Legal Corner
Capper-Volstead Q&A
By Stephanie M. Smith,
Senior Legal Advisor for
USDA Cooperative Programs
he 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.
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 Capper
Volstead 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.
- What are the limitations of Capper-
Volstead? Capper-Volstead provides
limited anti-trust exemption. Thus
Capper-Volstead will not protect farmer
cooperatives if they: engage in
predatory practices or unfair or coercive
conduct; combine or conspire with noncooperatives
or persons other than
producers to monopolize or restrain
trade; allow non-producer members in
the cooperative; or monopolize or
restrain trade to the extent that the
price of the agricultural product is
unduly enhanced.
- How is the general public protected?
Capper-Volstead protects the general
public against potential monopolization
and restraint of trade. It states that if an
association should monopolize or
restrain trade to the extent that it
unduly enhances prices of agricultural
products, an administrative hearing can
be held before the Secretary of
Agriculture, and the Secretary can order
the association to “…cease and desist
from monopolization or restraint of
trade.”
- Is Capper-Volstead still relevant?
Capper-Volstead permits farmers to get
together to collectively market their
products, which otherwise — in the
absence of the Capper-Volstead Act —
could result in antitrust action against
them. Second, it protects the general
public against undue price enhancement
as a result of any monopoly position
that a group of producers could
otherwise legally achieve under the Act.
It is not hard to see why so many
farmer cooperatives and their trade
organizations are making their presence
known at the competition workshops,
where they are discussing the role of
Capper-Volstead in the agricultural
marketplace. It is an opportunity to
educate the public about this law, and
the importance of co-ops to the nation’s
farmers.
To view submitted comments and
other presentations made at the
sessions, visit: www.justice.gov/atr/
public/workshops/ag2010/index.htm. If
you have further questions about
Capper-Volstead, contact Stephanie
Smith at: stephaniem.smith@
wdc.usda.gov.
Ag Competition Workshop Schedule
The final three of five workshops are being held:
- June 25—Madison, Wis. Focus: Dairy Industry. Specific
areas of focus may include concentration, marketplace
transparency and vertical integration in the dairy industry.
At University of Wisconsin, Great Hall, Memorial Union,
800 Langdon St.
- Aug. 27—Fort Collins, Colo. Focus: Livestock Industry.
Specific areas of focus will address beef, hog and other
animal sectors and may include enforcement of the
Packers and Stockyards Act and concentration. At
Colorado State University.
- Dec. 8—Washington, D.C. Focus: Producer Margins. This
workshop will look at the discrepancies between the
prices received by farmers and the prices paid by
consumers. As a concluding event, discussions from
previous workshops will be incorporated into the analysis
of agriculture markets nationally. At USDA headquarters,
Jefferson Auditorium, 1400 Independence Ave., S.W.,
Washington, D.C.
Additional updates and information, including agendas
and speakers, will be posted on the Antitrust Division's
events website at: www.usdoj.gov/atr/events.htm.
