Sell too many cherries, and the federal fruit police might come knocking at your door. Washington’s fruit and vegetable marketing orders give cartels the green light to restrict the supply of certain fruits and vegetables. The feds then act as the enforcer of the regulations developed through these cartels.
Marketing orders were center stage in Horne v. USDA, a case decided this year by the U.S. Supreme Court. The feds wanted to fine raisin growers for not turning over part of their crop to the government. Fortunately, the Court held that the government’s actions constituted a taking of private property and would require just compensation.
However, this doesn’t mean there couldn’t be ways to restrict raisin supply, such as by imposing quotas that limit production. In fact, a web page for the U.S. Department of Agriculture now says that the raisin supply restrictions will be amended in light of the Horne case. Translation: If independent raisin growers dare try to sell more than what the raisin cartel wants on the market, the feds will still find a way to quash them.
The USDA imposes 28 fruit and vegetable marketing orders. The orders are initiated by industry and must be approved by two-thirds of growers. If you are a grower who is covered by the marketing order and didn’t vote for it, tough. The government will force everyone affected by a specific order to abide by its provisions. In this way, industry members use government compulsion rather than private cooperation to maintain “order” in the marketplace.
These orders can cover issues such as research and promotion, minimum quality standards, and supply restrictions. While marketing orders in general are outdated and problematic, the supply restrictions are their most egregious aspect. The intent is to stabilize prices and match supply with demand. Industry representatives centrally plan the specific market to meet the needs of the industry, or more likely, specific members of the industry. Any other industry hatching such schemes would likely be hauled up on price-fixing charges. But this has the federal government’s blessings.
It’s quite absurd. In telling producers how much of a legal product they can sell, the government is keeping Americans from freely making a living. And, it’s doing it with little regard for consumers and the prices they pay.
Even Supreme Court justices not considered free-market champions slammed the raisin marketing order. 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.”
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.”
The Agricultural Marketing Agreement Act of 1937, which authorized these marketing orders, is indeed outdated and silly. Unfortunately, it is also harmful. The good news is that only 10 of the 28 marketing orders have authorized supply restrictions. And only two marketing orders—those covering spearmint oil and tart cherries—have supply restrictions that are actually active (i.e., in effect). These restrictions clearly aren’t necessary, given that most of the marketing orders don’t have them.
The “Raisin Case” sparked a lot of outrage when it reached the Supreme Court. But that outrage ultimately won’t mean much unless Congress takes action to stop the government from limiting the sale of certain fruits and vegetables. Right now, the USDA appears to be trying to figure out ways around the Horne case so that the raisin industry can restrict supply in the future.
Congress should not stand by and let regulators dream up a new way to use an outdated and indefensible law to hurt American producers and consumers. Lawmakers should to amend the 1937 Agricultural Marketing Agreement Act to prohibit supply restrictions of any kind.
This story was originally published in The Washington Times.