USDA guts anti-competition rules from Packers and Stockyard act, opening the door for powerful corporate agribusinesses to drive independent livestock producers out of business.
For over two decades, cattle producers across the seven-state WORC region have organized to challenge the unfair, anti-competitive practices of the heavily concentrated meatpacking industry. When there’s no competition in the market, prices paid to producers plummet and livestock producers can’t make a decent living. It wasn’t always like that. Beginning in the 1980s, the livestock industry became increasingly concentrated until now just four packers monopolize 84% of the market for fed cattle. Today, we have an opportunity to weigh in on the Trump Administration’s lackluster effort to address this issue.
The Packers & Stockyards Act of 1921
The Packers & Stockyards Act of 1921 (P&SA) was enacted to ensure open, competitive livestock markets to protect producers’ interests from the meatpackers’ exercise of excessive market power. At the time of its passage it was considered to be the strongest anti-trust law ever enacted. However, in the last few decades the law has not been effectively enforced and has been weakened through a number of court rulings. WORC and other organizations representing independent livestock producers, poultry growers, and consumers have been fighting for government action to stop price fixing and restore fair competition.
This proposed rule would make it very unlikely that farmers and ranchers could ever win a complaint against unfair and anticompetitive practices by meatpackers.
Congress worked to remedy this lack of enforcement in the 2008 Farm Bill. The Farm Bill required USDA to write rules to address the problems of price manipulation and unfair contracts as a first step to addressing the problems of the unfair livestock markets. There were several strong rules proposed during the Obama administration to be enforced by GIPSA (Grain Inspection Packers and Stockyards Administration), but these Vilsack-Obama rules were eventually gutted and killed by the Trump Administration. The enforcement agency itself was reorganized and no longer exists. One section of the rules, “Undue and Unreasonable Preferences and Advantages,” has been revived under the Trump Administration but it is weak and could set a terrible precedent. WORC is opposed to this new Trump-Perdue rule. The USDA is accepting comments on the proposed rule until March 13, 2020.
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Section 202(b) of the Packers and Stockyards Act specifies that it’s unlawful for any packer, swine contractor, or live poultry dealer to either make or give an undue or unreasonable preference or advantage to any particular person or locality in any respect. In administering this provision of the Act, the Secretary of Agriculture must determine whether the conduct of meatpacking corporations is a violation of the Act.
In summary, here is what the Trump-Perdue “Undue and Unreasonable Preferences and Advantages” rule says about how USDA will enforce the Packers and Stockyards Act:
The Secretary will consider one or more criteria when determining whether a packer, swine contractor, or live poultry dealer has made or given any undue or unreasonable preference or advantage to any particular person or locality in any respect in violation of section 202(b) of the Act. These criteria include, but are not limited to, whether the preference or advantage under consideration:
- Cannot be justified on the basis of a cost savings related to dealing with different producers, sellers, or growers
- Cannot be justified on the basis of meeting a competitor’s prices
- Cannot be justified on the basis of meeting other terms offered by a competitor
- Cannot be justified as a reasonable business decision that would be customary in the industry
What does this mean and why is it a failure?
The Perdue-Trump proposed rule leaves out clarity and specifics.
- The Perdue-Trump rule does not acknowledge that an action by a meatpacker does not have to be found to adversely affect competition across the industry in order to be illegal, as the Vilsack-Obama rule did. For example, a dishonest packer who fixes scales in order to pay producers less does not harm the entire industry, but should nonetheless be prosecuted and stopped.
- The Perdue-Trump rule does not define which practices are “unfair, unjustly discriminatory, or deceptive” – the Vilsack-Obama rule did, and would have made clear that actions by packers to retaliate against producers, or limit their legal rights, are illegal.
- The Vilsack-Obama rule listed a series of criteria for what would be considered undue or unreasonable preference or advantage, including treating one producer differently than another similar producer for an action that lawfully communicates or assert their rights, or on the basis of race, national origin, sex, religion, age, disability, etc.
- The Perdue-Trump rule suggests that there is no undue or unreasonable preference or advantage if there is a cost savings, if the packer is meeting a competitor’s price or terms, or can justify the act as a “reasonable business decision”.
Let us summarize the legal jargon: This proposed rule would make it very unlikely that farmers and ranchers could ever win a complaint against unfair and anti-competitive practices by meatpackers. It’s exactly what we’ve been fighting against!
Strong undue preference rules are vital to the livelihood of ranchers, poultry growers and feeders across our country. Without them, the trend of vertical integration, manipulated markets, and unfair contracts will persist, resulting in the destruction of any free market system we have left in the livestock and poultry sectors.
WORC and its allies have long advocated rules to address the harms caused by increased concentration and the loss of open, competitive markets for slaughter livestock. A properly functioning, open, public, competitive market would generate real-time price transparency and price discovery, which means fair prices for producers. As long as there aren’t properly functioning, open, public, competitively bid markets for livestock, it will be essential to regulate packer practices, as these proposed regulations should do. We urge the USDA to take additional steps designed explicitly to get packers to competitively bid for livestock in an open, public manner.
Strong undue preference rules are vital to the livelihood of ranchers, poultry growers, and feeders across our country. Without them, the trend of vertical integration, manipulated markets, and unfair contracts will persist, resulting in the destruction of any free market system we have left in the livestock and poultry sectors. In 2010, USDA reviewed 60,000 comments submitted (the majority of which supported the old rules). The Trump Administration has dropped those rules.
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