Capper-Volstead Q&A

By Smith, Stephanie M. | Rural Cooperatives, May-June 2010 | Go to article overview

Capper-Volstead Q&A


Smith, Stephanie M., Rural Cooperatives


The Department of Justice (DOJ) and the U.S. Department of Agriculture (USDA) are jointly hosting workshops for the public to discuss issues affecting competition in the agricultural marketplace. These issues include antitrust immunity laws and the Capper-Volstead Act (see page 2).

These are the first joint DOJ/USDA workshops ever held to discuss competition and regulatory issues in the agriculture industry. The first two workshops were held in March (in Iowa) and May (in Alabama), with three more still slated (see sidebar).

Each workshop features keynote speakers, general expert panels and/or break-out panels that address more narrowly focused issues. The attendance and participation of the public are encouraged throughout the series of workshops. Opportunity is provided for comments and questions.

The goals of these sessions are to generate further dialogue among interested parties and to improve understanding of the legal and economic aspects of antitrust issues. The workshops have generated interest in the CapperVolstead Act, the law that provides certain cooperatives limited antitrust immunity.

Following are some of the most commonly asked questions about Capper-Volstead:

* What is Capper-Volstead, and why was it enacted? The law was enacted in 1922 to allow farmers to form for-profit associations, with or without capital stock, to collectively market their products. From a historical point of view, before Capper-Volstead became law, farmers who joined in stockholding cooperatives were being prosecuted under the antitrust laws for illegal combinations and price-fixing. Congress goals for the Capper-Volstead Act included increasing producers bargaining power, bringing consumers and producers closer together, eliminating unnecessary middlemen in the marketing of agricultural products, and providing the same benefits in capital acquisition that are available to corporations.

* How does this law provide limited antitrust exemptions for farm co-ops? Capper-Volstead legally permits farmers to join together to process, prepare for market and market products of their own production. Also, a group of producers may act together not only through their own association, but also by joining with other associations of producers to create a common marketing agency.

* Are cooperatives the only organizations protected under Capper-Volstead? Capper-Volstead states, in part, that: "persons engaged in the production of agricultural products...may act together." It does not use the word "cooperative" or define "agricultural producers." Further, it is not an enabling statute under which cooperatives organize. It uses the language "association of producers."

* What conditions do farmer co-ops have to meet to qualify for the antitrust exemptions? An association of producers must meet the following two conditions: 1) It must be operated for the mutual benefit of its members insofar as they are producers of agricultural products; and 2) It must not deal in the products of nonmembers in an amount greater in value than such products that it handles for its members.

* Are there any other requirements? Yes. Farmer cooperatives have a choice of conforming to one or both of the following requirements: 1) No member of an association is allowed more than one vote because of the amount of stock or membership capital owned, or 2) The association does not pay dividends on stock or membership capital in excess of 8 percent per year. …

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