On September 26, 2022, the Biden administration announced two new efforts from the U.S. Department of Agriculture to encourage competition in the meat and poultry industry, protect producers, and reduce costs. Included in these efforts are (1) publishing the proposed Inclusive Competition and Market Integrity Rules under the Packers and Stockyards Act, and (2) a new $15 million Agricultural Competition Challenge to increase collaboration with state attorneys general on enforcement of competition laws.
Key Takeaway: These new initiatives illustrate that the Biden administration and USDA see competition in the agricultural space as a focus, and intend to both push rules to further regulate unfair competition, and encourage collaboration with state enforcers to bolster investigation and enforcement efforts.
Proposed Inclusive Competition and Market Integrity Rules
The proposed Inclusive Competition and Market Integrity Rules are intended to “modernize” provisions intended to prohibit undue prejudice, unjust discrimination and deception to provide for clearer standards to govern the livestock, meat and poultry markets.1
The proposed rule targets undue prejudices or disadvantages and unjust discriminatory practices. Under the proposed rule, “regulated entities” — defined as a swine contractor or live poultry dealer as defined in section 2(a) of the Packers and Stockyards Act (PSA), or a “packer” as defined in section 201 of the PSA — are prohibited from engaging in certain practices. Specifically, a regulated entity “may not prejudice, disadvantage, inhibit market access, or otherwise take adverse action against a covered producer2 with respect to any matter related to livestock, meats, meat food products, livestock products in unmanufactured form, or live poultry based upon the covered producer’s status as a market vulnerable individual3 or as a cooperative.” The proposed rule defines prejudice or disadvantage as including:
- offering contract terms that are less favorable than those generally or ordinarily offered;
- refusing to deal;
- differential contract performance or enforcement; or
- termination of a contract or nonrenewal of a contract.
Id. The proposed rule further provides that a regulated entity “may not retaliate or otherwise take an adverse action against a covered producer because of the covered producer’s participation in certain activities to the extent that these activities are not otherwise prohibited by Federal or state law, including antitrust laws.” Id. The proposed rule specifically protects a covered producer when:
- A covered producer communicates with a government agency with respect to any matter related to livestock, meats, meat food products, livestock products in unmanufactured form, or live poultry or petitions for redress of grievances before a court, legislature or government agency.
- A covered producer asserts any of the rights granted under the PSA or this part, or asserts contract rights.
- A covered producer asserts the right to form or join a producer or grower association or organization, or to collectively process, prepare for market, handle, or market livestock or poultry.
- A covered producer communicates or cooperates with a person for the purposes of improving production or marketing of livestock or poultry.
- A covered producer communicates or negotiates with a regulated entity for the purpose of exploring a business relationship.
- A covered producer supports or participates as a witness in any proceeding under the PSA, or a proceeding that relates to an alleged violation of law by a regulated entity.
Id. In addition, the proposed rule defines retaliation as including the following actions:
- Termination of contracts or nonrenewal of contracts
- Adversely differential performance or enforcement of a contract
- Refusing to deal with a covered producer
- Interference in farm real estate transactions or contracts with third parties
Id. Finally, the proposed rule includes recordkeeping requirements related to these provisions. Id.
The proposed rule also targets deceptive practices. Specifically, the rule prohibits a regulated entity from engaging in specific practices with respect to any matter related to livestock, meats, meat food products, livestock products in unmanufactured form or live poultry:
- Contract formation. A regulated entity may not make or modify a contract by employing a pretext, false or misleading statement, or omission of material fact necessary to make a statement not false or misleading.
- Contract performance. A regulated entity may not perform under or enforce a contract by employing a pretext, false or misleading statement, or omission of material fact necessary to make a statement not false or misleading.
- Contract termination. A regulated entity may not terminate a contract or take any other adverse action against a covered producer by employing a pretext, false or misleading statement, or omission of material fact necessary to make a statement not false or misleading.
- Contract refusal. A regulated entity may not provide false or misleading information to a covered producer or association of covered producers concerning a refusal to contract.
Id. The announcement on September 26 indicates that the proposed rule will soon be published. Once published, stakeholders and other interested parties will have 60 days from the date of publication to submit public comments. Such comments will be considered as USDA develops a final rule.
Agricultural Competition Challenge to State Attorneys General
In addition to announcing the forthcoming publication of the new proposed rule, the administration announced the Agricultural Competition Challenge to State Attorneys General. This initiative is intended to challenge state attorneys general to partner with USDA on competition issues in the food and agricultural space and allocate up to $15 million in appropriated funds to do so. The announcement discusses using renewable cooperative agreements and memoranda of understanding to assist state attorneys general in “tackling anticompetitive practices in the agricultural sector and related industries that are contributing to heightened inflationary pressures, lack of choices for consumers and producers, and conflicts of interest and anticompetitive barriers across the food and agriculture supply chains.”
Specifically, the announcement references improving the capacity of state attorneys general to conduct investigations of competition issues, enhancing coordination between federal and state agricultural and competition enforcement authorities, and creating new and more independent research programs, with the ultimate goal of more rigorous enforcement of competition laws.
- Inclusive Competition and Market Integrity Under the Packers and Stockyards Act (draft proposed rule, soon to be published in the Federal Register) (to be codified at 9 C.F.R. pt. 201).
- “Covered producer” means a livestock producer (any person engaged in the raising and caring for livestock by the producer or other person, whether the livestock is owned by the producer or by another person, but not an employee of the owner of the livestock) or a swine production contract grower or poultry grower as defined in Section 2(a) of the PSA. Id.
- A “market vulnerable individual” is defined as a person who is a member, or who a regulated entity perceives to be a member, of a group whose members have been subjected to, or are at heightened risk of, adverse treatment because of their identity as a member or perceived member of the group without regard to their individual qualities. A market vulnerable individual includes a company or organization where one or more of the principal owners, executives, or members would otherwise be a market vulnerable individual. Id.