George Farah, Cohen Milstein Sellers & Toll

1. Three Topics
• What Are the Antitrust Laws?
• How Are Antitrust Laws Enforced in
Agricultural Markets?
• What Can You Do to Facilitate Antitrust
Enforcement?

2. Sherman Act (1890)
• Section 1: “Every contract, combination ... or
conspiracy, in restraint of trade or commerce
… is declared to be illegal.”
• Section 2: “Every person who shall
monopolize, or attempt to monopolize, or
combine or conspire with any other person or
persons to monopolize … shall be deemed
guilty …”

3. 3
VERTICAL
Farmer FarmerFarmer
Cooperative CooperativeCooperative
Processor ProcessorProcessor
Retailer RetailerRetailer
HORIZONTAL
Section 1
Horizontal Agreement v. Vertical Agreements

4. Section 1:
Horizontal Agreements
• Between Processors or Between Retailers
• Automatically Unlawful
• Common Examples
–Price-Fixing
–Market Allocation
–Group Boycott
–Wage-Fixing

5. Section 1:
Vertical Agreements
• Agreements between:
–Farmers and Cooperatives
–Cooperatives and Processors
–Processors and Retailers
• Rule of Reason Analysis: Sometimes
Unlawful
• Most important vertical agreement in
agricultural markets: Exclusive Dealing

6. Section 2: Monopolization
• Section 2 punishes businesses that acquire or
maintain a monopoly through improper conduct.
• A monopolization claim requires: (1) “Monopoly
Power” and (2) Improper Conduct
• Monopoly Power is often shown by market share, i.e.
typically more than 70%
• Improper Conduct includes:
– Refusal to Deal
– Exclusive Dealing Agreement
– Acquisition

7. Capper-Volstead Act Immunity
• Congress granted an exemption that allows
cooperatives and their members to fix prices
• Makes it very challenging to build horizontal
antitrust claim against bona fide cooperatives
• But immunity does not extend to:
– Agreements between cooperatives and
processors or retailers, i.e. vertical agreements
– Predatory conduct by cooperatives to
monopolize markets

8. Packers and Stockyards Act
• Packers & Stockyard Act was intended to provide
farmers with another tool to fight processors.
• Prohibits unfair, deceptive and discriminatory
practices and efforts to manipulate prices
• But courts interpreted the Act as requiring a
plaintiff to show harm to competition – in effect,
requiring a plaintiff to show an antitrust violation.
• Obama tried to change it. He appointed Dudley
Butler to run GIPSA, who proposed major rule
changes, but Congress refused to adopt them.

9. Enforcing the Antitrust Laws
• Government
– DOJ, FTC and state agencies prosecute antitrust cases
– Can obtain civil penalties or criminal convictions
– All money recovered goes to government
– Can block mergers
• Private Lawsuits
– Injured parties file lawsuit
– Money recovered goes to injured parties
– Can recover treble damages
– Can obtain injunctive relief

10. Class Actions
• Most private cases on behalf of farmers are
class actions:
– There are many victims of an antitrust violation
– Only cost-effective to litigate as class actions
• Contingency Fees: Lawyers are only paid if
they succeed in recovering money for the
class.
• Law firms typically only pursue claims for
damages.

11. Antitrust in Dairy Market
• In a competitive dairy farming market, two dynamics would be present:
– Processors would compete for raw milk supplied independent farmers and
cooperatives by offering higher prices
– Cooperatives would compete for farmers by offering higher premiums and services
• Recent antitrust class actions in various regions have involved:
– The largest processor, Dean Foods, buys up a bunch of rival processing plants
– DFA, the largest dairy cooperative, owns substantial processing plants. Instead of
seeking to increase raw milk prices, DFA is compromised by its vertical integration
and seeks lower raw milk prices to maximize profits from its processing interests
– DFA enters into exclusive supply contracts with Dean to supply all of Dean’s plants.
– Dean and DFA tell independent farmers and other cooperatives that they no longer
can access processing plants unless they join DFA, giving DFA a monopoly.
– Having eliminated competition, Dean and DFA set low prices for raw milk
• Recent Cases
– In re Southeastern Milk Antitrust (2012): $303 million
– In re Northeast Milk Antitrust (2015): $80 million

12. Antitrust in Poultry Market
• In a competitive market: growers would sell broilers on a cash market, through
contracts with processors, or directly to retailers.
• Instead, vertically-integrated processors impose oppressive contracts on 98% of
growers that:
– Prohibit growers from even owning the chickens they raise
– Require growers to incur massive debt to purchase chicken coops and equipment
– Determine the medicine and feed growers must buy
– Prohibit growers from raising chickens provided by competitors
• Growers are trapped. Because of massive debts, growers must continue to sell to
integrators or suffer financial ruin.
• In re: Broiler Chicken Litigation (pending): wage-fixing case
– Nearly all 30,000 growers against Tyson, Pilgrim’s, Perdue, Koch, and Sanderson
– Defendants share compensation data to ensure no integrator offers too much pay.
– Defendants agree not to solicit, recruit or hire, each other’s growers.

13. Antitrust in Cattle Market

14. What You Can Do:
Elect Supportive Candidates
• Support candidates that believe in antitrust
enforcement and class actions.
• President
– Appoints judges to the Supreme Court, 12 Circuit
Courts, 94 district courts
– Appoints directors of DOJ and FTC
• Congress
– Packers & Stockyard Act rules
– Arbitration Fairness Act
– Open Access to Courts Act

15. What You Can Do:
Find Antitrust Cases
• Agricultural markets are ripe for antitrust violations:
highly concentrated with high entry barriers.
• What to Look For:
– Unlawful Agreements: Agreements with processors to
eliminate competition, including price-fixing, exclusive
dealing, wage-fixing and market allocation
– Monopolization: Processors that acquire large market
share by engaging in improper acts, including refusal to
deal, acquisition of rivals and exclusive deals.
• Don’t need smoking guns. We can build a case with
circumstantial evidence of misconduct.

16. Law Firms Can Share Attorneys’
Fees with Nonprofits
• According to the ethics rules of 30
states, lawyers may share attorneys’
fees with a nonprofit that develops a
case or secures a clients
• Win-Win-Win relationships