As part of the USDA’s commitment to ensuring fair and competitive markets for the livestock, meat, and poultry industries, the USDA Agricultural Marketing Service published in the Federal Register a new proposed rule specifying four criteria the agency would consider when determining whether an undue or unreasonable preference or advantage has occurred in violation of the Packers and Stockyards (P&S) Act.
The P&S Act states that it is unlawful for a packer, swine contractor or live poultry dealer to make or give any undue or unreasonable preference or advantage to a seller or grower of livestock or poultry. An undue or unreasonable preference or advantage is an action that creates excessively favorable conditions for one or more persons, reducing opportunities for optimal pricing and business success for competitors.
The proposed criteria will serve as a basis to determine whether these differences are a reasonable and fair preference or advantage. Under the proposed rule, USDA would consider whether a preference or advantage meets one or more of the criteria below:
- cannot be justified on the basis of a cost savings related to dealing with different producers, sellers, or growers.
- cannot be justified on the basis of meeting a competitor’s prices.
- cannot be justified on the basis of meeting other terms offered by a competitor and,
- cannot be justified as a reasonable business decision that would be customary in the industry.
USDA would not be limited to considering only these four criteria, but could also take other factors into consideration as appropriate on a case-by-case basis. The proposed rule retains necessary flexibility while providing greater clarity around what may constitute a violation.
While many in the industry appreciate the step forward toward enhancing farmer protections, it may not be enough.
“After much delay, we are very pleased to see AMS finally moving forward on the undue preference rule,” said Candace Spencer, Policy Specialist at National Sustainable Agriculture Coalition. “Their proposed criteria focus solely on business justifications, which could be very helpful depending on how they are interpreted and whether or not they are actively enforced. One major concern we have about the criteria, however, is that they include language that would judge undue preference by whether or not such behavior can be considered customary for the industry. Unfair competition and undue preference has unfortunately become customary for the industry — that does not mean it should be endorsed. In order to ensure this rule is fair and effective for contract farmers, this criterion must be either deleted or heavily revised. We will be working closely with our membership to analyze these criteria and put forward a more detailed analysis next week.”