New legal challenges to U.S. agricultural cartels: the Horne decision.

• Author: Burrus, Trevor
• Position: Essay

Farm policy, although it's complex, can be explained. What it can't be is believed. No cheating spouse, no teen with a wrecked family car, no mayor of Washington, D.C., videotaped in flagrante delicto has ever come up with anything as farfetched as U.S. farm policy.

--P. J. O'Rourke (1991: 145)

U.S. agricultural policy is a complex mish-mash of carve-outs, cartels, and cronyism. Consequently, much of the agricultural world exists in the shadows: too obscure to attract genuine interest from laymen, and too boring to command the attention of any but the most hardened academics and policy wonks. Moreover, except when the Farm Bill occasionally comes up for reauthorization, the media rarely pays attention to what's going on in American agricultural policy.

Some of this complexity may be by design. According to Cato Institute adjunct scholar Daniel A. Sumner, Norfleet Sugg, former executive secretary of the North Carolina Peanut Growers Association and later head of the Agricultural Council of America, once explained that "the peanut program is so complicated; there's only three people in the world that actually understand how it works. It's my job to keep it that way" (Sumner 2012).

Sumner believes the programs are complicated by design: "Every time somebody proposes one more complicated government program, I can't help but think part of that is, the less the average taxpayer or the average analyst can figure out what this thing is about, or the average congressman for that matter, they throw up their hands and think, well, the industry must know what they're talking about."

Occasionally, certain silly agricultural programs get exposed, and the disinfecting power of sunlight helps slightly purify our foolish agricultural code. That's what happened at the Supreme Court in 2015, when, for the second time, the justices heard a challenge to the despotic powers of the Raisin Administrative Committee (RAC).

The RAC is one of several government-created agricultural cartels formed around certain commodities and certain regions. How many are there? Well, when questioned by the Supreme Court at oral argument, even the deputy solicitor general couldn't say for sure. "I think there's scores of them," he said, in a shocking display of ignorance before the highest court in the land. (1)

The RAC was created under what's called a "marketing order," a New Deal relic that proves that, no matter how silly the government program, once it is in place it is nearly impossible to remove. The 47-member RAC meets in an office in Fresno, California, and decides, among other things, how many raisins should be sold on the open market each year. They then can take the "excess" raisins from farmers and offer them nothing in return.

Usually, those who benefit from government-enforced supply controls and anticompetitive policies are reticent to challenge the hand that feeds them. Raisin growers and handlers (those who prepare, pack, and distribute raisins) have historically been no different, and the RAC has been generally free to operate its cartel without pushback. That is, until it met Marvin and Laura Horne, two raisin farmers who became fed up with the RAC's commands. The Hornes took the RAC to the Supreme Court twice, and when the dust had cleared they won resounding 9-0 and 8-1 victories and forever changed the ability of the RAC and other similar entities to take farmers' property without paying for it.

This is the story of the Hornes' case and its implications. But it is also the story of backward and antiquated agricultural policies that came out of the New Deal. Finally, it is the story of a laudable type of civil disobedience, and the incredible tenacity of the Hornes in their fight against government power and entrenched interests.

New Deal Command-and-Control Policies

The RAC can be seen as the product of two New Deal policies. One is the push toward cartelization that dominated much of New Deal thinking; the other is the doctrine of pricing parity.

More specifically, the RAC came from a 1949 amendment to the 1937 Agricultural Marketing Agreement Act (AMAA). The AMAA sought to create "orderly" marketing conditions via heavy-handed government controls. In part, this entailed cartelizing various industries and allowing them to govern themselves.

President Franklin D. Roosevelt had a strange tendency to think that cartels were the answer to the perceived shortcomings of free markets (see Powell 2004). The first major New Deal program, the National Industrial Recovery Act of 1933 (NIRA), empowered businesses to create "codes of fair competition" in order to "encourage national industrial recovery, to foster fair competition, and to provide for the construction of certain useful public works." The law allowed for "the organization of industry for the purpose of cooperative action among trade groups," the "united action of labor and management under adequate governmental sanctions and supervision," and the "elimination] of...