Antitrust and Agriculture

• Author: Christopher L. Sagers
• Pages: 207-229

207

CHAPTER XI

ANTITRUST AND AGRICULTURE

American agriculture policy has long struggled to balance the

interests of small producers against the interests of consumers.

1

On the

one hand, Congress has sought to support producer profits, primarily by

exempting some collective operations and marketing from antitrust.

Congress did so first in the Clayton and Capper-Volstead Acts early in

the 20th century, and somewhat later in the Depression-era Agricultural

Marketing Agreement Act (AMAA).

2

These statutes have generated a

substantial amount of litigation and policy debate.

3

Congress has also

sought to modify marketing and the organization of production, with the

goal of giving farmers a larger share of the revenue their products earn,

without raising prices. Congress has pursued that goal by encouraging

1

. Protection of farmers and ranchers finds its early roots during the

American i ndustrial revol ution, i n the Granger and Alliance movements

of the 1870s. See W ILLARD COCHRANE, THE DEVELOPMENT OF

AMERICAN AGRICULTURE: A HISTORICAL ANALYSIS 93-95 (2d ed. 1993).

2

. See parts XI.B and XI.C of this chapter.

3

. The great bulk of antitrust litigation against cooperatives, both before and

after the adoption of the Cap per-Volstead Act, has targeted farm

cooperatives engaged in the marketing of agricultural products.

Cooperatives that provide group purchasing for inputs such as seed,

fertilizer, and pesticid es, have rarely been the object of attack, despite

their lack of antitrust exemption. One excep tion is Bell v. Fur Breeders

Ag. Co-op., 348 F.3d 1224 (10th Cir. 2003) (dismissing on Capper-

Volstead and Clayton Act, § 6, grounds a challenge to pricing practices

concerning purchasing of mink feed by a cooperative). The application of

the Capper-Volstead Act exemption does not seem to have bee n contested

in this case, although sale s of supplies to farmers are not within the scope

of the Capper-Volstead Act exemption even if t he cooperative also

engaged in the sale of agricultural products to which the Capper-Volstead

Act would apply. But supply cooperatives that fit the Clayton Act

requirements could, in any event, claim that exemption.

A Handbook on the Scope of Antitrust

208

more efficient marketing and forward integration by producers into

processing and distribution.

4

A. The Policy Problem and Evolution of the Statutory Framework

Farmers have used a variety of collective self-help efforts over the

years, some of which Congress has exempted and some not. Some are

more problematic than others from the perspective of contemporary

antitrust policy.

Congress originally rejected Sherman Act exceptions for labor and

agricultural collaborations, believing them unnecessary.

5

However,

following several successful challenges to unions and state law actions

against agricultural cooperatives,

6

Congress first exempted the

cooperatives in Clayton Act section 6.

7

Because section 6 proved

disappointing to many members of Congress, in failing to exempt some

cooperatives

8

and in failing to empower them effectively to combat the

4

. Among those statutes were the Grain Standards Act, ch. 313, 39 Stat. 4 82

(1916) (codified, as amended, at 7 U.S.C. §§ 71-87K); the Commodities

Exchange Act, ch. 369, 42 Stat. 998 (1922) (codified, as amended, at 7

U.S.C. §§ 1-27f); the Packers and Stockyards Act, ch. 74, 42 Stat. 159

(1921) (codified, as a mended, 7 U.S.C. §§ 181-231); and the Agricultural

Fair Practices Act, P ub. L. 90-288, 82 Stat. 93 (1968) (codified, as

amended, at 7 U.S.C. §§2 301-06).

5

. The 1 890 Congress believed the law would not apply to such

organizations, see U.S. DEP’T OF JUSTICE, REPORT OF THE TASK GROUP

ON ANTITRUST IMMUNITIES (1977) [hereinafter DOJ REPORT]; DONALD

FREDERICK, RURAL BUS. COOP. SERV., U.S.D.A., ANTITRUST STATUS OF

FARMER COOPERATIVES: THE STORY OF THE CAPPER VOLSTEAD ACT 25-

27 (2002), a vailable at www.rurdev.usda. gov/rbs/pub/cir59.pdf, and

indeed, prior to the adoption of the Clayton Act, there were no antitrust

challenges to agricultural cooperatives under t he Sherman Act. Id. at 68-

70. But see Steers v. United States 192 F. 1, 9-10 (6th Cir. 1911) (antitrust

law ap plied to “night riders” who sought to enforce boycott of tobacco

buyers by coercive means).

6

. Labor unions were subject to several successful antitrust challenges

before 1914. See, e.g., Loewe v. Lawlor, 208 U.S. 274 (1908). For review

of the state law cases against agricultural cooperatives, se e FREDERICK,

supra note 5, at 67-71.

7

. Clayton Act § 6, 15 U.S.C. § 17.

8

. Section 6 was limited to “labor, agricultural, or horticultural organizations

. . . not having capital stock or conducted for profit.” 15 U.S.C. § 17. It

did not apply to the increasing numbers o f cooperatives organized in

corporate form with equity o wnership. Moreover, the exemption applied