by Natalie S. Marcus
On December 2, 2011, a federal judge took the
extraordinary step of issuing an advisory opinion about an area of law that has
little precedent. In In re: Fresh and Process Potatoes Antitrust Litigation,
No. 10-2186 (D. Idaho), plaintiffs alleged that defendants created cooperatives
for the purpose of increasing the price of potatoes by limiting potato planting
acreages, and by paying farmers to either destroy existing stocks or to refrain
from growing additional potatoes.
When ruling on the motion to dismiss, the district court
took the unusual step of including in the decision an advisory opinion about
whether the Capper-Volstead Act immunizes defendants from Sherman Act
liability. The court was willing to take this step because: there were no
disputed issues of fact; the parties briefed and argued an area of law where
case law is scant; and if this issue was not resolved at this stage of the
litigation, it would cause the parties to incur unnecessary expenses.
The Capper-Volstead Act was enacted in the early 1900's
and provides agricultural cooperatives with a limited exception from the
antitrust laws. The district court explained that the Capper-Volstead Act and
"its legislative history indicate a purpose to make it possible for
farmer-producers to organize together, set association policy, fix prices at
which their cooperatives will sell their produce, and otherwise carry on like a
business cooperative without violating the antitrust laws."
The district court held that the Capper-Volstead Act does
not protect pre-production agricultural output limitations such as coordinating
and reducing acreage for planting. Defendants argued that because
Capper-Volstead cooperatives are allowed to fix prices, they must also be
permitted to restrict production. The district court responded that the "reason
an agricultural cooperative can fix the price at which their good is sold is
because if the prices rises, farmers will produce more and consumers will not
be overcharged. Individual freedom to produce more in time of high prices is a
quintessential safeguard against Capper-Volstead abuse, which Congress
recognized in enacting the statute."
This decision will likely have an impact on similar
litigation against dairy cooperatives, as well as antitrust cases that are
pending in the egg and mushroom industries, and we will be following these
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