Citing grave concerns that they would “cause serious harm to the pork industry,” the National Pork Producers Council in comments submitted today says the USDA should not finalize – or at least exempt pork producers from – regulations related to the buying and selling of livestock.
According to NPPC, the so-called Farmer Fair Practices Rules – an interim final rule and a proposed regulation – would “enable a torrent of lawsuits against members of the pork industry,” replace carefully negotiated contracts with standard terms that are unworkable, ignore crucial differences among the various sectors of the meat industry and raise serious constitutional concerns under the First Amendment.” The regulations were issued in the last weeks of the Obama administration by USDA’s Grain Inspection, Packers and Stockyards Administration.
“GIPSA’s one-size-fits-all approach would restrict livestock transactions, lead to consolidation of the livestock industry – putting farmers out of business – and increase consumer prices for meat,” says NPPC President Ken Maschhoff, a pork producer from Carlyle, Ill. “These regulations could impose staggering costs on the pork industry. The only people who would benefit from this heavy-handed government intrusion in the hog market are trial lawyers.”
NPPC is most concerned with the interim final rule, set to take effect next month, which would broaden the scope of the Packers and Stockyards Act on the use of “unfair, unjustly discriminatory or deceptive practices” and “undue or unreasonable preferences or advantages.” Specifically, the regulation would deem such actions per se violations of federal law even if they didn’t harm competition or cause competitive injury, prerequisites for winning PSA cases.
Pork producers aren’t the only ones making their GIPSA dissatisfaction known.
Craig Uden, president of the National Cattlemen’s Beef Association, says the rules stand to threaten market incentives, the quality of American beef the industry is known for, and will ultimately cost $954 million to the cattle industry.
“These rules are just as troubling as they were when USDA initially proposed them in 2010, after which Congress immediately stepped in to defund the rules, recognizing them as a flawed concept that limits producers’ ability to market their cattle and adding layers of crippling bureaucracy,” Uden says.
Two proposed rules and one interim final rule came out on Dec. 20, 2016, one month before the end of the Obama administration. The interim final rule regarding the scope of the Packers and Stockyards Act and the proposed rule regarding undue preference and unjust treatment have a direct negative impact on the cattle industry.
Alternative Marketing Arrangements reward cattle producers for producing the quality beef consumers demand. Under the interim final rule, USDA or a producer no longer needs to prove true economic harm but rather one only needs to say that he or she was treated “unfairly” to sue a packer or processor.
“This approach is counter to the decisions of seven federal courts of appeals and it is this change that ultimately makes the interim final rule a trial attorney’s dream and jeopardizes the Alternative Marketing Arrangements cattle producers utilize,” Uden says. “What incentive would a packer have to pay for superior cattle when they may be sued for rewarding quality? The industry will be forced back to treating all beef as commodity beef under a one-size-fits-all approach.”
The National Turkey Federation cited concerns:
• The overriding concern that the increased legal and regulatory uncertainty created by these rules will make it difficult for the industry to fully reward growers for premium performance. Regardless of the rule’s stated intent to benefit growers, the potential for legal challenges when companies write unique contracts or offer competitive premiums likely will increase to the point that it may be necessary to make contracts and compensation more uniform, to the detriment of current high-performing growers
• The ambiguities, as well as its contradiction of established case law, will lead to a significant increase in lawsuits, to the detriment of growers and processors. These ambiguous requirements will also make compliance difficult and result in added regulatory costs.
• The detrimental effect on the grower-processor relationship will ultimately harm the very growers they were designed to protect.
• The long-term impact of these proposed regulations is unknown and, if the current contract model becomes too risky from a legal or economic standpoint, they could significantly change the structure of the industry over time to one that is far less beneficial for the grower. It conceivably could force companies to evaluate other production models that do not include contracting with independent family farmers to raise turkeys.
The North American Meat Institute echoes the livestock group’s sentiments about the need to abandon the Obama administration’s last-minute “regulatory end-run around Congress and the Courts.”
“Anything less than withdrawal of these stale and controversial rules will simply line the pockets of trial lawyers, while making our industry less competitive and our livestock producer-partners less profitable,” NAMI President and CEO Barry Carpenter says.
The Institute’s comments respond to an interim final rule that Congress blocked for six subsequent years after it was proposed in 2010, but failed to block in 2016, leaving an opening for GIPSA to move ahead in the final weeks of the Obama administration. The so-called “scope” interim final rule would make it unnecessary for a disgruntled producer to show harm to competition generally when challenging a particular practice by a packer. This change would represent a major reversal of long settled case law.
“GIPSA, through the IFR, is conducting an administrative end run to accomplish what it has failed to do before the courts and before the Congress,” the Institute says. “As the agency concedes, that action will set in motion a cascade of litigation brought under the PSA. The impact of that litigation, or the threat of it, will be to undermine and likely roll back the significant progress made by the livestock and meat and poultry industry in meeting consumer demands during the past quarter century.”
The Institute points out that before and after the rule was originally proposed in 2010, courts have ruled and their decisions show that the rule is even more legally problematic than originally thought.