What Can a Lobstermen’s Union Do (That a Cooperative Can’t)?

by Nicholas Walsh, PA

When I heard about the new lobstermen’s union I immediately wondered if the union would have any direct ability to control the ex-vessel price of lobster through organized tie-ups or similar means. The short answer to this question is no.

Readers of this column will recall that in 1957, a year of bad lobster prices, the United States Department of Justice sued the Maine Lobstermen’s Association, alleging that the MLA and others “have engaged in a combination and conspiracy to fix, stabilize and maintain the prices for live Maine lobsters sold by both MLA member and non-member lobstermen to lobster dealers, in unreasonable restraint of the . . . interstate trade and commerce in live Maine lobsters, in violation of Section 1 of the Sherman Act.” The illegal acts, the complaint continued, included fixing a minimum price for lobsters, refraining from catching lobsters until the minimum price was reached, and conspiring “to induce and compel all Maine lobstermen . . . to adhere to the terms of the conspiracy hereinbefore alleged.”

In 1958 the parties agreed to a judgment which prohibited the defendants from entering into an agreement to set the lobster price or terms of lobster sale, or limiting competition, or urging others not to sell for a given price, or not fishing. That judgment stands as law today, and every lobsterman in Maine is held to its terms.

Each lobsterman is, of course, a business. In the United States it is generally illegal for businesses to collude in setting prices, or setting sales territories, or otherwise making arrangements to limit competition. A lobstermen’s union can lobby, it can use the aggregated purchasing power of its members to negotiate a lower cost for fuel, bait and other supplies, and it can provide member benefits, such as health or life insurance. It cannot dictate a boat price, organize tie-ups, limit fishing, or do anything else which is in restraint of trade.

But what about a fishery cooperative? The Fishermen’s Collective Marketing Act of 1934 allows fishermen to form a cooperative to jointly control harvesting among co-op members, and to market, price and sell their fish, all without violating antitrust law. The co-op, through its members, can agree on a minimum price and can agree to limit fishing, activities that would otherwise violate antitrust law.

Could all the lobstermen in Maine, or the vast majority, form a single co-op and so try to control the ex-vessel price? Probably not - there are limits to the extent to which a co-op can enhance pricing through limits on production or other means, and a cooperative can be sued for antitrust violations for unduly limiting competition.

I believe Maine’s lobstermen could form a few large co-ops, with each co-op agreeing (but probably not between the co-ops themselves) to seasonal timing of harvest effort, and to limits on fishing when the price dropped low. The extent to which the co-ops could engage in this activity is not easy to say. The Department of Justice (DOJ) has demonstrated greater tolerance for this sort of activity when the total output of the fishery is capped by a Total Allowable Catch (TAC), as has been the experience with the Bearing Sea Pollock cooperatives. The rationale is that if the total harvest is capped and therefore all the fish available for harvest are likely to enter the market in any case, it does no undue harm to the consumer if the harvesters coordinate in, for example, the timing of the harvest.

Maine’s lobster fishery, of course, has no TAC. Therefore cooperative arrangements which had the effect of reducing total lobster harvest would increase the price the processor (and probably the consumer) would pay. The DOJ doesn’t like that. Similarly frowned upon are cooperatives requiring non-members to adhere to the co-op’s harvest restrictions and price limits, and pressuring processors to purchase only from co-op members.

It is possible for a cooperative to get a “business review letter” from the DOJ weighing in on a fishery cooperative’s proposed activities. In the normal course, the cooperative would discuss or negotiate with the DOJ toward getting a business review letter which DOJ is willing to sign. For example, a lobster cooperative might affirm that it would coordinate only seasonal harvest effort, but not pricing, and thus, perhaps, receive DOJ favorable review.

There are many possibilities here, and opportunities too. The Maine Lobstermen’s Association appears to be moving toward an attempt to amend or terminate the 1958 consent decree limiting tie ups and other anti-competitive activities among lobstermen. I have to think that effort is tied to a plan to use the Fishermen’s Collective Marketing Act to manage effort in the lobster fishery, with the goal of better managing gluts such as occurred last summer, and ultimately of achieving higher ex-vessel prices.

Nicholas Walsh is an attorney specializing in maritime law and waterfront matters. He can be reached at 772-2191, or nwalsh@gwi.net.