Takeaways from the National Rural Grocery Summit, USDA Proposes Another Packers and Stockyards Rule

Rural Grocers Share Challenges and Innovations at Bi-Annual Conference

On Monday and Tuesday, independent grocery store owners, academics, suppliers, and policymakers gathered in Montgomery, Alabama, for the national rural grocery summit. Kansas State University’s Rural Grocery Initiative hosts the event every other year as part of broader efforts to support rural food access. The Hunger Solutions Institute at Auburn University co-hosted this year’s summit.

At the event, 35 different panels and two keynote speakers covered a wide range of topics such as how smaller rural grocers can better use data and digital tools, work with local producers, and adopt cooperative business models.

Single location grocery stores and small independent chains still outnumber chain stores in rural counties, but they only capture 18% of rural retail food sales, according to USDA data. Supercenters (i.e., Walmart) and dollar stores have expanded rapidly in rural areas since the 1990s. One recent study found independent rural grocery stores are 5% more likely to shut down after a dollar store opens in their census tract. For small communities that want a full-service grocery store, dollar stores also deter full-service grocers from setting up shop, said Gerry D’Alessandro the CEO of Fresh Value, an independent grocery chain in Alabama.

Even though independent grocers offer far healthier and fresher foods, dollar stores can draw business with their lower prices for shelf-stable goods. Karen Gardner with the Center for Science in the Public Interest argued that Dollar General’s poor nutrition standards and lack of staple food offerings could constitute an unfair method of competition.

Dollar stores and Big Box stores can also procure money-making products for much less, even when independents pool their purchasing power to buy in bulk, because of their large national buyer power over suppliers. The Robinson-Patman Act technically bans suppliers from offering unjustified deals to their largest customers. However, antitrust enforcers haven’t used the law in decades.

Independent grocers aren’t giving up. At the summit, retailers and researchers highlighted dozens of innovative rural grocery models, including vertically integrated farmers’ cooperatives, membership-based self-service stores, and wholesale purchasing partnerships. Speakers, such as John Ross, the president and CEO of IGA, emphasized how independents can play to their competitive advantages over national chains, namely, their ability to source local foods and respond to community needs.

“What people want is a farmers’ market that’s open every day and has grocery store prices. That’s what a well-run independent is,” Ross said.

To help more grocers in rural areas get off the ground, expand existing stores, and build rural food supply chains, the Department of Agriculture announced that it will distribute $60 million in loans, grants, and technical assistance through the Healthy Food Financing Initiative over the next five years. These funds will help finance retail and supply chain projects in underserved communities such as store renovations, equipment purchases, land acquisition, and feasibility studies.

USDA Defines “Unfair Practices” Under the Packers and Stockyards Act

The U.S. Department of Agriculture (USDA) proposed a new rule on Tuesday that could make it easier for farmers to sue meatpackers for unfair and deceptive tactics. The proposal weighs in on a contentious legal debate that has spanned numerous lawsuits and previous rulemaking attempts.

Since the 1960s, the Supreme Court and lower federal courts have severely weakened the Packers and Stockyards Act, which stood as farmers’ and ranchers’ primary defense against collusive, unfair, deceptive, and abusive conduct by powerful meatpackers. Congress passed this law in 1921 to regulate the monopolistic “meat trusts” of the day, which closely controlled the sale, slaughter, and transport of U.S. meat.

The law sought to protect farmers and ranchers from abuses of market power and general cheating by meatpackers by banning unfair or deceptive practices, “undue or unreasonable” preferences by packers, and monopolistic tactics like carving out territory between competitors. At the time, members of Congress said the law went even further to rein in corporate domination than similar antitrust statutes such as the Sherman Act or Federal Trade Commission Act.

However, over the years judges have read restrictive standards into the law to the benefit of corporate defendants. Some (though not all) federal circuit courts have ruled that farmers or federal enforcers must prove that a meatpacker’s actions interfered with the competitive process or “harmed competition” to prove they violated the Packers and Stockyards Act. There is no consensus on what harm to competition is, though it implies a broader impact across an industry.

This competitive injury standard doesn’t make sense for farmers seeking justice for personal injuries. Even when farmers have been able to show that packers violated their contracts, offered sweetheart deals to company insiders, or unjustifiably terminated an agreement, courts have denied their claims because they did not harm industry-wide competition.

USDA has long argued that farmers do not need to prove harm to competition to hold packers accountable to certain parts of the Packers and Stockyards Act, namely, the prohibitions on unfair and deceptive practices and undue preferences.

An Obama-era proposal attempted to codify USDA’s position on both unfair practices and undue preferences, while this new proposal only takes up the former. The proposal defines two types of unfair practices: those that harm individuals and those that harm the market. USDA created these criteria based on a comprehensive review of the legislative history of the Packers and Stockyards Act and the statute itself.

For individuals, USDA says an unfair practice by packers is something that harms or would likely harm a farmer that they cannot avoid and that has no “countervailing benefit” to the farmer. This harm could be short payment, barriers to market access, or restrictions on independent decision-making. These new criteria give farmers a pathway to allege that packers violated the Act without showing harm to the entire market.

Unfair practices in the broader market would cover collusive, predatory, deceitful, or exclusionary dealings that interfere with a fair competitive process. USDA will look for meatpacker tactics that limit choice, reduce competition between rivals, shut out competitors, or deny farmers fair compensation. This covers conduct like price-fixing and divvying up territory, like the Sherman Act does. It also includes unfair methods of competition that would violate the FTC Act, such as oppressive exclusive contracts, commercial bribery, or general law-breaking.

Ultimately, successful implementation of this rule will require judges to give deference to USDA’s interpretation of the law over some circuit courts’ interpretation. The rule will also face opposition and potentially a legal challenge from meat industry trade groups.