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This final rule would supplement a recent revision to regulations issued under the Packers and Stockyards Act (Act) (7 U.S.C.181 229c) that provided criteria for the Secretary to consider when determining whether certain conduct or action by packers, swine contractors, or live poultry dealers is unduly or unreasonably or advantageous. Supplemental amendments clarify the conduct the Department considers unfair, preferential unjustly discriminatory, or deceptive and a violation of sections 202(a) and (b) of the Act. The rule also clarifies the criteria and types of conduct that would be considered unduly or unreasonably preferential, advantageous, prejudicial, or disadvantageous and violations of the Act.

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, unjustly discriminatory, or deceptive and a violation of section 202(a) of the Act, regardless of whether such action harms or is likely to harm competition.  The rule also clarifies the criteria and/or types of conduct that would be considered unduly or unreasonably preferential, advantageous, prejudicial, or disadvantageous and a violation of section 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 and prejudices.  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, regardless of whether such violations harm or are likely to harm competition.   

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, unjustly discriminatory, or deceptive and, therefore a violation of the Act.  

Alternatives:

AMS considered taking no further action, allowing 100 years of case law to determine precedent in making determinations about whether certain behaviors violate the Act. AMS also considered revisiting the withdrawn 2016 rulemaking approach that would have identified criteria with which to determine whether certain behaviors violate the Act.

Anticipated Costs and Benefits:

USDA estimates first-year costs associated with this rule to be $517 thousand, with decreased costs each year thereafter, resulting in a ten-year total cost of $2.88 million. AMS expects this rule to benefit all segments of the industry, providing greater clarity about what would be considered violations of the Act. AMS expects this rule, coupled with a concurrent rule on the scope of the Act, to strengthen enforcement of the Act, resulting in fairer and more competitive markets for producers and poultry growers

Risks:

Industry is divided about adding lists or examples of specific prohibited conduct to the regulations.  Some argue such lists would inhibit freedom to forge contracts that fit individual situations, while others contend greater specificity is required so that affected parties can more readily identify violative behavior.  Industry is also split on the question of whether identified prohibited behaviors must be found to harm or likely harm competition to be considered violations of the Act.  AMS expects to resolve some of the controversy by being proactive and transparent with the industry to allow for critical discussions and decisions on the rule.