Summary of a Recent
Judicial Development in
Cooperatives

Cooperative Not Entitled to Capper-Volstead
Exemption from Antitrust Claims

Walt McCarter
National AgLaw Center Research Associate

Summary of Decision

In In re Mushroom Direct Purchaser Antitrust Litigation, --- F. Supp. 2d ---, 2009 WL 838490 (E.D. Pa. 2009), the United States District Court for the Eastern District of Pennsylvania held that a mushroom cooperative's members and affiliated distributors were not entitled to Capper-Volstead immunity from antitrust violation claims because non-growers were members of the cooperative, and because the members and affiliates were not a "single economic entity" incapable of conspiracy.

Background

The plaintiffs alleged that Eastern Mushroom Marketing Cooperative, Inc. (EMMC), a large mushroom cooperative, launched a "supply control" campaign by using membership funds to acquire and dismantle non-EMMC mushroom growing operations in order to support and maintain artificial price increases, in violation of antitrust law. Id. at *2. It was undisputed that from 2001 to 2005, the EMMC adopted various minimum pricing policies for mushrooms sold to the fresh market. Id. at *1.

Arguments

The defendants argued that as an agricultural cooperative, they were immune from suit under the Capper-Volstead Act. Id. at *5. They also argued that the cooperative members and affiliated distributors comprised a single economic unit, so price fixing at the distribution level was permissible because, as a cooperative, the plurality of actors required for a conspiracy was absent. Id. at *9.

The plaintiffs argued that the defendants were not entitled to the Capper-Volstead exemption because non-growers were members of the cooperative and the EMMC and its members conspired with non-members to fix prices. Id. at *6.

Analysis and Holdings

The court explained that "for defendants to be exempt from antitrust liability under the Capper-Volstead Act, they must establish not only that the EMMC was entitled to the Act's protection but also that all of the entities that were members of the EMMC were likewise qualified under the Act," adding that "even one non-farmer member in a cooperative disqualifies a cooperative from claiming the Capper-Volstead exemption." Id. It was undisputed that one EMMC member was a non-farmer processor, so its presence as a member destroyed Capper-Volstead immunity. Id. at *7. The court noted that horizontal price-fixing is per se illegal, and it was undisputed that the EMMC had adopted various minimum pricing policies between 2001 and 2005. Id. at *8-9. Regarding the defendants' argument that their members and distributors comprised a single economic unit incapable of conspiracy, the court reasoned,

While some overlap existed in ownership between the affiliated distributors and the member growers, they were not under common control in the same sense as is a corporation and its wholly-owned subsidiary, a corporation and its divisions or as are two corporations owned in identical proportions by the same set of investors.
Id. at *11.

Therefore, the court held that "for the EMMC and its members to fix prices with affiliated distributors when the distributors are not a single economic unit with their affiliated member grower constitutes a conspiracy that destroys the EMMC's Capper-Volstead exemption." Id. at *12.

The case was decided on March 26, 2009.