(3) by encouraging the organization of producers into effective associations or corporations under their own control for greater unity of effort in marketing and by promoting the establishment and financing of a farm marketing system of producer-owned and producer-controlled cooperative associations and other agencies. The act also authorized the Federal Farm Board to encourage "the organization, improvement in methods, and development of effective cooperative associations."

The Farm Credit Act of 1933 73 authorized the organization of 12 regional banks for cooperatives and the Central Bank for Cooperatives, for the purpose of making loans to cooperatives meeting the definition of such associations, as contained in section 15 (a) of the Agricultural Marketing Act, as amended, which definition " reads as follows:

74

As used in this act, the term "cooperative association" means any association in which farmers act together in processing, preparing for market, handling, and/or marketing the farm products of persons so engaged, and also means any association in which farmers act together in purchasing, testing, grading, processing, distributing, and/or furnishing farm supplies and/or farm business services: Provided, however, That such associations are operated for the mutual benefit of the members thereof as such producers or purchasers 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; and

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 farm products, farm supplies, and farm business services with or for nonmembers in an amount greater in value than the total amount of such business transacted by it with or for members. All business transacted by any cooperative association for or on behalf of the United States or any agency or instrumentality thereof shall be disregarded in determining the volume of member and nonmember business transacted by such association.

The Rural Electrification Act of 1936 75 contains the following reference to cooperatives:

The Administrator is authorized and empowered, from the sums hereinbefore authorized, to make loans to persons, corporations, States, Territories, and subdivisions and agencies thereof, municipalities, peoples' utility districts and cooperative nonprofit, or limited-dividend associations organized under the laws of any State or Territory of the United States, for the purpose of financing the construction and operation of generating plants, electric transmission and distribution lines or systems for the furnishing of electric energy to persons in rural areas who are not receiving central station service: Provided, however, That the Administrator, in making such loans, shall give preference to States, Territories, and subdivisions and agencies thereof, municipalities, peoples' utility districts, and cooperative, nonprofit, or limited dividend associations, the projects of which comply with the requirements of this act. * * *

Antitrust and Related Statutes

76

The Clayton Act was enacted in 1914. Section 6 of that act purported to give agricultural associations, which met certain conditions, immunity under the antitrust laws.77

The appropriations acts for the Department of Justice beginning with the fiscal year ending June 30, 1914,78 and up to and including the appro

73

48 Stat. 257, 261, 12 U. S. C. A. 1134, 1134 (f).

7 49 Stat. 317, 12 U. S. C. A. 1141 (j) (a).

75 49 Stat. 1363, 1365. For current language, which is substantially the same, see 7 U. S. C. A. 904.

76 38 Stat. 730, 15 U. S. C. A. 12.

77 See p. 165 for a discussion of sec. 6 of the Clayton Act.

78 38 Stat. 53.

priation for the fiscal year ending June 30, 1928,79 contained the following provision relative to cooperatives:

Enforcement of antitrust laws. For the enforcement of antitrust laws * * * provided further, that no part of this appropriation shall be expended for the prosecution of producers of farm products and associations of farmers who cooperate and organize in an effort to and for the purpose to obtain and maintain a fair and reasonable price for their products.

The Capper-Volstead Act became a law in 1922.80 The object of this law was to permit associations of farmers, corporate or otherwise, and formed with or without capital stock, that met the conditions prescribed therein, to organize and operate in a normal manner without rendering themselves liable under the antitrust statutes as combinations in restraint of trade.81

The Robinson-Patman Act,82 enacted in 1936, relating to price discrimination between purchasers, provides in section 4 thereof that:

Nothing in this act shall prevent a cooperative association from returning to its members, producers, or consumers the whole, or any part of, the net earnings or surplus resulting from its trading operations, in proportion to their purchases or sales from, to, or through the association.

Regulatory Statutes

Section 26 of a statute enacted in 1917 entitled, "An act to provide further for the national security and defense by encouraging the production, conserving the supply, and controlling the distribution of food products and fuel" 83 prohibited the hoarding of food and contained provisos reading as follows:

Provided, That any storing or holding by any farmer, gardener, or other person of the products of any farm, garden, or other land cultivated by him shall not be deemed to be a storing or holding within the meaning of this act: Provided further, That farmers and fruit growers, cooperative and other exchanges, or societies of a similar character shall not be included within the provisions of this section.

84

The Packers and Stockyards Act,85 was enacted in 1921. By this act Congress gave the Secretary of Agriculture a certain degree of regulatory authority over stockyards and those doing business therein. Section 306 (f) of that act provides that persons carrying on the business of a stockyard owner or market agency must file and publish their rates, and prohibits the making of rebates by them. In parentheses it is stated:

(but this shall not prohibit a cooperative association of producers from bona fide returning to its members, on a patronage basis, its excess earnings on their livestock, subject to such regulations as the Secretary may prescribe); * * *.

86

The Future Trading Act, which was enacted in 1921, gave the Secretary of Agriculture regulatory power over boards of trade and contained

79 44 Stat. 1194.

80 42 Stat. 388, 7 U. S. C. A. 291.

81

See

For construction of the Capper-Volstead Act, see United States v. Borden Company, 308 U. S. 188, 60 S. Ct. 182, 84 L. Ed. 181, reversing 28 F. Supp. 177. also discussion of the Capper-Volstead Act on p. 166.

82 49 Stat. 1526, 1528, 15 U. S. C. A. 13.

83 40 Stat. 276, 286.

84 This was a war measure and sec. 24 (p. 283) provided: "That the provisions of this act shall cease to be in effect when the existing state of war between the United States and Germany shall have terminated, and the fact and date of such termination shall be ascertained and proclaimed by the President."

85 42 Stat. 159, 165, 7 U. S. C. A. 181. The Supreme Court held this act constitutional in the case of Stafford v. Wallace, 258 Ú. S. 495, 42 S. Ct. 397, 66 L. Ed. 735, 23 A. L. R. 229.

86 42 Stat. 187.

provisions with respect to the admission of cooperatives to boards of trade similar to those provided for in the Grain Futures Act,87 which was subsequently enacted and which will be discussed later. The Future Trading Act was held unconstitutional because it involved a wrongful use of the taxing power of Congress.88

In 1922, the Grain Futures Act 89 based upon the interstate commerce power, was enacted. This act conferred regulatory power on the Secretary of Agriculture with respect to boards of trade. It forbade the exclusion from any board of trade that was designated as a contract market of the duly authorized representatives of any association of producers meeting the requirements of the statute. Section 5 (e) further provides:

That no rule of a contract market shall forbid or be construed to forbid the return on a patronage basis by such cooperative association to its bona fide members of moneys collected in excess of the expense of conducting the business of such association.

In a case involving the constitutionality of this statute, the Supreme Court said: 90

The next provision of the act which is attacked as invalid is that which forbids a board, designated as a contract market, from excluding from membership in, and all privileges on, its exchanges any duly authorized representative of a lawfully formed and conducted association of producers having adequate financial responsibility, engaged in the cash grain business, and complying or agreeing to comply with the terms and conditions lawfully imposed on the other members, and which bars any rule forbidding the return by such association of the commissions of its representative, less expenses, to the bona fide members of the cooperative association in proportion to their consignments of grain to the exchange. It is said that this will impair the value of membership in the board and will take the property of the members without due process of law.

The Board of Trade conducts a business which is affected with a public interest and is, therefore, subject to reasonable regulation in the public interest. *** The incidental effect which such reasonable rules may have, if any, in lowering the value of memberships does not constitute a taking, but is only a reasonable regulation in the exercise of the police power of the National Government. Congress evidently deems it helpful in the preservation of the vital function which such a board of trade exercises in interstate commerce in grain that producers and shippers should be given an opportunity to take part in the transactions in this world market through a chosen representative. Nor do we see why the requirement that the relation between them and this representative, looking to economy of participation on their part by a return of patronage dividends, should not be permissible because facilitating closer participation by the great body of producers in transactions of the Board which are of vital importance to them.

The Grain Futures Act was amended in 1936 and the title was changed to the Commodity Exchange Act.91 In the later act, the original provisions concerning the admission of the duly authorized representatives of cooperatives to boards of trade were expanded and strengthened.

In 1927 Congress enacted a statute 92 forbidding, subject to certain conditions, boards of trade and exchanges on which agricultural products were bought and sold from excluding the duly authorized representative of any lawfully formed and conducted cooperative "composed substantially of producers of agricultural products." This statute contains a provision identical to the provision heretofore quoted from the Grain Futures

87 42 Stat. 998.

88 Hill v. Wallace, 259 U. S. 44, 42 S. Ct. 453, 66 L. Ed. 822.

90 Board of Trade of the City of Chicago v. Olsen, 262 U. S. 1, 40, 43 S. Ct. 470, 67 L. Ed. 839.

91 49 Stat. 1491, 7 U. S. C. A. 1.

92 44 Stat. 1423, 15 U. S. C. A. 431.

Act, providing that no rule of a board of trade should be construed to prevent the paying of patronage refunds by an association of producers. Section 3 (a) of the Securities Act of 1933 93 deals with exempted securities, and paragraph (5) of that section reads:

Any security issued by a building and loan association, homestead association, savings and loan association, or similar institution, substantially all the business of which is confined to the making of loans to members (but the foregoing exemption shall not apply with respect to any such security where the issuer takes from the total amount paid or deposited by the purchaser, by way of any fee, cash value or other device whatsoever, either upon termination of the investment at maturity or before maturity, an aggregate amount in excess of 3 per centum of the face value of such security), or any security issued by a farmers' cooperative association as defined in paragraphs (12), (13), and (14) of section 103 of the Revenue Act of 1932; ***.

The Motor Carrier Act, enacted in 1935, provides in section 203 (b) that nothing

*

* except the provisions of section 204 relative to qualifications and maximum hours of service of employees and safety of operation or standards of equipment shall be construed to include *** (4a) motor vehicles controlled and operated by any farmer, and used in the transportation of his agricultural commodities and products thereof, or in the transportation of supplies to his farm; or (4b) motor vehicles controlled and operated by a cooperative association as defined in the Agricultural Marketing Act, approved June 15, 1929, as amended; * *

The Bituminous Coal Conservation Act of 1935 9 following language:

95 contained the

It shall not be an unfair method of competition or a violation of the code or any requirement of this Act (1) to sell to or through any bona fide and legitimate farmer's cooperative organization duly organized under the laws of any State, Territory, the District of Columbia, or the United States whether or not such organization grants rebates, discounts, patronage dividends, or other similar benefits to its members, (2) to sell through any intervening agency to any such cooperative organization, or (3) to pay or allow to any such cooperative organization or to any such intervening agency any discount, commission, rebate, or dividend ordinarily paid or allowed, or permitted by the code to be paid or allowed, to other purchasers for purchases in wholesale or middleman quantities.

The act was subsequently held unconstitutional 96 and was repealed by the Bituminous Coal Act of 1937,97 which, however, reenacted the language quoted above.98 It has been held that the phrase "a bona fide and legitimate farmers' cooperative," as used in the act, does not include a regional cooperative which had consumer cooperatives among its membership.99

While the Agricultural Marketing Agreement Act of 1937 might properly be discussed here, as it is so closely related to the Agricultural Adjustment Act it is treated under the next topical heading.

Agricultural Adjustment and Soil Conservation Statutes

The original Agricultural Adjustment Act was enacted in 1933.1 Section 8 of that act contained the following provisions:

93 48 Stat. 74, 76; 15 U. S. C. A. 77a-77aa, 77c (5).

94 49 Stat. 543, 545, 49 U. S. C. A. 301. See discussion on p. 244.

95 49 Stat. 991, 1000; 15 U. S. C. A. 801.

96 Carter v. Carter Coal Co., 298 U. S. 238, 56 S. Ct. 855, 80 L. Ed. 1160.

97 50 Stat. 90, 15 U. S. C. A. 850.

98 50 Stat. 72, 15 U. S. C. A. 833.

99 Midland Cooperative Wholesale v. Ickes, 125 F. 2d 618.

1 48 Stat. 31. The present Agricultural Adjustment Act is contained in 7 U. S. C. A. 601 to 659, inclusive.

In order to effectuate the declared policy, the Secretary of Agriculture shall have power

* * *

(2) To enter into marketing agreements with processors, associations of producers, and others engaged in the handling, in the current of interstate or foreign commerce of any agricultural commodity or product thereof, after due notice and opportunity for hearing to interested parties. The making of any such agreement shall not be held to be in violation of any of the antitrust laws of the United States, and any such agreement shall be deemed to be lawful: Provided, That no such agreement shall remain in force after the termination of this act. For the purpose

of carrying out any such agreement the parties thereto shall be eligible for loans from the Reconstruction Finance Corporation under section 5 of the Reconstruction Finance Corporation Act. Such loans shall not be in excess of such amounts as may be authorized by the agreements.

(3) To issue licenses permitting processors, associations of producers, and others to engage in the handling, in the current of interstate or foreign commerce, of any agricultural commodity or product thereof, or any competing commodity or product thereof. Such licenses shall be subject to such terms and conditions, not in conflict with existing acts of Congress or regulations pursuant thereto, as may be necessary to eliminate unfair practices or charges that prevent or tend to prevent the effectuation of the declared policy and the restoration of normal economic conditions in the marketing of such commodities or products and the financing thereof. The Secretary of Agriculture may suspend or revoke any such license, after due notice and opportunity for hearing, for violations of the terms or conditions thereof. Any order of the Secretary suspending or revoking any such license shall be final if in accordance with law. Any such person engaged in such handling without a license as required by the Secretary under this section shall be subject to a fine of not more than $1,000 for each day during which the violation continues.

The act, as amended, contains several other references to cooperatives, among which is section 610 (b) (1), 7 U. S. C. A., reading as follows:

The Secretary of Agriculture is authorized to establish, for the more effective administration of the functions vested in him by this chapter, State and local committees, or associations of producers, and to permit cooperative associations of producers, when in his judgment they are qualified to do so, to act as agents of their members and patrons in connection with the distribution of payments authorized to be made under section 608 of this title. The Secretary, in the administration of this chapter, shall accord such recognition and encouragement to producer-owned and producer-controlled cooperative associations as will be in harmony with the policy toward cooperative associations set forth in existing acts of Congress, and as will tend to promote efficient methods of marketing and distribution.

These and other sections of the Agricultural Adjustment Act were amended in 1935.2 Following an adverse decision by the Supreme Court of the United States in a case involving the payment of processing taxes under the Agricultural Adjustment Act, the sections of the original act, as amended, which dealt with matters other than processing taxes were reenacted in the Agricultural Marketing Agreement Act of 1937.4

The following provision which appeared in the Agricultural Adjustment Act as amended was adopted by the Agricultural Marketing Agreement Act:

The Secretary, in the administration of this chapter, shall accord such recognition and encouragement to producer-owned and producer-controlled cooperative associations as will be in harmony with the policy toward cooperative associations set forth in existing acts of Congress, and as will tend to promote efficient methods of marketing and distribution.5

2

49 Stat. 750. The licensing section, 8 (3), was omitted and the other sections were amended.

3 United States v. Butler, 297 U. S. 1, 56 S. Ct. 312, 80 L. Ed. 477, 102 A. L. R. 914.

4 50 Stat. 246.

5

48 Stat. 37, 49 Stat. 767, 50 Stat. 246, 7 U. S. C. A. 610 (b) (1).