The 1921 Packers & Stockyards Act (PSA), among other things, prohibits packers, swine contractors and poultry dealers from using any “unfair, unjustly discriminatory, or deceptive practice.” It also prohibits them from giving any “undue or unreasonable preference or advantage” to any person. For decades, federal courts have held that these provisions only apply to conduct that is intended to or does have an actual or potential adverse effect on competition. During that time, Congress amended the PSA at least seven times without attempting to correct these holdings.
The agency administering the PSA is the U.S. Department of Agriculture. USDA had never agreed with the courts that harm to competition is a necessary part of a PSA violation. On December 20, 2016, the outgoing Obama administration published an interim final rule stating that harm to competition was not necessarily an element of a PSA violation. The proposed rule would take effect on February 21, 2017.
On February 7, 2017, the new Trump USDA implemented a regulatory freeze that, among other things, postponed the effective date of the new rule to April 22, 2017, subsequently extended to October 19, 2017. On October 18, 2017 the Trump USDA withdrew the proposed final rule and announced that it would take no further action on it. USDA reasoned that, because the proposed rule conflicted with circuit court precedent, it would inevitably generate litigation, which would serve no one’s interests.
In December 2017, the Organization for Competitive Markets and three of its members filed in the U.S. Court of Appeals for the Eighth Circuit a petition for review of the USDA’s withdrawal of the proposed rule. The Organization is comprised of family farmers and ranchers and seeks to act as a counterweight to the large packing houses.
On December 21, 2018, in a unanimous opinion, the Eighth Circuit denied the petition. Organization for Competitive Markets v. U.S. Dep’t of Agriculture, 2018 WL 6713255 (8th Cir. 2018). The Organization’s principal argument was that USDA’s withdrawal of the proposed rule was arbitrary and capricious. The Eighth Circuit held that an agency abandoning a proposed rule had to provide a reasoned analysis based on principles that are “rational, neutral, and in accord with the agency’s proper understanding of its authority.” USDA satisfied that test with its litigation-avoiding rationale.
The appellate court rejected the Organization’s argument that the agency had to prove that the rationale for its new policy was superior to the rationale for its old policy. Rather, it was sufficient that the statute permitted the new policy and the agency had a reasoned belief that the new policy was superior.
The Eighth Circuit also rejected the Organization’s argument that it was arbitrary and capricious for USDA to seek additional public comments. The original proposal attracted such strong opposition that USDA deferred action until “the final days of a departing administration.”
Finally, the Eighth Circuit rejected the Organization’s argument that USDA had unreasonably delayed adopting new regulations. The 2008 Farm Bill required USDA to “promulgate regulations” implementing the PSA’s ban on undue or unreasonable preferences within two years. Just over two years thereafter, USDA did propose regulations on that topic. The 2012-15 appropriations bills prohibited USDA from finalizing those regulations, thus suggesting that the agency satisfied the statutory command to “promulgate” regulations by publishing proposed regulations.
The Eighth Circuit severely criticized the Organization’s request for relief: an order directing USDA to issue the regulations it had withdrawn. That request ignored the separation of powers issue it would have created, in that the judiciary has no power to rewrite a statute or issue regulations interpreting it.
Obviously, the opinion reflects a very deferential attitude toward agency rulings, an appropriate attitude given existing law. But that law may change. The Supreme Court has agreed to reconsider Auer deference, under which courts defer to agency interpretations of their own ambiguous regulations. Several of the current justices have suggested that the Court should review Chevron deference, under which courts defer to agency interpretations of ambiguous statutes that they administer.
Chevron and Auer deference rest on two propositions of fact: that agencies are experts in the areas of law that they administer; and that they will apply that expertise fairly and neutrally. The first is questionable; the second likely false. Judicial deference to administrative agencies’ interpretation of their statutes and regulations has transferred an enormous amount of power from the judiciary to the agencies and the Court may very well try to reclaim that power.