" and to submit its findings to Congress and the President. The AMC was a 12-member, bipartisan commission consisting primarily of antitrust lawyers with large metropolitan law firms, several with prior experience at the Antitrust Division, U.S. Department of Justice.

During its deliberations, the AMC developed and studied a list of all antitrust immunities and exemptions, including those of greatest importance to agricultural producers:

* Section 6 of the Clayton Act (authorizes the formation of non-stock agricultural co-ops),

* The Capper-Volstead Act (permits agricultural producers to market their production on a cooperative basis),

* Fishermen's Collective Marketing Act (similar to Capper-Volstead, protects associations of aquacultural producers), and

* Agricultural Marketing Agreement Act (authorizes agricultural marketing orders and agreements).

The Commission submitted its report on April 3, 2007. The report does not call for repeal of the Capper-Volstead Act or other laws important to rural cooperatives. It does, however, include recommendations which, if enacted, would create serious challenges for agricultural producers who market their production on a cooperative basis.

Producers need antitrust protection

Since enactment of the Sherman Act in 1890, it has been a criminal felony for competing businesses to agree on prices and terms of sale. Each farmer or rancher is a "competitor" under antitrust law. Without protection, any time their cooperative establishes the price or other terms of trade for selling the food and fiber they produce, they would be committing a criminal act.

Capper-Volstead and the other laws listed above shield farmers and ranchers from antitrust liability to market their production on a cooperative basis. Cooperatives are used to marketing many types of products across the United States and internationally, including: dairy products, fruits, vegetables, nuts, wheat, feed grains, rice, oilseeds, cotton and livestock.

Without this protection, producers would be at a severe disadvantage when trying to individually negotiate sales of their products to the large national and international processing and distribution firms in the food industry. Capper-Volstead levels the playing field by allowing farmers to combine their economic strength to balance that of the firms that purchase their products.

Consumers are protected from being charged unreasonable food prices. Section 2 of Capper-Volstead provides that if the price of any agricultural product is "unduly enhanced" by a cooperative, the Secretary of Agriculture shall issue an order directing the producers to cease such conduct. The U.S. Department of Justice has authority to enforce the order if the cooperative doesn't stop its unreasonable activity.

AMC deliberations

The overall AMC activity covered a wide spectrum of antitrust law. Ten study groups were formed. The one that examined producer association issues was called "Immunities and Exemptions." So while the findings in this area are significant to farmers and ranchers, the AMC did not only look at these exemptions. They were a small part of a much broader review.

During its process, the AMC asked for public comments on all of the issues it was studying. Several organizations filed comments in strong support of Capper-Volstead, including: the U.S. Department of Agriculture, the Congressional Farmer Cooperative Caucus, the National Council of Farmer Cooperatives, the National Farmers Union and the National Milk Producers Federation.

While a limited number of persons were allowed to make presentations in person to the Commission, most were antitrust enforcement officials, academicians and attorneys in private practice whose backgrounds were similar to those of the Commissioners. …

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Antitrust Report a Wake-Up Call for Co-Ops to Defend Marketing Rights
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