The United States Department of Agriculture's (USDA) Agricultural Marketing Service (AMS) has opened the 60 day comment period on its proposed rule to amend regulations under the Packers and Stockyards Act of 1921 (7 U.S.C. 181et seq.) (hereafter "PSA") that address prohibited unfair practices. The comment period lasts until August 27, 2024.
Under Section 202 of the PSA, unfair practices refer to actions by meat and poultry packers that harm the marketplace or directly harm its participants, such as termination of contracts without opportunity to cure alleged default, unreasonable non-delivery of birds to a contracted producer, as well as required capital investments during a contract. The proposed rule seeks to clarify definitions of such practices, and is informed by cases that have come before the USDA for adjudication. Over the course of its 102-year history, the PSA has regulated and remedied principles and cases involving prompt payment, standardized weights and measures, sufficient bonding and solvency, and commercial bribery.
The proposed regulations deal generally with the standards of proof of injury to competition and economic interests that parties must show to invoke protections under the PSA. According to USDA's review of PSA past litigation, United States Circuit Courts of Appeal have developed and applied differing standards of proof in litigation involving alleged PSA violations. According to the preamble to the proposed rule, the new regulations will "establish clearer tests and frameworks with which to apply section 202(a)'s prohibition on unfair practices, provide guidance to those hearing enforcement cases as to what unfairness means, and, in circumstances when competition is relevant, provide a framework for assessing the impact of a practice on the competitive environment." The changes provide clearer guidance on what types of evidence injured parties may introduce to prove violations, as well as the nature of evidence offered by integrators in defense.
The comment period on the proposed rule amendments opened on June 28, 2024 and will remain open until August 27, 2024. Here is the Federal Register window to supply comments.
Below is the proposed amended § 201.308 (Unfair practices and devices.) (emphasis added) (a) Unfair practices with respect to market participants. An act by a regulated entity with respect to one or more market participants is an unfair practice for the purposes of section 202(a) of the Packers and Stockyards Act, 1921 as amended and supplemented (7 U.S.C. 192(a)) if the act causes or is likely to cause substantial injury to one or more market participants, which the participant or participants cannot reasonably avoid, and which the regulated entity that has engaged in the act cannot justify by establishing countervailing benefits to the market participant or participants or to competition in the market that outweighs the substantial injury or likelihood of substantial injury.(b) Standards with respect to market participants. When assessing whether a practice under paragraph (a) of this section causes or is likely to cause substantial injury, and therefore the Secretary must halt the practice, the Secretary may consider:
(1) The extent to which the practice may impede or restrict the ability to participate in a market, interfere with the free exercise of decision-making by market participants, tend to subvert the operation of competitive market forces, deny a covered producer the full value of their products or services, or violates traditional doctrines of law or equity.
(2) The potential magnitude of the injury. An injury may be substantial if it causes significant harm to one market participant or if it imposes a small harm to many market participants.
(3) The extent to which the producer would have to take unreasonable steps to avoid injury. An injury is not reasonably avoidable solely because the practice has been disclosed. A market participant is not required to take unreasonable steps, such as exiting the market or making unreasonable additional investments or efforts, to avoid the harm.
(c) Unfair practices with respect to markets. A practice is unfair for the purposes of section 202(a) of the Packers Stockyards Act, 1921, as amended and supplemented (7 U.S.C. 192(a)) if it is a collusive, coercive, predatory, restrictive, deceitful or exclusionary method of competition that may negatively affect competitive conditions.
(d) Standards with respect to markets. When assessing whether a practice poses or is likely to pose a threat to markets under paragraph (c) of this section, and therefore the Secretary must halt the practice, the Secretary may consider the following:
(1) The extent to which the practice impedes or restricts the ability to participate in a market, tends to subvert the operation of competitive market forces, interferes with the free exercise of decision-making by market participants, violates traditional doctrines of law or equity, or has indicia of oppressiveness, such as evidence of anticompetitive intent or purpose, or absence of an independent legitimate business reason for the conduct.
(2) The extent to which the practice tends to foreclose or impair the opportunities of market participants, reduces competition between rivals, limits choice, distorts or impedes the process of competition, or denies a market participant the full value of their products or services.
