White House proposing new rules for meat companies

by Associated Press

Published: June 18,2010

Tags: agriculture, antitrust, grocers, meat

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

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 feedlots 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 to invest in chicken houses, for example, unless farmers were guaranteed to recoup 80 percent of the cost.

The law would also make it easier to file suits under the Depression-era Packers and Stockyards Act by stating that farmers don’t need to prove industrywide 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 with The Associated Press. “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 an ever-decreasing share of the money consumers spend at the grocery store. As a result, farms are failing, with the number of hog farms dropping from 660,000 in 1980 to 71,000 now. The number of cattle farms has fallen from 1.6 million in 1980 to 950,000.

“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.”

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, said Peter Carstensen, a law professor at the University of Wisconsin who has studied agriculture competition law for decades.

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, making it clear that the law only requires a farmer to show a company has engaged in “unfair” or “discriminatory” acts against the farmer. That sole provision could unleash a wave of litigation, and prompt courts to overturn earlier rulings, Carstensen said.

“They’re inviting the courts to reconsider their previous decisions,” he said.

Vilsack said 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.

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

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