DOJ/USDA “Workshops”

1. DOJ/USDA Workshops on Competition in AgricultureOutcomes for Dairy CooperativesMarlis CarsonSenior Vice President and General CounselNational Council of Farmer Cooperatives

2. DOJ/USDA “Workshops” August 2009: DOJ/USDA announce workshops to explore competition issues in agriculture. March 12 Issues of Concern to Farmers - Ankeny, Iowa May 21 Poultry Industry - Normal, Alabama June 25 Dairy Industry - Madison, Wisconsin Aug. 27 Livestock Industry - Fort Collins, Colorado Dec. 8 Margins - Washington, D.C.

3. Why Is the Administration Pursuing Competition/Antitrust Issues in Agriculture? • Consolidations in all sectors of agriculture. • Philosophy that all antitrust exemptions should be eliminated. Growing sentiment that big=bad. • Complaints that prior administration did not follow through on antitrust violations.

4. Reasons for Concern • October 2008 • Then candidate Obama: • “We will have an Antitrust Division that is serious about pursuing cases.”

5. Reasons for Concern • Assistant Attorney General Christine Varney (September 2009): Capper-Volstead “was intended to bring the small producers together in order to give them some ability to market their milk . . Some of these co-ops have grown extraordinarily beyond what anybody imagined when Capper-Volstead was enacted.”

6. Reasons for Concern • Assistant AG Varney (September 2009): • Congress might conclude that the Capper-Volstead Act “is not the right law for the state of the industry at this time.” • Varney tells Senate Judiciary Committee Chairman Leahy she looks forward to working with Congress on the limits of Capper-Volstead.

7. Reasons for Concern Assistant AG Varney: • DOJ is “reconsidering the validity of the current rationale” for antitrust exemptions. • Existing exemptions should be narrowly construed and DOJ is opposed to output restrictions. (DOJ has indicated it opposes any form of pre-harvest supply control. ) • At Senate Judiciary hearing Varney testifies DOJ “allergic” to exemptions.

8. DOJ/USDA Workshops: NCFC Response • NCFC worked hard to educate Administration, Congress, Industry • Talks with DOJ officials • DOJ official attends NCFC 2010 annual conference • Briefings for House/Senate Agriculture Committee Staffs • Briefings for industry groups • Formal comments submitted to DOJ • NCFC members meeting with Congressional delegations and USDA officials • Public Relations Campaign

9. Workshop #3: Dairy Industry • Cooperatives featured prominently • Secretary Vilsack: USDA “recognizes the important role of cooperatives in bringing fairness and balance to the marketplace.” • Assistant Attorney General Varney: “We understand co-ops are essential to the livelihood of producers.” Department of Justice “is supportive of the mission of cooperatives and the Capper-Volstead Act.” • Numerous producers spoke in support of cooperatives

10. Our Work Is Not Finished • Negative DOJ comments prompted letter signed by 14 state attorneys general calling for review of the Capper-Volstead Act. • Many influential policymakers believe large co-ops can’t be farmer friendly. • Senator Schumer (D-NY) has noted a distinction between “smaller, farmerfriendly co-ops and larger ones that act like big private companies and don’t help our farmers.”

11. Our Work Is Not Finished • Outcomes from DOJ/USDA? • No report to Congress • DOJ would rather bring cases than write a report. • Deputy Assistant Attorney General Pozen: Information learned from the workshops affects “everything we do every day.” • Cases will be “infused” with what was learned through the workshops • DOJ/USDA formed close working relationship.

12. Our Work Is Not Finished • Stage is set for Farm Bill mischief. • “Small producer/small farmer” references could lead to misguided policies. • Future co-op consolidation and integration could quickly put us back in the DOJ crosshairs. • Let your members of Congress know that you support your dairy cooperative.

13. Our Work Is Not Finished Senate Judiciary Committee Chairman Herb Kohl: The committee “will continue to examine competition in agricultural markets . . . Issues to be examined include consolidation in agricultural sector, dairy market concentration, and competition in the market for genetically modified seeds.”

16. Dairy Policy & Directors’Leadership Conference

17. Agricultural Antitrust Issues Peter S. Janzen Senior Vice President and General Counsel Land O’Lakes, Inc. April 5, 2011

18. Agricultural Antitrust Issues • Increased DOJ focus • Increased Private Party Litigation • Mushrooms • Eggs • Potatoes • Litigation has targeted businesses that are using Capper-Volstead as an exemption from antitrust laws and that involve some form of supply management.

19. Mushrooms Antitrust Litigation • DOJ investigation resulted in a consent decree prohibiting certain forms of “supply management”. • Private party litigation followed the government action and focused on the Capper-Volstead status of the cooperative. • Court determined that the existence of a single non-producer member of the cooperative eliminated the Capper-Volstead protection.

20. Eggs Antitrust Litigation • Allegations that the cooperative formed by members of the egg industry does not meet the requirements of Capper-Volstead – so no antitrust exemption. • Allegations that the “supply management” programs engaged in by the egg industry are not exempt from antitrust liability even if Capper-Volstead protection is available.

21. Potatoes Antitrust Litigation • Allegations that the “supply management” program engaged in by the cooperative formed by members of the potato industry is not exempt from antitrust liability even if Capper-Volstead protection is available.

22. Questions that Arise from Litigation • What is a producer? • Is an integrated entity still a producer? • What steps should a cooperative take to ensure that its members are producers? • Can a cooperative lawfully limit its members’ output?

23. What is a Producer? • Persons engaged in the production of agricultural products as farmers, planters, ranchmen, dairymen or nut or fruit growers. • Till the soil or raise the animal.

24. Is an Integrated Producer a Producer? • If a person or entity engages only in processing activities, would not meet Capper-Volstead definition of a producer. • Producer, but vertically integrated as a producer. • Vertically integrated and purchase significant quantity of products from third parties.

25. Steps a Cooperative Should Take • Annual certification from each member. • Including any entity utilizing Capper-Volstead protection (trade association, bargaining association, marketing agency. • Federated cooperative – certification of a members’ members. • Who actually owns agricultural production assets. • Bylaw – automatic termination without notice, of membership if not a producer. • Do not identify anyone as a member (associate member, member or the like) if not a producer.

26. Supply Management • Producers and Capper-Volstead cooperatives may act together to collectively process, prepare for market, handle and market agricultural products of its members. • Act as a single entity • Pricing not expressly allowed as a collective activity.

27. Questions?