a corporation to do, stand in danger

of being held to be in violation

of the Sherman law. 68

In addition to giving the farmer some measure of

economic power through joint action, it was felt that cooperation would benefit the ultimate consumer by giving the farmers countervailing power as to the "middleman." Organization was also seen as a means to allow farmers to integrate forward in the marketing process, displacing some middlemen. Further, it was felt that farm organizations would benefit the consumer by directing the farmer's energy toward research, increased production and improved quality. 69/

Although the legislative history contains conflicting statements as to whether there had ever

68/

62 Cong. Rec. 2224 (1922) (remarks of Senator Lenroot) (emphasis added).

69/

Investigations of farm organizations are
along the following lines: How can the
yield be increased in quantity and value
how secure a better kernel, more kernels
to the head or ear, more ears to the stalk,
more stalks on the groung, better quality
of flesh or meat, more of the better cuts
to the single animal, more pounds produced
from a given amount of feed and by using
as little high-priced feed as is consonant
with quality and economic production.
organization has directed its efforts towards
increasing production and improving quality.

His

59 Cong. Rec. 7853 (1920) (remarks of Representative Evans).

been prosecution of farmers or farmer cooperatives, 70/
the prevailing opinion in Congress was that farmers
would organize into cooperative associations for the
purpose of bettering their position but for the threat
of prosecution 71/ under the Sherman Act.

But it is said that when advocates of
the organization of these cooperative farm
associations go about for the purpose of
inducing farmers thus to cooperate and to
associate themselves in cooperation for the
purpose of marketing their products, interested
parties, those who handled the business now,

70/ See, e.g., 62 Cong. Rec. 2122 (1922) (remarks of Senator Walsh) (". no prosecution, so far as the committee was able to ascertain, has ever been instituted under the Sherman Act against any organization of farmers except the proceedings brought against what is known as the California Raisin Growers Association . . ."); Id., p. 2276 (remarks of Senator King) ("I have made inquiry and am advised by the Department of Justice that only four prosecutions have been instituted under the Sherman antitrust law against what might be denominated agriculturists, and in each case there was a flagrant attempt to monopolize and to oppress the people"); id., p. 2217 (remarks of Senator Calder) ("In some sections of the country, I am informed, officers and members of such organizations have been arrested, indicted, and even thrown into prison. United States attorneys and other officials

have so construed the Sherman antitrust law as to make it cover the operations of nonstock, nonprofit farm associations."). See also section 1.2 (B), p. 20, supra.

71/ Congress had placed itself in an awkward position in passing an appropriations bill under which $200,000 was appropriated for the enforcement of the antitrust laws with the proviso 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 of maintaining (footnote continued)

and generally throughout the country the
dealers in milk products, noise it about
and circulate a rumor to the effect that
organizations of that character are violative
of the Sherman Act and prosecutions are
likely to be instituted if they are organized.
Thus it is said, .. that farmers are
deterred from associating themselves with
these associations by reason of fear of
prosecution under the Sherman Act. 72/

The Clayton Act, 73/ passed in 1914 in part to make
clear the legal status of labor and agricultural associa-
tions under the antitrust laws, 74/ was thought inadequate

71/ (continued)

a fair and reasonable price for their product." Thus Congress appeared to be in the position of recognizing that farm organizations were in violation of the antitrust law but temporarily forbidding any prosecution of them. See 50 Cong. Rec. 8025 (1920) (remarks of Representative Hersman).

72/ 62 Cong. Rec. 2123 (1922) (remarks of Senator Walsh). 73/ Act of October 15, 1914, ch. 323, 38 Stat. 730, codified at 15 U.S.C. SS 12-27. (1970). Section 6 of the Clayton Act stated:

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 purpose 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 the

restraint of trade, under the antitrust laws. Id. p. 731.

74/ H. Rep. No. 627, 63rd Cong. 2d Sess., p. 14 (1914).

to protect the farmers.

The legislators debating Capper

Volstead perceived problems in the Clayton Act and confusion concerning what activities fell within the provisions of that act.

The apparent intention of Congress,
however, is not clearly expressed in
section 6 of the Clayton Act, and it is
rather uncertain what these farm organi-
zations can lawfully do or what are
"the legitimate objects thereof." 75/

In addition to problems created by ambiguities, the
prohibition against capital stock limited the type of
functions cooperative organizations could perform.

The farmer of to-day finds that his
associations must have capital stock
in order to handler his business most
effectively, and this bill is intended
to legalize farmers' cooperative
associations having capital stock. ..
The provision of the Clayton Act which
permitted cooperative marketing among
farmers can not under present business
methods be fully taken advantage of, and
this bill is framed in order to meet the
situation that the farmers of this
Nation are confronted with through the
evolution of modern business methods. 76/

Thus, Congress intended that the Capper-Volstead

Act authorize farmers to organize, so that farmers would enjoy the same benefits and powers that corporations

they dealt with enjoyed.

15/ 59 Cong. Rec. 8023 (1920) (remarks of Representative Swope).

16/ 59 Cong. Rec. 8025 (1920) (remarks of Representative Hersman). See also 59 Cong. Rec. 8022-23 (1920) (remarks of Representative Swope).

88-934 077-pt. 1-36

2.

Limited Powers of Agricultural Cooperatives

a. Extensive Power Unnecessary and Inappropriate

While Congress intended that farmers be allowed to associate for the purpose of exercising countervailing power in their dealing with corporate entities, Congress did not contemplate that the organizations, in turn, would hold such a degree of market power that competition and the consumer would be adversely affected. When legislators and farmers in the 1920s spoke of cooperatives, they had in mind organizations largely local in nature, serving, as a large part of their function, the social needs of the community, and intended to possess and exercise power limited in its ability to interfere with the competitive pricing of farm products.

The report of the National Agricultural Conference, convened in 1922 by President Warren G. Harding for the purpose of debating legislative solutions to the agricultural crisis of the 1920s, recommended legislation which would permit formation of associations which would be, in equal parts, business entities and centers of community and social life. 77/ This view of the

77/

The strongest organizations are those which
specialize in handling a single crop, such as
citrus fruits, raisins, walnuts, prunes, peaches,
etc.; and, when this specialized organization
is adopted, it develops the greatest depend-
ability if founded by small groups of growers
who are neighbors, who have confidence in one
another, who belong to the same churches,
schools, or other neighborhood institutions,
and who federate these local units into a
(con't)