{"id":53622,"date":"2020-02-25T16:49:32","date_gmt":"2020-02-25T21:49:32","guid":{"rendered":"https:\/\/sustainableagriculture.net\/?p=53622"},"modified":"2020-03-16T17:24:45","modified_gmt":"2020-03-16T21:24:45","slug":"awaited-gipsa-rule-needs-major-improvement","status":"publish","type":"post","link":"https:\/\/sustainableagriculture.net\/blog\/awaited-gipsa-rule-needs-major-improvement\/","title":{"rendered":"Long Awaited GIPSA Rule Needs Major Improvement"},"content":{"rendered":"\n
\"Some
Some of the 17,000 poultry at Seldom Rest Farms. USDA Multimedia by Lance Cheung.<\/figcaption><\/figure>\n\n\n\n

On January 13, 2020, the U.S. Department of Agriculture published a long-delayed proposed rule on the undue or unreasonable preference provision, Section 202(b), of the Packers & Stockyards Act of 1921 (P&SA). The P&SA was enacted to combat consolidation and lack of competition in the livestock and poultry industries as meatpackers and processors (also known as integrators) gained more power over the livestock and poultry producers. Attempts to strengthen P&SA, known as the Grain Inspection, Packers and Stockyards Administration (GIPSA) rules, have spanned the last ten years, following the 2008 Farm Bill mandate to publish rules to support the act, but have been largely unsuccessful due to congressional obstruction<\/a>, stalling by the Administration<\/a>, and agency inaction<\/a>.   <\/p>\n\n\n\n

Despite more than a decade of\nopportunity to establish meaningful rules to protect farmers from abusive\nintegrator practices, there is significant room for improvement in the proposed\nrule in order to fulfill the purpose of the P&SA.  <\/p>\n\n\n\n

Undue Preference<\/strong><\/h3>\n\n\n\n

The undue or unreasonable preference provision of P&SA is intended to prevent integrators from giving unwarranted advantages or disadvantages to producers who produce the same type and quality of livestock or poultry in the same relative geographic area. In poultry production, integrators require producers to enter a production contract that outlines the terms of how a farmer is paid and how that farmer must raise the poultry produced under the contract. This system is also prominent in hog production. Livestock producers face a different challenge of miniscule markets dominated by a single buyer that can dictate the prices producers receive. <\/p>\n\n\n\n

Integrators can use their control to give \u201cundue preference\u201d by offering\nfairer contract terms, higher prices, and higher quality animals and feed to\nfavored producers, even though they produce the same type and quality of\nlivestock or poultry as others in the same relative geographic area. This\ncontrol can also be used to unfairly disadvantage producers who fall out of\nfavor with the integrator. <\/p>\n\n\n\n

Proposed\nRule Criteria<\/strong><\/h3>\n\n\n\n

The proposed rule lays out four criteria that the Secretary of\nAgriculture will use in evaluating a claim of undue or unreasonable preference.\nA claim will be evaluated to see if the preference or advantage in question\ncannot be justified: <\/p>\n\n\n\n

  1. On the basis of a cost\nsavings related to dealing with different producers, sellers, or growers<\/li>
  2. On the basis of meeting a\ncompetitor\u2019s prices<\/li>
  3. On the basis of meeting\nother terms offered by a competitor<\/li>
  4. As a reasonable business\ndecision that would be customary in the industry<\/li><\/ol>\n\n\n\n

    The first three criteria are vague and fail to address the widespread consolidation in the livestock and poultry industries. There are four major meat processing companies \u2014 Tyson, Cargill, JBS, and Smithfield \u2014 that account for a majority of the market share in the livestock and poultry industries \u2014 84 percent in beef, 66 percent in pork, and 50 percent in chicken. Integrators use this market dominance to ensure that contract growers accept prices and terms that are most advantageous to the integrator. Because of this control, it is highly unlikely an integrator would need to save costs by dealing with a different producer, seller, or grower. Additionally, the terms and prices offered have little variation between the major companies so the opportunity to meet a competitor\u2019s price or terms is rare. <\/p>\n\n\n\n

    Even worse, the fourth criterion would enshrine a key component of\nunfair practices in the livestock and poultry industries. There are multiple\nbusiness practices that are commonplace in the industry that unfairly advantage\nor disadvantage producers. The poultry tournament system is a prime example. Despite\nbeing promised a base pay, producers are pitted against each other by integrators\nin a ranking system that awards a premium to certain producers, taken as a\ndeduction from the pay of other producers. The ranks are determined by metrics like\nthe weight gain of the birds, which is directly impacted by the quality of the\ninputs supplied to producers by the integrator. The integrator exercises\ncontrol over the entire system, to the disadvantage of some producers and\nadvantage of others. This criterion would enable integrators to justify use of\nthe tournament system and other practices that give undue and unreasonable\npreference because these practices are customary to the industry. The customary\nuse of a practice does not make it right or reasonable. <\/p>\n\n\n\n

    Missing\nComponents<\/strong> <\/h3>\n\n\n\n

    The proposed rule omits several key components needed to address undue preference that were included in the 2016 rule and supported by NSAC in previous comments. <\/p>\n\n\n\n

    \u201cCompetitive injury\u201d requirement<\/em><\/p>\n\n\n\n

    A significant omission is the clarification that the P&SA does\nnot require a producer to show harm to the entire industry in order to prove\nundue or unreasonable preference. Court precedent holds that a producer must prove\ncompetitive harm to the entire industry in order to bring a claim for personal\nharm from anticompetitive practices. The P&SA does not include this\nrequirement anywhere in the act, and both Congress and USDA have made it clear\nthat this \u201ccompetitive injury\u201d requirement is not founded in law. Not only does\nthe proposed rule fail to clearly establish that this standard is not required,\nit explicitly states that the rule is not intended \u201cto create criteria that\nwill conflict with case precedent\u201d so case law on competitive harm \u201cis likely\nto remain unchanged.\u201d Without clear language to the contrary, this illogical requirement\nwill remain unchanged and continue to pose an insurmountable obstacle to producers\nbringing a claim of undue or unreasonable preference. <\/p>\n\n\n\n

    Protection based on protected class<\/em><\/p>\n\n\n\n

    In the proposed rule,\nintegrators are not prevented from giving an undue or unreasonable preference\nbased on characteristics like race or national origin. These constitutionally\nprotected classes, and other categories such as political belief or disability,\nare not protected in the proposed rule, allowing integrators to unduly\npreference producers with characteristics that the integrator deems more acceptable.\n<\/p>\n\n\n\n

    Right to association and communication<\/em><\/p>\n\n\n\n

    The proposed rule does not protect a producer\u2019s right to lawfully\njoin in producer associations or speak to the media or elected officials about\ntheir growing contract without suffering retaliation from an integrator. It is\ncommon for poultry producers who speak out to receive lower quality inputs, like\nsick chicks or lower quality feed, which leads to lower quality chickens and\nreduction in a producer\u2019s pay. This right should be protected in the proposed\nrule. <\/p>\n\n\n\n

    Alleged misconduct or unrelated conduct<\/em><\/p>\n\n\n\n

    The proposed rule does not prevent an integrator from giving an\nundue or unreasonable preference to one producer over a producer that the\nintegrator believes has violated applicable laws or regulations without a\nreasonable basis for this belief. Without this protection, producers can be\ntargeted by integrators with false or ill-founded claims and unfairly\ndisadvantaged relative to producers who are not targeted. <\/p>\n\n\n\n

    Similarly, language preventing\nintegrators from giving preferential treatment for an arbitrary reason that is\ncompletely unrelated to the growing operation is absent from the proposed rule.\nIt is unfair to allow an integrator to punish or preference a producer for\nsomething that is unrelated to the contractual relationship between the\nintegrator and producer.   <\/p>\n\n\n\n

    Conclusion<\/strong><\/h3>\n\n\n\n

    The proposed rule on \u201cundue preference\u201d misses the opportunity to provide meaningful protections for producers and instead would enshrine unfair conduct by integrators in law. Instead of providing clear criteria to help integrators and producers understand what conduct equals an undue or unreasonable preference, the proposed rule provides potential defenses to protect integrators from a claim of undue or unreasonable preference. NSAC and its members will be submitting detailed comments on the rule. The comment period is 60 days and closes March 13, 2020. Individuals wishing to submit a comment can use the comment template developed by the Rural Advancement Foundation International – USA, which can be found <\/a>here<\/a>. <\/p>\n","protected":false},"excerpt":{"rendered":"

    On January 13, 2020, the U.S. Department of Agriculture published a long-delayed proposed rule on the undue or unreasonable preference provision, Section 202(b), of the Packers & Stockyards Act of 1921 (P&SA). The P&SA was enacted to combat consolidation and lack of competition in the livestock and poultry industries as meatpackers and processors (also known […]<\/p>\n","protected":false},"author":1,"featured_media":48294,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"categories":[197,920],"tags":[178,629,207],"class_list":{"0":"post-53622","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-competition-antitrust","8":"category-implementation","9":"tag-fair-competition-2","10":"tag-gipsa-rules","11":"tag-livestock","12":"entry","13":"clb-has-post-thumbnail"},"acf":[],"yoast_head":"\nLong Awaited GIPSA Rule Needs Major 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