Billings, MT | The U.S. Department of Agriculture (USDA) announced it will soon publish a proposed rule titled, “Fair and Competitive Livestock and Poultry Markets.” The proposed rule is designed to implement the provisions in the over 100-year-old Packers and Stockyards Act that sought to protect America’s farmers and ranchers against unfair practices in the marketplace.
We welcome this proposed rule and here’s why:
For decades the Packers and Stockyards Act of 1921, and the Packers and Stockyards Division in charge of enforcing the Act, have been deemed toothless tigers. There are two reasons for this. First, the USDA never wrote the rules and regulations needed to properly administer and enforce the protections the law was supposed to provide.
Second, without the guidance provided by rules, several courts had interpreted the law in such a way as to place the law’s protections out of the reach of America’s cattle and sheep farmers and ranchers.
You see, the Packers and Stockyards Act was intended to protect independent livestock producers from abusive buying practices by the concentrated meatpacking industry, which due to its high level of concentration, wielded considerable buying power.
The Packers and Stockyards Act makes it unlawful for meatpackers to use any unfair, unjustly discriminatory, or deceptive practice; or to give any undue or unreasonable preference or advantage to any particular person or subject any particular person to any undue or unreasonable prejudice or disadvantage. It also prevents the manipulation or controlling of prices or the creation of a monopoly.
The first part of these protections is directed toward individual farmers and ranchers who may find themselves on the receiving end of unfair buying practices. The second part of the protections are intended to protect competition in the marketplace, similar to what the preexisting antitrust laws like the Sherman Act and Clayton Act were created to do for the marketplace.
But for decades, several courts have made it impossible for farmers and ranchers to seek protections against practices that adversely affected them because those courts stated that in order for an individual to seek protections against an unfair practice, even if the unfair practice put the individual out of business, the individual would first have to prove that the practice had caused harm to the competitiveness of the entire industry.
Now this is a standard commonplace in antitrust enforcement, and it’s known as the competitive injury standard. It’s intended to protect the competitiveness of the entire industry.
But it’s an untenable standard when, for example, a meatpacker refuses to accept delivery of a farmer or rancher’s cattle until weeks after a price for the cattle had been negotiated, forcing the farmer or rancher to incur additional production costs that would have been avoided if timely delivery had been allowed.
So, even though this would be an unfair practice that caused economic harm to the affected farmer or rancher, it would not likely cause industrywide harm to the market. And, therefore, the farmer and rancher could not obtain a remedy under the Packers and Stockyards Act.
But now, and finally, the USDA is proposing a rule to make it clear that an individual farmer or rancher can seek protections against unfair practices in certain situations without having to prove competitive injury or industrywide harm.
Here’s what the proposed rule provides.
First, it generally states that a farmer or rancher subjected to an unfair practice that causes or is likely to cause substantial injury, and which the farmer or rancher cannot reasonably avoid, and which cannot be justified as a beneficial practice, will be actionable under the Packers and Stockyards Act.
Second, the proposed rule attempts to protect the marketplace itself from unfair practices by making it clear that practices that are collusive, coercive, predatory, restrictive, deceitful or an exclusionary method of competition that may negatively affect competitive conditions are also actionable under the Packers and Stockyards Act.
And now, hold onto your hats. There will be stiff and violent opposition to this proposed rule by the multinational meatpackers and their lobbyist friends. They’ll claim the sky will fall, that food prices will rise because packers will have to expend legal costs to protect themselves against farmers and ranchers, and that this proposed rule will be a trial lawyer’s dream as they’ll have the green light to file lawsuit after lawsuit against the big packers.
This is, of course, bologna. The rule finally draws lines in the sand that multinational meatpackers will know not to cross. The effect will be a much needed and long-awaited balance between the tremendous market power wielded by the largest meatpackers and the individual farmer and rancher’s right to market their livestock in a competitive marketplace free of unfair market practices.
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R-CALF USA’s weekly commentary educates and informs both consumers and producers about timely issues important to the U.S. cattle and sheep industries and rural America.
Ranchers Cattlemen Action Legal Fund United Stockgrowers of America (R-CALF USA) is the largest producer-only trade association in the United States. It is a national, nonprofit organization dedicated to ensuring the continued profitability and viability of the U.S. cattle and sheep industries. Visit www.r-calfusa.com or call (406) 252-2516 for more information.
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