WASHINGTON – The US Dept. of Agriculture is proposing a new rule that would give the Secretary of Agriculture criteria to determine whether “undue or unreasonable” preferences or advantages have occurred in violation of the Packers and Stockyards Act.

The proposed rule establishes four criteria the USDA must consider when determining whether a violation has occurred. The Secretary of Agriculture would consider:

  • Whether the preference or advantage under consideration cannot be justified on the basis of a cost savings related to dealing with different producers, sellers, or growers.
  • Whether the preference or advantage in question cannot be justified on the basis of meeting a competitor's prices.
  • Whether the preference or advantage in question cannot be justified on the basis of meeting other terms offered by a competitor.
  • Whether the preference or advantage in question cannot be justified as a reasonable business decision that would be customary in the industry.

According to USDA, “This proposed rule addresses a situation occasionally encountered in the industry, namely the need to determine whether a preference or advantage in a specific instance is undue or unreasonable.”

The Packers and Stockyards Act prohibits packers, swine contractors, or live poultry dealers from making or giving any “undue or unreasonable preference or advantage to any particular person or locality in any respect. In administering this provision of the Act, the United States Secretary of Agriculture (Secretary) determines whether the conduct of regulated entities is considered a violation of the Act.”

In the past, violations were determined on a case-by-case basis, and complainants had to prove actual or likely harm to the market. USDA sought to change the regulation with the Farmer Fair Practice Rules which eliminated the requirement of proving actual or likely harm to the market as opposed to individualized harm to the victim of the violation.

But the USDA announced in October 2019 the agency would withdraw the Farmer Fair Practice Rules, which were largely opposed by the industry but supported by the Organization for Competitive Markets (OCM) which advocates for small family farms. OCM took a dim view of the new proposed rule following an initial review.

“USDA fails to own up to its longstanding position that the Packers and Stockyards Act is both an antitrust law and a producer protection law,” OCM said. “Unlike the previous iteration of this rule, it fails to set out which actions are unfair, unjustly discriminatory, or deceptive by meat packers and processors.

“USDA leaves farmers, ranchers, and poultry contract growers under the threat of retaliation for speaking out against any wrongdoing of the packer or processor,” OCM continued. “A particularly gross omission in this proposed rule is restoration of the right of an individual producer to bring a claim without proving competitive harm to the entire sector.”

Julie Anna Potts, CEO of the North American Meat Institute, said NAMI will review the proposed rule “…and work to ensure livestock producers have a variety of tools available to market their animals and to ensure meat and poultry markets remain competitive.”

“Any rule must protect marketing agreements between packer/processors and livestock producers, which provide stability to the industry and benefits consumers with lower prices and better-quality meat and poultry,” Potts said. “Eight federal appellate courts have concluded that the Packers and Stockyards Act requires a plaintiff to show actual or likely harm to competition. Without such a requirement, frivolous lawsuits could flood the courts and hurt the producer-processor relationship, ultimately harming those the law is intended to protect.”

The Grain Inspection, Packers and Stockyards Administration (GIPSA) of the USDA was the agency in charge of enforcing The Farmer Fair Practice Rules. But Agriculture Secretary Sonny Perdue eliminated GIPSA in November 2019 as a standalone agency and re-established it in the Fair Trade Practices program of the Agricultural Marketing Service (AMS).

USDA has opened a 60-day comment period on the proposed rule. The deadline to submit comments is March 13, 2020.