Capper-Volstead - In re Mushroom Direct Purchaser Antitrust

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					                In Re Mushroom Direct Purchaser Antitrust Litig. (E.D. Pa. 2007)

Greg Garrett of Tydings and Rosenberg sent along the following summary of a recent case
decision that considered Capper-Volstead immunity:

The United States District Court for the Eastern District of Pennsylvania recently held that the
Capper-Volstead Act -- which provides a limited antitrust exemption to joint ventures formed by
farmers and other agricultural producers -- did not exempt certain activities of the Eastern
Mushroom Marketing Cooperative, Inc. ("EMMC"), from application of the Sherman or Clayton
Acts. In re Mushroom Direct Purchaser Antitrust Litig., Master File No. 06-0620, 2007 WL
1221143 (E.D. Pa. April 25, 2007).

Plaintiffs, direct purchasers of mushrooms, filed a class action complaint against, inter alia,
EMMC and its members, alleging violations of Sections One and Two of the Sherman Act and
Section Six of the Clayton Act. The civil action was filed after the Department of Justice
obtained a consent decree against EMMC. Plaintiffs alleged that EMMC controls the production
of more than sixty percent of all Agaricus mushrooms grown in the United States and more than
ninety percent of all Agaricus mushrooms grown in the eastern United States. The defendants
allegedly agreed to fix the price of mushrooms. The defendants also allegedly engaged in a
"supply control" campaign to maintain the fixed price. Using membership funds, EMMC
allegedly purchased certain non-members' mushroom farms or other farmland, then sold or
exchanged the land at a loss, attaching a deed restriction that would prevent the subsequent
owners from growing mushrooms. The defendants moved to dismiss based in part on the
Capper-Volstead Act.

The court first examined Supreme Court precedent concerning the scope of the exemption
offered by Capper-Volstead. In Maryland & Virginia Milk Producers Ass'n v. United States, the
Court held that the Act and its legislative history made clear that Congress wanted to "make it
possible for farmer-producers to organize together, to set association policy, fix prices at which
their cooperative will sell their produce, and otherwise carry on like a business corporation
without thereby violating the antitrust laws." Under the Court's holding in National Broiler
Mktg. Ass'n v. United States, however, the Capper-Volstead exemption is inapplicable if
members of the cooperative include those who are not entitled to the protection of the Act.
Hence, if "non-producers participate as members in an agricultural cooperative, the cooperative
is not entitled to avail itself of the Capper-Volstead exemption." Finally, if a cooperative
engages in practices that are "so far outside of the legitimate objects of a cooperative that, if
proved, they would constitute clear violations of the Sherman Act," the Capper-Volstead
exemption is inapplicable.

Taking the allegations in the complaint as true, the court held that the defendants were not
entitled to the Capper-Volstead exemption. Plaintiffs alleged that (1) some members of EMMC
were not agricultural producers, (2) defendants made anticompetitive agreements with non-
producers, and (3) the conduct complained of fell outside the "legitimate objects of an
agricultural cooperative."

DCDB01 20861492.1 03-Jul-07 15:06