Health Law

USDA Promotes Tighter Antitrust Rules

By Dan Flynn and Suzanna Schreck

On Friday the Obama administration proposed new antitrust rules for meat companies that reflect willingness by the USDA to shift the balance of power between farmers and processors to regulate an industry long dominated by a handful of corporate giants.

According to a national wire service, the rules would place the sharpest limits on meat companies since the Great Depression, drastically lowering the bar that farmers and ranchers must meet to sue companies whom they accuse of demanding unfairly low prices.

The rules would dictate how meatpackers buy cattle on the open market, and prohibit them from showing preference to big feed lots rather than buying from small producers.

They would also limit the control chicken companies have over the farmers who raise birds for them. The companies couldn't require farmers to take on debt, for example, to invest in chicken houses unless farmers were guaranteed to recoup 80 percent of the cost.

The law would make it easier to file suits under the Depression-era Packers and Stockyards Act by stating that farmers don't need to prove industry-wide anticompetitive behavior to file a lawsuit under the act.

"I think it's fair to say that what we're proposing is aggressive," Secretary of Agriculture Tom Vilsack said in an interview. "The reality is, the Packers and Stockyards Act has not kept pace with the marketplace ... Our job is to make sure the playing field is level for producers."

Vilsack said increasing consolidation has strengthened the bargaining power that big companies have over farmers, giving producers less of a share of the money consumers spend at the grocery store. With the number of hog farms dropping from 660,000 in 1980 to 71,000 now and the number of cattle farms falling from 1.6 million in 1980 to 950,000, the USDA indicated it is clear that farms are failing.

"The genesis of all of this starts with recognition that folks generally in rural America are struggling," Vilsack said. "Livestock producers in particular are no strangers to that struggle."

Peter Carstensen, a law professor at the University of Wisconsin who has studied agriculture competition law for decades stated that perhaps the most significant provision in the new rules is one that makes it easier for farmers to file suits under the Packers and Stockyards Act.

Farmers who now sue under the act must show a company has not only harmed them but that it has hurt competition in the overall meat industry, Carstensen said. The new law would change that requiring farmers only to show a company has engaged in "unfair" or "discriminatory" acts against the farmers. That sole provision could unleash a wave of litigation, and prompt courts to overturn earlier rulings.

"They're inviting the courts to reconsider their previous decisions," Carstensen said.

Vilsack believed courts had set the bar too high.

"That's tantamount to having your car stolen, but before the police investigate ... you have to prove that that theft impacts not just you, but all of your neighbors. Well, that just doesn't make sense to us," he said.

August 23 is the deadline for farmers and meat companies to submit comments on the rules. Vilsack said there is no set date for implementing them after that deadline.

Full post as published by Food Safety News on June 21, 2010 (boomark / email).