June 17, 2014
The full House may soon be considering its FY 2015 agriculture appropriations bill (HR4800) that contains a legislative rider that is anti-farmer and anti-free market. In addition to the two specific issues discussed in the previous blog post that are the topic for an important floor amendment, the GIPSA rider contained in the House bill also blocks USDA from finalizing many other common sense rules and attempts to force the repeal of several rules that have already been finalized by USDA. This post explains in more detail the common sense rules that the GIPSA rider is attempting to block.
As explained in the previous post, Congress as part of the 2008 Farm Bill directed USDA to write rules that could be used to enforce key provisions of the Packers and Stockyards Act. USDA issued proposed rules in 2010, and since that time, the big meat and poultry corporations have tried to keep them bottled up via legislative riders to the annual agriculture appropriations bill. The balance of this post summarizes some of the key provisions that would be blocked by the rider.
Right to a Jury Trial — The House GIPSA rider stops a proposed rule that ensures that farmers can access a jury trial when there is a dispute over their contract. One relatively new tactic used by some poultry companies to make it more difficult for farmers to prevail in court when defending themselves against company abuses is to add a provision to their contracts that prohibits them from having a jury trial and allowing only judges to settle contract disputes. Juries are often more sympathetic than judges to farmers’ plights in dealing with powerful meatpackers and poultry companies.
Ensuring Fair and Transparent Contracts — The rider stops a proposed rule that requires livestock and poultry companies to provide sample contracts to USDA while still protecting their confidential business information. This transparency requirement will help inform the public and farmers about what kinds of contracts exist across the country. This helps farms better understand the contract being presented to them and be able to better identify a deceptive or fraudulent legal requirement.
Cracking Down on Manipulating Pay — The rider stops a proposed rule that requires companies using a so-called “tournament system” to pay the same base pay to growers raising the same type or kind of animal. In theory, these “tournament systems” base a farmer’s pay upon how well their animals convert feed into weight while in the farmer’s care. However, in practice within the livestock sector, the tournament system is quite a misnomer, because the word “tournament” suggests a fair competition based on the skill and effort of the competitors.
But in the case of the poultry grower payment system, farmers are paid based on things that are completely out of their control. The two factors that determine the farmer’s feed-conversion success — chick quality and feed quality — are completely controlled by the poultry companies and out of the control of the farmer. Some noted economists have described this system of payment as not being a tournament at all, but rather a “rigged lottery.”
However, regardless of the actual merits of the tournament system, the proposed rule that is halted by this GIPSA rider prevents livestock and poultry companies from manipulating the tournament system by providing different growers in the same system with different types of animals that convert feed at different rates.
Prohibiting Undue Price Preferences — The Packers and Stockyards Act prohibits preferential pricing for larger farms or company-preferred producers. Under USDA’s proposed rules, independent family farmers who meet the same quality standards as mega feedlots must be paid the same price. Those standards must be transparent and made publicly available. The proposed rule would have gone a long way to end the long-standing practice of undue and unjustified price preferences for industrial scale factory farms that have caused substantial harm to markets, small and mid-sized farmers, and rural communities. The rider is preventing USDA from perfecting the proposal and issuing a final rule that would make the law enforceable.
Reasonable Standards for Showing Farmer Injury — The rider also stops a proposed rule that clarifies that a farmer does not need to show a likelihood of an injury to competition to the entire livestock and poultry industry in order to show that they have been harmed by the anti-competitive, unfair, or deceptive practices of a livestock or poultry company. This rule closes a loophole that some bad court decisions have created.
Forcing individual farmers to show a likelihood of an injury to competition in the entire industry is a nonsensical standard in the context of the law, because if a farmer is able to demonstrate that they have been defrauded or actively deceived by the company that controls their contract or the marketing of their product, it makes no sense to also require them to demonstrate that that fraud has impacted the entire poultry or beef sector. This would be the same as saying that if someone’s house has been robbed they would need to prove in court that that robbery has negatively impacted the entire city in which they lived.
Reasonable Notice of Suspension of Birds — The rider also attempts to rescind an already final rule that puts poultry companies on notice that they should be providing farmers with at least 90 days notice before suspending the delivery of birds to their farms. Farmers make large capital investments based on the expectation of receiving animals from the livestock or poultry company they have a contract with. A requirement for a minimal amount of notice for the suspension of deliveries is common sense.
Protections for all Poultry Producers — There have long been two tracks to poultry production. The production of broilers has always clearly been covered by the Packers and Stockyards Act, but there has been confusion about whether the law applies to poultry growers who grow breeder hens, laying hens, or pullets (young chicks). The proposed rule would have brought long overdue clarity to the law, ensuring that it applies to all aspects of poultry production other than the egg industry. The rider attempts to force USDA to rescind this important clarification.
As summarized in our first post, the 2008 Farm Bill took important first steps in the modernization and enforcement of the Packers and Stockyards Act. That decision was reconfirmed by Congress when it passed the 2014 Farm Bill and struck a provision added in the House to eliminate the 2008 provision and block nearly every action that the Department could take to enforce the law.
Sadly, a few giant companies continue to believe they nonetheless rule the roost, and are back at it again with a new version of the anti-farmer and anti-free market provision known as the GIPSA rider, an attempt to legislate on an appropriations bill and emasculate the Packers and Stockyards Act. The Chair of the House Agriculture Appropriations Subcommittee agreed to put the rider in the House version of the annual spending bill for USDA.
The next step in this drama will occur when the full House takes up the bill, likely a few weeks from now, and gets a chance to vote on an amendment sponsored by Rep. Chellie Pingree (D-ME), herself a farmer, to eliminate two of the most egregious aspects of the rider. To take action in defense of farmers’ rights, see our alert on the Pingree amendment.
The next step after that will be when the House and Senate versions of the bill are melded into a single, final bill in the House-Senate conference committee. At that point, it is our hope that the Senate position will prevail — just as it did in the House-Senate conference on the 2014 Farm Bill — and the rider will be dropped.
Categories: Competition & Anti-trust