The U.S. Department of Agriculture (“USDA”) announced late last month that it will be taking measures to support the enforcement of the Packers and Stockyards Act (“P&S Act”), a 100-year-old law designed to protect “poultry farmers, hog farmers, and cattle ranchers from unfair, deceptive and anti-competitive practices within the meat markets.” The proposed revisions involve additional changes to the unlawful conduct provisions of Title II of the P&S Act as well as a menu of grant and loan programs to address problems throughout the food supply chain.
As a part of OMB’s “Spring 2021 Unified Agenda of Regulatory and Deregulatory Actions,” which sets forth the upcoming actions of the administrative agencies, USDA shared that its pending action focuses on three actions:
- Proposing a new rule that will provide greater clarity to strengthen enforcement of unfair and deceptive practices, undue preferences, and unjust prejudices;
- Proposing a new poultry grower tournament system rule; and,
- Re-proposing a rule to clarify that parties do not need to demonstrate harm to competition to bring an action under the Packers and Stockyards Act.
In the press release announcing the plan, Secretary of Agriculture Tom Vilsack noted how the pandemic exposed how concentration can have negative effects on independent farmers and ranchers, while exposing consumers to “increased prices and uncertain output.”
While the extent of the impact these future proposals have on the poultry, hog and cattle (“livestock”) industries will not be known until USDA releases the promised proposed regulations, we anticipate there will be significant pushback from the livestock industry as there was in past proposed revisions. Past proposals to modernize the P&S Act regulations have been received by the industry, Congress and federal courts with mixed reactions. USDA abandoned a slate of proposed market fairness rules promulgated under the Obama administration in the face of opposition. The agency announced the issuance of a final rule in December 2020 setting forth criteria by which to judge unfair and unreasonable preferences and advantages under the P&S Act. USDA did not make a policy statement on whether harm to competition must be shown. Several federal courts of appeal have held in the past that competitive injury must be shown as an element of proof under these market conduct provisions. The proposed revision seeks to clarify that market-wide injury need not be shown making it inconsistent with current case precedent.
We expect USDA to propose these regulations as a priority over the next few months in light of this month’s White House Executive Order designed to enhance competition across multiple sectors of the U.S. economy including the agriculture and livestock sector. Industry members should watch for these proposed rules to avail themselves of the ability to comment on the proposed rules, determine any impact on their current activities, and ensure their activities are in compliance with these requirements. This announcement also acts as a reminder to those in the livestock industry about ensuring that their actions in the marketplace are consistent with the principles of the P&S Act.
Written with the assistance of Temidayo Joseph, a summer associate in the Husch Blackwell LLP, Washington, DC office.