The Federal Fruit and Vegetable Cartels – Guest Essayist: Daren Bakst

If you grow fruits and vegetables, the federal government might limit how many fruits and vegetables you can sell. Some raisin growers learned this the hard way when they were fined by the United States Department of Agriculture (USDA) for not turning over part of their crop to the federal government.

This year, the United States Supreme Court in Horne v. USDA decided this “raisin case,” holding that under the Fifth Amendment, the federal government was taking the raisins and therefore must provide just compensation to the raisin growers.

While an important victory for property rights, raisin growers may still be subject to USDA meddling into their sales. On a USDA web page, they acknowledge that the raisin supply restrictions will be amended in light of the Horne case. The agency could be trying to figure out a new way to restrict the sale of raisins.

It is shocking that a farmer can’t make an honest living selling a legal product without the federal government coming in and telling them how much they can sell. This is reality though. It’s also not just a raisin problem, but much broader. These supply restrictions are the result of what are known as marketing orders.

The Agricultural Marketing Agreement Act of 1937 authorizes the use of fruit and vegetable marketing orders. These New Deal programs attempt to create stable markets for certain commodities. Marketing orders, among other things, authorize research and promotion of commodities, establish minimum quality standards, and sometimes limit supply through volume controls (i.e. supply restrictions).

They are initiated by industry and must be approved by two-thirds of growers. The government acts as the enforcer for industry, requiring everyone affected by a specific order to abide by its legally enforceable provisions. In this way, industry members use government compulsion rather than private cooperation to maintain “order” in the marketplace. It doesn’t matter if a covered grower doesn’t support the marketing order or didn’t vote for it, they have to abide by its terms.

The USDA gives its blessing to these fruit and vegetable cartels, which would likely violate federal antitrust law absent government intervention. The industry leaders running these cartels are seeking to benefit the industry, and more likely specific members of the industry. The interests of consumers are of little to no concern.

Currently, there are 28 fruit and vegetable marketing orders. Of these, 10 have authorized supply restrictions. Only two have supply restrictions that are active (i.e. in effect): spearmint oil and tart cherries. This low number of active supply restrictions is evidence that they are unnecessary; 26 of 28 marketing orders don’t have active supply restrictions.

While supply restrictions may be the most egregious aspect of marketing orders, these orders in general are the problem. Nobody should be forced to be part of any association of individuals, including these cartels. These orders are egregious, plain and simple. Even two Supreme Court justices not necessarily known as free market champions captured the absurdity of marketing orders.

The first time the Horne case came to the Court (it came twice), Justice Elena Kagan quipped, “And now, the Ninth Circuit can go and try to figure out whether this marketing order is a taking or it’s just the world’s most outdated law.”

And Justice Sonia Sotomayor, who held that the government had not actually taken the raisins, noted in her dissent: “The Order may well be an outdated, and by some lights downright silly, regulation. It is also no doubt intrusive.”

These orders are outdated, silly, and intrusive. Worse though, they are completely counter to the idea of a free society where Americans have the unalienable rights of life, liberty, and the pursuit of happiness. The USDA may implement these orders, but it is Congress that gave the agency the green light to wield this incredible power. Only Congress can fix this situation.

Daren Bakst is the Research Fellow in Agricultural Policy at The Heritage Foundation. Bakst frequently submits comments to regulatory agencies and has appeared in or been quoted by a wide range of media outlets such as The Wall Street Journal, USA Today, The Washington Times, CNN, Fox Business News, Al-Jazeera America, and U.S. News and World Report. A licensed attorney, he holds a law degree from University of Miami and a master of laws degree from American University.

 

 

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