indiscriminately and without restriction, in the general trucking business at the expense of authorized motor carriers. In this regard, the following excerpts from the Congressional Record of July 31, 1935, (79 Cong. Rec. 12218-12220) are informative:

"Mr. JONES *** Now I hope I may not be interrupted until I explain the reason for offering this cooperative amendment. This exemption is consistent with the purpose of the act to regulate the use of highways by persons and corporations who use them regularly as places of business and as the primary means of gaining a livelihood. Cooperative organizations do not act as moneymakers in transportation. The hauling is done as a means of reducing the marketing expenses of their members.

Especially in highly roganized communities it is almost essential they do some hauling for nonmembers. Otherwise certain farmers who are only temporarily in the community and in some instances tenants might be left without transportation facilities. In some instances it reduces the expense of handling to combine some hauling for nonmembers. This does not mean going into the general business of transportation. It is merely incidental to the hauling for their own members. It is a practical proposition."

*

"This will not open the gate for a lot of men to go into the trucking business and thus escape, because the moment they haul more for outside people than they haul for their own members they will be out of the window so far as the exemption is concerned.

"Mr. TERRY. Does not the gentlemen feel that while it may be proper for the cooperatives to haul their own products and those of the membership, that whenever they go into the general trucking business they should be subject to these regulations?

"Mr. JONES. If they go into the general trucking business, most assuredly they should be subject to the regulations. My amendment will not prevent that." [Italics supplied.]

After the House adopted a number of amendments to S. 1629 (The Motor Carrier Act of 1935) including then section 203(b)(4)(b), Joseph D. Eastman, Federal Coordinator of Transportation, wrote, on July 27, 1935, to Senator Wheeler commenting in detail on each of the amendments adopted by the House. With respect to this section, he said:

The

"Amendment 4(b), exempting vehicles controlled and operated by a cooperative association as defined in the Marketing Act, 1929, also is not objectionable. cooperative marketing of farm products is something which Congress has encouraged for many years. Trucking is a vital function of many of the cooperatives. Regulation of rates in this instance would, in fact, accomplish little, as all profits and losses on the completed transactions of the cooperatives are shared by the members. While the definition referred to permits the cooperatives to deal in and transport the products of nonmembers, restrictions in the definition and practical considerations make it impossible for cooperatives to engage in outside trucking to a degree that would injure regular, for-hire motor carriers. For these reasons, the amendment should be accepted." [Italics supplied.]

The three subsidiary questions posed above will next be considered and discussed in the light of the foregoing purposes and policies as they are ultimately expressed in the partial exemption embraced in section 203(b) (5) of the act. Our conclusions with respect to these general questions will then be applied to the basic issue concerning the motor-carrier operations of ACS and its agents. 1. Qualifying criteria of a bona fide cooperative association

Since the partial exemption is available only to "cooperative associations as defined in the Agricultural Marketing Act" or to federations of such associations, an essential phase of our inquiry must be directed to a determination of the criteria to be met by an association before it may qualify for the privileges conferred section 203(b) (5). The definition of a cooperative association as set fo section 15(a) of the Agricultural Marketing Act of 1929, as amended, 12 U 1141j, is as follows:

"As used in this subchapter, the term "cooperative association" m association in which farmers act together in processing, preparing fo handling, and/or marketing the farm products of persons so engaged, means any association in which farmers act together in purchasing grading, processing, distributing, and/or furnishing farm supplies an business services:

"Provided, however, That such associations are operated for the mutual benefit of the members thereof as much producers or purchasers and conform to one or both of the following requirements:

First. That no member of the association is allowed more than one vote becasue of the amount of stock or membership capital he may own therein; and Second. That the association does not pay dividends on stock or membership capital in excess of 8 per centum per annum.

"And in any case to the following:

"Third. That the association shall not deal in farm products, farm supplies, and farm business services with or for non-members in an amount greater in value than the total amount of such business transacted by it with or for members. All business transacted by any cooperative association for or on behalf of the United States or any agency or instrumentality thereof shall be disregarded in determining the volume of member and non-member business transacted by such association."

The plain language of the statute makes clear (1) that a cooperative association meeting this definition must be an association in which member-farmers act together for their mutual benefit as producers of agricultural products or purchasers of farm supplies in "processing, preparing for market, handling, and/or marketing the farm products of persons so engaged, and *** in purchasing, testing, grading, processing, distributing, and/or furnishing farm supplies and/or farm business services," (2) that such an association may not handle nonmembership business greater in value than the total amount of business transacted by it with or for its own members, and (3) that a bona fide cooperative either must limit member's voting power to a single vote or it must not pay dividends in excess of 8 percent a year. The voting and dividend limitations do not require extensive discussion; and for our purposes, it is sufficient to note that ACS conforms to at least one of these alternative requirements, inasmuch as no dividends, either stock or patronage, are paid by it to its members.

The interpretative problems with respect to the remaining aspects of the statutory definition relate to the qualifications for membership in a cooperative association, the ownership and/or control of such an association, and the relationship between member and nonmember business. These matters are interrelated, but, to the extent possible, they will be discussed separately in the order presented. Before proceeding to a consideration of these problems, however, a preliminary issue raised by the parties merits discussion. A cooperative association is not created or organized under Federal statutes, but rather, it is established and chartered pursuant to the laws of the State in which it is domiciled. As a result, complainants and supporting interveners assert that a cooperative association must operate in conformity with the State statute under which it is chartered in order to receive the benefits of the Agricultural Marketing Act and in order to be eligible for the partial exemption here under consideration. While we agree, in principle, that an agricultural cooperative should not violate the terms of the State laws pursuant to which it is organized, the language of the partial exemption of section 203(b) (5) of the Interstate Commerce Act, neither expressly not by implication, imposes upon this Commission the duty of interpreting and administering such State laws or determining whether the operations are conducted in conformity therewith. That is a matter within the exclusive province of the State authorities charged with the enforcement of those statutes, and our function here is that of ascertaining whether the cooperative meets the definition embraced in the Agricultural Marketing Act.

Qualifications for membership.-A cooperative association as defined in the Agricultural Marketing Act, as noted above, must be an organization in which member farmers act together for their mutual benefit as producers of farm products or as purchasers of farm supplies and farm business services. As used in the statutory definition, the term "farmers" includes not only individuals, but also may include corporations, partnerships, and other business entities. Compare United States v. Maryland & Virginia Milk Pro. Assn., 167 F. Supp. 45, reversed on other grounds, 362 U.S. 458. Obviously, however, such persons, whether natural or corporate, must be engaged, to some extent at least, in a common pursuit-farming-in order to qualify for membership in a lawfully constituted cooperative. In other words, farming is the denominator which binds such persons together in a common purpose, and those not engaged in agrarian activities, and having no agricultural production whatever, clearly are not eligible for membership even though farm products may be utilized by such persons as raw materials in their manufacturing processes. As stated by the court in Industrial Commission v. United Fruit Growers Assn., 106 Colo. 223, 103 P. 2d 15:

"The basic conception of an agricultural cooperative association is that of a group of farmers who reside in the same vicinity acting together, for their mutual benefit in the cultivating, harvesting and marketing of their agricultural products, and the association itself, with the special powers and limitations conferred by statute, is merely a convenient instrumentality in the hands of the farmers for carrying on such activities."

*

"Accordingly, because of the peculiar relationship between the cooperative association and its members, it would seem evident that such of the purely agricultural activities of the producer members as are incidental to his ordinary farming operations remain so whether they are performed by him on his farm or for him through the medium of his cooperative marketing association. By the circumstance that the expense of marketing is apportioned on a pro-rata basis among the members of the members of the cooperative, the farmer member just as directly pays the wages for all labor involved in the marketing service as if he had paid his individual employees for doing the same work. In either case the labor incident thereto is "agricultural labor" and that is what the statute exempts a different result might attain where farm crops are marketed by a commercial "profit corporation" *** or are not marketed in an unmanufactured state." [Italics added.]

***

Neither the express wording of the Marketing Act nor the legislative history thereof justifies the conclusion that persons who market or distribute products manufactured from farm products, such as meat packinghouses, canneries, and the like, may qualify for membership in a cooperative association on that basis alone. To the contrary, in order to be eligible for membership in a cooperative association as defined in the Agricultural Marketing Act, we believe that such persons must be engaged in some respect in farming operations, for otherwise all persons engaged in handling or processing food products at any intermediate step between farmer and ultimate consumer might qualify for such membership, and there would then be virtually no limitation upon those who may become members. A similar result should also apply to manufacturers, distributors, and dealers of farm implements or farm supplies. In our opinion, such persons cannot qualify as members of a farmers' cooperative on the tenuous grounds that the products which they sell may be used on a farm or by a farmer. Any other conclusion in this respect would result in the untenable position that any supplier of consumer goods might become a member of an agricultural cooperative since their products conceivably could be purchased and used by a farmer.

Much controversy has arisen herein concerning the extent to which a person must engage in farm operations in order to qualify as a member of a bona fide cooperative association. With respect to those who can qualify as farmers in some degree, but who have other activities which, in many instances, constitute the principal business in which they are engaged, defendants and the Secretary of Agriculture generally take the position that such persons are "farmers" within the meaning of the Agricultural Marketing Act, and that they, therefore, may become lawful members of a cooperative association. Complainants and the Bureau, on the other hand, say that a person must be primarily engaged in farming operations in order to be eligible for membership.

Insofar as qualifications for membership are concerned, we agree with defendants and the Secretary of Agriculture that persons engaged in farming may qualify as members of a cooperative association even though such farm activities may not constitute the primary business in which such persons are engaged. This position is generally in consonance with the legislative purposes of the Agricultural Marketing Act discussed above, and is further supported by the following excerpt from the court's opinion in United States v. Maryland & Virginia Milk Pro. Assn., supra, involving the construction of similar provisions embraced in the Capper-Volstead Act (7 U.S.C.A. 291):

"It is urged by the Government that the words 'dairymen' and 'farmers' should be restricted to natural persons who personally work on dairy farms and who derive the major portion of their income from the farms. The court sees no basis for such restricted definition *** the owner of a farm may be regarded as a farmer even though he devotes the major portion of his activities to other pursuits. When Congress desired to put a more circumscribed definition on the term 'farmer' it did so expressly, as is true of the Bankruptcy Act ***. The Court, therefore, is of the opinion that it is immaterial whether every member of the association personally works on his farm or whether every member of the association is a natural person or a corporation." [Italics added.]

We see no reason, either in the express language of the Marketing Act or in the legislative history thereof, to depart from this interpretation. Accordingly, we conclude that individuals, partnerships, corporations, and other business entities engaged in farming operations, either as actual producers of agricultural products or as farm owners, may qualify for membership in a cooperative association as defined above, even though such farming operations may not constitute the primary business in which they are engaged.

Several other problems concerning qualifications for membership in a farmers' cooperative remain to be considered. As indicated, corporations engaged in farming operations in the manner described above are eligible for membership in a legitimate cooperative association. It does not follow, however, that other persons, whether corporate or natural, affiliated with or in control of such qualifying corporations may become, by virtue of such affiiliation or control, eligible members in that cooperative. Corporate entities may be disregarded where they are, in reality, a scheme for avoiding the legislative purposes of the act, but not be so disregarded where those in control have deliberately adopted the corporate form in order to secure its advantages and where no violence to the statute is done by considering the corporate entity as a separate legal person. Compare Schenley Distillers Corp. v. United States, 326 U.S. 432. We conclude, therefore, that in situations where one or more of a number of affiiliated persons, corporate or otherwise, qualify as "farmers" within the meaning of the Agricultural Marketing Act, only those persons so qualifying are eligible for membership in a cooperative association; and that affiliated or controlling corporate or natural persons not so qualifying may not become lawful members in the association on the basis of such affiliation or control alone.

Finally, the Agricultural Marketing Act clearly contemplates a cooperative effort by farmer members acting together for their mutual benefit. Obviously, such cooperation can be accomplished only by a contractual relationship or understanding between the association and its members. Compare Sun-Maid Raisin Growers of California v. K. Arakelian, Inc., 90 Cal. App. 10, 265 P. 832; and Constructors' Assn. of Western Pennsylvania v. Furman, 165 Pa. Super. 268, 67 A. 2d 590. At the very least the members of a cooperative should be aware of their membership, and have an opportunity to participate in the affairs of the association. The inclusion on the cooperative's membership rolls of the names of persons having no knowledge of their ostensible membership represents an obvious device or scheme to circumvent the requirements of the act, and cannot be condoned.

Ownership and control of the association.-While only those engaged in farm operations as described above may qualify as members in a farm cooperative, there remains for consideration the proper status to be accorded an association whose membership includes persons not so qualifying, that is, nonfarmers. The Bureau avers that the membership of nonfarmers in a purported cooperative association causes that organization automatically to lose its status as a bona fide

cooperative under the Agricultural Marketing Act. We do not agree. While

the term "cooperative association" is defined by statute as an organization in which member-farmers act together for their mutual benefits in furtherance of certain stated purposes, it does not follow that the inclusion of nonfarmers on its membership rolls necessarily alters the status of such an association.

The Marketing Act is administered by the Farm Credit Administration, and the statutory definition of a cooperative association, quoted above, constitutes the standard employed by that agency to determine whether an organization is eligible to borrow money from the Banks for Cooperatives. As a result, the interpretations placed by the Farm Credit Administration upon that statute and the regulations promulgated thereunder should be given considerable weight in ascertaining whether or not a particular association is within the definition embraced in the Agricultural Marketing Act. Compare Harrill v. Davis, 168 Fed. 187, 198. In determining eligibility for loans under the Marketing Act, that agency has prescribed the following regulation:

6 CFR 70.1 Nonproducer ownership of voting media in cooperative associations. Loans may not be made to a cooperative association, except a mutual fire insurance company, unless at least 90 percent of the voting media are held by either producers (individuals, partnerships, or corporations), or cooperative associations as defined in the Agricultural Marketing Act, as amended (see sec. 15, 46 Stat. 18 as amended: 12 U.S.C. 1141j).

In determining eligibility, all business transacted with members that are neither producers, nor cooperative associations as defined in the Agricultural Marketing Act, as amended, shall be deemed to be nonmember business.

This regulation reflects the time-tested administrative practice of the Farm Credit Administration to the effect that an organization must be substantially owned and controlled by farmers, as defined above, in order to qualify as a cooperative association as defined by the Agricultural Marketing Act. As stated by the lower court in United States v. Elm Springs Farm Cooperative (D.C. Mass.), 38 F. Supp. 508, at page 510, order modified 127 F. (2d) 920:

Merely naming an association a cooperative one cannot effect [sic] its real character. Its makeup and purpose are the real criteria.

If persons not qualifying as "farmers" own or control a purported cooperative association, it follows that such an association is not one in which member farmers act together for their mutual benefit either as producers of agricultural products or as purchasers of farm supplies and farm business services. Rather, such an organization may be said to have as its primary purpose the betterment of the interests of the nonfarmers contrary to the declared policy of the Marketing Act"to promote the effective merchandising of agricultural commodities *** so that the industry of agriculture will be placed on a basis of economic equality with other industries, * * * by encouraging the organization of producers into effective associations or corporations under their own control for greater unity of effort in marketing and by promoting the establishment and financing of a farm marketing system of producer-owned and producer-controlled cooperative associations." [Italics supplied.]

At the same time, however, the Agricultural Marketing Act should not be interpreted so literally or applied so strictly as to preclude cooperatives from retaining on their membership rolls, for informational or promotional purposes, retired farmers, administrators of estates, and other similarly situated nonfarmers. Although such persons are not eligible for true membership in a cooperative association and should not be admitted as new members therein, the presence of their names on the association's membership roster, in our opinion, does not automatically cause that association to lose its status as a legitimate farm cooperative. A contrary conclusion would place upon an association, founded and operated in good faith, the onerous burden of frequently reviewing and investigating its membership lists for the purpose of purging the names of those persons not then qualifying for membership. In the circumstances, we conclude that the apparent membership in a cooperative association of persons who may not qualify as "farmers" within the meaning of the Agricultural Marketing Act does not automatically change the status of such association, provided that the association continues to be substantially owned and controlled by qualifying members as previously defined herein.

Member vs. nonmember business.-The Agricultural Marketing Act further provides, in effect, that the value of business handled by a cooperative association for or with nonmembers (excluding business conducted "for or on behalf of the United States or any agency or instrumentality thereof") shall not exceed that transacted by such association for or with its eligible members, as defined above. This requirement pertains not only to all transportation services rendered by a cooperative (whether or not such transportation is exempt from economic regulation under some other provision of the Interstate Commerce Act), but, in addition, to all farm products, farm supplies, and farm business services dealth in by the association. Hence, a preponderance of a cooperative's transportation activities might be performed for nonmembers without altering the association's status, provided that the value thereof is offset by the value of other types of business which it handles for or with members.

It should be noted, however, that the proportion which member business bears to that handled for or with nonmembers logically cannot be derived from a limited investigation of the coperative's activities as of some isolated moment in time. Rather, in order for the association to be a legitimate farm cooperative, the evidence must establish that such association, as a general and continuing practice, does not conduct nonmember business greater in value than that performed as agent for its own members. This can only be accomplished by an examination of the total business activities of the cooperatives covering a period of time sufficient in duration to establsh the normal and usual ratio obtaining between the member and nonmember business of the association.

For example, the transportation of so-called exempt agricultural commodities under section of the Interstate Commerce Act, when performed for a nonmember, clearly must be treated business.

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