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THE LATEST: FTC Settles with Breeder Trade Association over Association Rules That Limited Price Competition for Dairy Bull Semen

The two current commissioners of the Federal Trade Commission (FTC) approved another final order and consent agreement with a trade association, this time with the National Association of Animal Breeders, Inc. (NAAB). WHAT HAPPENED: NAAB is a non-profit corporation of approximately 24 member businesses that compete to sell dairy cattle semen to US dairy farms for artificial insemination of dairy cows. Together, the NAAB membership accounts for more than 90 percent of sales to US farms. In 2006, NAAB entered into an agreement with the United States Department of Agriculture (USDA) to develop genomic testing of dairy bulls to predict a bull’s ability to pass along commercially important traits to its daughters, like high milk yield. The new technology, called Genomic Predicted Transmitting Ability (GPTA) was developed by mid-2008. In late 2008, NAAB implemented rules limiting access to the GPTA technology. Specifically, (1) only a NAAB member could obtain a...

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THE LATEST: Entanglements and Concentrated Markets Require Divestiture in the Dairy Industry

On July 6, 2016, Danone S.A. (Danone) agreed to acquire The WhiteWave Foods Company (WhiteWave) for $12.5 billion. WhiteWave is the leading manufacturer of fluid organic milk in the United States and one of the top purchasers of raw organic milk. Danone is the leading US manufacturer of organic yogurt (Stonyfield). Nearly 90 percent of the raw organic milk used by Danone to manufacture organic yogurt is supplied via a strategic agreement by CROPP Cooperative (CROPP). As of 2009, the strategic supply agreement between Danone and CROPP also includes Danone providing CROPP with an exclusive license for the production and sale of Stonyfield branded fluid organic milk. WhiteWave and CROPP are the two largest purchasers and top competitors for purchasing raw organic milk from farmers in the Northeast US. Additionally, WhiteWave, CROPP and Danone-CROPP are the only nationwide competitors for the sale of fluid organic milk to retailers and have a 91 percent share of...

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THE LATEST: Further Efforts to Broaden the Scope and Impact for CFIUS Reviews of Foreign Acquisitions of US Businesses

We reported earlier on the Committee on Foreign Investment in the United States (CFIUS) and its legal and practical authority to review M&A transactions for possible risks to US national security posed by foreign ownership of a US business. Sens. Cornyn (R-TX) and Schumer (D-NY) reportedly are working separately on legislation to strengthen CFIUS, which could directly affect some cross-border M&A. Sen. Cornyn’s proposed changes to CFIUS would target Chinese technology investments while Sen. Schumer’s bill would encourage CFIUS to look at economic implications as part of its review.  These legislative efforts follow a bipartisan Congressional request in late Fall 2016 for the Government Accountability Office (GAO) to update its periodic analysis of CFIUS, urging the GAO to evaluate the possible expansion of factors considered by CFIUS in its M&A reviews to cover investment reciprocity and net economic benefits. WHAT HAPPENED: Now Sen. Debbie...

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Mushroom Growers Denied Capper-Volstead Antitrust Immunity

On October 14, 2014, the Eastern District of Pennsylvania denied a motion for reconsideration brought by members and affiliates of the former Eastern Mushroom Marketing Cooperative (EMMC).  In re Mushroom Direct Purchaser Antitrust Litig., No. 06-0620 (E.D. Pa. Oct. 14, 2014).  In 2009, the court denied defendants’ motion for partial summary judgment, which argued that defendants were immune from antitrust liability as members of an agricultural cooperative under the Capper-Volstead Act, 7 U.S.C. § 291.  The court gave two reasons for denying the motion: (1) the EMMC allegedly conspired with entities that were not engaged in agricultural production and (2) non-grower M. Cutone’s membership in the cooperative destroyed Capper-Volstead immunity.  Defendants moved for reconsideration in light of intervening authority from the Supreme Court in American Needle Inc. v. Nat’l Football League, 560 U.S. 783 (2010), and the Third Circuit in Deutscher Tennis Bund v. APT...

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S.D.N.Y. Dismisses Cotton Traders’ § 1 Claims Under Copperweld

On September 30, 2014, the Southern District of New York reconsidered the Commodities Exchange Act (CEA) and Sherman Act claims brought against Louis Dreyfus Commodities B.V. and its affiliates in In re Term Commodities Cotton Futures Litigation, 12 Civ. 5126 (ALC)(KNF) (S.D.N.Y. Sept. 30, 2014).  The plaintiffs, cotton futures traders, alleged that the defendants manipulated the price of cotton futures by “unreasonably and uneconomically demanding delivery of certificated cotton in fulfillment of futures contracts,” among other allegations of manipulative behavior.  In December 2013, the court denied defendants’ motion to dismiss, and defendants subsequently moved for reconsideration.  On reconsideration, the court dismissed plaintiffs’ § 1 claim under the intra-enterprise conspiracy doctrine set forth in Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984), but declined to dismiss the CEA or § 2 claims. The court began its analysis by...

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Fifth Circuit Reverses $25 Million Damages Award Against Pilgrim’s Pride

On August 27, 2013, the Court of Appeals for the Fifth Circuit reversed a district court damages award of more than $25 million against Pilgrim’s Pride Corporation, a large producer of processed chicken.  A group of chicken growers with whom Pilgrim’s Pride contracted filed suit against the company alleging that the company violated the Packers and Stockyards Act (PSA) by engaging in a course of business for the purpose of “manipulating or controlling prices.”  The Eastern District of Texas held that Pilgrim’s Pride’s conduct of idling or selling its chicken processing plant reduced output to increase prices, and awarded damages over $25 million to plaintiffs. On appeal, Pilgrim’s Pride argued that the PSA section (7 U.S.C. § 192) that prohibits manipulation or control of prices is, in actuality, an antitrust statute.  Therefore, the PSA section “is only violated by attempts to affect market prices which are anti-competitive, or ‘injurious to competition.’” ...

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Egg Producer Agrees to Pay $28 Million to Settle Price-Fixing Claims

by Nicole Castle On July 23, 2013, Cal-Maine Foods Inc., the largest producer of fresh shell eggs in the U.S., announced that it had agreed to pay $28 million to settlement the direct purchaser claims brought by plaintiffs in In re Processed Egg Products Antitrust Litigation, 08-cv-2002 (E.D. Pa.).  The direct purchaser plaintiffs alleged that Cal-Maine Foods and the other defendants engaged in a long-running scheme to limit egg supply in an effort to raise prices.   Cal-Maine Foods will be the third defendant to settle with the direct purchasers in this case.  Defendants Sparboe Farms Inc. and Moark LLC previously settled the direct purchaser claims. Cal-Maine Chairman, President, and CEO Dolph Baker said in a statement on Tuesday:  We remain confident that our conduct has at all times been lawful, appropriate and fair to our customers.  The largest retailers and egg buyers in the country, including many of our customers, in fact,...

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Patent Exhaustion Rejected: Patented Seed Purchaser Has No Right to Make Copies

by Paul Devinsky, Cynthia Chen and Lincoln Mayer The Supreme Court in Bowman v. Monsanto Co. ruled unanimously that a farmer’s replanting of harvested seeds constituted making new infringing articles. While the case is important for agricultural industries, the Supreme Court cautioned that its decision is limited to the facts of the Bowman case and is not a pronouncement regarding all self-replicating products. To read the full article, click here.

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Potato Price-Fixing Case Survives Motion to Dismiss Holds That Pre-Production Agricultural Output Restrictions Are Not Exempt Under Capper-Volstead

by Gregory E. Heltzer and Nicole Castle On December 2, 2011, a federal judge overseeing multidistrict litigation involving an alleged potato price-fixing conspiracy denied a motion to dismiss the antitrust conspiracy claims despite the potato grower cooperatives asserting that the concerted action was permissible under the Capper-Volstead Act.  In Re: Fresh and Process Potatoes Antitrust Litigation, No. 10-2186 (D. Idaho). In particular, the plaintiffs alleged that defendants increased the price of potatoes through reduction of potato planting acreages and by paying farmers to destroy existing stocks.  Not only did the court deny the motion to dismiss on several grounds, but took the “extraordinary step” of providing an “advisory opinion” regarding an area of law with scant precedent.  The court was willing to offer its opinion at this stage because there were no disputed facts on this legal issue, the parties had...

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Antitrust Agriculture Update: Mushroom Grower Direct Purchaser Litigation

by Lincoln Mayer and Gregory E. Heltzer On August 23, the Third Circuit denied interlocutory review of an order from the Eastern District of Pennsylvania, which held that defendant mushroom growers were "not a proper agricultural cooperative under the Capper-Volstead Act because one of its members was not technically a grower of agricultural produce."  In re: Mushroom Direct Purchaser Antitrust Litigation, Nos. 09-2257, 09-2258, slip op. at 13 (3d Cir. Aug. 23, 2011). The Third Circuit agreed with the growers that "whether the arguably inadvertent inclusion of an ineligible member strips an agricultural cooperative of Capper-Volstead protection, is both serious and unsettled."  Id. at 16 n.4.  However, the court considered and rejected the growers' argument that Capper-Volstead provides not merely a defense to liability, but immunity from suit:  "Neither the language of the Capper-Volstead Act...

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