NSAC's Blog

Oklahoma Case Shows Why Farmers Need Strong GIPSA Rules

March 14, 2012

On March 6, the Oklahoma Supreme Court overturned a jury award of $10 million to poultry growers who had contracts to grow out broiler chickens for Tyson Foods.  The growers alleged that Tyson had given them unhealthy chicks and feed because the growers would not make costly modifications to their chicken houses that were not required by their contracts.

The case, James v. Tyson Foods, Inc, was filed in 2008.  This was before USDA issued regulations in 2011, under the authority of the federal Packers and Stockyards Act and the 2008 Farm Bill, that provide some modest protections for farmers raising poultry and livestock under contracts with processing companies.  The farmers claimed that Tyson had violated the Oklahoma Consumer Protection Act by providing the farmers with substandard birds and feed.  After the jury award, Tyson’s request for a new trial was refused by a lower court judge and the company then went to the Oklahoma Supreme Court.  That court ruled that the Oklahoma Consumer Protection Act does not cover the poultry growers because they are not strictly consumers who are buying products from Tyson.

The new GIPSA regulations do provide some limited protection for farmers who find themselves under the thumb of processing companies.  Under one provision of the 2011 regulations, if a company requires a poultry farmer to make additional capital investments not included in a production contract the company must also provide a reasonable opportunity for the farmer to recoup the investment over the life of the production contract.   But USDA failed to eliminate a judge-made doctrine that in addition to showing unfair and deceptive practices by a company, farmers also must show that the harms to them as individuals also harm competition for the agricultural products they produce.  In addition, the GIPSA rules do not address the issue of retaliation by companies or the unfair practice of providing substandard birds, feed and other inputs to farmers who complain about how they are treated in the vertically integrated contract system.

In the FY2012 Agricultural Appropriations bill, some provisions of the GIPSA proposed rule were blocked for a year by Congress.  Even the modest GIPSA regulation issued by USDA is currently under attack by some members of Congress, who are content to see large corporations manipulating agricultural markets and trapping farmers in one-sided contracts.  The current GIPSA regulations must be protected from these attacks.  And USDA should stand up to Congress and call for new stronger regulations to ensure that farmers and ranchers have fair terms in their dealings with meatpackers and poultry processors.

Categories: Competition & Anti-trust

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