Respondents Brief — National Boiler Marketing Assn. v. United States

ie ELE D' se

: JAN 11 1978 :

e | | | MICHAEL RODAK, JR., CLERK |

rE eo geen OS) aie, ;

Bed in te Supreme Gout ofthe Writed States ;

y | Octoser TERM, 1977 | =

|e Nationa Brormzr MaRKETING ASsociaTION, PETITIONER

Beep eit, . Usrrep StaTes OF AMERICA

ny eet: OF SEER OER POR ee Pee prs 2

i ae. ow WRIT OF y CRRPLORARE TO THE UNITED STATES COURT : iv

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oh gS BRIEF FOR THE UNITED STATES

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| Fee ees WADE H McCREE, JE., | |

. | Solicitor General, $3

eee: JOHN SHENEFIELD, \s

< . Assistant Attorney General, ©

ie | | FRANK H. EASTERBROOK, ~

eA Assistant to the Solicitor General, .

wt. 3 JOHN J. POWERS, II, . ie

aa a BRUCE E FEIN, ~*~

; Attorneys, Cnet ae

| Department of Justice,

Ee Washington, D.C. 205380.

priser 1c Be: eee Re tren ag ae

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Cases—Continued — Statutes and Regulations—Continued: mere Beeaaee

Farmers Reservoir & Irrigation Co. v. pags _ Capper-Volstead Act—Continued . vob vd” page

McComb, 337 U.S. 755.---.------------ 23 Section 2, 7 U.S.C. 299 oo ene i 12, 22

Federal Trade Commission v. Bunte Bros., Clayton Act, Section 6, 38.Stat. 731,,15

.. 812 US. 349_- EASED eR MA Fee ee .- 23 | Jo ae. siicaditbiia duds Sih 8

Imco Poultry, 202 N.L.R.B. 259__-.-- >-.. 22-23 | Cooperative Marketing Act of 1926, 44

Marshall v. Abbott Farms, Inc., 559 F. 2d | Stat. 802, 7 U.S.C. 451 ef seq.z? ©.

WEE Seincatintpaetigcee cities enue 7, 23 7 UBC. 461-48 nnnctitagsyes 21

Marshall v. Guif & Western Industries, 7US.C. 453(a)-----~--~ iis net ieee 33 2

) SS OS® OE SS eee 23 T UBD. Giseeninitikin SEE: ee 8

Maryland and Virginia Milk Producers As- . Farm: Credit Act of 1971, Title lil, 85

soctation, Ine. v. . United States, 362 U.S. Stat. 602, 12 U.S.C. (Supp. Vd 2121

BOB ig hie nes ei a oe 7,12 et seq.:

National Labor Relations Board v. Strain — 12 U.S.C. (Supp. V) 2121-2134: _.,_- 21

Poultry Farms, Inc., 405 F. 2d 1025__._- 7 12 U.S.C. (Supp. V) 2129_----.- tien 21

Northern Pacific Ry. v. United States, 356 Food and Agricultural Act of 1977,:Section

US. 1 owe = A oe 102a, Pub. L:; 95-113, 91 Stat. 913..:...; 17

Otter Tail Power Co. v.U nited States, 410 Sherman Act, Section 1, 26 Stat. 209, as

Ce Biers Sst ciins “ORR amended, 15 U.S.C. 1--2.------= Limes 2) O

Simpson v. Union Oil Co., 377 U.S.13---- 6 28 C.F.R. 50.6__--------. ne 6

United States v. Borden Co., 308 U.S. 188_ 12, 20 29 C.F.R. 780. sie spiioibint Kiewmatiittetety £2

United States v. Imperial Irrigation Dis- ‘Miscellaneous: 1% SIT

trict, 559 F. 2d 509_____ eS St eat 17 . Broiler Business (October 1976) -- ssn 24

_ United States v. Sisson, 399 U.S. 267____- 17 59 Cong. Ree. (1920): os

United States v. Socony-Vacuum Oil Co. e pp. TOS -TO56 asics ne nmisiwstp 13

310 U.S. 150 sit p<. Ol¥.--------..-.--- - aes “SR

United States v. Topco Associates, 405 | > Sa Sinatileniatiailaal iad Se

GS! GRR RE ASAE, SES ta ag eS Ae 20 p. 9025..-.-----<i..- ambien cstl 13

Statutes and regulations: , Bs 8026...-..--------~ « n> 1

' Agricultural Fair Practices Act of 1967, 82 Gg. _ ae — 4B

Stat. 93, 7 U.S.C. 2301 ef seg__-_--2 2. __ 17 61 tie Ree. (1921) :

Capper-Volstead Act, 42 Stat. 388, 7 U. S. ¢. a M6 es disci 13

291 et seq.: Res De MBF a sen ene neietet ctbbnd 13

Section 1, 7 U.S.C. OSS ORS 2,11 S MG i eee 13

Sections 1-2, 7 U.S.C. 291-292_______ 5 Ge RENEE re Ra SO 13

Miscellaneous—Continued

62 Cong. Ree. (1922) Sa

p. 2048 Bat WEES RAREE ae ory Le 13

p. 2050_--.. ie 12,13

p. 2051 WU, 12, 13

p. 2052 ahiininiatitlchdabtiihitiiy 14,15

p. 2058_-.-- a ih 12

pp. 2058-2059 sewn inthis 14

pp. 2059-2060_ disitisinathibiilipiaritrenn 11

RS A ies 11

p 056... see 11,14

p. 2218 ihsasihs ascii hecniseentliihcbiestiiidabiepin 19

EES PONENT Tin NO 15

ae nee ARE er are SOR TE 15, 16, 19

p. 2277 0 RSE ARSC Lr STE Or 15

FEI Pia visite diernaiin citation 15

Hearings on §. 109 (Agricultural Pro-

ducers Marketing Act) before a Sub-

committee of the Senate Committee on

Agriculture and Forestry, 90th Cong.,

1st Sess. (1967). be

H.R. Rep. No. 24, 67th Cong. Ist Sess.

(1921) 10, 11, 13

Kennedy, Legal Formality, 2 J. Legal

Studies 351 (1973) 10

Landes and Posner, The Independent Judi-

ciary in an Interest Group Perspective,

18 J.L. & Econ. 815 (1975) _- 10

S. Rep: No. 90-474, 90th Cong., Ist Sess.

(1967) - -- 17

srt Singreme Gourt of the tied St

Ocroser TERM, 1977 “

>

No. 77-117

NationaL BromLeR MARKETING ASSOCIATION, PRTTTIONER

v. sae

Untrep States or AMERICA

ON WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPBALS FORTHE FIFTH CIRCUIT. _—_.

OPINIONS BELOW 29. 69.33

The opinion of the court of appeals (A. ‘111-182)

is reported at 550 F. 2d 1380. The opinions of the dis-

trict court (A. 81-90, 105-108) are not officially re-

sens

JURISDICTION

The judgment of the court of wiih, 133)

was. entered-on April 22; 1977. The petition for a

writ of certiorari was filed on July 21, 197". and

granted on October 11, 1977. The jurisdiction of this

Court rests on 28 U.S.C. 1254(1). |

(1)

2

QUESTION PRESENTED

Whether poultry processors that neither own nor

opetate farnis but that contract with growers to feed

and raise chickens are “engaged in the production of

agricultural products as farmers” within the mean-

ing of the Capper-Volstead Act, 7 U.S.C. 291.

STATUTES: INVOLVED

. The pertinent portions of Section 1 of the Sherman

Act, 26 Stat. 209, as amended, 15 U.S.C. 1, and the

Capper-Volstead Act, 42 Stat. 388, 7 U.S.C. 291, are

reproduced at Pet Br. 2-3.

1. Petitioner is a marketing cooperative composed

primarily of vertically integrated ‘‘broiler”* proces-

sors known as “ifttegrators.”* Most integrators own

breeding flocks of chickens that lay eggs, from which

chicks hatch. The integrators contract with independ-

ent ‘‘growers” to husband the chicks for seven to nine

weeks (the “‘grow-out process”) until they are. large

enough to slaughter.

The growérs own the land and buildings in which

the grow process occurs, and they supply the nec-

essary Jabor,..The. integrators generally supply...and

own ,the, birds, and they provide the necessary ,feed

4 ‘Broilers are chickens that re slaughtered at ‘seven ‘to nine

wach 00 age Gait gemeeeet: Sr tal to Copaemaiite, meteatents,

hotels and other institutions"(A;93)." _ -

* This statement of facts is based on the parties’ pa of

facts in the district court; it was stipulated (A. 91) that these

facts are not disputed.

8

and veterinary services.* The integrators retrieve the

grown birds and prepare ther for sale (A. 114-115).

Most of petitioner’s members tise independent growers

to raisé 80 péfeent or more of their broilers (A. 23).

The contract between an integrator and a grower

usually requires the grower to provide the land, build-

ings, equipment, water, electricity, and labor needed

to raise chicks from the day of birth to marketable

size and weight (A. 24). Ordinarily, a grower must

also. supply litter for lining and fuel for heating the

broiler houses (A. 26). The day- -to-day management

of the flocks is the responsibility of the grower

(A. 24-25).*

The integrator assumes most of the Anasitia) risks

of changes in the price broilers will fetch in the mar-

ket (A. 14); the integrator risks capital by investing

in each flock. The grower’s investment is illiquid; it

consists primarily of land, buildings and equipment

(A. 10-11), and the growers’ investment .in these

items exceeds the integrators’ (A. 13, 23-24).".

§ Petitioner’s members have integrated their broiler production

in varying degrees. Some operate processing plants and. feed mills

but purchase chicks from outside sources. Four members, although

owning breeder flocks, hatcheries, and feed mills, have declined to

invest in processing plants; their processing is done by another

company under contract. Two members neither own nor operate

broiler flocks, and they have no investment in ; ler flocks,

hatcheries or feed mills; their sole fixed investment in broiler pro-

duction is in processing plants (A. 8). sa as

‘Some growers also are obligated to help the in

wud omen bar or tno ta prvang at

(A. 24).

* Integrators generally are larger businesses than mn wwe

in some cases growers’ investment in broiler husbandry may ex-

4

The financial arrangements between the integrators

and growers depend on the contracts between them,

and their terms differ. Many contracts characterize

the growers as independent contractors (A. 24-25) ; no

contract characterizes the grower as an employee of

the integrator. Particular contracts require growers,

in addition to making the substantial investments and

contributions discussed above: (1) to pay taxes on

chicks, feed, grit, litter, fuel and sanitation products;

(2) to pay for chick losses exceeding five percent; (3)

to make up the integrator’s lost profits if chicks die

because of grower negligence; and (4) to pay for 50

percent of the cost of feed destroyed by fire or natural

disaster (A. 28). Moreover, many growers receive no

compensation for birds that die beeause of disease or

foul weather during the grow-out phase (A. 25).

Many contracts also require the grower to share

with the integrator the risk of market fluctuations.

A typical contract specifies a minimum and maximum

payment to the grower per bird or per pound. The

minimum payment provided in some members’ con-

tracts is less than the cost incurred by the average

grower in raising a flock (A. 26-27). Under contracts

used by 23 integrators, the payment received is tied

to the market price of broilers (A. 25). Under con-

tracts used by 50 integrators, a grower’s payment is

ceed an integrator’s. investment in breeder flocks, hatcheries and

snore. lpsiten madved Although the fixed costs incurred by

integrators usually exceed the grower’s fixed costs because of the

disparity in size of operation, a substantially higher percentage of

the grower’s cost is fixed (A. 13, 65). ,

5

inversely related to the amount of feed supplied dur-

ing the grow-out phase (A. 25). Two contracts tie a

grower’s compensation to the market price of feed or

feed ingredients: the higher the price of feed, the

lower the grower’s compensation (A. 26). And most

eontracts permit an integrator to reduce payment

levels for any new flock if feed costs rise or r broiler

prices fall (A. 27).°

Growers bear market risks indirectly as well. The

number of chicks or flocks placed with growers may

be_reduced if broiler prices fall or seem likely to fall

(A. 14-16, 27). The duration of a grower’s contract

is generally limited to one growing cycle of seven to

nine weeks (A. 8); growers’ contracts have been ter-

minated for a variety of reasons (A. 27-28), and some

have been unsuccessful in obtaining new contracts

with other integrators (tbid.).

2. On April 16, 1973, the United States filed this

civil antitrust action against petitioner. The complaint

alleged that petitioner’s members engaged in various

activities—including exchanging price information

and restricting the supply of broilers—designed to

fix, maintain, and stabilize the price of broilers, in

violation of Section 1 of the Sherman Act, 15 U.S.C.

1. Petitioner contended, among other things, that its

questioned practices were sheltered from the antitrust

laws by the Capper-Volstead Act, 7 U.S.C. 291-292.

The Capper-Volstead Act partially exempts from

antitrust scrutiny the cooperative activities of “ [p]er-

* In one case an integrator lowered the payment level by 45 per-

cent (A. 27).

253-394—78—__2

sons engaged in the production of agricultural prod-

ucts as farmers * * *.’’ Petitioner argued that the

integrators were farmers.’

3. The district court agreed with petitioner’s argu-

ment that the integrators are “farmers’’ (A. 81-90).

The court thought it dispositive that the integrators

bear most of the risks of fluctuation in the market for

broilers; it ‘also relied on an appellate opinion that

* Petitioner’s description of the background of this litigation

(Br. 7) is incomplete in some respects. In 1969 the Department

issued a business review letter to the National Egg Co., express-

ing an intent not to institute a criminal prosecution of a cooper-

ative that planned to admit a corporation that contracted with

farmers for the care of laying hens and the production of eggs.

The letter was issued pursuant to a procedure for case-by-case re-

view of particular proposed actions. The Department expressly

reserved the right to change its mind and institute a prosecution if

the public interest should so require (28 C.F.R. 50.6).

Petitioner was formed in 1970. It did not seek an indication

of the Department’s enforcement intentions pursuant to the busi-

ness review procedure. On November 17, 1971, the Department

issued & business review letter to Holly Farms Poultry, Inc., con-

cerning Holly’s proposal to join petitioner. The business review

letter stated that integrators that contracted with growers for the

raising of broilers were not farmers within the meaning of the

Capper-Volstead Act, and in a simultaneous press release the De-

partment took the position that agricultural cooperatives might

forfeit their limited antitrust exemption if they admitted inte-

grators.

Although the Department of Justice thus made clear its legal

position, petitioner continued to operate as before. The Depart-

ment brought suit 17 monthz later, seeking only an injunction

against petitioner’s marketing practices. Whether any defense

founded on unfairness would be available in a treble damage ac-

tion is a question that need not be faced in this case. Cantor v.

Detroit Edison Co., 428 U.S. 579, 592-595; cf. Simpson v. Union

Oil Co., 377 U.S. 18, 24-25.

7

firms similar:to the integrators were farmers for pur-

poses of the National Labor Relations Act.”

The United States then filed an amended complaint

eliminating any allegations that would have allowed

it to argue that the integrators .overstepped their

limited antitrust exemption as Oapper-Volstead

“farmers” (A. 92-96).° The parties stipulated that

the United. States could refile a complaint at a later

date reviving the allegations that had been deleted

(A. 91). Because the amendment to the complaint

made the integrators’ status as “farmers” the con-

trolling issue in the ease, the district court entered

summary judgment for petitioner (A. 105-110).”

* The district court relied on National Labor Relations Board

vy. Strain Poultry Farms, Inc., 405 F. 2d 1025 (C.A. 5). But this

Court disapproved Strain in holding that truck drivers employed

by integrators to transport feed to growers are not “agricultural

laborers” for purposes of the labor laws. Bayside Enterprises, Inc.

v. National Labor Relations Board, 429 U.S. 298, 299 n. 4. The

court of appeals relied in part on Bayside in reversing the district

court (A. 180-131). See also Marehall v. Abbott Farms, Inc., 559

F. 2d 1006 (C.A. 5) (integrated egg producers are not farmers

for purposes of the Fair Labor Standards Act). :

* The exemption is not total; it does not pertain to predatory

practices or to conspiracies with persons outside agricultural

cooperatives. See Maryland and Virginia Milk Producers Asso-

ciation, Inc. v. United States, 362 U.S. 458, 465-467 ; United States

v. Borden Co., 308 U.S. 188, 204-206. The Capper-Volstead Act

was desigried only to allow a cooperative to act as if it were a

unitary corporation. But in light of the amendment to the com-

plaint, which eliminated from the case all allegations pertaining

to activities that would not be exempt if the integrators are not

“farmers,” there is no need for the Court to consider what types

of activities are exempt.

° The question whether the integrators are “farmers” under

the Capper-Volstead Act also controls petitioner’s claim to anti-

4, The court of appeals reversed (A. 111-132). The

court observed that the Capper-Volstead Act exempts

only ‘“‘farmers,” not all persons connected with the

production of agricultural commodities (A. 121). It

first examined the ordinary meaning of ‘“‘farmer” and

concluded that ‘‘an irreducible minimum must be

either husbandry of animals or crops or farm owner-

ship” (A. 123). Because the integrators neither hus-

band broiler flocks nor own the farms where this task

is performed by growers, the court held that they

were not farmers (A. 123).

Legislative history reinforced the court of appeals’

view that Congress meant to exempt only “farmers”

as that term was commonly understood. The court

concluded that the Act was designed to bolster the

bargaining position of farmers vis-a-vis middlemen,

to forestall migration of farmers to the cities, and to

preserve the values of independence and individual-

ism nourished by traditional farm life (A. 124-127).

Moreover, Congress defeated an amendment that

would have included processors, such as sugar refiners

that concluded pre-planting contracts with farmers,

trust exemption under Section 6 of the Clayton Act, 38 Stat. 731,

15 U.S.C. 17, because that statute provides immunity identical to

that available under the Capper-Volstead Act. Case-Swayne Co.

v. Sunkist Growers, Inc., 389 U.S. 384, 391.

Moreover, although petitioner refers (Br. 23 n. 17) to Section

5 of the Cooperative Marketing Act of 1926, 44 Stat. 803, 7 U.S.C.

455, that section authorizes price information exchanges only if

petitioners are “farmers” under the Capper-Volstead Act. The dis-

trict court did not resolve any question concerning that section

(see A. 90), and consequently none is properly before this Court.

9

among those entitled to antitrust exemption (A. 127).

The court held that the integrators are more like

middlemen and processors than they are like tradi-

tional farmers (A. 128). It explained that “[r]eading

‘farmers’ in its ordinary sense as meaning those who

own or operate farms focuses the benefits of the Act

more closely on the persons central to Congress’ con-

cern and it keeps subject to the antitrust laws those

companies that prepare farm products for market”

(A. 129).

SUMMARY OF ARGUMENT

The growers raise the birds from chick to chicken,

from the day. after their birth until a brief time be-

fore their death. It is as if the growers obtained

seedlings from the integrators and returned a mature

crop. The growers raise and husband their crop of

birds, yet the integrators contend that they, rather

than the growers, are ‘‘farmers.”

The integrators are much more like suppliers and

processors than they are like farmers; they are more

like the orange packing houses that are outside the

protection of the Capper-Volstead Act (see Case-

Swayne Co. v. Sunkist Growers, Inc., 389 U.S. 384,

393) than they are like the growers of oranges. The

integrators doubtless are engaged in the production

of agricultural products—so were the operators of the

packing houses—but they are not engaged in that pro-

duction as farmers. As the court of appeals con-

cluded (A. 123): “Asked to examine the broiler busi-

10

ness and to identify the ‘farmers,’ Justice Frank-

furter’s common run of men * * * would point to

the contract growers—the persons who own and oper-

ate the farms—as the ‘farmers.’ * * * ‘Farmer’ still

means what it meant in 1922—one who owns or oper-

ates a farm.” _

The legislative history shows that the Capper-

Volstead Act is a populist statute designed to advance

the cause of ‘‘actual farmers” (H.R. Rep. No. 24,

67th Cong., Ist Sess. 1 (1921)), the backbone of the

populist movement, against the cause of middlemen

and suppliers. Congress rejected an amendment that

would have extended to entities similar to integrators

the exemption from the antitrust laws. The statute is

special interest legislation, hardly intended to give

privileges to processors and middlemen that were the

objects of suspicion. Faithfulness to the intent of

the 67th Congress, and adherence to the rule that

exceptions to the antitrust laws must be strictly con-

strued, requires the conclusion that integrators are

not farmers.”

11 See generally Landes and Posner, The /ndependent Judiciary

in an Interest Group Perspective, 18 J.L. & Econ. 815, 877, 883,

894 (1975); Kennedy, Legal Formality, 2. J. Legal Studies 351

(1978).

11

ARGUMENT

THE LANGUAGE, LEGISLATIVE HISTORY AND PURPOSES OF

THE CAPPER-VOLSTEAD ACT SHOW THAT INTEGRATED

BROILER PRODUCERS ARE NOT “FARMERS’”

A. THE EXEMPTION FOR “FARMERS” APPLIES ONLY TO PERSONS WHO

OWN OR WORK ON AGRICULTURAL LAND

The Capper-Volstead Act exemption from the anti-

trust laws does not apply to all persons associated

with agricultural production. It reaches only persons

“engaged in the production of agricultural products

as farmers, planters, ranchmen, dairymen, [or] nut

or fruit growers * * *.’’ 7 U.S.C. 291 (emphasis sup-

plied). Congress intended the language to be restric-

tive; the House Report explained that the language

“aimed to exclude from the benefits of this legislation

all but actual farmers” (H.R. Rep. No. 24, supra,

at 1).

The statute was a response to an agricultural

depression. Prices of agricultural commodities fell

dramatically after World War I,” threatening many

farmers with bankruptcy “ and forcing others to leave

the land for the cities.* Although farm prices fell,

the price of food in the cities rose; Congress con-

cluded that part of this disparity was caused by ex-

cess profits of middlemen.”

The sponsors of the Capper-Volstead Act believed

that these trends, so damaging to farmers and farm

12 62 Cong. Rec. 2051 (1922) (remarks of Sen. Kellogg).

*8 62 Cong. Rec. 2060 (1922) (remarks of Sen. Capper).

+4 62 Cong. Rec. 2059-2060 (1922) (remarks of Sen. Capper).

25 62 Cong. Rec. 2060 (1922) (remarks of Sen. Capper).

18 Ibid.

12

life, could be arrested if farmers acted collectively as

their own middlemen. See Case-Swayne Co. v. Sunkist

Growers, Inc., supra, 389 U.S. at 393-394. They hoped

that collective marketing would “increase the pro-

ducer’s profit by shortening the road to market,’’ by-

passing “the unessential and speculative middleman,”’

and providing ‘‘the producer and the consumer their

due.” ** Congress saw in higher profits for farmers a

way to make the traditional farming life attractive

once more, keeping farmers on the land and nourish-

ing their independence and individual effort in keep-

ing with traditional values.”

Congress thought that collaboration among farmers

would be a boon for farmers and consumers alike,

because in its view the elimination of middlemen

would lead to lower prices for consumers. It was

anxious, however, “to preserve the principles of the

Sherman Act against the oppressive power of wealth

and great aggregations of capital or any other

organization which may oppress the people.’’* Its

concern was reflected, in part, by the provision in

Section 2 of the Act, 7 U.S.C. 292, of a procedure to

assess the fairness of prices charged by agricultural

cooperatives.”

1 [bid.

. 62 Cong. Rec. 2051 (1922) (remarks of Sen. Kellogg) ; id.

at 2058 (remarks of Sen. Capper).

- * 62 Cong. Rec. 2050 (1922) (remarks of Sen. Kellogg).

2° The Court has held that the remedy under Section 2 is not

exclusive. See United States v. Borden Co., 308 U.S. 188, 205-206 ;

Maryland and Virginia Milk Producers Association, Inc. v.

United States, 362 U.S. 458, 462-463.

a

13

In order to exclude from the benefits of the Act

persons—such as middlemen and processors—that rep-

resented “the oppressive power of wealth and great

aggregations of capital,’’ Congress carefully limited

the statutory description to persons engaged in agri-

culture “as farmers,” a term that Congress under-

stood to mean holders of land,” owners of farms,”

occupiers of farms,” persons cultivating their own

land,” tillers of the soil,” and se on. The descriptive

terms point in the same direction: only “actual farm-

ers” * may organize into cooperatives free from anti-

trust serutiny.”

21 62 Cong. Rec. 2050 (1922) (remarks of Sen. Kellogg).

22 62 Cong. Rec. 2051 (1922) (remarks of Sen. Kellogg).

28 Ibid.

24 Ibid.

25 59 Cong. Rec. 7855-7856 (1920) (remarks of Rep. Evans). -

2° H.R. Rep. No. 24, supra, at 1.

2" See also, e.g., 59 Cong. Rec. 7855-7856 (1920) (remarks of

Rep. Evans: “the liberty sought in this bill for the man who tills

the soil”) ; 59 Cong. Rec. 8017 (1920) (remarks of Rep. Volstead) ;

59 Cong. Rec. 8022 (1920) (remarks of Rep. Sumners) ; 59 Cong.

Rec. 8025 (1920) (remarks of Rep. Hersman) ; 59 Cong. Rec.

8026) (remarks of Rep. Towner: “this privilege is not to dealers

or handlers or speculators for profit ; it is limited to the producers

themselves”); 59 Cong. Rec. 8033 (1920) (remarks of Rep.

Fields) ; 61 Cong. Rec. 1034 (1921) (remarks of Rep. Walsh) ; 61

Cong. Rec. 1037 (1921) (remarks of Rep. Blanton) ; 61 Cong. Rec.

1040 (1921) (remarks of Rep. Towner: “The farmer is an indi-

vidual unit. He must manage his own farm. He must have his own

home”) ; 61 Cong. Rec. 1044 (1921) (remarks of Rep. Hersey) ;

62 Cong. Rec. 2048, 2050 (1922) (remarks of Sen. Kellogg, noting

the “individualistic nature of the farmer’s occupation” and de-

scribing a farmer as “a small holder of land”) ; 62 Cong. Rec.

2051 (1922) (remarks of Sen. Kellogg, observing that the legisla-

tion was designed to encourage the farmer “in his ownership, in

“14

.«« The- integrators are: not “actual farmers’’ and do

not claim to be.so. They do not till the land or hus-

band. the flocks. They.do not own the land on which

the flocks are raised.” They contend, rather, that they

are entitled to solicitude because they bear market

risks and provide a stable income for the; growers

(Br. 23-26). ita

..,Lhis contention proves , no much, It cotein the

fact that the Court rejected a similar argument in

Cage-Swayne in concluding that orange processors

are, not “farmers” (389 U.S. at 391-396) and, indeed,

that membership of “nonproducer interests” (id. at

396). such as processors in a cooperative strips the

entire. cooperative of antitrust immunity. Petitioner

overlooks the fact that Congress did not include every

agricultural interest within the definition of “farm-

the occupation of his farm, and in the cultivation of his own

land”) ; 62 Cong. Rec. 2052 (1922} (remarks of Sens, Cummins,

Kellogg and Townsend) ; 62 Cong. Rec. 2156 (1922) (remarks of

Sen. Walsh, observing that the legislation protects only “an orga-

nization of the producers themselves of the product of the

farm”); 62 Cong. Rec. 2058-2059 (1922) (remarks of Sen.

per).

Re is (Br. 15) on a statement made by an opponent

of the Capper-Volstead Act to support a broad interpretation of

the term “farmer.” Statements by opponents, however, are en-

tidied to Title welgns. Zrnet & Frees v. Hochfelder, 425 U.S. 185,

* 204 n. 24. '

Biren havin draws no sustenance from the fact that

both sharécroppers and the owners of sharecropped land may be

“farmers”: the sharecroppers work the farmland and pas owners

own it. Integrators do neither.

>

15

ers.” And, most: importantly, : petitioner: overlooks

the fact that Congress considered and rejected a pro-

‘vision that would have included ‘entities like -inte-

‘grators among those sensu to Prerttea? from the

antitrust laws.

Senator Phipps proposed an amendment: to seasons

from the antitrust laws the activities of manufac-

turers or producers of agricultural products, provided

that they entered into pre-planting’ contracts with

farmers and the farmers’ compensation deperided on

the price of the agricultural commodity.” Senator

Phipps remarked that processors of milk, sugar beets,

chicory, fruits and vegetables—agricultural industries

with organizations similar in some ways to that of the

broiler industry today—would be eligible for antitrust

exemption under his amendment." He contended that

the amendment would enable farmers to receive

higher prices at the same time as it reduced costs to

consumers because of savings in distribution.”

The leading supporters of the Capper-Volstead Act

opposed the Phipps amendment. Senator Kellogg

stated that the amendment would permit processors,

mills and manufacturers.to obtain exemption from the

antitrust laws.” Senator Norris argued that the

* See 62 Cong. Rec, 2052 (1922) (flour mills are engaged in the

production of agricultural preducts but are not entitled: to claim

the antitrust exemption). She eor Sine a arena

change in Case-Swayne, naa amma aia erve

% 62 Cong. Rec. 2273 (1922).

*1 62 Cong. Rec. 2273-2274 (1922).

53 Tbid.

2 62 Cong. Rec. 2274 (1922).

16

amendment would allow processors to raise prices to

consumers as long as they shared part of the increased

profit with farmers.“ The amendment was defeated

(62 Cong. Ree. 2275 (1922)).

The debates on the Phipps amendment establish

that processors, other persons who enter into pre-

planting agreements with farmers for crops, and so

on, are not themselves farmers even though they bear

much of the risk of market fluctuation. Congress

thought that it would take an amendment to the bill

to exempt such persons from the antitrust laws. And

Congress rejected the amendment that was proposed,

in large measure because it would have jeopardized

the interests of consumers and extended the benefits

of the statute to the very middlemen and processors

that Congress saw as one cause of the difficulties of

farmers.” Processors with pre-planting contracts have

much in common with the integrators, and the rejec-

tion of the Phipps amendment therefore disposes of

many of petitioner’s arguments.

Congress, in 1922, did not exempt integrators from

the antitrust laws. To the extent Congress addressed

the status of entities related to integrators, it decided

that they were not entitled to the benefits of the

statute. Petitioner contends (Br. 12) that farming

* 62 Cong. Rec. 2975 (1922).

* Petitioner correctly observes (Br. 16) that our interpretation

~ the Capper-Volstead Act would allow an integrator

engaged

to be treated as a farmer if it also owned the

place where the birds were nurtured. But the fact thet “farmers”

may engage collectively in ancillary activities such as the market-

ing of farm products is not a reason to extend the statute still

further to “agribusinesses” that do not grow their own chickens.

—_,

17

has changed since 1922, but this is-not a sufficient rea-

son to reverse a choice consciously made by Congress.

The language of the statute ‘‘is not an empty vessel

into which this Court is free to pour a vintage that

* * * better suits present-day tastes.” United States v.

Sisson, 399 U.S. 267, 297. Petitioner’s argument that

the integrators deserve to be treated like farmers

should be addressed to the sitting Congress; the 67th

Congress, which passed the Capper-Volstead Act, did

not accommodate integrators, and the prerogative of

altering laws to suit changed circumstances belongs to

Congress rather than the courts.”

B. THE INTEGRATORS’ FINANCIAL STAKE IN THE BROILERS DOES

NOT MAKE THEM FARMERS

Petitioner’s central argument is that the integrators

are farmers because they bear most of the risks, and

incur most of the costs, of the production of broilers.

** Modern technology and changes in economic conditions may

have overtaken other farming statutes that were passed long ago.

See United States v. Imperial Irrigation District, 559 F. 2d 509

(C.A. 9) (acreage limitation on land irrigated by public projects

may be obsolete, but it must be enforced).

Congress has been attentive to the problems of agriculture, but

the most recent statutes simply reinforce our arguments concern-

ing the Capper-Volstead Act. For example, Section 102a of the

Food and Agricultural Act of 1977, Pub. L. 95-113, 91 Stat. 913,

“reaffirms the historical policy of the United States to foster

and encourage the family farm system of agriculture in this coun-

try.” The Agricultura] Fair Practices Act of 1967, 82 Stat. 93, 7

U.S.C. 2301 et seq., is to the same effect. See S. Rep. No, 90-474,

90th Cong., Ist Sess. 2-3, 5-6 (1967) ; Hearings on S. 109 (Agri-

cultural Producers Marketing Act) before a Subcommittee of the

Senate Committee on Agriculture and Forestry, 90th Cong., Ist

Sess. 12, 90-96 (1967).

18

But this Court rejected ‘in Case-Swayne the conten-

tion that! investment and assumption of agricultural

risk are enough to make a person a “farmer” under

the Capper-Volstead -Act. .

The growers nurture the birds from the day after

birth until shortly before: their slaughter. They have

day-to-day control over the care of the birds. The

contribution of: the. grower is what turns a bird

from'a chick. into a marketable broiler, just as

other farmers tend their fields while the forces of

nature turn seeds or seedlings into a mature crop.

The growers, not the integrators, invest in farm land

and farm buildings. Most of a grower’s investment in

broiler production is fixed in farm land and farm

buildings; an integrator’s investment, on. the other

hand, may be no more than the cost of processing

facilities and the cost of a particular flock of birds

(A. 9-10, 13, 65)." Two members of petitioner own

- no breeder flocks, hatcheries or feed mills (A. 8, 23) ;

their investment in facilities is limited to processing

plants, which, as Case-Swayne holds, are not farms.”

** The growers’ fixed investments are those common to farming.

They cannot easily be turned to other endeavors if poultry raising

should become unprofitable. To cut his losses, a grower may be

required to sell or abandon his farm, the result that the Capper-

Volstead Act was designed to prevent. Integrators, by contrast, can

turn their feedmills to other endeavors (such as selling feed to

other livestock raisers).

* Petitioner’s statement (Br. 17 n. 10) that all of its members

are engaged in more than the processing of birds therefore is

incorrect. The two members discussed in the text, like the sugar

beet that the rejected Phipps amendment would have

covered, and like the orange packing plant owners discussed in

Case-Swayne, have no more than an interest in processing, together

with investments in particular lots of agricultural products.

19 :

Many growers bear. market risks directly, because

the price they receive from the integrators depends on .

the price of feed, or processed birds, or both (A, 25-

26). The growers also bear market risks indirectly, :

beeause the consequence of a decrease in the price of

processed birds (or an increase in ‘the’ price’ of. feed)

is a reduction in the number'of birds integrators wil]

place for growing (A. 15-16, .27-28); and when. inte--

grators place fewer birds, growers are paid less,. Inte-

grators may decline to renew a grower’s contract after

any flock of birds (A. 27), leaving the grower with.an .

investment in farm land and buildings that cannot

easily be turned to other uses.”

When the price of birds goes down the integrators

doubtless suffer, but they do not suffer as farmers.

Processors, retailers, and many other persons’ asso-

ciated with agriculture bear market risks, but the fact

that they do so does not make them farmers.“

Petitioner stresses (Br. 15-16) that an integrator’s

investment in each flock of birds is greater than a

*° An abandoned farm represents not only a loss to the farmer

but also a loss to passersby. “An abandoned farm is an eyesore. It

is evidence of local decay, threatening the national fiber, and if

permitted to continue imperiling the national health. Let us keep

our boys on the farm.” 62 Cong. Rec. 2218 (1922) (remarks of

Sen. Calder). |

In opposing the Phipps amendment despite the fact that sugar

refiners had been losing money, Senator Norris observed : “A great

many people, a great many retailers, lost money on sugar they had

on hand when it went down. I have no joy in seeing anyone lose

any money, but I was glad when the price of sugar a

thetigh comubotty hod to lane, and 1 do ast suppesn thee ap

way to putt down without some lsing” 62 Cong. Re. 273

20

grower’s, but that disparity is immaterial unless the

integrator’s investment is made as a farmer; for the

reasons discussed above, we submit that it is not.

C. THE CAPPER-VOLSTEAD ACT SHOULD BE CONSTRUED NARROWLY

The Sherman ,Act “was designed to be a compre-

hensive charter of economic liberty aimed at preserv-

. ing free and unfettered competition as the rule of

trade.” Northern Pacific Ry. v. United States, 356

U.S. 1, 4. In combination with other antitrust laws,

it is “the Magna Carta of free enterprise.” United

States v. Topco Associates, 405 U.S. 596, 610. The

Capper-Volstead Act is special-interest legislation

that derogates from the general statutory policy; it

serves an important purpose, but, because it states

the exception rather than the rule, it should be

strictly construed.** Case-Swayne Co., supra, 389 U.S.

at 393-394; United States v. Borden Co., 308 U.S.

188, 198, 204-206.

Petitioner presses on this Court an inventive and

sweeping interpretation of ‘‘farmer.” To the extent

its contentions amount to an invitation to rewrite the

“ Petitioner asserts (Br. 22) that “the Justice Department can

derive no support from the principle that immunities from the

antitrust laws must be narrowly construed.” This is so, petitioner

maintains, because the cooperative activities it carries out are

beneficial to the chicken industry. But this argument confuses the

question of statutory exemption with the question whether the

activities described in the complaint are illegal under the antitrust

laws. (What is more, petitioner’s emphasis on the benefits of price

information exchanges in an atomistic market overlooks the fact

that the complaint (A. 94-95) alleges price fixing and restrictions

on quantity of birds produced, not simply the exchange of

inf tion.)

21

Capper-Volstead Act to take changed circumstances

into account, they are addressed to the wrong forum.

To the extent its contentions amount to a plea for con-

sistent treatment, they are mistaken.

Petitioner argues (Br. 18) that the Department of

Agriculture and the Farm Credit Administration have

treated integrators as farmers and that they should

receive the same treatment under the Capper-Volstead

Act. But. the statutes on which petitioner relies were

not passed by the 67th Congress and did not address

the problems to which the Capper-Volstead Act was

directed.“

“ Petitioner relies, for example, on its treatment under the Farm

Credit Act of 1971, 85 Stat. 602, 12 U.S.C. (Supp. V) 2121-2134.

But that statute separately defines “producers” and “farmers” (12

U.S.C. (Supp. V) 2129), and petitioner classifies itself as a coop-

erative of “agricultural producers” (Br. 17) rather than as a

cooperative of “farmers.” This statute, and petitioner’s eligibility

for credit under it, therefore have no bearing on the definition of

“farmer” for purposes of the Capper-Volstead Act.

Petitioner also has received assistance from the Department of

Agriculture under the Coo -rative Marketing Act of 1926, 44

Stat. 802, 7 0.S.C. 451-457. But this statute allows the Department

to render assistance to cooperatives consisting entirely of “associa-

tions of producers of agricultural products, and federations and

subsidiaries thereof, engaged in the cooperative marketing of agri-

cultural products, including processing, warehousing, manufactur-

ing, storage, the cooperative purchasing of farm supplies, credit,

Gnenaian tecailenens sndh alton denismantinn ndiiedbert (7 USC.

453 (a) ). This definition of eligible cooperatives is far broader than

the definition contained in the Capper-Volstead Act. The fact that

pretation of the Cooperative Marketing Act and the Farm Credit

Act.)

22

None of the agencies that have classified integra-

tors as agricultural producers for some purposes has

expressed the opinion that the integrators are immune

from antitrust liability under the Capper-Volstead

Act; none has even claimed the competence to do so.“

The assistance that petitioner received from these

agencies therefore has no bearing on the question of

antitrust immunity. United States v. Socony-Vacuum

Oil Co., 310.U.S. 150, 225-227; Otter Tail Power Co.

v. Umted States, 410 U.S. 366, 372-374. |

Indeed, the treatment of integrators under other

statutes supports the position we take here.“ For

example, the National Labor Relations Board has

held that the growers of birds, not the integrators and

their employees, are entitled to the agricultural ex-

emption from the National Labor Relations Act. Imco

“ Section 2 of the Capper-Volstead Act allows the Secretary of

Agriculture to commence administrative proceedings against

cooperatives that charge excessive prices. But discharge of this

responsibility to determine the reasonableness of prices ordinarily

would not require the Secretary to determine whether a particular

person was a “farmer.” Moreover, this Court has held that the

responsibility given to the Secretary under Section 2 does not affect

enforcement of the antitrust laws (see note 20, supra), and the

Seeretary, who has investigated several cases but never filed a

Section 2 complaint, has not purported to construe “farmers” 3 in a

way favorable to petitioner. —

“ Because “[t]ranslation of an implication drawn from the

special aspects of one statute to a totally different statute i is treach-

erous business” (Federal Trade Commission v. Bunte Bros., 312

U.S. 349, 353), we do not rely heavily on the treatment of integra-

tors under other statutes. But, by the same token, petitioner also

draws little support from its treatment under other : statutes 8 (see

note 42, supra).

23

Poultry, 202 N.L.R.B. 259, 260. This Court accepted

that construction of the statute in Bayside Enter-

prises, Inc. v. National Labor Relations Board, 429

U.S. 298, which held that the employees who deliver

feed to the growers are not agricultural laborers.

The Court explained (id. at 301) that “[t}he mill

in which Bayside produces poultry feed and the

processing plant in which: it slaughters and dresses

poultry are not agricultural operations”; it rejected

the integrator’s argument that the work of its con-

tract growers converted the labor of its own em-

ployees into agricultural labor.“

Similarly, employees of integrators are not agricul-

tural employees for purposes of the Fair Labor

Standards Act. A regulation of the Secretary of

Labor so provides (29 C.F.R. 780.126), andthe Secre-

tary’s interpretation of the Act has been upheld by

the courts. Marshall v. Abbott Farms, Inc., 559 F. 2d

1006 (C.A. 5); Marshall vy. Gulf & Western Indus-

tries, Inc., 552 F. 2d 124 (C.A. 5). See generally,

Farmers Reservoir & Irrigation Co. v. McComb, 337

U.S. 755, 761.

Petitioner ultimately falls back on the. ‘argument

that enforcement of the ant*trnst laws in the poultry

industry would be counterproductive because it’ Would

either induce integrators to aequire farms or increase

*S Petitioner’s contention (Br. 19) that Bayside’s employees

were not agricultural laborers because the feed they delivered is

not an agricultural product is incorrect. Chicken feed is made from

grain and is an agricultural product; the Court’s holding had

nothing to do with the proper characterization of chicken feed.

the market share of the larger, more diversified poul-

try producers (Br. 17, 24-27). But no evidence in the

record supports petitioner’s contention, and petition-

er’s prediction is not self-evident.

Many considerations, including the tax laws, the

labor. relations of the integrators, and the economic

efficiency of further integration may be primarily re-

spomsibie-for shaping the structure of the poultry

business.“ Applying the antitrust laws to the broiler

business might lead to the formation of additional

cooperatives of growers, an outcome that would ad-

vance the purposes of the Capper-Volstead Act. One

of petitioner’s members is a cooperative of growers

(A. 9, 29), and petitioner does not suggest that there

are impediments to the formation of additional grow-

er cooperatives.

However that may be, petitioner’s argument is an

empirical contention that should be addressed to Con-

gress.’ It is not a reason to exempt integrators from

antitrust serutiny under existing laws (see note 41,

supra.)

“* Integrators might hesitate to acquire growers because of the

capital investment involved (A. 13) or because farm employees’

productivity is lower than that of independent farmers (Broiler

Business 10-11 (October 1976) ).

25

The judgment of the court of appeals should beé

affirmed. |

Respectfully submitted.

Wane H. McCnrez, Jr.,

Solicitor General.

JOHN H. SHENEFIELD,

Assistant Attorney General.

Frank H. EAsTERBROOK,

Assistant to the Solicitor General.

JoHN J. Powers, ITI,

Bruce E. Fer,

Attorneys.

JANUARY 1978.