LEGAL CORNER

Antitrust developments;
case against mushroom
growers’ co-op settled

By Marlis Carson
Vice President, Legal,
Tax and Accounting
National Council of Farmer
Cooperatives

Donald Frederick
Program Leader for Law,
Policy & Governance
USDA Rural Development


wo recent developments should remind agricultural cooperative leaders that they can not take for granted the limited antitrust protections accorded associations of producers.

The first is the decision by the new Antitrust Modernization Commission to study all antitrust exemptions, including those enacted to promote cooperative marketing of agricultural and aquacultural products. The second is the settlement of an antitrust suit against a mushroom marketing cooperative that resulted in the association agreeing to cease activities the Department of Justice felt were outside the scope of applicable antitrust shields.

Antitrust Modernization Commission
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 is a 12- member, bipartisan commission consisting primarily of antitrust lawyers with large law firms and major corporations. The commissioners plan to complete a draft report by the summer of 2006 and to submit a final report in the spring of 2007.

Once appointed, the AMC established eight working groups to develop recommendations for issues the commissioners should study. The AMC met on Jan. 13 in Washington, D.C., to discuss those recommendations.

At their January 2005 meeting, the commissioners unanimously agreed to accept the Immunities and Exemptions Working Group’s recommendation that the AMC study all antitrust immunities and exemptions (both statutory and those based on case law) to determine whether they should be eliminated if not justified by the benefits they provide, or if they should otherwise be time-limited. The list of exemptions to be considered includes: In a letter to the AMC, the Department of Justice did not mention any of the producer-oriented exemptions but did call attention to exemptions that can “...undermine our global leadership in advocating market-based approaches in other jurisdictions. Among the immunities and exemptions that deserve to be studied are the Shipping Act, 46 U.S.C. § 813, the Export Trading Company Act, 15 U.S.C. §§ 4011-21, and the Webb- Pomerene Act, 15 U.S.C. §§ 61-66.”

At the conclusion of the January meeting, the working groups were instructed to prepare written proposals detailing how their recommendations should be carried out. The commissioners anticipate they will eventually hold hearings and receive testimony from industry representatives.

Information about the AMC, its commissioners and the initial reports of all Working Groups are available at: http://www.amc.gov. Producer-owned marketing cooperatives will want to keep abreast of commission actions and be ready to defend their antitrust protections if necessary.

Mushroom growers case settled
In December 2004, the Department of Justice simultaneously filed an antitrust lawsuit against the Eastern Mushroom Marketing Cooperative (EMMC) of Kennett Square, Pa., while also entering into a consent decree settling the case. EMMC, in an attempt to limit mushroom production by non-members of the cooperative, purchased and leased land capable of producing mushrooms and placed deed restrictions on the titles to the land. The deed restrictions barred mushroom farming on the land, usually forever.

Justice did not challenge the Capper-Volstead status of EMMC. Rather, the department asserted in its complaint that the Capper-Volstead Act does not protect members of a cooperative who conspire to prevent independent, non-member farms from competing with the cooperative or its members.

Under the terms of the consent decree, EMMC agreed to remove all restrictions on producing mushrooms from the deeds and to restrain from similar activity in the future. No fine or other additional punishment was levied against the association or its producer-members. Thus, EMMC members may continue to agree on prices and otherwise market their mushrooms through their cooperative.

A consent decree does not set a judicial precedent in the same way a court decision can. However, this case should put marketing associations on notice that the Justice Department may intervene when it believes a cooperative’s actions artificially reduce the acreage and facilities available to non-members to grow and market the same product as the cooperative’s members, thereby depriving consumers of the benefits of competition.





March/April Table of Contents