Thursday, February 11, 2010
Posted by Peter Carstensen (University of Wisconsin Law)
I have elsewhere commented on issues related to agricultural markets (available at http://ssrn.com/abstract=1537191). Two antitrust exemptions apply to farmers: Capper-Volstead Act and the Agricultural Marketing Agreement Act (AMAA). Capper-Volstead immunizes agreements between a cooperative and its members as well as agreements among cooperatives, but not for agreements with non-cooperatives. The exemption provides no immunity for coercive or exclusionary conduct by a cooperative and denies immunity to any cooperative with a non-farmer members. Because of their usual obligation to take all output of members, Cooperatives have limited capacity to suppress output; moreover, entry barriers to most types of agricultural production are low. Thus, standing alone, Capper-Volstead does not create serious competitive concerns.
In contrast, the AMAA authorizes producers to create federally enforced market orders (with the approval of the USDA and all covered producers) that can restrict output of all covered participants. It applies only to a few commodities, and past USDA actions have reduced the number of highly anticompetitive terms in orders generally. The most important orders govern milk. The milk order system gives premiums for milk used as fluid, but farmers must have access to a fluid milk processor to share in that premium. The current pricing system is vulnerable to manipulation by both large cooperatives and buyers. Moreover, exclusive fluid supply agreements in many areas compel farmers to join the favored cooperative which in turn has significant discretion to allocate access and control actual payments to the farmers. The result is an inefficient and discriminatory system. The AMAA confers on the cooperative the right to cast its members votes on the order thus denying farmer-members any say in approving order terms. A fuller account is in the ABA Antitrust Section’s Federal Statutory Exemptions from Antitrust Law, Monograph 24 , 2007, Chap. 4.