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UNITED STATES v. MARYLAND & VIRGINIA MILK PRODUCER

October 16, 1958

UNITED STATES of America,
v.
MARYLAND & VIRGINIA MILK PRODUCERS ASSOCIATION, Inc., Defendant



The opinion of the court was delivered by: HOLTZOFF

This is a civil action brought by the United States against the Maryland and Virginia Milk Producers Association, Incorporated, under the antitrust laws, for injunctive and other similar relief. Among the defenses pleaded by the defendant are assertions that under the Clayton Act and the Capper-Volstead Act the defendant, as an agricultural co-operative organization, is exempt and immune from the provisions of the anti-trust laws in respect to the activities of which the government complains. A further defense is that the Secretary of Agriculture has primary jurisdiction of one of the activities concerning which complaint is made. Pursuant to Rule 42(b) of the Federal Rules of Civil Procedure, 28 U.S.C.A., the Court has ordered a separate trial of these defenses in view of the fact that if they are sustained in whole or in part they may be finally dispositive of either the entire litigation or some aspects of it.

The complaint is not divided into separate counts, as the Rules permit, but it in effect sets forth three separate claims for relief or causes of action. Although they are not separately numbered in the complaint, they are in fact distinct.

 The first cause of action, contained in Paragraphs 21, 22, and 23 of the complaint, alleges that the defendant has attempted to monopolize and has monopolized interstate trade and commerce in supplying milk for resale as fluid milk in the area comprising the District of Columbia and certain regions in Maryland and Virginia adjoining the District of Columbia. This cause of action is based on Section 2 of the Sherman Act, 15 U.S.C.A. § 2, which reads as follows:

 'Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a misdemeanor.'

 The second cause of action, pleaded in Paragraphs 24, 25, 26, 27 and 28 of the complaint, charges a combination and conspiracy to eliminate and foreclose competition in the Washington metropolitan area by making and carrying out a contract for the transfer to the defendant of substantially all of the assets of a concern known as the Embassy Dairy, which is a retail outlet for milk in the Washington metropolitan area. This cause of action is predicated on Sections 1 and 3 of the Sherman Act. Section 1 of the Sherman Act, 15 U.S.C.A. § 1, reads as follows, insofar as is pertinent to the issues of this case:

 'Every contract, combination in the form of trust or otherwise, or conspiracy in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.'

 Section 3 of the Sherman Act, 15 U.S.C.A. § 3, reads, in part, as follows:

 'Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce in any Territory of the United States or of the District of Columbia, or in restraint of trade or commerce between any such Territory and another, or between any such Territory or Territories and any State or States or the District of Columbia, or with foreign nations, or between the District of Columbia and any State or States or foreign nations, is declared illegal.'

 The third cause of action is found in Paragraphs 29 and 29(a) of the complaint, and charges that the defendant on July 26, 1954, purchased and acquired substantially all of the assets of the Embassy Dairy and that the effects of this acquisition have been and may be substantially to lessen competition or to tend to create a monopoly in the production and sale of milk to dealers in the Washington metropolitan area. It is further charged that with the same effect the defendant on December 6, 1957, purchased and acquired all of the outstanding stock of Richfield Dairy Corporation and Simpson Brothers, Incorporated. This cause of action is founded on Section 7 of the Clayton Act, 15 U.S.C.A. § 18, the pertinent portions of which read as follows:

 'No corporation engaged in commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no corporation subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of another corporation engaged also in commerce, where in any line of commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.'

 As a result of lengthy and detailed discovery proceedings, as well as by proof at the trial, the following pertinent facts that are relevant to the defenses now being tried have been developed. The defendant, Maryland and Virginia Milk Producers Association, Incorporated, is a Maryland corporation having its principal office in the District of Columbia. It is an agricultural cooperative association, having as members nearly two thousand milk producers, that is, persons owning or operating dairy farms at which milk is produced, most of the members being located in the States of Maryland and Virginia. The milk is delivered by the members to the defendant, which acts as the marketing agency for them. Most of the milk is sold eventually to dealers in the Washington metropolitan area. The defendant also owns a plant at which it transforms surplus milk into various milk products, such as ice cream. These by-products are shipped to other markets. The net worth of the defendant corporation is approximately five million dollars. Most of its members are natural persons. Some, however, are partnerships and some are corporations. Some of the members devote all or a major portion of their time and energy to operating their dairy farms themselves. Some of them operate their farms through employees and are engaged principally in other occupations.

 The defendant claims to be exempt from the provisions of the antitrust laws under two distinct statutes. The first is Section 6 of the Clayton Act, which became law on October 15, 1914. Its pertinent portions, 15 U.S.C.A. § 17, read follows:

 The second statute under which immunity is claimed is Section 1 of the Capper-Volstead Act, which became law on February 18, 1922. This provision, 7 U.S.C.A. § 291, reads as follows:

 'Persons engaged in the production of agricultural products as farmers, planters, ranchmen, dairymen, nut or fruit growers may act together in associations, corporate or otherwise, with or without capital stock, in collectively processing, preparing for market, handling, and marketing in interstate and foreign commerce, such products of persons so engaged. Such associations may have marketing agencies in common; and such associations and their members may make the necessary contracts and agreements to effect such purposes: Provided, however, That such associations are operated for the mutual benefit of the members thereof, as such producers, and conform to one or both of the following requirements:

 'First. That no member of the association is allowed more than one vote because of the amount of stock or membership ...


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