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This action proposes to revise regulations issued under the Packers and Stockyards Act (Act) (7 U.S.C.181 229c), providing clarity regarding conduct that may violate the Act. Revisions are intended to support market growth, assure fair trade practices and competition, and protect livestock and poultry growers and producers. The action addresses long-standing issues related to competitiveness and showings of harm or likely harm to competition.

Statement of Need:

Revisions to regulations pertaining to the Packers and Stockyards Act (Act) clarify the types of conduct by packers, swine contractors, or live poultry dealers that the Agricultural Marketing Service (AMS) considers unfair practices or undue preferences and a violation of sections 202(a) or 202(b) of the Act. 

Sections 202(a) and 202(b) of the P&S Act are broadly written to prohibit unjustly practices and undue preferences.  Industry members have complained that the regulations effectuating the Act are too vague and do not provide adequate clarity about the types of conduct or action that are likely to violate the Act.  This rule is needed to provide essential clarity about what would be considered violations of the Act.   

Revisions to regulations pertaining to the Packers and Stockyards Act (Act) that would also 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 or as they may relate to harm or likely harm to competition as such terms were contemplated under the Act. Such revisions reflect the Department of Agriculture’s (USDA) longstanding position in this regard.

Summary of the Legal Basis:

The Packers and Stockyards Act (Act) authorizes AMS to determine if conduct within the poultry and livestock industries are unfair practices or undue preferences and, therefore a violation of the Act.  

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. 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.