Professor Melanie Stallings Williams, CE Director Dr. Michael A. Williams and CE Principal Wei Zhao to publish an upcoming article entitled “The OPEC of Potatoes: Should Collusive Agricultural Production Restrictions Be Immune From Antitrust Law Enforcement?” in the Virginia Law & Business Review Winter 2017 issue.

 

A pre-Depression era statute, the Capper-Volstead Act, allowed farmers to cooperate in marketing goods and has been interpreted to permit farming cartels to avoid the application of antitrust law. Such cooperatives set production limits designed to reduce quantities so that prices rise. Normally, horizontal output restrictions would constitute per se violations of antitrust law.

 

This costly collusion has gone almost unexamined and unregulated, partly due to the fact that cases, such as class actions, are likely to settle due to the expense, uncertainty and high stakes of such cases. Thus, there is a lack of judicial opinions on the legality of horizontal production restraints among agricultural products, but also of publicly available economic analysis on the cost of such collusion. The authors of this article examine the potato industry and conclude that coordinated production caps significantly increased the cost to buyers, and thus the social welfare costs are substantial. Therefore, the Capper-Volstead Act should be interpreted to encourage – not thwart – competition, and hence, should not provide antitrust immunity to farmers who collude to restrict output.