Summary of a Recent
Judicial Development in
Cooperatives

Agricultural Cooperative Qualifies As
"Single Enterprise" Under Antitrust Laws

Jennifer Williams
National AgLaw Center Graduate Assistant

Summary of Decision

In Bell v. Fur Breeders Agricultural Cooperative, 348 F.3d 1224 (10th Cir. 2003), the United States Court of Appeals for the Tenth Circuit held that the Sherman Antitrust Act, 15 U.S.C. §§ 1-11, and the Robinson-Patman Act, 15 U.S.C. § 13(a), were inapplicable to an agricultural cooperative's pricing and delivery activities and that the cooperative therefore did not violate antitrust laws.

Background

Fur Breeders was an agricultural cooperative that provided reduced-cost feed to its members. See id. at 1227. It had two production plants where the feed was mixed. See id. Members who had feed delivered to them were charged a higher price, due to the cost of delivery, than those members who picked feed up at the production plants. See id. Plaintiffs Jack and Bob Bell were former members of Fur Breeders who obtained their feed at the production plants. See id.

The plaintiffs brought an action against Fur Breeders for antitrust violations under § 1 of the Sherman Act and § 2(a) of the Clayton Act, as amended by the Robinson-Patman Act. See id. They argued that Fur Breeders violated antitrust laws "because the discounted price it charged the . . . [plaintiffs] for feed they hauled themselves did not cover their actual costs, thereby limiting their ability to remain competitive with other cooperative members who ranched within the cooperative's delivery route and paid a different price for delivered feed." Id. The district court granted Fur Breeders' motion for summary judgment, ruling that the plaintiffs "presented no evidence 'that Fur Breeders engaged in price discrimination'" and that Fur Breeders was immune from liability as an agricultural cooperative. Id. The plaintiffs appealed the district court's decision to the Tenth Circuit. See id.

Arguments

The plaintiffs argued that the district court erred in dismissing their claims. See id. at 1229. Specifically, they argued that there were material issues of genuine fact regarding whether Fur Breeders engaged in price discrimination in violation of the Robinson-Patman Act, whether Fur Breeders' board members were not "exempt from antitrust liability for conspiring to discriminate in the price of a product" under the Sherman Act, and whether the board members and the members of Fur Breeders were "a single entity as a matter of law and thereby incapable of conspiring" under the Sherman Act. Id.

Fur Breeders argued that it qualified as an agricultural cooperative under federal laws and was therefore exempt from certain provisions of antitrust law. See id. at 1231.

Analysis and Holdings

The court explained that the antitrust exemption for agricultural cooperatives found in both the Clayton Act, 15 U.S.C. §§ 12-17, and Capper-Volstead Act, 7 U.S.C. §§ 291-292, provides a "limited exemption from antitrust laws" and that "certain actions by cooperatives may place them outside the Capper-Volstead exemption." Id. at 1231-32 (citations omitted). It also explained that § 1 of the Sherman Act states that "every contract, combination . . ., or conspiracy, in restraint of trade or commerce . . . is declared to be illegal" and that "a conspiracy 'necessarily involves concerted action by a plurality of actors'." Id. at 1232 (citations omitted). The court cited case law that determined that "agricultural cooperatives, like corporations, do not have the plurality of actors necessary for a Section 1 conspiracy." Id. at 1232-33. It thus concluded that Fur Breeders lacked the plurality of actors necessary to violate § 1 of the Sherman Act. See id.

The court also rejected the plaintiffs' argument that Fur Breeders should not be treated as a single entity for antitrust purposes because the board members are all mink ranchers who "are in direct competition with each other and therefore, constitute a plurality of actors." Id. at 1233. The court explained that "cooperative members are theoretically always in competition with each other because they are in the same trade and sell the same product." Id. It also explained that rather than examining whether the members of the board take themselves out of the cooperative exemption by having an "'independent personal stake' to conspire to benefit themselves," the test was whether the actions of the board were "'beyond the scope of their authority or for their own benefit' rather than the benefit of the cooperative of the whole." Id. at 1233-34.

The court determined that Fur Breeders was acting with legitimate purpose and the board members were "well within their authority when making [the] 'business decisions'" the plaintiffs viewed as discriminatory. Id. at 1234-35. The court concluded "the prohibitions in Section 1 of the Sherman Act are inapplicable here because the cooperative's activities fall squarely within the antitrust exemptions in the Clayton and Capper-Volstead Acts . . . [U]nder these provisions, Fur Breeders and its board members are a single entity unable to conspire with itself." Id. at 1235. It added that "the board members acted within their authority in setting prices and delivery policies for the good of the cooperative as a whole rather than merely for personal benefit. These activities do not amount to a violation of Section 1 of the Sherman Act." Id.

The court next considered the plaintiffs' Robinson-Patman Act claims. See id. It stated it first had to determine if the Act applied to Fur Breeders since "the pricing issue involves only a single agricultural cooperative and its members." Id. at 1236. The court explained that "one element of a Robinson-Patman claim is that there be two sales to separate entities in interstate commerce." Id. It stated that because it had already "explained that an agricultural cooperative is considered a single entity unable to conspire with itself under Section 1 of the Sherman Act, it follows that an agricultural cooperative and its members are likewise a single entity for the purposes of the Robinson-Patman Act." Id.

As such, the court upheld the dismissal of these claims, as "Fur Breeders [was] a single economic enterprise, with its main purpose to supply feed to members at a lower cost . . . the resulting sale of either delivered or picked-up feed constitute[d] product transfers within an single enterprise, which . . . does not trigger the Robinson-Patman Act." Id. at 1237.

The case was decided on November 7, 2003; this summary was posted Dec. 22, 2004.