The Capper-Volstead Act and Defenses
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CHAPTER IV
THE CAPPER-VOLSTEAD ACT AND DEFENSES
The Capper-Volstead Act1 creates an express exemption from
antitrust liability for collective activity by farmers and agricultural
producers. Congress passed the Act in 1922 to ensure that members of
qualifying agricultural cooperatives could make collective decisions
about pricing and marketing their products. That said, the A ct has been
interpreted as a narrow exemption to the Sherman Act, and courts
generally require cooperatives to demonstrate that: (1) each of their
members is a qualified farmer or producer under the Act, and (2) the
cooperative’s activities fit within the Act’s narrow scope.
A. History of the Capper-Volstead Act
The Capper-Volstead Act permits competing agricultural producers
to form cooperatives and engage in collective conduct, such as pricing
and marketing goods, that the Sherman Act would not otherwise allow.
The Act resulted from decades of consideration and debate.2 When
Congress debated the Sherman Act in 1890, some members expressed
concern that the proposed antitrust legislation might constrain
agricultural cooperatives. There is evidence that some members of
Congress did not intend the Sherman Act to limit (or even apply to) such
activity.3 The Congressional Record reflects concern for farmers who, in
order to survive, had to sell their products at low prices.4 Sen ator John
Sherman, for whom the act is named, introduced an amendment to
clarify that the Sherman Act did not apply to “combinations among
persons engaged in horticulture or agriculture made with the view of
enhancing the price of agricultural or horticultural products.”5 Sherman,
however, later said that he “d[id] not think it necessary” to add the
1. 7 U.S.C. §§ 291-292.
3. See, e.g., 21 Cong. Rec. 2731 (1890).
4. Id.
5. Id. at 2611.
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amendment,6 and the amendment ultimately was not incorporated into
the Sherman Act.7
In 1908, the United States Supreme Court clarified that the Sherman
Act applied to agricultural associations, citing Congress’s failure to
exempt organizations of farmers from the Sherman Act8 and Congress’s
specific rejection of an agricultural exemption at the time it passed the
Sherman Act.9 While there had been no antitrust challenges to
agricultural cooperatives under the Sherman Act in its early years, a
number of state antitrust cases found cooperatives liable under state
antitrust laws.10 Moreover, when states tried to enact their own statutory
exemptions to state competition regimes, the federal district courts struck
down these exemptions as contrary to the Fourteenth Amendment to the
U.S. Constitution.11
The federal court decisions prompted Congress to enact Section 6 of
the Clayton Act.12 Section 6 provides that “[n]othing in the antitrust laws
6. Id.
7. 15 U.S.C. §§ 1-7.
8. See 21 Cong. Rec. 2611 (1890); Loewe, 208 U.S. at 310 (“The records of
Congress show that several efforts were made to exempt, by legislation,
organizations of farmers and laborers from the operations of the act, and
that all these efforts failed, so that the act remained as we have it before
us.”). Notably, the Loewe case did not involve an agricultural cooperative
or its members, but the Supreme Court went out of its way to clarify that
the Sherman Act did not exempt them from liability.
9. 59 Cong. Rec. 7852 (1920); see supra notes 3-6 and accompanying text.
10. Georgia Fruit Exch. v. Turnipseed, 62 So. 542, 549 (Ala. 1913)
(agreement among cooperative members to enhance prices paid to
members was an unreasonable restraint of trade that violated common
law); Reeves v. Decorah Famers’ Coop. Soc’y, 140 N.W. 844, 849 (Iowa
1913) (permanentl y enjoining agricult ural cooperative from charging
liquidated damages to members that sold their products to competitors);
Ford v. Chicago Mil k Shippers Ass’n, 39 N.E. 651, 655 (Ill. 1895)
(marketing agreement between agricultural cooperative and its members
to fix prices and limit supply of dairy products was unlawful).
11. Connolly v. Union Sewer Pipe Co., 184 U.S. 540, 559-60 (1902) (Illinois
law exempting farm products in hands of producers violated the equal
protection clause of the Fourteenth Amendment to the federal
Constitution); I n re Grice, 79 F. 627, 646-50 (N.D. Tex. 1897) (striking
down Texas law).
12. See, e.g., Loewe v. Lawlor, 208 U.S. 274, 310 (1907).
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