View Rule

Title XI of the 2008 Farm Bill required the Secretary of Agriculture to issue a number of regulations under the P&S Act. Among these instructions, the 2008 Farm Bill directed the Secretary to identify criteria to be considered in determining whether an undue or unreasonable preference or advantage has occurred in violation of the P&S Act. In June of 2010, the Grain Inspection, Packers and Stockyards Administration (GIPSA) published a proposed rule addressing this statutory requirement along with several other rules required by the 2008 Farm Bill. Proposed 201.211 to the regulations under the P&S Act would have established criteria that the Secretary may consider in determining if conduct would violate section 202(b) of the P&S Act (undue or unreasonable preference or advantage). While many commenters provided examples of similarly situated poultry growers and livestock producers receiving different treatment, other commenters were concerned about the impacts of the provision on marketing arrangements and other beneficial contractual agreements. Beginning with the FY 2012 appropriations act, USDA was precluded from working on certain proposed regulatory provisions related to the P&S Act, including criteria in this proposal regarding undue or unreasonable preferences or advantages. Consequently, GIPSA did not finalize this rule in 2011. The prohibitions are not included in the Consolidated Appropriations Act, 2016. This rulemaking is necessary to fulfill statutory requirements. Section 201.210 will illustrate by way of examples types of conduct GIPSA would consider unfair, unjustly discriminatory, or deceptive.

Statement of Need:

This proposed rulemaking will establish a list of practices that violate section 202(a) of the P&S Act without a showing of harm to completion and establish criteria that the Secretary will consider when determining whether a packer, swine contractor, or live poultry dealer has engaged in conduct or action that constitutes an undue or unreasonable preference or advantage in violation of section 202(b) of the P&S Act. These provisions are needed to protect livestock producers and poultry growers from unfair, unjustly discriminatory or deceptive practices and devices and from undue or unreasonable prejudice or disadvantage or undue or unreasonable preference or advantage. The 2008 Farm Bill directed the Secretary of Agriculture to establish criteria that the Secretary will consider in determining whether a live poultry dealer has provided reasonable notice to poultry growers of any suspension of the delivery of birds under a poultry growing arrangement; when a requirement of additional capital investments over the life of a poultry growing arrangement or swine production contract constitutes a violation of the P&S Act; and if a live poultry dealer or swine contractor has provided a reasonable period of time for a poultry grower or a swine production contract grower to remedy a breach of contract that could lead to termination of the poultry growing arrangement or swine production contract. GIPSA published final rules establishing the required criteria in December 2011. These regulations will link the regulatory criteria to  a violation of the P&S Act.

Summary of the Legal Basis:

Section 11006 of the Food, Conservation, and Energy Act of 2008 (Pub. L. 110-246) (2008 Farm Bill) required GIPSA to establish criteria regarding: undue or unreasonable preference or advantage; suspension of delivery of birds under a poultry growing arrangement; additional capital investments for poultry or swine contracts; and reasonable period of time to remedy a breach of contract.  GIPSA issued final regulations for three of the four required criteria on December 9, 2011.  Section 201.210 of this rule, will link the criteria to a violation of the section 202(a) of the Packers and Stockyards Act.  In addition, section 201.210 will identify other conduct that GIPSA considers to be unfair, unjustly discriminatory, or deceptive and a violation of section 202(a) of the P&S Act without a showing of harm to competition.  Section 201.211 will establish criteria for the remaining area undue or unreasonable preference or advantage.  Together, the regulations will complete the unfinished work from the 2008 Farm Bill.  Section 407 of the P&S Act provides that [t]he Secretary may make such rules, regulations, and orders as may be necessary to carry out the provisions of this Act.  This rule is necessary to carry out the provisions of section 202(a) and (b) of the P&S Act.

Alternatives:

GIPSA considered three regulatory alternatives: maintain the status quo and not issue the regulations; issuing revised versions of the proposed rule published in 2010 as proposed rules; and proposing regulations that would be phased in as existing contracts expire.

Anticipated Costs and Benefits:

GIPSA estimates the cost to be greater than $100 million annually. GIPSA was unable to quantify the benefits of the regulations. However, the primary benefit of regulations 201.210 and 201.211 is the increased ability to protect producers and growers through enforcement of the P&S Act for violations of section 202(a) and/or (b) that do not result in harm or the likelihood of harm to competition.

Risks:

The risk addressed by this rulemaking is the present uncertainty that limits enforcement of section 202(a) or (b) of the P&S Act. The clarification provided by this rulemaking will allow the linkage of the regulatory criteria to a violation of the P&S Act, which is a substantial portion of the GIPSA Packers and Stockyards Program’s mission.