tions. Independent retail merchants frequently unite in associations for buying, advertising, and other purposes.32 Corporations sometimes attempt to masquerade as cooperative organizations; but the courts are quick to deny this status if, because of control or other factors, a corporation is not entitled to be so classified. 33 Statutes Affecting Cooperatives It should not be assumed that a cooperative is not amenable to a statute simply because it is a cooperative. Associations generally, if they come within the scope of a particular statute and are not specifically excluded, are subject to it. In Oregon, a statute was enacted "to encourage and reward the production of the highest quality of cream and milk, thereby effecting the improvement of one of the state's principal industries." This statute was upheld against the contention of a cooperative (which “paid” its members and patrons for their cream without regard to its grade) that it impaired the obligations of its contracts with its members and patrons because it required those subject thereto to "maintain to the producer a price differential between each grade of not less than one cent (1c) per pound of butterfat content."34 A Georgia statute which permitted mutual insurance companies to have salaried agents, but which forbade other 32 Packel, The Law of the Organization and Operation of Cooperatives, 3rd ed., Mathew Bender and Co., Inc. (1940), p. 9. 33 Cunliffe v. Consumers' Association, 280 Pa. 263, 124 A. 501, 32 A.L.R. 1348 (1924); People ex rel. Hughes v. Universal Service Association, 365 III. 542, 7 N.E. 2d 310 (1937); Chickasha Cotton Oil Co. v. Cotton County Gin Co., 40 F. 2d 846 (10th Cir. 1930), 74 A.L.R. 1070; Affiliated Service Corporation v. Public Utilities Commission of Ohio, 127 Ohio St. 47, 186 N.E. 703, 103 A.L.R. 264 (1933); Driscoll v. Washington County Fire Insurance Co., 110 F. 2d 485 (3rd Cir. 1940), certiorari denied, 311 U.S. 658 (1940); Western Canal Co. v. Railroad Comm., 216 Cal. 639, 15 P. 2d 853 (1932); Mississippi Valley Portland Cement Co. v. United States, 408 F. 2d 827 (5th Cir. 1969), affirming 280 F. Supp. 393 (S.D. Miss. 1967); Etter Grain Company v. United States, 331 F. Supp. 283 (N.D Tex. 1971), affirmed, 462 F. 2d 259 (5th Cir. 1972). See also Keystone Automobile Club Cas. Co. v. Commissioner, 122 F. 2d 886 (3rd Cir. 1941) certiorari denied, 315 U.S. 814 (1942). 34 State ex rel. Van Winkle v. Farmers Union Cooperative Creamery, 160 Ore. 205, 84 P. 2d 471 (1938). See also New York State Guernsey Breeders' Cooperative, Inc. v. Noyes, 260 App. Div. 139, 21 N.Y.S. 2d 347 (1940); Nebbia v. New York, 291 U.S. 502, 89 A.L.R. 1469 (1934); United States v. Rock Royal Cooperative, Inc., 307 U.S. 533 (1939); Noyes v. Erie & Wyoming Farmers insurance companies to act through salaried agents, was held to be unduly discriminatory and to violate the equal-protection clause of the 14th amendment.35 A provision in the Fair Trade Act of Wisconsin was held unconstitutional by the supreme court of that State because it exempted "any cooperative society or association not organized for profit." In this connection the court said: That exemption is not confined to merely transactions Although cooperative marketing statutes generally authorize associations formed under them to include in their marketing contracts provisions for liquidated damages, and also authorize the associations to enforce such contracts by suits for injunctions and specific performance, seldom is the violation of such a contract made a crime. An example of this is an early Kentucky statute that made it a crime for a farmer who had entered into a pooling contract covering his tobacco to dispose of it contrary to the contract. The criminal statute was an amendment to a 1906 law which authorized farmers to pool their tobacco. A farmer was indicted for violating the statute. The Supreme Court of the United States held this statute unconstitutional because, as construed by the Kentucky courts, it "did not authorize a pool to enhance the cost of crops above their real value" and what constituted Cooperative Corporation, 281 N.Y. 187, 22 N.E. 2d 334 (1939); Turner v. Maryland, 107 U.S. 38 (1882); New York State Guernsey Breeders' Cooperative, Inc. v. Noyes, 284 N. Y. 197, 30 N.E. 2d 471 (1940); West Central Producers Cooperative Association v. Commissioner of Agriculture, 124 W. Va. 81, 20 S.E. 2d 797 (1942). 35 Hartford Steamboiler Inspection & Insurance Co. v. Harrison, 301 U.S. 459 (1937). 36 Weco Products Company v. Reed Drug Company, 225 Wis. 474, 274 N.W. 426, 433 (1937). their real value was considered too uncertain to form a basis for criminal action, 37 Benefits Derived from Cooperatives Many benefits accrue to agriculture and the consumer generally from cooperative marketing and farm supply associations. Numerous instances could be cited in which production supplies and services were obtained at lower costs with better net returns from products marketed for farmers. These are indirect benefits that accrue to all farmers and consumers whether they are members of cooperatives or not. In fact, some people apparently fail to realize what the situation would be if cooperatives were not functioning. 38 Farm supply associations have every incentive to furnish their members with the best and highest grade feeds, fertilizers, and other farm supplies and services at the lowest possible cost, thus providing a strong competitive force. Likewise, marketing associations have every incentive to handle the products of their members efficiently, and to obtain as wide and complete a distribution of such products as is practicable. As one writer points out:39 The action of farmers in merchandising their product 37 Collins v. Kentucky, 234 U.S. 634 (1914). See also Commonwealth v. Hodges, 137 Ky. 233, 125 S. W. 689 (1910). 38 Stitts, The Co-op And Its Second Generation Members, Farm Credit Admin. Cir. A-19 (1940). 39 Packel, The Organization and Operation of Cooperatives, 4th ed., American Law Institute (1970), p. 17. for payments to the cooperatives under the federal Ordinarily, industry is able to pass on to consumers its operating costs plus a profit, but farmers find this rather difficult to do. Even with the technology and research that is characteristic of modern agriculture, production is still influenced by the whims of nature. Consequently, agriculture is not able to adjust production to demand with the same ease and certainty as industry.40 By means of efficient cooperatives, however, farmers may reduce costs incident to the production, assembling, handling, processing, and marketing of their products. More and more cooperatives are operating both supply purchasing functions and processing marketing functions. This enables policy and management decisions to be made from a market orientation rather than from a farmer production orientation.41 Industry determines how its products will be marketed. Farmers are doing likewise. Most of the products of industry are manufactured and distributed by large corporations which represent a pooling of capital. On the other hand, it is impracticable for farmers to pool their farms in giant agricultural corporations, but, through the medium of cooperatives, farmers have been able to market their products on a basis somewhat comparable with industry. Every farmer, as a producer, is in a sense a manufacturer and is directly interested in the costs of the goods and services he must buy for use in his farming operations. The lower his production costs the greater are his chances for turning out a reasonably priced product that will provide him a livelihood. Again, this is a problem comparable to that of industry which aims to buy its raw materials on the most favorable basis to increase its chances of making a profit. Thus, it is only natural that farmers should act together in the purchase of farm needs and the marketing of their products. No one has so unquestionable a right to market the products of farmers or to furnish them with production supplies and services as the farmers themselves. 40 Mahaffie, Jr., Agricultural Cooperatives and the Antitrust Laws, talk given at the annual meeting of the Springfield Bank for Cooperatives, Cherry Hill, N.J., August 18, 1971. See also talk by Don Paarlberg, Director of Agricultural Economics, U.S. Dept. Agr., on Changing World Needs for Grains in the 1970's, at El Batan, Mexico, Jan. 22, 1973. 41 Thor, Changing Economic Structure of the Food and Fiber Industry with Implications for Finance and Accounting, Cooperative Accountant, Spring 1973, 49. Statistics compiled annually by the Farmer Cooperative Service on farmer marketing, farm supply, and service cooperatives show trends in operations of these organizations.42 Typical Operations Cooperatives vary widely in character and in the way they function. A large group consists of marketing associations which act either on a purchase-and-sale basis or on an agency basis, assembling and marketing agricultural commodities with little or no processing. In some instances, an association simply acts as bargaining agent for the purpose of entering into contracts with buyers covering the sale of members' products.43 Dairy farmers frequently form associations of this type.44 Some cooperatives, like grain associations in the terminal markets, act as "commission agents" for their members in the disposition of their grain. Some livestock associations operate auction markets at which the products of their members are sold. Other associations do a considerable amount of processing of the commodities received from their members. Some farm supply associations operate feed mills in which grain is ground, mixed, or custom blended into feeds adapted to the particular needs of the members. An increasing number of farm supply cooperatives manufacture fertilizer, refine petroleum products, or obtain other farm supplies and services for their members. One of the oldest and most successful groups of farmer cooperatives exists in the field of insurance. There are mutual fire 42Click, Statistics of Farmer Cooperatives, 1969-1970, FCS Res. Rpt. 22, Farmer Cooperative Service, U.S. Dept. Agr. (1972). See also Abrahamsen, Cooperatives Now and in the Future, FCS Inf. 62, Revised, Farmer Cooperative Service, U. S. Dept. Agr. (1969); Abrahamsen, The Co-op Sixties, Stepping Stones for the Seventies. Reprint 369, News for Farmer Cooperatives (Mar. 1970); Abrahamsen, Cooperative Growth: Trends, Comparisons, Strategy, FCS Information 87, Farmer Cooperative Service, U. S. Dept. Agr. (1973); Bradford and Berberich, Foreign Trade of Cooperatives, FCS Information 88, Farmer Cooperative Service, U. S. Dept. Agr. (1973). 43 Mountain States Beet Growers' Marketing Association v. Monroe, 84 Colo. 300, 269 P. 886 (1928). 44 Dairy Cooperative Association v. Brandes Creamery, 147 Ore. 488, 30 P. 2d 338 (1934), 147 Ore. 503, 30 P. 2d 344 (1934); Stark County Milk Producers' Association v. Tabeling, 129 Ohio St. 159, 194 N.E. 16, 98 A.L.R. 1393 (1934); Connecticut Milk Producers' Association v. Brock-Hall Dairy Co., Inc., |