(Oct. 27, 1:44 p.m.) The Department of Justice is keeping a close eye on agriculture, searching for evidence of anti-competitive practices in the citrus, dairy, egg and tomato processing industries.

Attorney Michael Finio of Philadelphia-based Saul Ewing LLP said the department is scrutinizing the Capper-Volstead Act, the 1922 legislation that allows agricultural producers to form cooperatives and exempts them from most antitrust laws.

The act was intended to allow small farmers to work together on issues like acreage, marketing and promotions, but Finio said the Department of Justice is questioning whether multi-million and multi-billion dollar companies should be shielded in that manner.

“Farming wasn’t what it is today when Capper-Volstead was enacted,” he said. “You had solo farmers banding together to protect themselves. Now you get a bunch of smart people in the same room, and they think ‘How far can we take this?’”

Marketing cooperatives reviews

According to The Wall Street Journal, the California Tomato Export Group disbanded its group — though the processors maintained they were exempt from antitrust law — after the department started an investigation of price fixing.

The egg industry is facing similar scrutiny in the wake of drastic price increases in the past two years.

Attorney Peter Spadoni of Wenatchee, Wash.-based Jeffers, Danielson, Sonn & Aylward PS, said agricultural cooperatives should review their practices and documentation every three to five years to make sure they are in compliance with antitrust laws.

“It certainly would be appropriate, given governmental action, to do a complete review,” said Spadoni, who represents several apple and pear organizations in the Pacific Northwest.

Spadoni said members of cooperatives are entitled to work collaboratively to establish marketing plans, including when to go to market, pricing strategy and volume control.

“Farmers can sit down and say, ‘How many acres should we plant this year?’” he said.

However, he said members should make sure that their organizations are properly formed, that bylaws are in place and that participants sign membership agreements.

Including non-members in activities, he said, is a dangerous mistake.

“If you start letting third parties be involved in your meeting, you lose the exemption for everyone,” Spadoni said. “That’s the biggest risk.”

Mushroom investigation

Finio represented the Eastern Mushroom Marketing Cooperative — now the West Chester, Pa.-based American Mushroom Cooperative — during a 2004 investigation by the Department of Justice.

Finio said that after a thorough investigation the department didn’t find any problems with the cooperative’s pricing and marketing strategies.

However, the cooperative had sold some shuttered mushroom operations and in the process implemented deed restrictions that said land couldn’t be used for mushroom farming.

The department required those restrictions be eliminated and in its complaint included language that indicated the organization’s actions might have affected pricing.

That opened the door to several class action lawsuits being filed in 2006.

Finio said Department of Justice involvement makes class action suits easier for plaintiffs because the government does the leg work, and information is easily accessible.

Though the American Mushroom Cooperative’s case was settled with the justice department, the class action suits remain.

Attorney Bill DeStefano of Philadelphia-based Buchanan, Ingersoll & Rooney PC said the lawsuits, including one brought by retailers Publix and Giant Eagle, have been consolidated in one case in the U.S. District Court for the Eastern District Court of Pennsylvania.

The defendants entered a motion to dismiss in the spring. DeStefano, who represents the mushroom cooperative, is hoping for a summary judgment by the end of the year.

“It would be an opportunity for the district court to reinforce the concept that agricultural cooperatives are exempt from anti-trust laws,” he said. “It’s an important decision that could resolve questions about the scope and extent of the Capper-Volstead Act.”

Citrus industry scrutiny

Co-ops aren’t the only agricultural entities with antitrust issues.

Federal Bureau of Investigation agents visited the offices of three large importing companies in January 2007. Nearly two years later, a Department of Justice spokeswoman said the investigation into anticompetitive practices in the citrus industry still is ongoing. She declined further comment.

A source at Vero Beach, Fla.-based Seald Sweet LLC declined to comment on the investigation, and sources at Montreal-based Fisher Capespan LLC and Fort Pierce, Fla.-based DNE World Fruit Sales did not return calls.

In June 2007, Del Monte, Dole and Chiquita signed settlement agreements to dismiss two class action antitrust lawsuits in the U.S. District Court for the Southern District of Florida.

The defendants, who agreed to pay $2.5 million each to settle with direct purchasers of their bananas, were accused of conspiring to fix banana prices and of restricting distribution to artificially inflate prices. The companies also agreed to settle a case with indirect buyers.

Earlier this month the European Commission fined Dole, Del Monte and a German importer a total of $81.9 million for allegedly conspiring to fix banana prices from 2000 to 2002 in eight European countries.