Agricultural News
National Cattlemens Beef Association States Serious Concerns in Comments Submitted to USDA on GIPSA Rule
Fri, 19 Nov 2010 6:17:50 CST
The National Cattlemen's Beef Association has submitted comments to USDA on behalf of its membership, concerning the proposed rule on livestock and poultry marketing, as presented by USDA's Grain Inspection, packers and Stockyards Administration. NCBA vice president of government affairs, Colin Woodall, says comments, as submitted, represent a thorough review of the potential consequences the proposed rule will have on the U.S. beef cattle industry.
You will find the Summary of the NCBA Comments below- click here to go to the page where you can download the entire comments with all documentation that has been submitted to USDA by the NCBA.
Summary of NCBA Comments on Proposed GIPSA Rules
Background
The National Cattlemen's Beef Association ("NCBA") has been working with counsel, economists and its internal
committees to respond to the proposed rules published by GIPSA in the Federal Register on June 22, 2010 (the
"Proposed Rules"). Comments are due on November 22, 1010. The NCBA believes the proposed rules exceed the
authority granted GIPSA by Congress, are arbitrary and capricious and have not been properly promulgated.
The beef industry is the largest livestock and meat production industry in the United States. Between 1980 and 1998,
demand for beef decreased by fifty percent. This dramatic decrease in consumer demand for beef is unique in the meat
industry. Competing protein sources (i.e., pork and poultry) have not suffered such declines. In order to stimulate
demand, the beef industry has improved genetics, adopted new technologies and improved animal nutrition to provide
beef products preferred by consumers. An essential element in the industry's response to decreased demand was closer
coordination with packers so as to be responsive to consumer demand. Such coordination is made possible through the
use of marketing agreements and other alternative marketing arrangements.
By combining concepts of marketing agreements with production contracts, placing huge regulatory burdens on the use
of marketing agreements, redefining terms to eliminate business justifications defenses to allegations of market place
improprieties, and overt attempts to rewrite the PSA and judicial precedent GIPSA has created a regulatory quagmire
that will stifle beef trade, placing beef producers at a competitive disadvantage to other protein suppliers.
Overview of Comments
The NCBA has serious concerns relating to many of the Proposed Rules. The Proposed Rules adopt a view of the Packers
& Stockyards Act ("PSA") that has been uniformly rejected by the federal appellate courts. The Proposed Rules have
been offered by GIPSA despite the recent rejection by Congress of several policies inherent in them. And the Proposed
Rules have been offered with no meaningful analysis of their impact on the beef industry and without concern for their
impact on producers, packers, retailers or consumers.
Comments
A. GIPSA Lacks Authority to Declare That No Showing of Injury to Competition is Necessary to Establish a
Violation of Sections 202(a) and (b) of the PSA.
The PSA and the 2008 Farm Bill contain limited authorizations to GIPSA to issue Proposed Rules. GIPSA has
exceeded its authority under both. The federal courts of appeals have held consistently and correctly that proof
of injury to competition or the likelihood thereof is a prerequisite to finding a violation of Sections 202(a) and
(b). GIPSA does not have authority to override these unanimous appellate court interpretations of the statute
which are consistent with long-standing antitrust policy.
"Competitive injury," as defined by GIPSA, does not satisfy the injury to competition requirements of the
statute because it rejects the values and methodology of the national competition policy as reflected in the
antitrust laws, and would create differing judicial and administrative enforcement schemes for claims under
Section 202(a).
In addition, the Proposed Rules are invalid because Congress clearly intended to require a showing of injury to
competition to establish a claim under section 202(a) of the PSA.
By rewriting the statute and caselaw, the Proposed Rules open the industry to litigation by the government and
private citizens which will chill innovation, and investment in the industry.
B. The Proposed Rules are Arbitrary and Capricious.
The Proposed Rules hinder, rather than advance, the purposes of the PSA in numerous ways. The Proposed
Rules will:
1. Limit marketing options available to producers due to packers' concerns about increased litigation.
2
a. Alternative marketing agreements (AMAs) are contracts for the sale of livestock. The
proposed rules incorporate concepts of sales into production contracts
b. AMA's have resulted in efficiencies in the beef industry and money to producers. AMAs
are the tools that producers use to capture returns on innovation and investment in improved
genetics. Premiums range from $24 to $190 per head with an average of $72.00
c. Proposed rules require justification of any deviation from a "standard price". There is no
definition of "standard price". Risk of litigation for violation of reporting requirements will
force packers to greatly reduce or eliminate premiums. Resulting in losses to producers and
consumers.
2. Require additional record-keeping
a. Recordkeeping costs money and ignores that producers are competing for market share.
b. Requiring reporting of "samples" of contracts publicizes private information of producers.
c. Requiring justification of price variations from standard prices will be disruptive to the
market. The regulation essentially prohibits market movement and is especially disruptive
to the cash or spot market.
3. No provision of the PSA provides authority for GIPSA to require packers to provide copies of all
marketing contracts. Beef producers are not regulated entities under the PSA yet their confidential
business information will be required to be reported to PSA.
4. Numerous provisions of the Proposed Rules are unreasonable because their vagueness makes
compliance impossible. As a result, packers are left to speculate without any guidance from GIPSA
on how to comply with the rules.
5. The Proposed Rules would convert every breach of contract claim in the livestock industry into a
PSA claim without any statutory authority to do so.
C. The Proposed Rules Violate the Data Quality Act and GIPSA's Own Implementing Guidelines for the Data
Quality Act.
1. GIPSA has failed to comply with Executive Order 12866 and the Data Quality Act due to its failure
to base the Proposed Rules on reliable data and information.
2. The Proposed Rules are not supported by adequate record evidence or economic support. Numerous
members of Congress have called upon the agency to provide economic support for the Proposed Rules. GIPSA
has declined to do so. More significantly, the Proposed Rules do not recognize GIPSA's own industry studies
and subsequent peer-reviewed economic studies.
Conclusion
The NCBA respectfully requests GIPSA withdraw those portions of the Proposed Rules which will have an immediate
and detrimental impact upon the beef industry. In particular: those provisions which
(a) eliminate the requirement a plaintiff establish injury to competition in order to prove a claim under Section
202 of the PSA;
(b) suggest the factors which may establish an undue or unreasonable preference under Section 202(b) of the
PSA;
(c) prohibit sales of livestock by a packer to another packer or its affiliates; and (d) require the production and
publication of all beef marketing and production contracts.
Before issuing future rules pursuant to the provisions of the Farm Bill, the NCBA requests GIPSA engage in substantive
and meaningful discussions with producers, packers, retailers and consumers so as to ensure any such future rules are
workable in the beef industry, recognize legitimate business reasons for marketing agreements and production contracts,
do not stifle innovation in the industry, and are consistent with existing legal authority. In addition, the NCBA requests
GIPSA provide all participants in the beef industry a thorough and comprehensive practical, legal and economic analysis
of the costs and benefits of such rules. Following such discussions and analysis, the NCBA requests that GIPSA issue
separate, appropriate, clear and legally supportable rules, consistent with Congressional grants of authority, for each of
the poultry, cattle and hog industries, recognizing that each segment of the meat industry is unique.
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