Cattlemen Call On USDA To Withdraw Damaging GIPSA Rules

Today, the National Cattlemen’s Beef Association called on USDA to withdraw the Grain Inspection, Packers and Stockyards Act interim final and proposed rules, collectively labeled with the misleading title, Farmer Fair Practices Rules. Craig Uden, NCBA president, said the rules stand to threaten market incentives, the quality of American beef the industry is known for, and will ultimately cost $954 million to the cattle industry.

“These rules are just as troubling as they were when USDA initially proposed them in 2010, after which Congress immediately stepped in to defund the rules, recognizing them as a flawed concept that limits producers’ ability to market their cattle and adding layers of crippling bureaucracy,” said Uden.

Two proposed rules and one interim final rule came out on December 20, 2016, one month before the end of the Obama Administration. The interim final rule regarding the scope of the Packers and Stockyards Act and the proposed rule regarding undue preference and unjust treatment have a direct negative impact on the cattle industry.

Alternative Marketing Arrangements reward cattle producers for producing the quality beef consumers demand. Under the interim final rule, USDA or a producer no longer needs to prove true economic harm but rather one only needs to say that he or she was treated “unfairly” to sue a packer or processor.

“This approach is counter to the decisions of seven federal courts of appeals and it is this change that ultimately makes the interim final rule a trial attorney’s dream and jeopardizes the Alternative Marketing Arrangements cattle producers utilize,” said Uden. “What incentive would a packer have to pay for superior cattle when they may be sued for rewarding quality? The industry will be forced back to treating all beef as commodity beef under a one-size-fits-all approach.”

Much like the interim final rule, this proposed rule introduces more litigation into the cattle marketing system. The unfair practices and undue preferences provisions in the proposed rule are extremely vague and so ambiguous that broad interpretation is expected and compliance will be difficult.

“Vague and ambiguous rules typically result in producers and each segment of the beef supply chain unable to determine which practices are prohibited or permissible,” said Uden. “The resulting uncertainty will simply lead producers to incur litigation costs to protect their respective marketing arrangements. Conversely, it provides other producers an opportunity to file a lawsuit to challenge such arrangements.”

Furthermore, GIPSA admits it is “unable to quantify the benefits” of these proposals.

“This is concerning since issuing rules with no discernable benefits should alone be grounds to withdraw the interim final rule and the proposed rule,” said Uden.

NPPC Asks USDA To Abandon GIPSA Rules

Citing grave concerns that they would “cause serious harm to the pork industry,” the National Pork Producers Council in comments submitted today said the U.S. Department of Agriculture should not finalize – or at least exempt pork producers from – regulations related to the buying and selling of livestock.

According to NPPC, the so-called Farmer Fair Practices Rules – an interim final rule and a proposed regulation – would “enable a torrent of lawsuits against members of the pork industry,” replace carefully negotiated contracts with standard terms that are unworkable, ignore crucial differences among the various sectors of the meat industry and raise serious constitutional concerns under the First Amendment.” The regulations were issued in the last weeks of the Obama administration by USDA’s Grain Inspection, Packers and Stockyards Administration (GIPSA).

“GIPSA’s one-size-fits-all approach would restrict livestock transactions, lead to consolidation of the livestock industry – putting farmers out of business – and increase consumer prices for meat,” said NPPC President Ken Maschhoff, a pork producer from Carlyle, Ill. “These regulations could impose staggering costs on the pork industry. The only people who would benefit from this heavy-handed government intrusion in the hog market are trial lawyers.”

NPPC is most concerned with the interim final rule, set to take effect next month, which would broaden the scope of the Packers and Stockyards Act (PSA) on the use of “unfair, unjustly discriminatory or deceptive practices” and “undue or unreasonable preferences or advantages.” Specifically, the regulation would deem such actions per se violations of federal law even if they didn’t harm competition or cause competitive injury, prerequisites for winning PSA cases.

USDA in 2010 proposed several PSA provisions – collectively known as the GIPSA Rule – that Congress mandated in the 2008 Farm Bill; eliminating the need to prove a competitive injury to win a PSA lawsuit was not one of them. In fact, Congress rejected such a “no competitive injury” provision during debate on the Farm Bill. Additionally, eight federal appeals courts have held that harm to competition must be an element of a PSA case.

The Farmer Fair Practices Rules, NPPC pointed out in its comments, “invites the courts to regulate the meat industry in ways that courts have repeatedly refused to do. This judicial regulation threatens to replace the innovative practices that have arisen over time out of specific market conditions and based on the needs of the industry as a whole.”

“Eliminating the need to prove injury to competition would prompt an explosion in PSA lawsuits by turning every contract dispute into a federal case subject to triple damages,” Maschhoff said. “The inevitable costs associated with that and the legal uncertainty it would create could lead to further vertical integration of our industry and reduce competition.”

An Informa Economics study found that the 2010 GIPSA Rule coupled with the interim final rule would cost the U.S. pork industry more than $420 million annually, with most of the costs related to the interim final rule’s “no competitive injury” provision.

 [Click here to read NPPC’s comments on the Interim Final Rule and here to read comments on the Proposed Rule.]