USDA to Propose New P&S Rules

New Round of Packers and Stockyards Rules in the Works

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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USDA on Friday stated the department will prepare to draft three new rules involving enforcement of the Packers and Stockyards Act. The rules run parallel to proposals under the Obama administration that were never enacted. Agriculture Secretary Tom Vilsack said the Packers and Stockyards Act is a 100-year-old law that requires enforcement updates to hold bad actors into account. (DTN file photo)

OMAHA (DTN) -- With increasing calls from lawmakers and cattle producers, USDA on Friday announced the department will start working on new rules to tighten enforcement of the Packers and Stockyards Act (P&S).

The moves by USDA reflect another attempt to find a balance in strengthening competition rules under the 100-year-old law as packers, cattle producers and government officials have battled for more than a decade to properly define what exactly falls under "unfair, deceptive and anti-competitive practices" in livestock markets.

Regarding the three proposed rules, USDA stated the following steps:

First, USDA intends to propose a new rule that will provide greater clarity to strengthen enforcement of unfair and deceptive practices, undue preferences, and unjust prejudices. The proposal would further clarify what USDA considers as "unfair, unjustly, unjustifiably discriminatory or deceptive." USDA also would clarify the types of conduct that would be considered "unduly or unreasonably preferential, advantageous, prejudicial or disadvantageous" violations of the P&S Act.

Second, USDA will propose a new poultry grower tournament system rule, with the current inactive proposal to be withdrawn. USDA had attempted to change the poultry tournament system under the Obama administration, but had failed.

Third, USDA will re-propose a rule to clarify that parties do not need to demonstrate harm to competition to bring an action under section 202 (a) and 202 (b) of the P&S Act. This has been a longstanding battle over packer influence and defining anticompetitive practices. Multiple federal court rulings against individual producers have stated that practices by packers that may have harmed a single producer were not extensive enough to cause competitive injury to overall livestock markets.

The department noted the proposed rules were included as part of the "Unified Agenda of Regulatory and Deregulatory Actions" released Friday by the White House Office of Management and Budget.

The P&S proposals and final rules have swung like a pendulum. In the waning days of his first stint at USDA, Vilsack released similar rules dubbed the "Farm Fair Practices Rules" in late 2016 that were later shelved or rewritten by the Trump administration. USDA now proposes to reopen some rules on undue and unreasonable preferences that were finalized under the Trump administration last December.

After repeated disconnects between the live cattle price and the USDA boxed beef price, major agricultural and livestock groups got together in May and issued a joint statement expressing frustration over repetitive issues that plague the industry -- "packer concentration, price transparency and discovery, packer oversight, Packers and Stockyards Act enforcement, level of captive supply and packer capacity."

USDA stated Friday the planned P&S Act proposals will support USDA's efforts to ensure fairer and more resilient markets for farmers, ranchers and producers. In the last five years, stresses and disruptions caused by concentration in livestock markets have impacted not only producers, but consumers as well. As USDA works to strengthen the resiliency of supply chains, enforcement of the P&S Act will be critically important.

"The pandemic and other recent events have revealed how concentration can take a painful toll on independent farmers and ranchers, while exposing working family consumers to higher prices and uncertain output," said Agriculture Secretary Tom Vilsack. "The Packers and Stockyards Act is a vital tool for protecting farmers and ranchers from excessive concentration, and unfair, deceptive practices in the poultry, hog and cattle markets, but the law is 100 years old and needs to take into account modern market dynamics. It should not be used as a safe harbor for bad actors. The process we're beginning today will seek to strengthen the fairness and resiliency of livestock markets on behalf of farmers, ranchers and growers."

USDA's Packers and Stockyards Division operates under the Agricultural Marketing Service (AMS). The agency often takes administrative actions, but seldom does the division take enforcement action against large packing companies.

The North American Meat Institute (Meat Institute) has criticized the Biden administration for looking into new regulatory proposals.

“In the past, these sorts of proposals have been opposed by many livestock producers and Congress. In fact, the concepts embodied in these proposals have been rejected by eight federal appellate courts. They were a bad idea in 2010, they were a bad idea in 2016, and they are a bad idea in 2021. Should these proposals be implemented, they will limit producers' ability to market their livestock the way they see fit and will lead to costly, specious lawsuits,” said Julie Anna Potts, President and CEO of the North American Meat Institute. “The Meat Institute will continue to oppose unnecessary and burdensome government intervention in livestock markets.”

The Department of Justice issued a statement about USDA's proposals, commending USDA for taking the steps.

Acting Assistant Attorney General Richard A. Powers of the Justice Department's Antitrust Division issued the following statement Friday after the USDA announcement concerning the proposed new rules:

"The Antitrust Division remains committed to vigorous enforcement of the antitrust laws to protect American farmers, ranchers and consumers, and to ensure they all benefit from robust competition," said Richard Powers, acting assistant attorney for the DOJ Antitrust Division. "We stand ready to work hand in hand with the USDA to use our combined enforcement authorities to pursue these shared goals."

Still, DOJ did not comment on the status of its year-long investigation into cattle markets, despite repeated statements in recent weeks from senators, congressmen, governors and livestock groups demanding the Justice Department release the findings of its investigation. DOJ last year issued subpoenas for information to major packers after historic spreads in the price of live cattle and boxed beef in spring 2020 as the pandemic affected processing capacity for packers.

At least 30 members of the House and Senate have written DOJ asking for the department to release its investigation findings. Livestock groups including the National Cattlemen's Beef Association also have asked for DOJ to share that information.

"That's where our focus is on the antitrust component at the moment," said Ethan Lane, vice president of government affairs at NCBA, in an interview in late May with DTN. "We're a year into a DOJ investigation that we requested amongst other groups at the height of the market failures last spring, and we don't have a readout yet. Let's wrap it up and see what they found out."

USDA's action also comes as Sens. Chuck Grassley, R-Iowa, and Jon Tester, D-Mont., are introducing legislation specifically to amend the Packers and Stockyards Act to establish a "special investigator on competition matters." The bill would create a special office at USDA with more enforcement teeth to look into livestock markets.

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Chris Clayton