Understanding Capper Volstead
Phil Kenkel
Bill Fitzwater Cooperative Chair
With the Capper Volstead Act under review it’s useful to review what the legislation provides.
Prior to the passage of the Capper Volstead Act in 1922 agricultural producers were prosecuted
under anti-trust legislation. The Sherman Anti Trust Act (1890) along with the Clayton Act
(1914) ban predatory practices, price discrimination, restricting output, coercing competitors or
customers, colluding or conspiring to fix prices, engaging in boycotts or combining with other
firms to substantially reduce competition. At first glance, this list would not seem to apply to
farmers. However a group of producers attempting to collectively market could be and have
been prosecuted for price fixing or restricting output. The Capper Volstead provides a limited
anti-trust exemption to agricultural association and specifies the organizational requirements to
qualify for the exemption. These qualifications provide much of the basis for the structure of
U.S. agricultural cooperatives.
The Capper Volstead Act allows farmers to collectively market their products. The limited antitrust immunity therefore applies to marketing cooperative or the marketing activities of
marketing/supply cooperatives. The Act also specifies that associations must act for the mutual
benefit of its farmer members. This provision led to the structure of distributing profits in
proportion to use. The Act goes on to restrict non-member business to less than 50% and require
associations to either use a one member-one vote system or restrict dividends to less than 8%.
There are several reasons why the Capper Volstead Act is said to provide limited immunity from
Anti-trust prosecution. First, the Act prohibits associations from engaging in activities that
“unduly increase prices”. Second, the Secretary of Agriculture has authority to review the
actions of associations and invoke remedies forcing the association to cease and desist from
monopolization or restraint of trade. Finally, the only activities of a cooperative that are
protected are the "processing, preparing for market, handling or marketing. Even a properly
structured, a cooperative will lose the Capper-Volstead exemption if it engages in certain illegal
activities
The primary purpose of the Capper-Volstead Act was to place farmers on an equal footing with
the large agribusinesses that purchase their raw agricultural products. In fact, Senator Capper
stated that the purpose of the bill "is to give to the farmer the same right to bargain collectively
that is already enjoyed by corporations”. The Capper Volstead Act is as important now, as ever.
Without it agricultural cooperatives will not be able to provide value to their members and help
farmers meet the challenges of today’s market place.
3-17-2010