were protected by the antitrust laws from courses of action adopted by third persons which, if unchallenged, would have seriously hampered the organizations. A tobacco marketing association was granted relief from an illegal exclusion from market.36 A group health cooperative was granted relief from illegal opposition by the American Medical Association and a local medical society. Another health cooperative obtained injunctive relief against a local medical society in a State court. 38

37

The act of Congress 39 approved July 2, 1926, directing the Secretary of Agriculture to establish a division of cooperative marketing in the Department of Agriculture, contains a provision reading as follows:

Persons engaged, as original producers of agricultural products, such as farmers, planters, ranchmen, dairymen, nut or fruit growers, acting together in association, corporate or otherwise, in collectively processing, preparing for market, handling, and marketing in interstate and/or foreign commerce such products of persons so engaged, may acquire, exchange, interpret, and disseminate past, present, and prospective crop, market, statistical, economic, and other similar information by direct exchange between such persons, and/or such associations or federations thereof, and/or by and through a common agent created or selected by them.

This provision confers broad authority on producers and their associations to acquire and exchange information pertaining to the production and marketing of crops.

Section 6 of the Clayton Act

Following the passage of the Sherman Act, as larger and larger marketing and bargaining associations of producers were formed, the question of the application of the Sherman Act to such associations claimed the attention of agricultural leaders. To clarify the situation, when the Clayton Act 40 was enacted in 1914, language was included in section 6 thereof with reference to the status of organizations of farmers. This section reads as follows:

That the labor of a human being is not a commodity or article of commerce. Nothing contained in the antitrust laws shall be construed to forbid the existence and operation of labor, agricultural, or horticultural organizations, instituted for the purposes of mutual help, and not having capital stock or conducted for profit, or to forbid or restrain individual members of such organizations from lawfully carrying out the legitimate objects thereof; nor shall such organizations, or the members thereof, be held or construed to be illegal combinations or conspiracies in restraint of trade, under the antitrust laws.

It seems to be generally agreed that this section appears to prevent the dissolution of an organization which meets the conditions it prescribes, namely, that it is a "labor, agricultural, or horticultural organization;" that it is "instituted for the purposes of mutual help," and does not have "capital stock;" and last, is not "conducted for profit." However, the few decisions of the courts relative to this section indicate that it does not enable such organizations, if they desire, to adopt methods of conducting their operations denied to other lawful business organizations. In a case 11

36 American Federation of Tobacco Growers, Inc. v. Neal, 183 F. 2d 869.

37 American Medical Association v. United States, 317 U. S. 519, 63 S. Ct. 326, 87 L. Ed. 434.

38

Group Health Cooperative of Puget Sound v. King County Medical Soc., 237 P. 2d 737 (Wash.).

1 Duplex Printing Press Co. v. Deering, 254 U. S. 443, 469, 41 S. Ct. 172, 65 L. Ed. 349, 16 A. L. R. 196. See also Buyer v. Guillan, 271 F. 65; United States v. Borden Company, 308 U. S. 188, 60 S. Ct. 182, 84 L. Ed. 181, reversing 28 F. Supp. 177; Apex Hosiery Company v. Leader, 310 U. S. 469, 60 S. Ct. 982, 84 L. Ed. 1311.

decided by the Supreme Court involving the legality of a secondary boycott by a labor organization it was said:

*** As to [section] 6, it seems to us its principal importance in this discussion is for what it does not authorize, and for the limit it sets to the immunity conferred. The section assumes the normal objects of a labor organization to be legitimate, and declares that nothing in the antitrust laws shall be construed to forbid the existence and operation of such organizations or to forbid their members for lawfully carrying out their legitimate objects; and that such an organization shall not be held in itself— merely because of its existence and operation—to be an illegal combination or conspiracy in restraint of trade. But there is nothing in the section to exempt such an organization or its members from accountability where it or they depart from its normal and legitimate objects and engage in an actual combination or conspiracy in restraint of trade. And by no fair or permissible construction can it be taken as authorizing any activity otherwise unlawful, or enabling a normally lawful organization to become a cloak for an illegal combination or conspiracy in restraint of trade as defined by the antitrust laws.

In a case 42 involving solely a farmer cooperative the Department of Justice brought a criminal complaint for violations of the Federal antitrust laws. The United States district court, without mentioning the Sherman Act, dismissed the indictment against the cooperative on the sole grounds of section 6 of the Clayton Act. The court said a farmer cooperative, acting alone and not in concert with others, cannot be prosecuted as a monopoly, for to do so would “* * * scuttle the plain language of the Clayton Act as to cooperatives, as antilabor courts scuttled the labor provisions of the same Act * * *”

In a certain case,13 the Aroostook Potato Shippers' Association, acting through a committee, blacklisted certain buyers of potatoes. Members of the association were forbidden, under penalty, to deal with such buyers. Persons outside the association who dealt with persons so blacklisted were also blacklisted and boycotted. The defendants, members of the association, were indicted for a conspiracy in restraint of trade and were fined. The court said with reference to the contention that section 6 relieved the defendants:

*** I do not think that the coercion of outsiders by a secondary boycott, which was discussed in my opinion on the former indictment, can be held to be a lawful carrying out of the legitimate objects of such an association. That act means, as I understand it, that organizations such as it describes are not to be dissolved and broken up as illegal, nor held to be combinations or conspiracies in restraint of trade; but they are not privileged to adopt methods of carrying on their business which are not permitted to other lawful associations.

Section 6 of the Clayton Act is still in effect and is not repealed by the Capper-Volstead Act.

Capper-Volstead Act

The Capper-Volstead Act became a law on February 18, 1922. It is entitled "An act to authorize association of producers of agricultural products," and reads as follows:

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, 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. Such associations may have marketing agencies in common; and such associations and their members may make the necessary contracts and agreements to effect such purposes: Provided,

42 United States v. Dairy Coop. Association, 49 F. Supp. 475. 43 United States v. King, 229 F. 275, 250 F. 908, 910.

however, That such associations are operated for the mutual benefit of the members thereof, as such producers, and conform to one or both of the following requirements:

First. That no member of the association is allowed more than one vote because of the amount of stock or membership capital he may own therein, or,

Second. That the association does not pay dividends on stock or membership capital in excess of 8 per centum per annum.

And in any case to the following:

Third. That the association shall not deal in the products of nonmembers to an amount greater in value than such as are handled by it for members.

SEC. 2. That if the Secretary of Agriculture shall have reason to believe that any such association monopolizes or restrains trade in interstate or foreign commerce to such an extent that the price of any agricultural product is unduly enhanced by reason thereof, he shall serve upon such association a complaint stating his charge in that respect, to which complaint shall be attached or contained therein, a notice of hearing, specifying a day and place not less than thirty days after the service thereof, requiring the association to show cause why an order should not be made directing it to cease and desist from monopolization or restraint of trade. An association so complained of may at the time and place so fixed show cause why such order should not be entered. The evidence given on such a hearing shall be taken under such rules and regulations as the Secretary of Agriculture may prescribe, reduced to writing, and made a part of the record therein. If upon such hearing the Secretary of Agriculture shall be of the opinion that such association monopolizes or restrains trade in interstate or foreign commerce to such an extent that the price of any agricultural product is unduly enhanced thereby, he shall issue and cause to be served upon the association an order reciting the facts found by him, directing such association to cease and desist from monopolization or restraint of trade. On the request of such association or if such association fails or neglects for thirty days to obey such order, the Secretary of Agriculture shall file in the district court in the judicial district in which such association has its principal place of business a certified copy of the order and of all the records in the proceeding, together with a petition asking that the order be enforced, and shall give notice to the Attorney General and to said association of such filing. Such district court shall thereupon have jurisdiction to enter a decree affirming, modifying, or setting aside said order, or enter such other decree as the court may deem equitable, and may make rules as to pleadings and proceedings to be had in considering such order. The place of trial may, for cause or by consent of parties, be changed as in other causes.

The facts found by the Secretary of Agriculture and recited or set forth in said order shall be prima facie evidence of such facts, but either party may adduce additional evidence. The Department of Justice shall have charge of the enforcement of such order. After the order is so filed in such district court and while pending for review therein the court may issue a temporary writ of injunction forbidding such association from violating such order or any part thereof. The court may, upon conclusion of its hearing, enforce its decree by a permanent injunction or other appropriate remedy. Service of such complaint and of all notices may be made upon such association by service upon any officer or agent thereof engaged in carrying on its business, or on any attorney authorized to appear in such proceeding for such association, and such service shall be binding upon such association, the officers, and members thereof.45

Section 6 of the Clayton Act refers only to nonstock organizations, so that an association of producers formed with capital stock would not be entitled to the benefits therof. Owing to this fact and for the further purpose of making the status of the associations of producers under the Federal antitrust laws more clear than was done by section 6 of the Clayton Act, the Capper-Volstead Act was passed.

44 Mr. Lenroot, during the debate on this bill in Congress said: "If the Secretary of Agriculture finds that there is a monopolization or restraint of trade, and also an undue enhancement of price, then under the bill as it would read if amended he is directed to issue an order, not against the undue enhancement of price, but against the monopolization or restraint of trade. In other words, when these facts exist the order goes against the monopoly, against the restraint of trade, and the command will be that they must desist from such monopolization or restraint of trade; and a mere abandonment of the undue enhancement of price will not be a defense." 62 Cong. Rec. 2269 (1922).

Mr. Volstead, in discussing the bill said:

The objection made to these organizations at present is that they violate the Sherman Antitrust Act, and that is upon the theory that each farmer is a separate business entity. When he combines with his neighbor for the purpose of securing better treatment in the disposal of his crops, he is charged with a conspiracy or combination contrary to the Sherman Antitrust Act. Businessmen can combine by putting their money into corporations, but it is impractical for farmers to combine their farms into similar corporate form. The object of this bill is to modify the laws under which business organizations are now formed, so that farmers may take advantage of the form of organization that is used by business concerns. It is objected in some quarters that this repeals the Sherman Antitrust Act as to farmers. That is not true any more than it is true that a combination of two or three corporations violates the act. Such combinations may or may not monopolize or restrain trade. Corporations today have all sorts of subsidiary companies that operate together, and no one claims they violate this act.46

Senator Capper in discussing the bill said: 47

Mr. President, the cooperative marketing bill as it was offered in both the Senate and House seeks simply to make definite the law relating to cooperative associations of farmers and to establish a basis on which these organizations may be legally formed. Its purpose is to give to the farmer the same right to bargain collectively that is already enjoyed by corporations. The bill is designed to make affirmative and unquestioned the right which already is generally admitted, but which, in view of the Sherman law, is subject to nullifying interpretation by those whose interests are not identical with those of the farmer, and who for one reason or another may be in a position to obtain an interpretation advantageous to themselves and embarrassing or detrimental to the members of cooperative organization. **

*

While it seems evident that Congress intends that the farmer shall not be prosecuted for acting collectively in the marketing of his product, yet the Federal law is such that these prosecutions may be threatened or actually brought against him. The farmer does not relish the possibility of being prosecuted for an alleged violation of law, even though he feels fairly certain that he would not be convicted.

Prior to the enactment of the Capper-Volstead Act there was at least uncertainty as to whether the elimination of the competition among farmers by their acting through a cooperative did not constitute a violation of the antitrust statutes.48 The act, which in effect is an amendment of the antitrust statutes, authorizes and sanctions the elimination of such competition. In the opinion of the writer the fundamental object and result of the Capper-Volstead Act are to authorize farmers to unite in organizations that may or may not be incorporated, which organizations, insofar as the assembling, the processing, the handling and the marketing of the products dealt in by the association are concerned, may act with the same force and effect as though all the agricultural products in question were being handled by one farmer.4

49

The reports of the committees of Congress that reported out the measure and the debates in Congress with reference thereto show that it was the intention of Congress that the Capper-Volstead Act should exempt associa

46

61 Cong. Rec. 1033 (1921).

4762 Cong. Rec. 2057, 2059 (1922).

48 "The uncertainty of the legal status of farm organizations which conduct business in a collective way has had a paralyzing effect on the efforts of men and associations who are brought together so that they may more economically and efficiently administer their affairs. In some sections of the country, I am informed, officers and members of such organizations have been arrested, indicted, and even thrown into prison." Mr. Calder, in the debate in the Senate concerning the Capper-Volstead Act; 62 Cong. Rec. 2217 (1922). For a discussion of instances in which the officers of cooperative associations were arrested on account of alleged violations of antitrust laws, see article entitled THE BATTLE OF MILK by Professor Boyle, deceased (formerly of Cornell University), in the Saturday Evening Post of November 13, 1937.

49 See Minnesota Wheat Growers Coop. Marketing Association v. Huggins, 162 Minn. 471, 203 N. W. 420.

tions of farmers, when they operate along normal business lines, from the Federal antitrust statutes. In other words, the fact that an association that meets the conditions of the act controls the handling and marketing of all of a given agricultural product would not of itself, standing alone, cause the organization to be in violation of such statutes, and the restraint of trade caused thereby would not amount to a violation of the law on the part of the association.

This view is also supported by one case.50 The court's charge to the jury in that case stated:

It is not unlawful under the antitrust acts for a Capper-Volstead cooperative, such as the National Cranberry Association admittedly is, to try to acquire even 100 percent of the market if it does it exclusively through marketing agreements approved under the Capper-Volstead Act.

* *

It has been argued that a contrary view is probably supported by another case,51 which construed a marketing cooperative exemption under the Fishermen's Collective Marketing Act 52 comparable to Capper-Volstead and administered by the Secretary of the Interior. There a canner sought an injunction against a fishermen's cooperative for requiring the canner to purchase exclusively from cooperative members. The cooperative's extensive control of the fish catch in the adjacent seaports forced canners to accept such terms or go out of business. Although there was no combination with outsiders, the court affirmed an injunction on the authority of the Borden case discussed below.5

53

It should be remembered that the Capper-Volstead Act was passed subsequent to the antitrust statutes and insofar as there is any conflict it should control. An association that meets the conditions of the CapperVolstead Act is not free to engage in any course of conduct which it might see fit to adopt. For instance, if it should engage in unfair competition, that would subject it to the jurisdiction conferred upon the Federal Trade Commission by the act 54 creating it. Again, abnormal conduct on the part of an association might subject it to the jurisdiction of the Department of Justice of the United States for a violation of the antitrust laws.

So far as the price at which an association offers its products for sale is concerned, its reasonableness, if a question with reference thereto should arise, is to be determined by the Secretary of Agriculture. If he “shall have reason to believe that any such association monopolizes or restrains trade in interstate or foreign commerce to such an extent that the price of any agricultural product is unduly enhanced thereby," he may, following a hearing, issue an order directing such association to cease and desist from monopolization or restraint of trade.

This act has no application to purely purchasing associations or to cooperative stores, or associations engaged in rendering farm business services,

50

O Cape Cod Food Products v. National Cranberry Association, 119 F. Supp. 900, 907. See also United States v. Dairy Coop. Association, 49 F. Supp. 475. 51 Hinton v. Columbia River Packers Association, 131 F. 2d 88. 52 48 Stat. 1213; 15 U. S. C. A. 521.

53 Borden has been cited in two other fishermen's cooperative cases, Manaka v. Monterey Sardine Industries, Inc., 41 F. Supp. 531, where the plaintiff prevailed in a treble damage suit for violation of the Sherman Act and Local 36 of International Fishermen and Allied Workers of America v. United States, 177 F. 2d 320, cert. den. 339 U. S. 947, a criminal conviction under the Sherman Act upheld on the strength of the Columbia River and Borden cases.

54 38 Stat. 730, 15 U. S. C. A. 12. Several complaints have been brought against cooperatives by the Federal Trade Commission. For example, see Carpel Frosted Foods, Inc., FTC Order No. 5482; Florida Citrus Mutual, FTC Doc. No. 6074; C. H. Musselman Co., et al., FTC Doc. No. 6041.

412528-58-12