USDA Posts New Antitrust Rule on Meat Industry

Reproduced in full from http://www.lavidalocavore.org

Awesome New USDA Antitrust Rule on Meat Industry

by: Jill Richardson

Fri Jun 18, 2010 at 21:01:35 PM PDT

The USDA has come out with a new proposed rule and – based on the reaction it has gotten thus far – it’s a big fucking deal. In a good way. Here’s how the AP described the new rule:

The rules would place the sharpest limits on meat companies since the Great Depression, drastically lowering the bar that farmers and ranchers must meet to sue companies  whom they accuse of demanding unfairly low prices.The rules would dictate how meatpackers buy cattle on the open market, and prohibit them from showing preference to big feedlots rather than buying from small producers.

They would also limit the control chicken companies have over the farmers who raise birds for them. The companies couldn’t require farmers to take on debt to invest in chicken houses, for example, unless farmers were guaranteed to recoup 80 percent of the cost.

The law would also make it easier to file suits under the Depression-era Packers and Stockyards Act by stating that farmers don’t need to prove industrywide anticompetitive behavior to file a lawsuit under the act.

Sen. Feingold, a longtime champion for fair competition in agriculture, has already come out praising this rule in a statement I’ve included below. South Dakota Senator Tim Johnson praised the rule as well, as did R-CALF USA. You can see the USDA’s press release about this here and the actual rule itself here.

From Sen. Feingold:

Statement of U.S. Senator Russ Feingold On the USDA’s Actions to Improve Fairness in the Livestock and Poultry Industries

Washington, D.C. – Following the release of a proposed rule to improve fairness in the livestock and poultry industries by the Department of Agriculture, U.S. Senator Russ Feingold released the following statement:

“For too long, there hasn’t been a cop on the beat when it comes to anticompetitive, unfair and retaliatory practices in agriculture, which has opened the door to mischief.  After inaction under the previous administration, the current agencies have really turned a page and seem ready to listen, collect evidence and take enforcement actions when appropriate.  I am glad to see today that Secretary Vilsack has continued this turn-around by proposing strong additional protections against unfair, deceptive and retaliatory actions in the livestock and poultry industry.  I am particularly encouraged to see a proposal to give producers the choice to opt out of arbitration requirements in contracts that can be skewed against them or force them to give up their rights, an issue on which I have worked with Senator Chuck Grassley.  It will take time to make up for previous neglect, but this proposed rule, combined with the joint USDA/DOJ agriculture competition workshops and other actions, are putting us back on the path of ensuring farmers, small businesses and consumers are treated fairly.”

The proposed rule implements a provision of the 2008 Farm Bill that is based on a proposal championed by Senator Feingold and Senator Chuck Grassley (R-IA) to eliminate mandatory arbitration in agriculture contracts.  Additional Farm Bill provisions implemented by the rule were based on a broader proposal by Senator Tom Harkin (D-IA), which Feingold supported, to help producers by improving protections against unfair competition.  Feingold has also pushed for greater attention to be paid to competition issues in the dairy industry.  Partly as a result of these efforts, next Friday, June 25th, the USDA and DOJ will hold a workshop in Madison on competition in the dairy industry.

From R-CALF USA:

Group Calls USDA Rulemaking “Bold” and “Absolutely Essential”Billings, Mont. – R-CALF USA President/Region VI Director Max Thornsberry, D.V.M., called the proposed rule issued today by the U.S. Department of Agriculture (USDA) “a bold and absolutely essential step in ridding the U.S. cattle market of anticompetitive practices.”

USDA’s proposed rule was issued pursuant to provisions in the 2008 Farm Bill that required the agency to promulgate rules to define what actions would constitute undue or unreasonable preference or advantage under the Packers and Stockyards Act of 1921 (PSA), as well as protect poultry and swine contract growers from unfair and deceptive practices committed by meatpackers.

The proposed rule not only establishes standards for identifying when meatpackers have unlawfully engaged in granting unreasonable preference or advantage to a select group of cattle sellers, but also, it clarifies that a violation of the PSA can be proven without the need to also provide proof of predatory intent, competitive injury, or likelihood of competitive injury.

In recent high-profile class action lawsuits, U.S. cattle producers proved to juries that they were materially injured by unfair and deceptive practices committed by meatpackers in violation of the PSA, resulting in significant jury awards to class members. The jury in the Pickett v Tyson Fresh Meats case awarded $1.28 billion to class members within the cattle industry and the jury award in the Herman Schumacher et al. v. Tyson Fresh Meats, Inc. et al. was $9.25 million.

However, both those jury awards were overturned by appellate courts that decided the burden of proof for prohibiting unfair and deceptive meatpacker practices under the PSA was much higher than the juries’ findings of unlawful conduct. The appellate courts essentially decided that conduct prohibited by the PSA was not actionable without additional proof of intent or injury to competition.

“As a result of these overturned jury decisions, the Packers and Stockyards Act was relegated a toothless tiger,” said Thornsberry, adding, “U.S. cattle producers were left without any recourse from the highly concentrated meatpackers’ exercise of monopoly-type power, which enables them to capture profits that should be flowing to independent cattle producers.”

Thornsberry said the inability to enforce the PSA has contributed to the exodus of about 150,000 cattle operations since the mid-1990s, which has, consequently, caused the hollowing out of rural communities all across America.

“This proposed rule corrects the core problem that prevents U.S. cattle farmers and ranchers from obtaining relief from the anticompetitive practices of the highly concentrated meatpackers and will help restore competition to our industry by providing a means to discipline anticompetitive behavior,” asserted Thornsberry.

Other provisions in the proposed rule include a requirement that meatpackers retain written records to justify differential prices offered to livestock sellers, a prohibition to prevent two or more meatpackers from using a single cattle buyer to procure cattle, and a prohibition to prevent meatpackers from trading live cattle among themselves.

“Taken together, the long-awaited provisions in the proposed rule are monumental and represent a genuine effort to reverse the ongoing loss of competition that has ravaged Rural America for well over a decade. While more must be done to reestablish a fully functioning competitive market for independent U.S. cattle producers, this is definitely a positive start,” Thornsberry concluded.

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