Cooperative Strategies in Imperfectly Competitive Market Structures—A Policy Perspective

Abstract

ing in a sea of atomistic competition. A basic premise of this discussion is that such an analogy is rapidly becoming obsolete. Cooperatives are adjusting this imperfect competition by developing their own growth strategies. Horizontally, vertically, and conglomerately integrated cooperatives are being formed compete effectively with comparably organized corporate entities. Economists including those in the Farmer Cooperative Service and the universities play an influential role in advising cooperatives on growth and marketing strategies including the development of . . blueprints for cooperatives. Such blueprints have from time time included concepts such as a single cooperative handling a major share of a product; mergers between cooperatives; advising on the desirability of closed membership, treatment of the nonmember, or the need for full supply contracts and marketing agreements.' Some have become involved in developing a rationale for cooperative involvement with corporations in various joint venture configurations [8]. The Capper-Volstead Act allows persons engaged in the production of agricultural products as farmers act together in associations in marketing their commodities. The antitrust exemption conferred by the CapperVolstead Act is not absolute. Certain activities of cooperatives such as the involvement of nonfarmers can destroy the exemption. Other activities such as predatory practices go beyond the shelter the Capper-Volstead Act provides. During the past two years six significant new antitrust suits have been filed against cooperatives either by the Department of Justice or Federal Trade Commission. Three of these suits allege various predatory and monopolistic practices by cooperatives in the milk industry. Two involve corporate integrator involvement in cooperatives which make price and production recommendations their members. One involves a joint venture between a cooperative and a noncooperative. During this same period the Department of Agriculture took action curb custom feeding in livestock. This action was sufficiently broad in scope that it will likely also limit cooperatives developing integrated production-marketing systems in livestock. Finally, in June 1973 the assistant attorney general of the Antitrust Division, Department of Justice, called on Congress to reevaluate the need for and scope of this [Capper-Volstead] immunity [10]. Some very important issues of social consequence are raised by the Kauper testimony as well as the related antitrust suits. They raise the central question of the degree and methods by which cooperatives will be allowed respond structural change in the production and marketing of agricultural products. Accordingly, this would appear be an ideal time for evaluation of the changing structure of agriculture, its implications for cooperatives, and some analysis and suggested solutions critical policy issues existing in the cooperative sector. This reevaluation is done in the spirit that the appropriate time for public interest evaluation of structural change is while the foundation for change is being laid. I do not mean imply that it is my belief that major problems of monopoly exist within the cooperative sector. Quite the opposite is the case. In fact the bulk of cooperatives operate in an inferior market position. However, without such evaluation more restrictive decisions may be imposed upon the cooperative sector in the future either by court or legislative action. The extreme consequence is the 1 For an illustration involving a blueprint for a purely cooperative agricultural marketing system, see [111.