Farms often aren’t targets, but cooperatives can be at risk
Some fear the agriculture industry is walking headlong into a figurative hall of mirrors. Amid consolidation and consumer food awareness, perceptions of conspiracy and collusion can lead to class-action antitrust lawsuits against food companies and cooperatives with ties to producers of broilers, milk and more.
Producers and the farms they operate are not typically targeted in class-action cases alleging price fixing, fraudulent organic production, wage discrimination and animal mistreatment. Still, attorneys say, producers in leadership roles within commodity organizations need to act with total transparency.
“A cynical view would be that these are trial attorneys seeing opportunity to extract money from food companies,” says John Dillard, an attorney at OFW Law in Washington, D.C., and a Farm Journal columnist. “But a trial attorney would say they are using antitrust laws to protect consumers from getting ripped off and hold companies accountable. There is some truth in both arguments.”
Recent Examples. Pressure from industry groups advocating for agricultural production changes and also from consumers suggests such antitrust cases will become more common in the future, says Chris Ondeck, co-chair of the antitrust group at the law firm Proskauer Rose, also in Washington.
“Once you get into the industry trying to develop an industry-wide standard or code or proposed way of addressing those concerns—which is entirely legal to do, even outside agriculture—there is an exposure to a claim that the use of the standard-setting process is a sham by the producers as a way to reduce production or increase prices,” Ondeck points out.
Lawyers who once sued asbestos and tobacco firms have turned to the profitable ag sector, Ondeck says. A recent case against several dairy cooperatives settled for $52 million.
To safeguard themselves, their businesses and cooperatives, Ondeck recommends producers take several practical steps. He notes there are roughly 3,000 agricultural cooperatives in the U.S., making them an important part of the farm landscape. Thanks to the Capper-Volstead Act, farmer cooperatives are exempt from some provisions of antitrust laws, allowing farmers to pool resources to buy inputs or market their products.
Proper Safeguards. Ensure any cooperatives in which you hold membership have recently evaluated legal compliance, Ondeck says. Industry groups and associations should keep paper trails that preserve transparency, down to the level of who participated in votes on crucial issues and how the effects of an industry standard are described.
“Sometimes, a member of an association will accurately state that a voluntary code or set of standards … is going to have a significant impact,” he says. “But then they’ll go further and they’ll talk about impact on prices or output levels, and they should not do that.”
How to Act in an Active Antitrust Case
If you or organizations in your circle are named as defendants in an antitrust lawsuit, prepare for a long and grueling process, says Chris Ondeck, co-chair of the antitrust group at Washington law firm Proskauer Rose.
Often in cases involving a cooperative, there are actually two antitrust cases moving through the courts in tandem—one involving direct commodity purchasers such as grocery stores, food processors and food companies, and a separate class under state law, which can include indirect purchasers such as consumers.
“Their goal always is to force or create enough risk to force a settlement, which is the actual best way for plaintiffs’ lawyers to get money via wire transfer,” Ondeck says. “It can happen very, very quickly.”