Ag Policy Blog

USDA, Vilsack Take Another Shot at Redefining 'Competitive Injury' in P&S Act

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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Agriculture Secretary Tom Vilsack speaking Tuesday at the Center for American Progress about USDA rules relating to the balance between producers and packers. USDA on Tuesday proposed a rule to redefine how federal courts interpret competitive injury claims in lawsuits brought by producers. (Image from event livestream)

OMAHA (DTN) -- Continuing to push on livestock competition issues, USDA on Tuesday proposed a new Packers and Stockyards Act rule targeting how "injury to competition" should be interpreted in lawsuits brought by producers against packers.

The issue has been a longstanding challenge for livestock and poultry producers filing claims against meatpackers. USDA also has proposed similar rules in the past -- often late in an administration's time in office -- and seen those proposals later shelved.

The "Fair and Competitive Livestock and Poultry Markets" proposed rule would clarify the interpretation of "unfair" under the P&S Act and spell out in more detail conduct prohibited under the law. USDA stated the rule would help ensure livestock and poultry producers receive the full value for their products and services.

Specifically, the rule would clarify "competitive injury" or "injury to competition." Over the years, federal courts have interpreted injury to competition to mean that a packer's actions against a producer not only harmed the producer, but diminished competition by hurting other producers as well, such as affecting overall market conditions. USDA maintains that the Packers and Stockyards Act should include harm not just to the market but also harm to individual producers.

The proposed rule drew praise from groups such as Farm Action, the Organization for Competitive Markets, the Alabama Contract Poultry Growers Association as well as the National Farmers Union. NFU, for its part, has helped push the Biden administration with its "Fairness for Farmers" campaign.

"We commend Secretary Vilsack and the Biden-Harris Administration for the continued progress in issuing important updates to the P&S Act," said Rob Larew, president of NFU. "Family farmers and ranchers continue to face unfair practices at the hands of monopolistic meatpackers, and they need P&S Act rules that are clear, durable, and enforceable. NFU looks forward to fully reviewing the rule to ensure it protects farmers from abuses in the marketplace."

On the flip side, the Meat Institute, which represents the meatpacking industry, said USDA is "attempting to set meat production back decades" with the proposal.

"Unfortunately for the Biden Administration, Secretary Vilsack has tried these changes before," said Julie Anna Potts, president and CEO of the Meat Institute. "They have failed before the courts, conflict with Congressional intent and are a blatant attempt to pick winners and losers in the marketplace. Under these proposed rules, everyone loses, the livestock producer, the packer and ultimately the consumer."

The Meat Institute added that while the rule is "portrayed as an effort to increase competition, this government interference comes when fed cattle prices were at record levels for most of 2023, surpassing the 2014-2015 previous record highs, and now, well into 2024, cattle prices remain at record levels."

Potts noted, "What is the Biden Administration trying to fix?"

Ethan Lane, vice president of government affairs for the National Cattlemen's Beef Association, said USDA's proposal would end up harming producers and their ability to profit from producing better-quality beef.

"USDA's newly proposed rule is a direct attack on cattle producer profitability. By creating criteria that effectively deems any innovation or differentiation in the marketplace improper, USDA is sending a clear message that cattle producers should not derive any benefit from the free market but instead be paid one low price regardless of quality, all in the name of so-called fairness."

In the final days of the Obama administration in 2016, Agriculture Secretary Tom Vilsack pushed to finalize the "Farmer Fair Practice Rules" that included similar language. USDA had been blocked for years from implementing the rule because of riders in funding bills that prevented USDA from trying to finalize the rule. The Trump administration then froze the rule and rewrote it, which also restarted the regulatory process. The Trump rules went into effect in December 2020 and were then pulled when the Biden administration took office and Vilsack reclaimed the Cabinet post.

On Tuesday, Vilsack discussed the proposal as part of a forum on agricultural competition hosted by the Center for American Progress in Washington. The secretary said the rule would translate unfair practices to mean "individual harm" to a specific operation.

"Today, we provide an enforcement tool that I think will provide for greater balance in the relationship between the farmer and the integrator," Vilsack said.

The secretary said too often there remains an imbalance between producers who enter contracts with packers and may be left holding significant liabilities on their operations.

"That's basically what Packers & Stockyards was designed to do was to create a balance in the relationship," Vilsack said.

The secretary's event also included Jonathan Kanter, an assistant U.S. attorney general for antitrust. Vilsack and Kanter talked about how the two departments have worked together in the Biden administration to bring litigation against packers and processors, as well as draft rules. Vilsack said that collaboration helps gird USDA against likely litigation if the rule becomes final.

"We know at the end of the day folks may very well challenge what we're proposing, so it's important for us to get it right," Vilsack said. He added, "The rule we proposed today, it's been a difficult one. It's one that's challenged folks for quite some time. With the Department of Justice's help, we fashioned a way in which we see a roadmap to how an individual producer can receive the protections of the Packers & Stockyards (Act)."

Kanter also announced at the CAP event that the Department of Justice is increasing its focus on agricultural competition issues by hiring more attorneys and staff "based in the Midwest" who will more closely scrutinize competition issues and potentially bring more P&S cases with USDA's help.

Asked about looking into cattle marketing contracts, Vilsack also responded, "The next thing we are going to be looking at is a cattle discovery rule."

The proposed Fair and Competitive Livestock and Poultry Markets rule will be published in the Federal Register, which will open a 60-day comment period.…

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