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USDA proposes to revise the regulations issued under the Packers and Stockyards Act (Act) (7 U.S.C.181 229c) to provide clarity regarding conduct that may violate the Act. This action is intended to support market growth, assure fair trade practices and competition, and protect livestock and poultry growers and producers. The proposed rule addresses long-standing issues related to competitiveness and whether all allegations of violations of the Act must be accompanied by a showing of harm or likely harm to competition.

Statement of Need:

Revisions to regulations pertaining to the Packers and Stockyards Act (Act) that would clarify the scope of the Act are needed to establish what conduct or action, depending on their nature and the circumstances, violate the Act without a finding of harm or likely harm to competition. Such revisions reflect the Department of Agriculture’s (USDA) longstanding position in this regard and complement two concurrent rules related to poultry grower ranking systems and conduct that constitutes unfair trade practices under the Act.

Summary of the Legal Basis:

The Act provides USDA with the authority to assure fair competition and trade practices and to safeguard farmers against receiving less than the true market value of their livestock. Sections 202(c), (d), and (e) of the Act limit the application of those sections to acts or practices that have an adverse effect on competition, such as acts restraining commerce, creating a monopoly, or producing another type of antitrust injury. However, provisions in sections 202(a) and (b) restrict practices that are deceptive, unfair, unjust, undue, and unreasonable; terms that are understood to encompass more than anticompetitive conduct.  USDA’s position is that Congress did not intend application of sections 202(a) and (b) to be limited to instances in which there is harm to competition. 

Alternatives:

USDA considered doing nothing, not challenging standing court decisions. However, courts are not unanimous in their findings. Further, several courts disagree with USDA’s position. Lack of clarity hinders the agency’s ability to consistently administer and enforce the Act.

Anticipated Costs and Benefits:

USDA estimate annual costs related to this rule of $9 million for the first five years, decreasing in subsequent years, for total ten-year costs of $66 million. We believe the primary benefit of the proposed regulation is the increased ability to protect producers and growers through enforcement of the Act for violations of section 202(a) and/or (b) that do not result in harm, or a likelihood of harm, to competition.

Risks:

Courts have recognized that the proper analysis of alleged violations of these two sections depends on the facts of each case. However, four courts of appeals have disagreed with USDA’s interpretation of the Act and have concluded that plaintiffs could not prove their claims under those sections without proving harm to competition or likely harm to competition.  There is a risk if future legal challenge of USDA interpretation of sections 202(c), (d), and (e) of the Act.