USDA Proposes Rule to Deter Packer Retaliation, Discrimination, and Deception

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The U.S. Department of Agriculture proposed a new rule on Monday to crack down on discrimination, retaliation, and deception by meatpackers under the Packers and Stockyards Act. USDA also committed $15 million to support state attorneys general investigating antitrust violations within the food sector. These announcements follow a series of efforts by the Biden administration to combat the corporate concentration in food production that has driven supply chain disruptions and price-fixing for consumers, farmers, and workers.

Farmers have long sought greater protections from the dominant meatpackers that buy and prepare their animals for grocery shelves and restaurants. Just four companies process 81% of all beef, 64% of all pork, and 53% of all chicken in the U.S., and the regional markets that farmers sell into are even more concentrated, according to USDA. Packers also exert varying degrees of direct control over livestock farmers through contracts.

These market dynamics leave farmers with very few options to access markets. Concentrated meatpacking companies abuse their power by intimidating and retaliating against farmers that engage in contract disputes, form associations, speak with regulators, or otherwise stand up to meatpacker mistreatment. “Retaliation is part of their business plan,” argues Amanda Hitt, director of the Government Accountability Project’s food integrity campaign which represents farmers with retaliation claims. Farmers that try to challenge meatpacker retaliation under the Packers and Stockyards Act (P&S Act) have had to prove that individual retaliation against them harmed competition across their entire industry, creating a significant barrier to justice.

Packers have also been accused of driving out Black farmers and other farmers of color. According to USDA’s 2017 census, more than 90% of contract livestock farmers were white. Even though the Packers and Stockyards Act bans “undue prejudices” by meatpackers, farmers of color have struggled to successfully bring discrimination claims under the P&S Act.

USDA’s proposed rule attempts to clarify and strengthen retaliation and discrimination prohibitions in the P&S Act. First, the rule would explicitly ban packers from retaliating against farmers for a range of actions, including communicating with the government, contesting weights, seeking expert third-party guidance, exploring new business relationships, or complaining about company practices. It also bars packers from retaliating against farmers that form associations to discuss concerns and share information, which Hitt says is critical to supporting whistleblowing and general free exchange between often isolated and intimidated farmers.

The rule would also ban meatpackers from discriminating against so-called “market vulnerable” producers, which the USDA defines as “membership in a group that has been subjected to, or is at heightened risk of, adversely differential treatment in the marketplace.” Notably, by relying on this new terminology, USDA’s proposed rule doesn’t name specific protected classes identified in civil rights laws and in a similar 2016 P&S Act proposal. However, USDA’s explanation of the rule says that a farmer’s race, ethnicity, gender, religion, sexual orientation, disability, or age could be a factor that makes them vulnerable to “adverse marketplace treatment.”

Beyond banning retaliation and discrimination, USDA’s rule identifies and prohibits specific deceptive practices that meatpackers use to mislead farmers, consumers, and competitors, such as bait-and-switch advertisements or contract offers that misrepresent farmers’ payment terms. It also states that packers cannot use a pretext or false reason for canceling a contract or denying farmers a certain type of contract, like a cash market sale.

Furthermore, failing to disclose information, or omission, also counts as deception under this rule, which means that packers are obligated to tell farmers about any changes in the formulas used to determine payments. USDA pointed to the example of a packer that tweaked the formula used to grade some 20,000 lots of hogs without notifying producers, shorting farmers a total of $1.8 million they would have received under the previous formula.

USDA also claims that secret payments, commercial bribes, or kickbacks that packers give to customers or farmers undermine producers’ and consumers’ ability to trust publicly posted prices and are therefore also deceptive. While most of the rule focuses on protections for farmers, USDA asserts that these limitations on deception will level the playing field for more honest meatpackers that struggle to compete with cheats.

Hitt says this rule could lower legal barriers for farmers seeking justice against meatpacker retaliation and discrimination. But she noted that USDA will also need to increase its enforcement of the law and commit to outreach to educate farmers about their rights to begin the long work of unwinding a culture of fear in the industry. “The enforcement is now the big thing,” Hitt says. “If this doesn’t have legs under it and if it doesn’t have teeth in it and farmers aren’t aware of it, then as a practical matter this is still a dead-in-the-water thing.”

In tandem with this new PSA rule, the Biden administration announced that it will make $15 million in funds from the Consolidated Appropriations Act available for state attorneys general to pursue investigations into agricultural antitrust violations. At the Midwest Forum on Fair Competition hosted by the Open Markets Institute and the Institute for Local Self-Reliance last Thursday, Minnesota Attorney General Keith Ellison spoke about the hard choices state attorneys general have to make with limited resources. The high cost of expert witnesses and antitrust litigation “makes it very difficult to hold [corporations] accountable,” Ellison said.

USDA’s program could help alleviate these resource constraints. It also aims to strengthen relationships between federal and state-level antitrust enforcers as investigations by state attorneys general can feed into federal actions.

What We’re Reading

• Smithfield and JBS will pay $75 million and $20 million, respectively, to settle class-action lawsuits alleging the corporations conspired to restrict pork production and raise prices. (Reuters and the Associated Press)

• A new investigation found that the world’s largest meatpacking corporation, JBS, used shell companies to avoid paying U.K. taxes on tens of millions in profits. (The Guardian and Lighthouse Reports)

• After sustained demonstrations and pressure from national Democratic leaders, California Governor Gavin Newsom signed a bill lowering barriers to unionization for farmworkers. Newsom previously indicated that he would veto the law. (Cal Matters)

• Despite rising prices, Iowa fertilizer sales in 2022 were up 14% from 2021 to their highest levels since 2014, raising concerns about overapplication and water pollution. (The Gazette)