In an effort to ensure fair trade and competitive marketing of livestock and poultry, USDA’s Agricultural Marketing Service issued a final rule required under the 2008 Farm Bill. The rule has been tossed back and forth between the past two administrations and producer groups still remain mixed on the final product.
The rule clarifies the types of conduct prohibited by the Packers and Stockyards Act and sets forth several criteria the secretary of agriculture will consider when determining whether conduct by packers, swine contractors or live poultry dealers represents an undue or unreasonable preference or advantage.
“The establishment of these criteria is representative of USDA’s commitment to equity in the livestock, meat and poultry industries,” said USDA Under Secretary for Marketing and Regulatory Programs Greg Ibach. “These criteria further clarify USDA’s enforcement mechanisms under the P&S Act that ultimately work to benefit everyone in the supply chain. We appreciate the significant public comments submitted to USDA that helped inform the development of this final rule.”
The four criteria include whether the preference or advantage:
- cannot be justified on the basis of a cost savings related to dealing with different producers, sellers, or growers;
- cannot be justified on the basis of meeting a competitor’s prices;
- cannot be justified on the basis of meeting other terms offered by a competitor; and
- cannot be justified as a reasonable business decision.
AMS made minimal changes to the four criteria in the January 2020 proposed rule. The National Pork Producers Council had sought minor changes to the rule earlier this year and welcomed the final product.
“We are happy that this 12-year saga has come to a conclusion and ends this cycle of regulatory uncertainty,” says NPPC Assistant Vice President and General Counsel Michael Formica. “We are supportive of any rules that recognize the right of farmers to freely enter into contracts of their choosing.”
The North American Meat Institute also welcomed the rule’s recognition of marketing agreements and other tools used by producers and packers while also providing some guidance and clarity the secretary will use when reviewing the use of those tools.
“This rule also, however, introduces some uncertainty into the use of those tools by allowing consideration of other, undefined, factors,” says Meat Institute President and CEO Julie Anna Potts. “We will move forward and continue to work to ensure livestock producers have a variety of tools available to market their animals and to ensure meat and poultry markets remain competitive.”
National Chicken Council President Mike Brown says, “This rule serves both farmers and chicken companies by establishing uniform standards USDA will consider when evaluating conduct under the Packers & Stockyards Act. It will help bring greater certainty for all by clearly laying out defined standards, respecting well established federal circuit court precedent, and at long last bring to completion the process initiated by the Farm Bill more than 12 years ago.”
Calls for another rewrite
As the National Farmers Union pointed out in comments submitted earlier this year, they note the rule not only fails to defend farmers – it also shields corporations from legal challenges to discriminatory actions.
“In their relationship with meat packers and processors, family farmers have almost no bargaining power. Unlike individual farmers, these corporations have immense economic resources and political clout, which means they call the shots – and when they behave unfairly, as they often do, they usually face no repercussions,” says NFU President Rob Larew.
“Farmers have been practically begging legislators to balance the scales and protect them from predatory practices – but for some reason, their pleas have been all but ignored. Rather than offer farmers the very basic safeguards they’ve been asking for, USDA’s rule will inexplicably offer even more power to meatpackers, further tipping the scales in their favor,” Larew adds.
Larew calls for the incoming administration to reverse the rule and replace it with one that “actually protects farmers from unfair, deceptive and discriminatory practices.”
The undue preference rule is only a small part of a larger package of proposed rules advanced under the Obama Administration under USDA Secretary of Agriculture Tom Vilsack at the end of 2016, known as the “Farmer Fair Practices Rules”. These rules were strongly supported by contract producers.
“Unfortunately, the final rule issued does not do enough to prevent integrators from circumventing the purpose of the Packers and Stockyards Act and it fails to restore competition to the market to put our farmers and ranchers on a fair footing,” says Eric Deeble, policy director at the National Sustainable Agriculture Coalition. “We are counting on the new incoming Biden-Harris Administration and the incoming secretary of agriculture to not only rescind the Trump Administration rule, but to also bring back all of the ‘Farmer Fair Practices Rules’ and ensure that those previous rules are improved upon."
USDA notes the final rule does not address the long-settled issue of defining “competitive harm.” Eight circuit courts of appeals have ruled that demonstration of harm to competition is a necessary condition for finding a violation under Section 202 of the P&S Act. USDA will continue to evaluate harm to competition on a case-by-case basis, the agency says.
The Packers and Stockyards Act prohibits packers, swine contractors, or live poultry dealers from making or giving an undue or unreasonable preference or advantage to any person or locality. The Act provides USDA discretion in determining whether the conduct of regulated entities is considered a violation of the Act.