Court Ruling on Scope of Cooperative Antitrust Exemption

The first federal antitrust law was enacted in 1890. Additional antitrust legislation was put in place in the early 1900s. This early legislation contained a general exemption from antirust restrictions for agricultural organizations, but it came to be viewed as too limited and not applicable to cooperative marketing activities. As a result, the Capper-Volstead Act was enacted in 1922. That law specifies that “persons engaged in the production of agricultural products as farmers, planters, ranchmen, dairymen, nut or fruit growers, may act together in associations, corporate or otherwise, with or without capital stock, in collectively processing, preparing for market, handling, and marketing in interstate and foreign commerce, such products of persons so engaged.”

So, agricultural cooperatives that satisfy two requirements are not subject to antitrust restrictions that apply to other businesses. What are those requirements? First, the organization must be involved in the “processing, preparing for market, handling, or marketing of the agricultural products of its members.” Second, the organization must be comprised of “members” that are “producers of agricultural products” or cooperatives comprised of such producers. That means an association consisting in part of persons engaged in “production” and in part of persons not so engaged doesn’t get the exemption. That was the issue in this case.

The Eastern Mushroom Marketing Cooperative (EMCC) is the largest mushroom cooperative in the U.S., controlling more than 60 percent of all Agaricus mushrooms grown in the U.S. and about 90 percent of all Agaricus mushrooms grown in the eastern U.S. EMCC is comprised of entities that grow, buy, package and ship mushrooms to retail and food service outlets across the U.S. EMCC sets and regularly publishes the minimum prices at which its members sell their mushrooms to customers in various regions of the U.S. The plaintiff, a group of mushroom growers, packagers, sellers, distributors and other related entities sued, alleging that EMCC schemed to inflate the average prices for mushrooms by setting the price at which mushrooms would be sold in the various geographic regions. Then, the plaintiff claimed, EMCC launched a “supply control” campaign by using membership funds to acquire and dismantle non-EMCC mushroom-growing operations.

EMCC moved to have the case dismissed, at least in part, on the basis that their anti-competitive conduct was exempt from antitrust law under the Capper-Volstead Act. The court disagreed, noting that other courts have held that where an agricultural cooperative acts in concert or enters into an agreement with persons or entities not engaged in agricultural production, the Capper-Volstead exemption does not apply. So, if non-producers participate as members in an agricultural cooperative, that cooperative is not entitled to use the Capper-Volstead exemption. Because the plaintiff’s complaint alleged that some of the defendants were members of EMCC, but were not engaged in agricultural production, and that the EMCC entered into multiple agreements with persons or entities not engaged in agricultural production, the court refused to dismiss the case. The court also noted that the plaintiff sufficiently alleged an antitrust injury, and refused to dismiss the case on the argument that EMCC is a single entity. However, the court did dismiss a claim related to alleged monopolization and attempted monopolization. In re Mushroom Direct Purchaser Antitrust Litigation, No. 06-0620 (E.D. Pa. Apr. 25, 2007).