Source: https://m.openjurist.org/436/us/816
Timestamp: 2020-01-23 06:31:35
Document Index: 700983250

Matched Legal Cases: ['§ 1', '§ 1', '§ 1', '§ 2301', '§ 2301', '§ 2303', '§ 1', '§ 2302', '§ 4', '§ 291', '§ 291', '§ 291']

436 U.S. 816 - National Broiler Marketing Association v. United States
436 US 816 National Broiler Marketing Association v. United States
56 L.Ed.2d 728
NATIONAL BROILER MARKETING ASSOCIATION, Petitioner,
The legislative history makes clear that the regime which Congress created in the Capper-Volstead Act to ameliorate this situation was one of voluntary cooperation. The Act would allow farmers to " 'combine with [their] neighbors and cooperate and act as a corporation, following [their] product from the farm as near to the consumer as [they] can, doing away in the meantime with unnecessary machinery and unnecessary middle men.' That is all this bill attempts to do." 62 Cong.Rec. 2257 (1922) (remarks of Sen. Norris). As the Court notes, however, " c]learly, Congress did not intend to extend the benefits of the Act to processors and packers to whom the farmers sold their goods, even when the relationship was such that the processor and packer bore a part of the risk." Ante, p. 826-827. This fact is demonstrated from several exchanges during the debate clarifying the intent behind the bill and also by the abortive Phipps amendment. In the colloquy between Senators Kellogg and Cummins, quoted in extenso, ante, at 823-824, n.13, an intent not to extend the benefits of the bill to processors of agricultural products is clear:
Debate surrounding the proposed Phipps amendment, quoted ante, at 827 n. 19, the effect of which would have been to exempt, for example, sugar refiners with preplanting contracts, yields a similar understanding. Senator Norris, in leading the successful rejection of the amendment, explained: "The amendment . . . is simply offered for the purpose of giving to certain manufacturers the right to be immune from any prosecution under the Sherman Antitrust Act. . . . They are not cooperators ; they are not producers; it is not an organization composed of producers who incorporate together to handle their own products; that is not it." 62 Cong.Rec. 2275 (1922) (emphasis added). These statements show that Congress regarded both "manufacturers of finished agricultural products" and "processors" as ineligible. Whether or not there is a distinction in economic or other terms between "manufacturers" who refine sugar from beets, or "processors" who mill wheat into flour, both groups were thought of as beyond the reach of § 1—"They are not cooperators." Thus the legislative history demonstrates that the purpose of the legislation was to permit only individual economic units working at the farm level1 to form cooperatives for purposes of "collectively processing, preparing for market, handling, and marketing in interstate and foreign commerce, such products of persons so engaged." This focus on collectives to replace the processors and middlemen is the key to application of the Act's policies to modern agricultural conditions.
The dissent is correct, of course, that "[t]he nature of agriculture has changed profoundly since the early 1920's when the Capper-Volstead Act was debated and adopted. The reality of integrated agribusiness admittedly antiquates some of the congressional characterizations of farming." Post, at 843. Most NBMA members are fully integrated except for the grow-out stage which they contract out. Rather than groups of single-function farmers forming a collective jointly to handle, process and market their agricultural products, these multifunction integrated units stand astride several levels of agricultural production which Congress in 1922 envisioned would be collectivized. Performing these functions for themselves the allegations of the complaint suggest, they now seek protection of the exemption not to permit collectivized processing but simply as a shield for price fixing. The issue is whether a fully integrated producer of agricultural products performing its own processing or manufacturing and which hence does not associate for purposes of common handling, processing, and marketing is nevertheless "engaged in the production of agricultural products as [a] farme[r]" for purposes of § 1's exemption for such cooperatives if also engaged in traditional farming activity. The dissent frankly recognizes that integrated poultry producers do not neatly fit the limitation Congress signified by the phrase "as farmers," but reads that limitation out of the Act in order to give effect to what it perceives as Congress' desire to aid the agricultural industry generally because of the uncertainty of profits in that industry caused by the combination of weather, fluctuations in demand, and perishability of the product. Elison of the limitation Congress placed on the exemption is sacrificed to this end, and the exemption extended to encompass all persons engaged in the production of agriculture. But that drastic restructuring of the statute is not only inconsistent with Congress' specific intent regarding the meaning of the limitation, but is unnecessary to give continuing effect to its broader purposes. Congress clearly intended, as the discussion in Part I, supra, demonstrates, to withhold exempting processors engaged in the production of agriculture notwithstanding that they bore risks common to agriculture generally, and that they may be "price takers" with respect to the product they sell to large chains of grocery stores. The dissent fails to explain how extending the exemption in the fashion it suggests can be reconciled with the fundamental purpose of this populist legislation to authorize farmers' cooperatives for collective handling, processing, and marketing purposes.
Definition of the term "farmer" cannot be rendered without reference to Congress' purpose in enacting the Capper-Volstead Act. "When technological change has rendered its literal terms ambiguous, the . . . Act must be construed in light of [its] basic purpose." Twentieth Century Music Corp. v. Aiken, 422 U.S. 151, 156, 95 S.Ct. 2040, 2044, 45 L.Ed.2d 84 (1975). I seriously question the validity of any definition of "farmer" in § 1 which does not limit that term to exempt only persons engaged in agricultural production who are in a position to use cooperative associations for collective handling and processing—the very activities for which the exemption was created. At some point along the path of downstream integration, the function of the exemption for its intended purpose is lost, and I seriously doubt that a person engaged in agricultural production beyond that point can be considered to be a farmer, even if he also performs some functions indistinguishable from those performed by persons who are "farmers" under the Act. The statute itself may provide the functional definition of farmer as persons engaged in agriculture who are insufficiently integrated to perform their own processing and who therefore can benefit from the exemption for cooperative handling, processing, and marketing. Thus, in my view, the nature of the association's activities, the degree of integration of its members, and the functions historically performed by farmers in the industry are relevant considerations in deciding whether an association is exempt. The record before us does not provide evidence relevant to these considerations, and there is therefore no basis for appraising NBMA's entitlement to the exemption while it includes members whose operations are fully integrated whether or not they contract rather than perform the grow-out phase.
The dissent's reconstruction of the exemption is doubly flawed, for it would frustrate the Act's purpose to protect that segment of agricultural enterprise as to which Congress' purpose retains vitality. The American Farm Bureau Federation, which has filed a brief amicus curiae in this case, "is a voluntary general farm organization, representing more than 2.5 million member families in every State (except Alaska) and Puerto Rico." Brief as Amicus Curiae 2. Speaking for the contract growers—those who actually own the land and husband the chicks from the time they are hatched until just before their slaughter—the Federation argues that extending the exemption to integrators would stand the Act on its head; the integrators who process the fully grown broilers cou d thereby combine to dictate the terms upon which they will deal with the contract growers to the latter's disadvantage.
Moreover, there is persuasive evidence that Congress' concern for protecting contract growers vis-a-vis processors and handlers has not abated. In 1968, Congress enacted the Agricultural Fair Practices Act of 1967, 82 Stat. 93, 7 U.S.C. § 2301 et seq. (1976 ed.), designed to protect the "bargaining position" of "individual farmers" by prohibiting "handlers" from interfering with the "producers' " right "to join together voluntarily in cooperative organizations as authorized by law." § 2301. In doing so, Congress legislated specifically to protect contract growers from integrated broiler producers. Section 4(b) of the Act prohibits a "handler" from discriminating against "producers" with respect to any term "of purchase, acquisition, or other handling of agricultural products because of his membership in or contract with an association of producers." 7 U.S.C. § 2303(b) (1976 ed.) (emphasis added). The definition of the term "producer" is identical to that in § 1 of Capper-Volstead, see 7 U.S.C. § 2302(b) (1976 ed.), but the legislative history makes clear that for purposes of this Act, Congress considered integrated broiler producers to be "handlers" and acted to prevent them from preying on contract growers. The Senate Report makes this clear:2
"As introduced, [§ 4(b)] prohibited discrimination in the terms of 'purchase or acquisition' of agricultural products. The committee found that this provision would be ineffective with respect to much that it was manifestly intended to prohibit. Thus a broiler contractor might furnish hatching eggs or chicks to a producer under a bailment contract where title remained in the contractor ; or a canning company might furnish seeds or tomato plants to a producer under a similar arrangement. No 'purchase or acquisition' would be involved. The committee amendment would extend this provision to 'other handling' of agricultural products, thereby covering the examples just given and greatly broadening the scope of this provision." S.Rep.No.474, 90th Cong., 1st Sess., 5-6 (1967), U.S.Code Cong. & Admin.News 1968, pp. 1867, 1871. (Emphasis added.) The anomaly of allowing the exemption to those who function more as processors uniquely to disadvantage the contract grower "producers" who today continue to fall within the conception of "farmers" Congress envisioned in 1922, points up the danger of judicially extending the exemption to conditions unforeseen by Congress in 1922.3 The exemption provides a powerful economic weapon for the benefit of one economic interest group against another. However desirable the integrated broiler production system may be, and however needful of the exemption,4 judges should not readjust the conflicting interests of growers and integrators; t is for Congress to address the problem of readjusting the power balance between them. Teleprompter Corp., 415 U.S., at 414, 94 S.Ct., at 1141; Fortnightly Corp., supra, 392 U.S., at 401-402, 88 S.Ct., at 2090-2091.
Historically, perishability of produce forced the farmer to take whatever price he could obtain at the time of the harvest. This one factor, more than any other, underlay the legislative recognition that allowing farmers to combine in marketing cooperatives was necessary for the economic survival of agriculture. "It is folly to suggest to the farmer with a carload of cattle on the market to 'take them home' or to 'haul back his load of wheat' or other commodity." 59 Cong.Rec. 7856 (1920) (Cong. Evans).1
Even in a reasonably competitive market, physical inability to wi hhold produce will place a producer at a disadvantage. But the farmer did not face a reasonably competitive market. A theme running through the legislative history almost as persistently as perishability is the farmer's vulnerability to a small number of middlemen, organized, and capable of driving the price down below the farmer's cost of production.2 Senator Capper stated a point of view to be found on almost every page of the congressional debate on his bill: "Middlemen who buy farm products act collectively as stockholders in corporations owning the business and through their representatives buy of farmers, and if farmers must continue to sell individually to these large aggregations of men who control the avenues and agencies through and by which farm products reach the consuming market, then farmers must for all time remain at the mercy of the buyers." 62 Cong.Rec. 2058 (1922).3
Economics teaches that the result in such circumstances is "bilateral monopoly" with a potentially beneficial impact on the eventual consumer and a sharing of cartel profits between the organized suppliers and the organized buyers.4 The House Report for this reason concluded that the organization of agricultural cooperatives could actually lead to a lowering of the price paid by consumers,5 if the middleman were eliminated altogether. Senator Norris elaborated that the purpose of the bill was to permit farmers " 'to combine with [their] neighbors and cooperate and act as a corporation, following [their] product from the farm as near to the consumer as [they] can, doing away in the meantime with unnecessary machinery and unnecessary middle men.' That is all this bill attempts to do." 62 Cong.Rec. 2257 (1922).
The nature of agriculture has changed profoundly since the early 1920's when the Capper-Volstead Act was debated and adopted. The reality of integrated agribusiness admittedly antiquates some of the congressional characterizations of farming. But this Court has interpreted other statutory exemptions in the light of a changing economy,6 and the Court errs in failing to apply the sense and wording of the agriculture exemption because the industry's organization has changed.
The important reasons for granting antitrust immunity to farmers have not changed. Their produce is still, in large part, incapable of being withheld for a higher price. And in this case, that factor is particularly relevant. The overwhelming demand is for fresh, not frozen, 8-to-10-week-old broiler chickens, and integrators must sell their produce within four days of slaughter.7 The result is a buyer's market. And the buyers in this market are few and powerful: "[T]he market for broilers is oligopsonistic, dominated by large retail chains such as A & P, Kroger and Safeway and institutional food outlets such as Kentucky Fried Chicken."8 A recurrent pattern of prices below actual cost to the producer has been observed since the start of the current decade.9
All of this makes the present case a very poor one in which to depart from the wording of the antitrust exemption for farmers. Broiler chickens are agricultural products.10 Integrators produce them. Hence, integrators are "persons engaged in the production of agricultural products." They own the "crop" from chicks to dressed broilers.11 They are engaged in the production of agricultural products as farmers, within the meaning of 7 U.S.C. § 291 (1976 ed.).
The majority's insistence that Capper-Volstead protection not be extended unless the broiler producers own a breeder flock, hatchery, or grow-out facilit is sought to be explained by the rationale that "[t]he economic role" of a producer who does not own one of these facilities "is indistinguishable from that of [a] processor that enters into a preplanting contract with its supplier . . .." Ante, at 827-828. Such processors were sought to be included within the Act by Senator Phipps' amendment, which was rejected.
It is inaccurate to equate broiler producers with processors of agricultural commodities, even those with preplanting contracts. Such an equation ignores the important distinction that members of the NBMA are all producers of broilers, whereas a mere processor of an agricultural commodity is not a producer. The Act extends protection to "[p]ersons engaged in the production of agricultural products as farmers." (Emphasis added.) Opposition to the Phipps amendment was centered on precisely the fact that it would extend protection to those who did not produce agricultural commodities.
A leading critic explained his opposition: "The amendment . . . is simply offered for the purpose of giving to a certain class of manufacturers the right to be immune from any prosecution under the Sherman Antitrust Act . . . . They are not cooperators; they are not producers; it is not an organization composed of producers who incorporate together to handle their own products; that is not it." 62 Cong.Rec. 2275 (1922) (Sen. Norris). The problem with the proposal, therefore, was not that processing was involved. The statute's own words are conclusive that the activity of processing by producers was to be exempted from antitrust scrutiny.12 The objection to Senator Phipps' proposal was that processors who were not also producers were protected.
This hostility to Senator Phipps' amendment was understandable, given the frequent legislative references to the pernicious effect of middlemen. But NBMA members are not middlemen. Whether or not they own hatcheries or grow-out facilities, they are producers of agricultural commodities.13 They enter the production system before the chickens are hatched, and withdraw only at the time the dressed broilers are sold. They own the chickens throughout the raising process. They should be allowed to "follo[w their] product from the farm as near to the consumer as [they] can."
Under the United States' theory, an integrator of the type found unprotected in today's opinion could achieve antitrust exemption by purchasing the land on which the grow-out facility was maintained (perhaps leasing it back to the independent "grower"). Or he could achieve protection by hiring his grower as an employee, thereby achieving surrogate status for himself as a husbander of flocks. The anomalous aspect of either of these steps is that antitrust protection would thereby be attained by an expansion of the size of an operation—that is entirely the wrong direction, based on the majority's reading of congressional sentiment (with which I largely concur) that small, nonintegrated farmers were those most to be protected by the Act.14
"These large sections of the population—those who labored with their hands and those who worked the soil—were as a matter of economic fact in a different relation to the community from that occupied by industrial combinations. Farmers were widely scattered and inured to habits of individualism; their economic fate was in large measure dependent upon contingencies beyond their control." Tigner v. Texas, 310 U.S. 141, 145, 60 S.Ct. 879, 881, 84 L.Ed. 1124 (1940).
The dissenting opinion finds helpful in refuting the construction of the exemption suggested in this opinion two brief excerpts from the legislative history, quoted post, at 848 n. 14. These statements merely indicate that a processor like "Mr. Armour" who operates a farm would be entitled, free from antitrust liability, to cooperate with other producers in the common handling, processing, and marketing of the products they grow. Nothing in these statements suggests that the fact of farm ownership, however, would confer upon "Mr. Armour" the privilege to conspire with "Mr. Swift" to fix prices in their processing businesses. The dissent's assertion, moreover, that the third proviso of 7 U.S.C. § 291 (1976 ed.) allows a food processor by becoming a producer as well to acquire antitrust exemption for whatever he produces and up to 50% of the product of others is surely erroneous. Both the plain language of the proviso and the statement of Senator Walsh quoted indicate that the privilege to process up to 50% of nonmember producers' products while retaining the exemption belongs to the exempt association, not its members. Indeed, the full colloquy between Senators Kellogg and Walsh indicates that the intent was to exclude processors from the exemption with respect to their processing. "The object being that a few farmers should not organize a corporation simply as a selling agency and not personally really be cooperative members." 62 Cong.Rec. 2268 (1922) (remarks of Sen. Kellogg).
"Agriculture sells its product to the highest bidder in a restricted market. It sells in this sort of market at the price fixed by purchasers. . . . There must be given to agriculture some compensatory advantage to offset the present economic advantage which industry holds by reason of the fact that it can write into the selling price which it fixes all cost of production plus a profit." 59 Cong.Rec. 8022 (1920) (remarks of Cong. Sumners on an earlier version of the bill). "Operating individually, [the farmer] is helpless and falls an easy victim to the organized operators who deal in his output." Id., at 8025 (remarks of Cong. Hersman on earlier bill). "The farmers are not asking a chance to oppress the public, but insist that they should be given a fair opportunity to meet business conditions as they exist—a condition that is very unfair under the present law. Whenever a farmer seeks to sell his products he meets in the market place the representatives of vast aggregations of organized capital that largely determine the price of his products. Personally he has very little, if anything, to say about the price." Id., at 8033 (remarks of Cong. Fields on earlier bill). The Congressman stressed that the bill would give farmers "protection against the gamblers in agricultural products, who rob the producer with one hand and the consuming public with the other." Ibid. The farmer "stands defenseless against combinations of corporations. He finds that when he goes out to do business in the world that he has to do business with a combination that represents 40 or 50 or 100,000 individual incorporators, but the farmer is a unit and he can not incorporate." 61 Cong.Rec. 1040 (1921) (remarks of Cong. Towner on earlier bill). "[I]t is better to have the control of producers extend nearer than now to consumers as against the control of prices by the speculator, who has no concern in the maintenance of stable prices but whose concern is only his immediate profit." Id., at 1041 (remarks of Cong. Sumners on earlier bill). "[Cooperatives] have tended to prevent much of the gambling in foodstuffs and to eliminate many of the useless middlemen that stand between the producers, the retailers, and the consumers." H.R.Rep.No.24, 67th Cong., 1st Sess., 3 (1921).
could, by becoming producers, fall within the protection of the Act for whatever they produced (and up to 50% of the product of others not even eligible for exemption. 7 U.S.C. § 291 (third proviso) (1976 ed.)). In light of these explicit passages, the thrust of the concurring opinion's search of the legislative history is largely blunted.