USDA proposes criteria to strengthen enforcement of the Packers and Stockyards Act

The U.S. Department of Agriculture’s Agricultural Marketing Service has published in the Federal Register a proposed rule specifying four criteria the agency would consider when determining whether an undue or unreasonable preference or advantage has occurred in violation of the Packers and Stockyards Act.

The P&S Act states that it is unlawful for a packer, swine contractor or live poultry dealer to make or give any undue or unreasonable preference or advantage to a seller or grower of livestock or poultry. An undue or unreasonable preference or advantage is an action that creates excessively favorable conditions for one or more persons, reducing opportunities for optimal pricing and business success for competitors.

The proposed criteria will serve as a basis to determine whether these differences are a reasonable and fair preference or advantage. Under the proposed rule, USDA would consider whether a preference or advantage meets one or more of the criteria below:

• 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; 

• Cannot be justified as a reasonable business decision that would be customary in the industry.

USDA would not be limited to considering only these four criteria but could also take other factors into consideration as appropriate on a case-by-case basis. The proposed rule retains necessary flexibility while providing greater clarity around what may constitute a violation.

The criteria is being provided for the public comment until March 13. Comments will be taken into consideration as they work to finalize these guidelines. Comments must be submitted through www.regulations.gov and should reference the document number on the top of the first page of the proposed rule, along with the Federal Register date and page number where the published proposed rule is located. AMS will make all submitted comments available to the public, including the identity of the commenter and any personal information provided.

One farm group was encouraged by the Trump administration’s efforts to address this issue; however, the National Farmers Union expressed concerned about a provision that would allow customary industry practices to not be considered as an unfair preference or advantage. Lax antitrust enforcement over the past several decades has enabled the poultry and livestock industries to engage in manipulative and discriminatory practices, making those practices customary, the NFU said in a news release. As a result, the rule could strengthen the status quo, leaving farmers with little recourse when confronting unfair but typical treatment. It is unclear if the rule’s other provisions will provide needed protections to farmers.

In a statement, NFU President Roger Johnson expressed his apprehension about the rule and encouraged the administration to move forward with greater protections for family farmers and ranchers:

“Family farmers and ranchers have been plagued by corporate consolidation for as long as this organization has existed—but it’s gotten much worse in recent decades. With almost no oversight, just a handful of corporations have taken control of the poultry and livestock markets. This has made for an extremely lopsided relationship between meatpackers and processors and those who sell to them, where the former sets almost all of the terms and the latter has no choice but to accept them. This has left farmers susceptible to substantial discrimination and abuse.

“Though lawmakers have promised greater protections to farmers experiencing unfair treatment, we’ve seen very little in the way of progress. While Congress and the USDA have spun their wheels for more than a decade, farmers have continued to endure anticompetitive practices with few defenses.

“After so many years of inaction, it is encouraging to see this administration take some small steps to level the playing field. However, this rule does not go far enough to safeguard farmers from unfair treatment, nor does it address many of the other difficulties farmers have been suffering at the hands of powerful corporations. In order to provide farmers with the protections they need and deserve, we strongly urge USDA to strengthen its definition of “undue or unreasonable preference” as well as introduce additional rules to ensure fair treatment and competition in the livestock sector.”