Capper-Volstead Turns 100; It’s Time We Expand Its Goals, Within Agriculture and Beyond
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Co-authored by Daniel Hanley, senior legal analyst at the Open Markets Institute, and Claire Kelloway.
February marked the 100th birthday of the Capper-Volstead Act. This relatively unknown law deserves celebration for establishing the legal foundation for farmer cooperatives in the United States. By promoting farmer coordination and more democratic business structures via cooperatives, Congress allowed farmers to counteract concentrated buyers and receive fair prices for their goods. While the Capper-Volstead Act is not perfect and narrowly focused, the next 100 years of U.S. agriculture policy would benefit from studying its principles and further promoting cooperatives.
Cooperatives provide a legal vehicle for members to advance their mutual interests and operate for the benefit of the community, rather than just to return the highest profit to Wall Street investors. Since cooperatives can also increase wealth and capital for workers and rural communities, they can fundamentally transform our economy away from concentrated capital.
In 1922, Congress passed the Capper-Volstead Act to address two problems afflicting farmers following misguided enforcement of the landmark antitrust law, the 1890 Sherman Act. First, private individuals and the federal government, empowered by the Supreme Court, misused the Sherman Act’s ban on collusion to systematically attack labor unions. This made farmers wary of forming bargaining organizations themselves. Second, the Supreme Court and other antitrust enforcers failed to use the Sherman Act as intended to prevent rapid business consolidation in the early 20th century. With more consolidated and powerful buyers of their goods, farmers were forced to submit to ever-increasing demands and lower their prices.
Capper-Volstead attempted to address these problems by allowing farmers to form cooperatives and thus engage in behavior like price-fixing or collective selling that would otherwise violate the antitrust laws. By providing a limited antitrust exemption to cooperatives, Congress sought to ensure that farmers could form organizations to counterbalance the undue power of consolidated agricultural buyers, avoid ruinous competition between each other, and ensure fair returns for their crops. At the same time, Congress gave the Secretary of Agriculture authority to legally challenge any cooperatives that abuse these antitrust exemptions to engage in predatory practices or unduly raise prices.
Unlike traditional corporations, in which a centralized executive team dictates operations on behalf of investors, cooperatives democratically share managerial influence amongst members of the organization. For the typical corporation today, Wall Street financiers own most shares and shape decision-making. For cooperatives, all members, regardless of size or ownership stake, get one vote on key decisions, ensuring the co-op operates in members’ interest. While Capper-Volstead allowed independent business owners (farmers) to form processing and marketing co-ops, cooperatives can be made up of many different kinds of members. Consumers can join cooperatives, such as co-op grocery stores or electric utilities, that aim to provide better and lower cost services for customer-owners. Worker-owned business cooperatives also naturally prioritize safety and higher wages for worker-owners.
For these reasons and others, cooperatives have been historically seen as a critical and preferred mechanism to democratize the economy, promote better and fairer working conditions, and serve as a vehicle to ensure true economic independence. Over the past century, cooperatives have especially supported rural and low-income communities as well as communities of color to pool resources and provide services when investor-owned firms have left them behind. These services and resources include capital from credit unions, broadband and electricity from rural service cooperatives, and greater market access for Black farmers through organizations like the Federation of Southern Cooperatives. Rather than being a business that merely operates in a community, cooperatives are businesses that operate for a community — seeking to ensure the public derives the maximum amount of benefits possible from its operations, instead of mere short-term returns for financial institutions.
To be sure, Capper-Volstead has not been perfect despite its noble ambitions. Limiting challenges to monopolistic cooperatives to the Secretary of Agriculture has resulted in almost nonexistent enforcement — with merely seven investigations into cooperatives over the past century — none of which resulted in lawsuits from the U.S. Department of Agriculture. This is despite the fact that large cooperatives now dominate some agricultural sectors using unfair market practices. For example, the Dairy Farmers of America controls 30% of the U.S. raw milk industry, and the co-op has been accused of squeezing its own members’ profits and striking exclusive agreements to prevent other suppliers from accessing distribution markets.
Capper-Volstead also focuses narrowly on farmer processing and marketing cooperatives, but looking forward to the next 100 years of cooperative agriculture, Capper-Volstead’s principles should expand to the organization of the farm itself. Most agriculture cooperatives today are marketing cooperatives made up of family- or otherwise privately owned farms. But as farm ownership and agricultural production become increasingly consolidated into a shrinking number of very large operations, so too has access to farmland and agricultural wealth, which is concentrated among overwhelmingly white families. On the other hand, farmworkers are disproportionately people of color and contribute much of the labor and expertise to keep food on America’s tables without sharing in that wealth. Turning farmworkers into farm owners through cooperatively owned farms is one promising solution to address inequalities in agriculture. More collaborative farm structures can also provide more shared access to land and help new farmers pool resources, creating more accessible and successful farm structures for the next generation. More farms across the country are taking up cooperatively owned and run farm models.
Beyond agriculture, Capper-Volstead models fair competition rules to combat concentrated buyer power by allowing independent business owners to bargain. This principle holds promise for exploitative industries with powerful platforms and many unorganized independent contractors, such as the gig economy. In New York City, drivers have already begun circumvented dominant platforms by forming the Drivers Cooperative, a driver-owned ride-hailing app.
Cooperatives democratize the economy and give both small businesses and workers more control over their economic life. Extending the principles of Capper-Volstead within the farming industry, and the broader economy, could alleviate inequality and combat corporate concentration.
What We’re Reading
12 farm and pro-repair organizations joined a petition to the Federal Trade Commission requesting an investigation into repair restrictions by John Deere, which they deem unfair methods of competition. (Press Release)
Iowa Attorney General Tom Miller will conduct a market study to identify the causes of recent fertilizer price hikes. (The Associated Press)
War in Ukraine will further threaten fertilizer markets, as Russia controls global monopolies on key fertilizer ingredients. (Washington Monthly)
A Starbucks store in Mesa, Ariz., joins two Buffalo, N.Y., stores in successfully unionizing. These successes have inspired an organizing drive at Starbucks stores across the country. 109 stores in 26 states have filed petitions for union elections.
(The Counter)