Dairy Cooperatives:

Role and Effects of the Capper-Volstead Antitrust Exemption

RCED-90-186: Published: Sep 4, 1990. Publicly Released: Sep 11, 1990.

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Pursuant to a congressional request, GAO provided information on the limited antitrust exemption provided to agricultural cooperatives under the Capper-Volstead Act, particularly as it pertains to the dairy industry.

GAO found that: (1) technological advances have improved dairy operations and expanded dairy farmers' marketing opportunities since enactment of the act; (2) federal milk price intervention through a dairy price support program and a milk marketing order program reduced dairy farmers' risks; (3) many dairy herds remain relatively small, thereby limiting individual dairy farmers' bargaining strength; (4) the declining number of fluid milk processing plants has resulted in increased concentration of dairy farms over the past 60 years, and dairy cooperatives have played an increasingly important role in the milk industry; (5) the number of dairy cooperatives decreased from 2,458 in 1930 to 287 in 1988, in part due to mergers and consolidations; (6) although the percentage of marketing orders with over-order payments has been increasing over time, cross-sectional analyses suggested no significant relationship between cooperative market power and over-order payments; and (7) while legislation required that cooperatives not abuse their antitrust exemption, the Department of Agriculture (USDA) conducted limited oversight of cooperatives.

Matter for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: USDA is currently monitoring cooperative activities thus obviating the need for action by others.

    Matter: Congress should closely monitor USDA actions and, if USDA does not initiate active monitoring of cooperative activities, Congress should consider assigning regulatory responsibility for cooperative pricing activities to the Federal Trade Commission (FTC). If Congress assigns this responsibility to FTC, Section 20 should not be extended for subsequent fiscal years.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: USDA is currently monitoring cooperative pricing activities. USDA and the Department of Justice have implemented improved information sharing policies and practices. USDA has taken administrative actions against dairy cooperatives found guilty of inappropriate use of market power.

    Recommendation: The Secretary of Agriculture should direct his contingency committee that oversees Capper-Volstead to actively monitor cooperative pricing activities.

    Agency Affected: Department of Agriculture


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