- 41 -
That patronage dividends are somehow different from
transaction-specific price reductions was recognized well before
Congress codified the definition of a patronage dividend in 1962.
The difference was recognized by courts overseeing legislative
price regulation in fields in which cooperatives operated. In
1950, the U.S. Court of Appeals for the Third Circuit held that a
purchasing cooperative cannot use its cooperative status as a
shield against State Fair Trade Laws prohibiting price reductions
at the time of sale. Sunbeam Corp. v. Civil Serv. Employees’
Coop. Association, 187 F.2d 768 (3d Cir. 1951). Also in 1950,
the California District Court of Appeals held that the provisions
of the California Corporations Code that permit a cooperative
corporation to distribute its earnings to its shareholder-patrons
are paramount to the provisions of the California Alcoholic
Beverage Control Act that prohibit sales of liquor at less than
posted prices and secret rebates. Certified Grocers v. State Bd.
of Equalization, 223 P.2d 291 (Cal. Dist. Ct. App. 1950).
A categorical difference between patronage dividends and
transaction-specific price reductions had been recognized by
commentators. See, e.g., Packel, supra at 217 (“It is important
to distinguish a price reduction, given at the time of the
transaction, from a true patronage dividend.”); Bunn, Consumers’
Co-Operatives and Price Fixing Laws, 40 Mich. L. Rev. 165, 173
(1941) (“The truth is that a patronage dividend is not a price
Page: Previous 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 Next
Last modified: November 10, 2007