USDA has released another proposed rule to guide fair and competitive markets under the Packers and Stockyards (P&S) Act. The latest rule will clarify the definition of “fair” and provide guidance on how unfair practices will be dealt with.
“Fairer, more competitive markets enable greater choice, quality, and fairer prices in the meat and poultry processing markets, delivering benefits for working family consumers of meat and poultry,” USDA said in its announcement.
The “Fair and Competitive Livestock and Poultry Markets” rule would address injury to competition in producers’ lawsuits against packers.
In the past, USDA has identified unfair practices through case-by-case administrative adjudication. The department now proposes a rule to determine alleged violations, as the past standard is not up to modern enforcement investigations and fails to explain its position to regulated entities, USDA said.
The proposed rule has a two-part framework:
• Defines “unfair practice” with respect to market participants
• Defines “unfair practice” with respect to markets.
Regarding market participants, an unfair practice would be one that causes or is likely to cause substantial injury to a participant that cannot reasonably avoided. The regulated entity involved in the action could not prove the potential positive effects of their action are greater than the potential harm to the participant.
When determining an alleged violation, the USDA secretary can determine the extent to which the practice may hinder market participation, interfere with decision-making freedom, undermine competitive market forces, deny producers the full value of their products or services, violate traditional legal principles or force the producer into an unfair position.
With respect to markets, an unfair practice would be defined as “collusive, coercive, predatory, restrictive, deceitful or exclusionary method of competition that may negatively affect competitive conditions.”
The secretary may also consider whether the practice shows signs of being oppressive, such as having anticompetitive intent or lacking a legitimate business reason. In addition, the secretary may consider whether the practice hinders market participants’ opportunities, reduces competition between rivals, limits choice, distorts or impedes competition, or denies a market participant the full value of their products or services.
The National Cattlemen’s Beef Association (NCBA) said the proposed rule is an attack on cattle producer profitability. “By creating criteria that effectively deems any innovation or differentiation in the marketplace improper, USDA is sending a clear message that cattle producers should not derive any benefit from the free market but instead be paid one low price regardless of quality, all in the name of so-called fairness,” NCBA Vice President of Government Affairs Ethan Lane said in a statement.
The Meat Institute echoed NCBA’s sentiments, saying the rule was attempting to set meat production back decades by encouraging litigation, and packers may be forced to curtail the use of alternative marketing agreements to minimize litigation risks.
“Under these proposed rules, everyone loses, the livestock producer, the packer and ultimately the consumer,” said Julie Anna Potts, president and CEO of the Meat Institute, in a statement.
Once the rule is published in the Federal Register, a comment period will be opened for 60 days. — Anna Miller, WLJ managing editor
