Price fixing is a federal crime with a range of serious penalties including prison and fines. Not to worry, though, if you operate commodities programs under the Agricultural Marketing Agreement Act of 1937. The Depression era law allows the imposition of pricing and marketing decisions that would otherwise be forbidden. Commodities covered by the act are a big part of the American diet and include milk, fruits, vegetables and other agricultural products.
In California, a major agricultural state, marketing orders cover sheep, strawberries, walnuts, wheat, tomatoes, dry beans, cut flowers, salmon, celery, sea urchins and raisins.
Yes, sea urchins.
But a rebellion is brewing in the Golden State against the Raisin Administrative Committee, which might be more accurately described as the raisin cartel. It should shake the cozy structure of federal commodities programs established some 76 years ago.
The rebellion is led by a Fresno lawyer, Brian Leighton, who has been fighting the raisin cartel for two decades. He represents raisin grower Marvin Horne in his uphill legal battle to operate free of cartel rules that require him to freely give it a large portion of his crop to finance its activities. Horne considers it an illegal taking as defined by the Fifth Amendment to the U.S. Constitution.
In a recent year the Raisin Administrative Committee took in and sold raisins worth more than $65 million, according to The Washington Post. Although the law says any receipts in excess of the committee’s expenses should be paid back to raisin producers, the committee “pretty well spent it all” on advertising and other expenses, said its president Gary Schulz, giving “zero” back to producers.
Last month the U.S. Supreme Court gave Mr. Horne a partial victory. Lower courts had ruled that Mr. Horne was a “handler” of raisins subject to the marketing order but, in a Catch-22 situation, denied him the right to challenge the order as a “taking” because he had called himself a “producer” subject to different legal rights. The Supreme Court, however, declared that he could challenge the order.
Meanwhile, other raisin producers have won a California court decision that the California Raisin Marketing Board, also headed by Schulz, had exceeded its powers in ruling that it would only advertise Thompson Seedless Raisins, excluding other varieties.
In a separate case, a California judge agreed with Leighton’s argument challenging the legal basis for the marketing board, saying the state failed to provide evidence that its raisin industry faced “the kind of severe adverse economic conditions” the Depression-era law “was intended to address.”
The raisin cartel’s days may be numbered. Now what about all those other federally supported programs — such as the sugar program that benefits a few producers at the expense of every consumer?
It’s time to fix — not price-fix — U.S. agricultural programs.