After a recent series of lawsuits and government investigations, U.S. agricultural cooperatives face heightened scrutiny over the antitrust exemption they’ve had since 1922 under the Capper-Volstead Act.
That’s nothing new, antitrust experts say, noting that legal challenges to the cooperatives’ exemption extend back at least to the 1950s. But this time around, the heat is more intense.
“Perhaps never in all the years since the act’s passage has it been subject to the level of government and private litigant scrutiny that it is today,” attorneys Christopher Ondeck and Kathleen Clair wrote in a November 2009 report for the Bureau of National Affairs, a Washington, D.C.-based legal consultant.
The United Potato Growers of America and other businesses in the industry face lawsuits in Idaho and Los Angeles courts alleging they conspired to control supplies and fix prices.
In 2008, the plaintiff in the Idaho case, Brigiotta’s Farmland Produce and Garden Center Inc., Jamestown, N.Y., made similar accusations against egg producers in a Pennsylvania lawsuit.
The case is still pending, though one defendant, Moark LLC, an affiliate of Land O’Lakes, Inc., one of the largest cooperatives, recently agreed to pay a $25 million settlement, according to attorneys involved in the case.
The U.S. Department of Justice has since 2007 launched investigations into U.S. citrus, egg, tomato and mushroom producer or marketing groups.
Whether the recent court cases signal a threat to cooperatives’ ability to collectively manage production and discuss prices remains to be seen.
But it’s clear the Obama administration has turned a “skeptical eye” toward how Capper-Volstead is used by modern agriculture, antitrust experts said.
The recent scrutiny “is challenging many long-held notions about the Capper-Volstead Act,” Ondeck and Clair wrote in November.
“At stake is whether the Capper-Volstead Act will continue to protect the status quo of the traditional operations and conduct of agricultural cooperatives,” Ondeck and Clair said, “Or whether the (Justice Department) will seek to push back the current boundaries of the act.”