# 89 FR 53886: Fair and Competitive Livestock and Poultry Markets

> Federal · Regulations · In force

URL: https://www.frixlaw.com/law-library/statutes/FR_PRORULE_2024-14042

## Section

- **Citation:** 89 FR 53886
- **Heading:** Fair and Competitive Livestock and Poultry Markets
- **Jurisdiction:** Federal
- **Kind:** Regulations
- **Status:** In force
- **Text as of:** August 14, 2026
- **Source:** Compiled text
- **Location:** Federal Register / Vol. 89 / 89 FR 53886

## Text

DEPARTMENT OF AGRICULTURE Agricultural Marketing Service 9 CFR Part 201 [Doc. No. AMS-FTPP-21-0046] RIN 0581-AE04 Fair and Competitive Livestock and Poultry Markets AGENCY:
Agricultural Marketing Service, Department of Agriculture.

ACTION:
Proposed rule.

SUMMARY:
The United States Department of Agriculture's (USDA or Department) Agricultural Marketing Service (AMS) proposes to amend the regulations under the Packers and Stockyards Act of 1921 (the P&S Act or the Act) to clarify the unfair practices that the P&S Act prohibits. The proposed rule would define unfair practices as conduct that harms market participants and conduct that harms the market. Combined, these comprehensively define the contours of “unfair practices” under the P&S Act. The purpose of this proposed rule is to promote fair and competitive markets in the livestock, meats, poultry, and live poultry markets.

DATES:
Comments must be received by August 27, 2024.

ADDRESSES:
Comments must be submitted through the Federal e-rulemaking portal at https://www.regulations.gov and should reference the document number and the date and page number of this issue of the Federal Register . AMS strongly prefers comments be submitted electronically. However, written comments may be submitted ( i.e., postmarked) via mail to Docket No. AMS-FTPP-21-0046, S. Brett Offutt, Chief Legal Officer, Packers and Stockyards Division, USDA, AMS, FTPP; Room 2097-S, Mail Stop 3601, 1400 Independence Ave. SW, Washington, DC 20250-3601. All comments submitted in response to this proposed rule will be included in the record and will be made available to the public. Please be advised that the identity of individuals or entities submitting comments will be made public on the internet at the address provided above. Parties who wish to comment anonymously may do so by entering “N/A” in the fields that would identify the commenter. Pursuant to 5 U.S.C
mitted in response to this proposed rule will be included in the record and will be made available to the public. Please be advised that the identity of individuals or entities submitting comments will be made public on the internet at the address provided above. Parties who wish to comment anonymously may do so by entering “N/A” in the fields that would identify the commenter. Pursuant to 5 U.S.C. 553(b)(4), a plain language summary of this proposed rule is available on https://www.regulations.gov in the docket for this rulemaking.
FOR FURTHER INFORMATION CONTACT:
S. Brett Offutt, Chief Legal Officer/Policy Advisor, Packers and Stockyards Division, USDA AMS Fair Trade Practices Program, 1400 Independence Ave. SW, Washington, DC 20250; Phone: (202) 690-4355; or email: S.Brett.Offutt@usda.gov.

SUPPLEMENTARY INFORMATION:
Table of Contents
I. Authority II. Purpose of This Rulemaking A. Unfair Practices and Prior Rulemakings B. Statutory Language of the Act C. Legislative History of the Act D. Court Decisions III. The Proposed Rule A. Proposed § 201.308(a) and (b) B. Evaluation of Potential Injury to Market Participants C. Proposed § 201.308(c) and (d) D. Evaluation of Potential Injury to the Market E. Contracts F. Protected Parties IV. Severability V. Request for Comments VI. Regulatory Analysis A. Paperwork Reduction Act B. Executive Orders 12866, 13563, and 14094 C. Regulatory Impact Analysis D. Regulatory Flexibility Analysis E. Executive Order 13175—Consultation and Coordination With Indian Tribal Governments F. Executive Order 12988—Civil Justice Reform G. Civil Rights Impact Analysis H. E-Government Act I. Unfunded Mandates Reform Act I. Authority
Section 407 of the Act (7 U.S.C. 228) provides that the Secretary “may make such rules, regulations, and orders as may be necessary to carry out the provisions of this Act.” The Secretary has delegated the responsibility for administering the P&S Act to AMS
Executive Order 12988—Civil Justice Reform G. Civil Rights Impact Analysis H. E-Government Act I. Unfunded Mandates Reform Act I. Authority
Section 407 of the Act (7 U.S.C. 228) provides that the Secretary “may make such rules, regulations, and orders as may be necessary to carry out the provisions of this Act.” The Secretary has delegated the responsibility for administering the P&S Act to AMS. Within AMS, the Packers and Stockyards Division (PSD) of the Fair-Trade Practices Program has responsibility for the day-to-day administration of the Act. The current regulations implementing the Act are found in title 9, part 201, of the Code of Federal Regulations (CFR). Based on the authority Congress delegated to the Secretary to administer the P&S Act, AMS is proposing this rule to amend 9 CFR part 201 to specify the practices that are unfair and in violation of the P&S Act.
Prior to this rulemaking, the decisions of USDA's Judicial Officer, 1 acting for the Secretary, have comprised the bulk of USDA's interpretation of the meaning of “unfair” under the P&S Act, and the Judicial Officer's final decisions have the same force as regulation. 2 Those decisions make clear that “harm to competition can be proven by showing harm to competitors; . . . the Packers and Stockyards Act does not require that the person harmed be a direct competitor of the person causing the harm, viz., it would be a violation of the Packers and Stockyards Act if it were shown that a packer caused harm, which the Packers and Stockyards Act is designed to prevent . . . .” 3 Although, the Federal courts have not expressly rejected the Judicial Officer's overall interpretation of the Packers and Stockyards Act, courts have inconsistently applied the Judicial Officer's decisions. As a result, AMS proposes this regulation to provide a clear interpretation and promote consistency and predictability in its application of the law.
1 The position of Judicial Officer was established pursuant to the Act of April 4, 1940 (7 U.S.C
d the Judicial Officer's overall interpretation of the Packers and Stockyards Act, courts have inconsistently applied the Judicial Officer's decisions. As a result, AMS proposes this regulation to provide a clear interpretation and promote consistency and predictability in its application of the law.
1 The position of Judicial Officer was established pursuant to the Act of April 4, 1940 (7 U.S.C. 450c-450g); Reorganization Plan No. 2 of 1953, 18 FR 3219 (1953), reprinted in 5 U.S.C. app. at 1490 (1994); and sec. 212(a)(1) of the Department of Agriculture Reorganization Act of 1994 (7 U.S.C. 6912(a)(1)).
2 See, e.g., City of Arlington, Tex. v. F.C.C., 668 F.3d 229, 240 (5th Cir. 2012), aff'd, 569 U.S. 290 (2013) (“It is well-established that agencies can choose to announce new rules through adjudication rather than rulemaking.” ( citing NLRB v. Bell Aerospace Co., 416 U.S. 267, 294 (1974))); Mobil Exploration & Producing N. Am., Inc. v. FERC, 881 F.2d 193, 198 (5th Cir.1989); see also Sec. & Exch. Comm'n v. Chenery Corp., 332 U.S. 194, 207 (1947) (“The scope of our review of an administrative order wherein a new principle is announced and applied is no different from that which pertains to ordinary administrative action.”).
3 In re: IBP, Inc., 57 Agric. Dec. 1353 (U.S.D.A. July 31, 1998).
II. Purpose of This Rulemaking
Congress enacted the P&S Act, 7 U.S.C. 181 et seq., to promote fairness, reasonableness, and transparency in the livestock, meat, and poultry marketplace by prohibiting practices contrary to these goals. Enacted in 1921 “to comprehensively regulate packers, stockyards, marketing agents and dealers,” 4 the Act, among other things, prohibits actions that hinder integrity and competition in the livestock, meat, and poultry markets. Section 202(a) of the Act states that it is unlawful for any packer, swine contractor, or live poultry dealer to “[e]ngage in or use any unfair, unjustly discriminatory, or deceptive practice or device.” 5
4 Hays Livestock Comm'n Co. v
marketing agents and dealers,” 4 the Act, among other things, prohibits actions that hinder integrity and competition in the livestock, meat, and poultry markets. Section 202(a) of the Act states that it is unlawful for any packer, swine contractor, or live poultry dealer to “[e]ngage in or use any unfair, unjustly discriminatory, or deceptive practice or device.” 5
4 Hays Livestock Comm'n Co. v. Maly Livestock Comm'n Co., 498 F.2d 925, 927 (10th Cir. 1974).
5 7 U.S.C. 192(a).
Congress granted rulemaking and enforcement authority to USDA to ensure that appropriate competitive and fair trade and market protections are afforded to those participating in agricultural activities pertaining to livestock, meat, and poultry. 6 To date, USDA has largely left these determinations to a case-by-case analysis. Court decisions interpreting this statute, however, have not been consistent with respect to the evidence needed to establish, and the legal standard that applies to, unlawful unfair practices under section 202(a) of the Act, particularly as to whether competitive injury is a requirement and what the term “unfair practice or device” means. This proposed rule, therefore, seeks to clarify what falls under the scope of unfair practice or device.
6 See section 407 (7 U.S.C. 228(a)): “The Secretary may make such rules, regulations, and orders as may be necessary to carry out the provisions of this chapter. . .”. Congress understood it was giving the Secretary “the power to prevent packers, stockyards, companies, and all persons in the stockyards from engaging in unfair, unjustly discriminatory or deceptive practices or devices.” Report of the House Committee on Agriculture, H.R. Rep. No. 77 67th Congress, 1st session at pg. 2 (May 18, 1921). When amending the statute in 1987, this authority with respect to live poultry dealers was explained: “the Packers and Stockyards Administration will retain jurisdiction as the act currently provides
from engaging in unfair, unjustly discriminatory or deceptive practices or devices.” Report of the House Committee on Agriculture, H.R. Rep. No. 77 67th Congress, 1st session at pg. 2 (May 18, 1921). When amending the statute in 1987, this authority with respect to live poultry dealers was explained: “the Packers and Stockyards Administration will retain jurisdiction as the act currently provides. These transactions include things like weighing practices and contract compliance.” 133 Cong. Rec. H9000-02, 133 Cong. Rec. H9000-02, H9002, 1987 WL 850252.
From the plain language of the text, section 202 of the Act is broader than the antitrust laws and does not necessarily require harm to competition as that term is understood under the antitrust laws. The term “unfair” applies to conduct that harms the market (anticompetitive harm) and conduct that harms market participants (market abuse), similar to section 5 of the Federal Trade Commission Act, which prohibits both unfair methods of competition and unfair and deceptive acts or practices. Based on the text of section 202, legislative history, and both agency and judicial decisions, this proposed rule defines the term unfair. Those definitions draw on longstanding understandings of the term unfair both under the Act as well as the related Federal Trade Commission Act. The proposed rule also clarifies that the statute addresses conduct in its incipiency, does not require proof of actual harm, nor does it require proof of predatory intent.
USDA recognizes that some courts have recently required proof of competitive injury before finding that conduct is unfair. Those courts were not offered an alternative definition for unfair, which this rulemaking would propose. A competitive injury requirement cannot be imposed in a way that abrogates part of a statute
require proof of actual harm, nor does it require proof of predatory intent.
USDA recognizes that some courts have recently required proof of competitive injury before finding that conduct is unfair. Those courts were not offered an alternative definition for unfair, which this rulemaking would propose. A competitive injury requirement cannot be imposed in a way that abrogates part of a statute. To the degree requiring a “competitive injury” precludes finding conduct is unfair when it satisfies criteria in the proposed rule, such a requirement would unduly limit the reach of section 202(a) and is improper. Moreover, the statute and P&S Act case law make plain that competitive injury under the P&S Act is broader than harm to competition under the antitrust laws. To the extent that “competitive injury” is shorthand for the scope of harm section 202 reaches, competitive injury as understood under the P&S Act should include both harms to the market and harms to market participants as defined in the proposed rule.
A. Unfair Practices and Prior Rulemakings
Section 202(a) of the Act prohibits any unfair practice or device. The Act does not, however, specify what those practices and devices are, and in section 228(a), Congress has granted to the Secretary the authority to interpret and apply the Act to effectuate its purposes. Under the Act, this authority includes complete supervisory and regulatory power, which includes, inter alia, “the power to prevent packers . . . from engaging in unfair, unjustly discriminatory or deceptive practices or devices.” 7 USDA has consistently viewed the Act as prohibiting both market abuses (unfair trade practices) and competitively unfair conduct or unreasonable acts and practices (including anticompetitive conduct) owing to the adverse impact both have on the fair functioning of the marketplace and the importance of ensuring that producers can obtain the full value of their livestock and poultry despite economic power imbalances. 8
7 H.R. Rep. no. 67-77 at 2 (1921)
market abuses (unfair trade practices) and competitively unfair conduct or unreasonable acts and practices (including anticompetitive conduct) owing to the adverse impact both have on the fair functioning of the marketplace and the importance of ensuring that producers can obtain the full value of their livestock and poultry despite economic power imbalances. 8
7 H.R. Rep. no. 67-77 at 2 (1921).
8 Michael Kades, “Protecting Livestock Producers and Chicken Growers,” chapter 3, Washington Center for Equitable Growth, May 5, 2022, https://equitablegrowth.org/research-paper/protecting-livestock-producers-and-chicken-growers/. (The report provides the following acknowledgement: “A U.S. Department of Agriculture-Washington Center for Equitable Growth cooperative agreement supported the research and writing of this report. The findings and conclusions in this report are those of the author and should not be construed to represent any official U.S. Department of Agriculture or U.S. government determination or policy.”).
The Department has consistently interpreted unfair practices—and thus applied the Act—to protect producer welfare and advance fair-trade practices in the livestock, meat, and poultry industries. The Department's policy on unfair practices has not changed throughout the course of its enforcement of the Act.
In 2010, the Department issued a proposed rule that was never finalized (“2010 proposed rule”). The 2010 proposed rule was broader in scope than this proposed rule
lied the Act—to protect producer welfare and advance fair-trade practices in the livestock, meat, and poultry industries. The Department's policy on unfair practices has not changed throughout the course of its enforcement of the Act.
In 2010, the Department issued a proposed rule that was never finalized (“2010 proposed rule”). The 2010 proposed rule was broader in scope than this proposed rule. It addressed undue or unreasonable preference or advantage; undue or unreasonable prejudice or disadvantage; criteria related to reasonable notice of a suspension of the delivery of birds under a poultry growing arrangement; when a requirement of additional capital investments over the life of a poultry growing arrangement or swine production contract constitutes a violation of the P&S Act; and whether a packer, swine contractor or live poultry dealer has provided a reasonable period of time for a grower or a swine producer to remedy a breach of contract that could lead to termination of the growing arrangement or production contract (75 FR 35338; June 22, 2010). As it relates to the scope of this proposed rulemaking, the preamble to the 2010 proposed rule stated that “Section 202(a) of the P&S Act prohibits `any unfair, unjustly discriminatory, or deceptive practice.' ” The preamble also stated that “USDA has consistently taken the position that, in some cases, a violation of section 202(a) or (b) can be proven without proof of predatory intent, competitive injury, or likelihood of injury.” 9 But the USDA “always understood that an act or practice's effect on competition can be relevant and, in certain circumstances, even dispositive[.]” The proposed regulation attempted to define competition, and proposed a series of specific violations of the Act including: “Any act that causes competitive injury
9 75 FR 35338, 35340 (June 22, 2010)
, competitive injury, or likelihood of injury.” 9 But the USDA “always understood that an act or practice's effect on competition can be relevant and, in certain circumstances, even dispositive[.]” The proposed regulation attempted to define competition, and proposed a series of specific violations of the Act including: “Any act that causes competitive injury
9 75 FR 35338, 35340 (June 22, 2010).
The 2010 proposed rule was never finalized due to a series of appropriations riders from fiscal years 2012 through 2015 that prevented the Department from working on rules related to the subjects covered in the 2010 proposed rule.
In 2016, the Department issued an interim final rule that, in relevant part, addressed the scope of section 202(a) and (b) of the P&S Act (“2016 IFR”). The 2016 IFR published what had been issued as the 2010 proposed rule with slight modifications. However, the 2016 IFR reiterated “USDA has consistently taken the position that, in some cases, a violation of section 202(a) or (b) can be proven without proof of predatory intent, competitive injury, or likelihood of competitive injury.” (81 FR 92556, 92567; December 20, 2016). The 2016 IFR preamble also stated that “USDA has always understood that an act or practice's effect on competition can be relevant and, in certain circumstances, even dispositive with respect to whether an act or practice violates sections 202(a) and/or (b).” The 2016 IFR did not define competition or describe when harm to competition would not be required.
In 2017, following a change in administration, finalization of the 2016 IFR was delayed, and ultimately withdrawn (82 FR 48594; October 18, 2017). The 2016 IFR was withdrawn on the grounds that USDA believed that specific rule would not have effectively addressed court decisions in several U.S. Courts of Appeals, that the courts would not have deferred to it, and that the “good cause” justification for dispensing with notice and comment was inadequate
tion of the 2016 IFR was delayed, and ultimately withdrawn (82 FR 48594; October 18, 2017). The 2016 IFR was withdrawn on the grounds that USDA believed that specific rule would not have effectively addressed court decisions in several U.S. Courts of Appeals, that the courts would not have deferred to it, and that the “good cause” justification for dispensing with notice and comment was inadequate. At that time, the Department further determined that “[p]rotracted litigation to both interpret this regulation and defend it serves neither the interests of the livestock and poultry industries nor GIPSA.” 10 The 2017 withdrawal did not alter the longstanding position of USDA articulated in the 2010 proposed rule and again in the 2016 IFR. 11 Nor did the withdrawal announce a policy against regulation in general.
10 Scope of section 202(a) and (b) of the Packers and Stockyards Act, 82 FR 48594, 48597 (Oct. 18, 2017).
11 82 FR 48594, 48596 (Oct. 18, 2017) (“The purpose of the IFR was to clarify that conduct or actions may violate 7 U.S.C. 192(a) and (b) without adversely affecting, or having a likelihood of adversely affecting, competition. This reiterated USDA's longstanding interpretation that not all violations of the P&S Act require a showing of harm or likely harm to competition. Contrary to comments that GIPSA failed to show that USDA's interpretation was longstanding, USDA has adhered to this interpretation of the P&S Act for decades. DOJ has filed amicus briefs with several Federal appellate courts arguing against the need to show the likelihood of competitive harm for all violations of 7 U.S.C. 192(a) and (b).” (footnotes omitted)).
The current proposed rule is less about a judicial debate over competitive injury and instead would establish a more workable standard for USDA to consistently apply in its own administrative hearings and investigations, which in turn would provide a standard that the public can more easily understand. And the current rule is being issued through notice and comment
nd (b).” (footnotes omitted)).
The current proposed rule is less about a judicial debate over competitive injury and instead would establish a more workable standard for USDA to consistently apply in its own administrative hearings and investigations, which in turn would provide a standard that the public can more easily understand. And the current rule is being issued through notice and comment. Thus, AMS does not believe that the same concerns that prompted withdrawal of the 2016 IFR apply to this proposal.
In sum, it has always been USDA's position that it is not necessary in every case to demonstrate competitive injury in order to show a violation of section 202(a). But USDA has also consistently recognized that any act or practice that harms or is likely to harm competition also violates the statute. 12 This proposed rule provides a basis for the public to understand precisely how USDA would apply the statute to both categories of harms.
12 See id. at 92568.
B. Statutory Language of the Act
The P&S Act's language and structure support USDA's longstanding position on section 202(a) and (b), as well as USDA's position on the Act's legislative history and purposes. Congress drafted section 202(a) to reach a range of unfair practices and devices, such as anticompetitive practices, market abuses, or other distortions of the competitive process. 13 Congress proscribed “unfair” practices without limitation, using terms like section 202's proscription of “deceptive” and “unjust” conduct commonly understood then and now to encompass more than conduct causing competitive injury. 14 Congress confirmed this plain meaning by amending the P&S Act to add specific instances of conduct prohibited as unfair that do not involve any inherent likelihood of competitive injury. 15
13 Michael Kades, “Protecting Livestock Producers and Chicken Growers,” chapter 3, Washington Center for Equitable Growth, May 5, 2022, https://equitablegrowth.org/research-paper/protecting-livestock-producers-and-chicken-growers/
s plain meaning by amending the P&S Act to add specific instances of conduct prohibited as unfair that do not involve any inherent likelihood of competitive injury. 15
13 Michael Kades, “Protecting Livestock Producers and Chicken Growers,” chapter 3, Washington Center for Equitable Growth, May 5, 2022, https://equitablegrowth.org/research-paper/protecting-livestock-producers-and-chicken-growers/. quoting, inter alia, Herbert Hovenkamp, “Does the Packers and Stockyards Act Require Antitrust Harm?” (Philadelphia: Faculty Scholarship at Penn Law, 2011), available at https://scholarship.law.upenn.edu/faculty_scholarship/1862.
14 When the P&S Act was enacted, Webster's New International Dictionary defined “unfair” as “[n]ot fair in act or character; disingenuous; using or involving trick or artifice; dishonest; unjust; inequitable” (2d. definition); “unjust” as “[c]haracterized by injustice; contrary to justice and right; wrongful”; “undue” as “[n]ot right; not lawful or legal; violating legal or equitable rights; improper” (2d. definition); and “unreasonable” as “[n]ot conformable to reason; irrational” or “immoderate; exorbitant.” Webster's New International Dictionary 578, 2237, 2238, 2245, 2248 (1st ed. 1917). This is the same understanding of the terms today.
15 See sections 409, 410.
Unlike with other provisions of section 202, Congress chose not to limit section 202(a) and (b) to specific types of competitive injuries identified in other sections of the Act. 16 While section 202(c) through (f) include provisions that address particular competitive injuries—such as where a practice has the tendency, effect, or purpose of “creating a monopoly” or “restraining commerce”—those limitations are absent from section 202(a) and (b). 17 This difference confirms that section 202(a) and (b) do not require a showing of competitive injury for such conduct
the Act. 16 While section 202(c) through (f) include provisions that address particular competitive injuries—such as where a practice has the tendency, effect, or purpose of “creating a monopoly” or “restraining commerce”—those limitations are absent from section 202(a) and (b). 17 This difference confirms that section 202(a) and (b) do not require a showing of competitive injury for such conduct. 18
16 Michael Kades, “Protecting Livestock Producers and Chicken Growers,” chapter 3, Washington Center for Equitable Growth, May 5, 2022, https://equitablegrowth.org/research-paper/protecting-livestock-producers-and-chicken-growers/, quoting, inter alia, Herbert Hovenkamp, “Does the Packers and Stockyards Act Require Antitrust Harm?” (Philadelphia: Faculty Scholarship at Penn Law, 2011), available at https://scholarship.law.upenn.edu/faculty_scholarship/1862.
17 More specifically, subsection (c) reaches certain sales that apportion supply “if such apportionment has the tendency or effect of restraining commerce or of creating a monopoly.” Subsection (d) reaches sales and other transfers wherein parties “receive from or for any other person, any article for the purpose or with the effect of manipulating or controlling prices, or of creating a monopoly in the acquisition of, buying, selling, or dealing in, any article, or of restraining commerce. Subsection (e) reaches a course of business or any act with “the purpose or with the effect of manipulating. or controlling prices, or of creating a monopoly in the acquisition of, buying, selling, or dealing in, any article, or of restraining commerce.”
18 Department of Homeland Sec. v. MacLean, 135 S. Ct. 913, 919 (2015), citing Russello v. United States, 464 U.S
e, or of restraining commerce. Subsection (e) reaches a course of business or any act with “the purpose or with the effect of manipulating. or controlling prices, or of creating a monopoly in the acquisition of, buying, selling, or dealing in, any article, or of restraining commerce.”
18 Department of Homeland Sec. v. MacLean, 135 S. Ct. 913, 919 (2015), citing Russello v. United States, 464 U.S. 16, 23 (1983): “Congress generally acts intentionally when it uses particular language in one section of a statute but omits it in another.”
Moreover, Congress has amended the P&S Act to confirm the Department's longstanding view that there are specific instances of conduct that are prohibited as “unfair” that do not involve any inherent likelihood of competitive injury. 19 In 1976, Congress confirmed that failing to pay, when due, for livestock and meats was an “unfair practice” under the P&S Act, and it did not require any harm to competition to be a violation of section 202(a).
19 See, e.g., secs. 409 and 410 of the P&S Act.
The prevailing interpretation of section 312 of the P&S Act, which uses similar language, further confirms USDA's interpretation of section 202(a). 20 and that these sections may apply in the absence of competitive injury. 21
20 Capitol Packing Company v. United States, 350 F.2d 67, 76 (10th Cir. 1965); see also Spencer Livestock Comm'n Co. v. USDA, 1988.
21 Spencer Livestock Comm'n Co. v. USDA, 841 F.2d 1451, 1454 (9th Cir. 1988): section 312 covers “a deceptive practice, whether or not it harmed consumers or competitors.”
Furthermore, even with respect to subsections of the Act that do focus on competitive harm, the text of those subsections indicates that competitive harm under the P&S Act goes beyond the types of competitive injuries cognizable under Federal antitrust laws
v. USDA, 841 F.2d 1451, 1454 (9th Cir. 1988): section 312 covers “a deceptive practice, whether or not it harmed consumers or competitors.”
Furthermore, even with respect to subsections of the Act that do focus on competitive harm, the text of those subsections indicates that competitive harm under the P&S Act goes beyond the types of competitive injuries cognizable under Federal antitrust laws. 22 For example, section 202(d) through (f) unambiguously apply to market injuries that the antitrust laws often do not reach—such as price manipulation, where a single-firm practice “manipulat[es] or control[s] price” or otherwise restrains trade, irrespective of conspiracy. These prohibitions in the relevant subsections are each embedded within “or” clauses that otherwise cover prohibitions that are squarely about anticompetitive conduct cognizable under Federal antitrust laws. Further, section 202(a) and (b) must cover conduct not covered by section 202(d) through (f) or section 202(a) and (b) would be superfluous. The presence of all of these provisions in the P&S Act shows, at a minimum, the regulatory scheme for fair competition under the P&S Act is broader than competitive injury under the Federal antitrust laws and at least as broad as section 5 of the Federal Trade Commission Act. 23 And, when compared to antitrust statutes, the P&S Act, like section 5 of the Federal Trade Commission Act (FTC Act), covers incipient threats to competition and potential injuries to market participants. In addition, the P&S Act's remedial purposes prohibit incipient violations of the P&S Act even if the practice has no potential anti-competitive or impact on markets at all. 24
22 In particular see the FTC Act (15 U.S.C. 41 et seq. ), Sherman Antitrust Act (15 U.S.C. 1 et seq. ), and the Clayton Antitrust Act (15 U.S.C. 12 et seq. ).
23 See Fed. Trade Comm'n, Policy Statement Regarding the Scope of Unfair Methods of Competition Under Section 5 of the FTC Act, 9 (Nov
of the P&S Act even if the practice has no potential anti-competitive or impact on markets at all. 24
22 In particular see the FTC Act (15 U.S.C. 41 et seq. ), Sherman Antitrust Act (15 U.S.C. 1 et seq. ), and the Clayton Antitrust Act (15 U.S.C. 12 et seq. ).
23 See Fed. Trade Comm'n, Policy Statement Regarding the Scope of Unfair Methods of Competition Under Section 5 of the FTC Act, 9 (Nov. 10, 2022) (discussing competitive injuries cognizable under section 5 of the FTC Act that are not cognizable under the Sherman or Clayton Act); Been v. O.K. Indus., Inc., 495 F.3d 1217, 1241 (10th Cir. 2007) (Hartz, J. concurring) (“[I]t would be somewhat surprising if `unfair practices' under the PSA had a narrower meaning than `unfair methods of competition' in the FTCA.”).
24 See, e.g., Bowman v. United States Dep't of Agric., 363 F.2d 81, 85 (5th Cir. 1966) (finding the Department's insolvency standard was not an abuse of discretion because it helps to prevent the unfair practice of late payment).
In short, section 202(a) covers unfair conduct beyond harm to competition, and where harm to competition is relevant, the P&S Act is broader than the antitrust laws.
C. Legislative History of the Act
The legislative history and purposes of the P&S Act also support USDA's interpretation of section 202(a) with regard to the role of competitive injury. As the Supreme Court has stated, when interpreting a statute, a provision “must take meaning from its historical setting.” 25
25 United States v. Henning, 344 U.S. 66, 72 (1952).
The genesis of the P&S Act predates its enactment by several decades. 26 On May 16, 1888, the U.S. Senate authorized an investigation “to determine whether there exists or has existed any combination . .
tive injury. As the Supreme Court has stated, when interpreting a statute, a provision “must take meaning from its historical setting.” 25
25 United States v. Henning, 344 U.S. 66, 72 (1952).
The genesis of the P&S Act predates its enactment by several decades. 26 On May 16, 1888, the U.S. Senate authorized an investigation “to determine whether there exists or has existed any combination . . . on the part of those engaged in buying and shipping meat products, by reason of which the prices of beef and beef cattle have been so controlled or affected as to diminish the price paid the producer without lessening the cost of meat to the consumer.” 27 In 1902, a bill of equity was filed by the United States to enjoin the alleged conspiracy as a violation of the antitrust laws. In 1903, an injunction was issued, which was sustained by the U.S. Supreme Court. 28 The dominance and unfair or unreasonable anticompetitive conduct of the packers continued; on February 7, 1917, President Wilson directed the Federal Trade Commission (FTC) to investigate and report the facts with respect to the packing industry. 29
26 10 N. Harl, Agricultural Law sec. 71.4. (1987), 71-4.
27 61 Cong. Rec. 2614.
28 Swift & Co. v. United States, 196 U.S. 375 (1905).
29 Stafford v. Wallace, 258 U.S. 495 (1922).
The FTC meat industry investigation found that, in 1916, the Big Five 30 (the five largest meatpackers) controlled the processing of 82 percent of cattle, 79 percent of calves, 87 percent of sheep, and 63 percent of swine in the U.S. 31 The Big Five also controlled an interlocking network of feed mills, stockyards, and transportation infrastructure that supported the industry. As extensively documented in an FTC report, those five packers used their market power to engage in a range of practices to further entrench their dominance of the meat industry. 32 The FTC report documented a number of complaints by producers that the U.S
The Big Five also controlled an interlocking network of feed mills, stockyards, and transportation infrastructure that supported the industry. As extensively documented in an FTC report, those five packers used their market power to engage in a range of practices to further entrench their dominance of the meat industry. 32 The FTC report documented a number of complaints by producers that the U.S. Supreme Court summarized in the synopsis of the case upholding the constitutionality of the P&S Act, including excessive charges by stockyards for hay and other facilities, the duplication of commissions by commission men and dealers, and fraudulent reporting of livestock being crippled in transit, in addition to suppression of competition through collusion. 33
30 The highly concentrated meatpacking industry of the early 20th century was controlled by the industry's “Big Five” operators of Armour, Cudahy, Morris, Swift, and Wilson.
31 “Annual Report for 1918,” FTC, p. 23, https://www.ftc.gov/sites/default/files/documents/reports_annual/annual-report-1918/ar1918_0.pdf.
32 Id.
33 Stafford at 501-502.
Following the FTC's report, and before the passage of the signed a consent decree in 1920. 34 The decree enjoined the packers from pursuing combinations to monopolize the purchase and control the price of livestock and the sale and distribution of meat products, and from being involved in other food sectors. 35 In this way, the decree sought to break the industry up vertically, underscoring the broad approach of the P&S Act.
34 United States v. Swift & Co., Equity No. 37623 (Sup. Ct. of D.C. 1920); United States v. Swift & Co., 286 U.S. 106 (1932).
35 Id. at 399; see, generally, Michael C. Stumo & Douglas J. O'Brien, “Antitrust Unfairness vs. Equitable Unfairness in Farmer/meat Packer Relationships,” 8 Drake J. Agric. L. 91 (2003)
to break the industry up vertically, underscoring the broad approach of the P&S Act.
34 United States v. Swift & Co., Equity No. 37623 (Sup. Ct. of D.C. 1920); United States v. Swift & Co., 286 U.S. 106 (1932).
35 Id. at 399; see, generally, Michael C. Stumo & Douglas J. O'Brien, “Antitrust Unfairness vs. Equitable Unfairness in Farmer/meat Packer Relationships,” 8 Drake J. Agric. L. 91 (2003).
After the consent decree, the Senate and House of Representatives held extensive hearings on several bills to address problems related to concentration and market domination in the meat industry, one of which, H.R. 6320, eventually became the P&S Act of 1921. 36
36 See 10 N. Harl, Agricultural Law sec. 71.2. (1987).
The House of Representatives' report on the P&S Act stated, “A careful study of the bill, will . . . convince one that it and existing laws, give the Secretary of Agriculture complete inquisitorial, visitorial, supervisory, and regulatory power over the packers, stockyards and all activities connected therewith; that it is the most comprehensive measure and extends farther than any previous law in the regulation of private business, in time of peace, except possibly the Interstate Commerce Act.” 37 The Conference Report on the P&S Act stated that: “Congress intends to exercise, in the bill, the fullest control of the packers and stockyards which the Constitution permits . . .”. 38
37 House Report No. 67-77, at 2 (1921).
38 House Report No. 67-324, at 3 (1921).
It was emphasized by Representative Samuel T. Rayburn (later Speaker of the House of Representatives) that although Congress “gave the Federal Trade 39
39 61 Cong. Rec. 1806. When the P&S Act was passed, the FTC was authorized to prohibit only unfair methods of competition. Congress later gave the FTC additional authority to police unfair and deceptive acts or practices. See infra notes 53-57
It was emphasized by Representative Samuel T. Rayburn (later Speaker of the House of Representatives) that although Congress “gave the Federal Trade 39
39 61 Cong. Rec. 1806. When the P&S Act was passed, the FTC was authorized to prohibit only unfair methods of competition. Congress later gave the FTC additional authority to police unfair and deceptive acts or practices. See infra notes 53-57.
Congress subsequently made clear, through further legislative developments, that its goals for the statute extended beyond the prohibition of anticompetitive conduct in the manner of the antitrust laws. For instance, in a 1935 amendment adding live poultry dealers to the coverage of section 202(a) and (b), Congress amended the text to specify that “[t]he handling of the great volume of live poultry . . . is attendant with various unfair, deceptive, and fraudulent practices and devices, resulting in the producers sustaining sundry losses and receiving prices far below the reasonable value of their live poultry . . . ” 40 Similarly, the House Committee Report regarding 1958 amendments identified “[t]he primary purpose” of the P&S Act as “assur[ing] fair competition and fair trade practices” and “safeguard[ing] farmers . . . against receiving less than the true market value of their livestock.” 41 In accordance with this legislative history, courts and commentators have, over a span exceeding 70 years, recognized that although the purposes of the P&S Act include proscribing anticompetitive conduct, they are not limited solely to conduct that injures competition as understood in the antitrust laws. 42 Indeed, for these seven decades, USDA has regularly maintained and enforced a wide range of fair trade rules and principles including prompt payment, standardized weights and measures, sufficient bonding and solvency, prohibitions on commercial bribery, and more
scribing anticompetitive conduct, they are not limited solely to conduct that injures competition as understood in the antitrust laws. 42 Indeed, for these seven decades, USDA has regularly maintained and enforced a wide range of fair trade rules and principles including prompt payment, standardized weights and measures, sufficient bonding and solvency, prohibitions on commercial bribery, and more. These rules and enforcement mandates play important roles in protecting market participants from abuse, and to that end, they proscribe conduct that USDA has also viewed as distorting the competitive process within the livestock, meat, and poultry markets. 43 To that end, proscribing abuses of market participants is integral to any effort to understand “harm to competition” under the P&S Act itself. 44
40 Public Law 74-272, 49 Stat. 648, 648 (1935).
41 H.R. Rep. No. 85-1048 (1957), reprinted in 1958 U.S.C.C.A.N. 5212, 5213 (emphasis added); see also, e.g., id. at 5213 (further observing that protection extends to “unfair, deceptive, unjustly discriminatory” practices by “small” companies in addition to “monopolistic practices.”).
42 See, e.g., Stafford, 258 U.S. at 513-14; Spencer Livestock, 841 F.2d 1451, 1455 (9th Cir. 1988); United States v. Perdue Farms, Inc., 680 F.2d 277, 280 (2d Cir. 1982); Bruhn's Freezer Meats of Chi., Inc. v. United States Dep't of Agric., 438 F.2d 1332, 1336-37 (8th Cir. 1971); Bowman v. USDA, 363 F.2d 81, 85 (5th Cir. 1966); United States v. Donahue Bros., 59 F.2d 1019, 1023 (8th Cir. 1932).
43 See, e.g., In re: Central California Livestock, Inc. d/b/a Machlin Meat Packing Company, 15 Agric. Dec. 97, 110 (1956).
44 Michael Kades, “Protecting Livestock Producers and Chicken Growers,” Washington Center for Equitable Growth, May 5, 2022, https://equitablegrowth.org/research-paper/protecting-livestock-producers-and-chicken-growers/.
Nor is the statutory history of the P&S Act monolithic: it was used as a pattern for other laws as well, notably changes to the FTC Act
Company, 15 Agric. Dec. 97, 110 (1956).
44 Michael Kades, “Protecting Livestock Producers and Chicken Growers,” Washington Center for Equitable Growth, May 5, 2022, https://equitablegrowth.org/research-paper/protecting-livestock-producers-and-chicken-growers/.
Nor is the statutory history of the P&S Act monolithic: it was used as a pattern for other laws as well, notably changes to the FTC Act. When Congress passed the FTC Act in 1914, the statute prohibited only unfair methods of competition, which was a then-new term of art with a broad scope. 45 In 1937, the Supreme Court in FTC v. Raladam Co. gave a narrowing interpretation, holding that the FTC's unfairness authority was limited to conduct causing competitive injury. 46 Congress disapproved of this interpretation, and in 1938 it passed the Wheeler-Lea Act, 47 which clarified the expansiveness of the FTC's unfairness authority by specifying that it covers acts or practices that injure consumers, regardless of whether the acts or practices may also injure competition.
45 American Airlines, Inc. v. North American Airlines, Inc., 351 U.S. 79, 85 (1956); Fed. Trade Comm'n v. Motion Picture Advertising Service Co., 344 U.S. 392, 394-95 (1953); Fed. Trade Comm'n v. R. F. Keppel & Bro., Inc., 291 U.S. 304, 310 (1934).
46 FTC v. Raladam Co., 283 U.S. 643, 649 (1931). The Supreme Court later relaxed this holding. FTC v. Raladam Co., 316 U.S. 149 (1942). See Luke Herrine, “The Folklore of Unfairness,” 96 N.Y.U. L. Rev. 431, 465-66, 470-71 (2021).
47 The Wheeler-Lea Act, ch. 49 sec. 2, 52 Stat. 111 (1938); Stephanie W. Kanwit, 1 Fed. Trade Comm'n. sec. 3:5 (2023-2024).
Notably, the Wheeler-Lea Act was modeled on the P&S Act, specifically section 202(a)'s prohibition on unfair practices that injure producers. When the FTC proposed the Wheeler-Lea Act, the FTC pointed to the P&S Act as the precedent for its text
31, 465-66, 470-71 (2021).
47 The Wheeler-Lea Act, ch. 49 sec. 2, 52 Stat. 111 (1938); Stephanie W. Kanwit, 1 Fed. Trade Comm'n. sec. 3:5 (2023-2024).
Notably, the Wheeler-Lea Act was modeled on the P&S Act, specifically section 202(a)'s prohibition on unfair practices that injure producers. When the FTC proposed the Wheeler-Lea Act, the FTC pointed to the P&S Act as the precedent for its text. 48 If it were not enough that the FTC succeeded—that it persuaded Congress to pass the Wheeler-Lea Act by relying on the P&S Act as precedent for prohibiting unfair practices without a competitive injury requirement—the 17 years of P&S enforcement prior to the Wheeler-Lea Act are especially telling. During the period from 1921 to 1938, the Secretary frequently found unfairness violations under section 202 that would not have been “unfair methods of competition” under the narrowing gloss the Supreme Court applied in Raladam —and that Congress subsequently rejected by passing the Wheeler-Lea Act.
48 Charles Wesley Dunn, Wheeler-Lea Act: A Statement of its Legislative Record 411, 418 (1938) (testimony of Ewin Davis, Chair, FTC). The FTC did, however, propose an expansion of its authority to include “unfair acts in commerce” in 1919, before the P&S Act was proposed. High Cost of Living as Affected by Trust and Monopolies, Hearings Before the H. Comm. on the Judiciary, 66th Cong., 1st Sess. 25-26 (1919).
The design of the P&S Act's text, and the legislative history, thus clearly reflect Congressional intent that the Act's unfairness authority extend beyond unfair methods of competition
clude “unfair acts in commerce” in 1919, before the P&S Act was proposed. High Cost of Living as Affected by Trust and Monopolies, Hearings Before the H. Comm. on the Judiciary, 66th Cong., 1st Sess. 25-26 (1919).
The design of the P&S Act's text, and the legislative history, thus clearly reflect Congressional intent that the Act's unfairness authority extend beyond unfair methods of competition. 49 The Act “was framed in language designed to permit the fullest control of packers and stockyards which the Constitution permits, and its coverage was to encompass the complete chain of commerce and give the Secretary of Agriculture complete regulatory power over packers and all activities connected therewith.” 50 It was hailed as a “far-reaching measure and extend[ing] further than any previous law into the regulation of private business.” 51 If the existing antitrust laws and the consent decree signed by the Big Five packers had been sufficient to protect market participants from unfair practices, Congress would not have passed the P&S Act.
49 Michael Kades, “Protecting Livestock Producers and Chicken Growers,” Washington Center for Equitable Growth, May 5, 2022, https://equitablegrowth.org/research-paper/protecting-livestock-producers-and-chicken-growers/.
50 Bruhn's Freezer Meats of Chicago, Inc. v. USDA, 438 F.2d 1332, 1339 (8th Cir. 1971), citing H.R. Rep. No. 67-324 (1921); H.R. Rep. No. 67-77 (1921).
51 61 Cong. Rec. 1801 (1921), statement of Rep. Haugen; see also Wilson & Co. v. Benson, 286 F.2d 891, 895 (7th Cir. 1961): “The legislative history shows Congress understood the sections of the [Act] under consideration were broader in scope than the antecedent legislation,'” citing 61 Cong. Rec. 1805 (1921).
The P&S Act's legislative history demonstrates Congress intended the Act to cover a broader range of conduct than is covered by the Sherman Act and Clayton Act
Co. v. Benson, 286 F.2d 891, 895 (7th Cir. 1961): “The legislative history shows Congress understood the sections of the [Act] under consideration were broader in scope than the antecedent legislation,'” citing 61 Cong. Rec. 1805 (1921).
The P&S Act's legislative history demonstrates Congress intended the Act to cover a broader range of conduct than is covered by the Sherman Act and Clayton Act. Congress intended to regulate practices that would violate those two antitrust laws and practices that would be unfair under the FTC Act, as well as the “special mischiefs and injuries inherent in livestock and poultry traffic.” 52 Particularities in the market structure and operation of the livestock, meat, and poultry industries compelled Congress to create a statute specific to them; to regulate fair trade practices among livestock and poultry producers, stockyards, meat packers, swine contractors, and live poultry dealers; and to ensure equal access to 53 In these industries, a handful of firms owning a small number of capital-intensive slaughter and meat processing plants exercised substantial market power over thousands of producers spread across rural communities. 54 These conditions continue today and are even more important in light of increased industry concentration. For example, in 2019 the four-firm concentration ratio (the combined market share of the four largest firms in the industry) was as follows: 53% for broiler chickens, 55% for turkeys, 67% for hogs, and 85% for fed cattle. 55 These concentrated industries procure their poultry and livestock for processing from a large number of unconcentrated farms engaged in livestock and poultry production, including 14,144 farms raising broilers under contract, 47,510 farms that sold hogs and pigs, and 25,783 farms with cattle on feed in 2022. 56
52 See Spencer Livestock Comm'n Co. v. USDA, 841 F.2d 1451, 1455 (9th Cir. 1988); Armour & Co. v. United States, 402 F.2d 712 (7th Cir. 1968)
livestock for processing from a large number of unconcentrated farms engaged in livestock and poultry production, including 14,144 farms raising broilers under contract, 47,510 farms that sold hogs and pigs, and 25,783 farms with cattle on feed in 2022. 56
52 See Spencer Livestock Comm'n Co. v. USDA, 841 F.2d 1451, 1455 (9th Cir. 1988); Armour & Co. v. United States, 402 F.2d 712 (7th Cir. 1968).
53 Live Poultry Dealers were added to the Packers and Stockyards Act in 1935 by 49 Stat. 648 (August 14, 1935), and most recently modified in 1987 by 101 Stat. 917, Public Law 100-173 (November 23, 1987). Swine Contractors were added by amendment in 2002, 116 Stat. 134, Public Law 107-171 (May 13, 2002).
54 The imbalance of market power and size between producers, growers, and concentrated processors is discussed in MacDonald, J. M., Dong, X., & Fuglie, K. (2023). Concentration and competition in U.S. agribusiness (Report No. EIB-256). U.S. Department of Agriculture, Economic Research Service. https://doi.org/10.32747/2023.8054022.ers.
55 Industry concentration is discussed in more detail below in the Regulatory Impact Analysis section; additional four-firm concentration data is provided in table 1 of that section.
56 USDA, National Agricultural Statistics Service, “2022 Census of Agriculture: United States Summary and State Data,” issued February 2024, tables 38, 24, and 71.
Further, as held by the U.S. Court of Appeals for the Ninth Circuit, the Act was intended to “assure fair competition and fair trade practices in livestock marketing.” 57 “Fair competition” is consistent with the view of the P&S Act as a device for protecting against not only Sherman and Clayton Act violations but also other unfair methods of competition that tend to negatively affect market conditions, embodied for example in the prohibitions in 202(d) and (e) of the Act
was intended to “assure fair competition and fair trade practices in livestock marketing.” 57 “Fair competition” is consistent with the view of the P&S Act as a device for protecting against not only Sherman and Clayton Act violations but also other unfair methods of competition that tend to negatively affect market conditions, embodied for example in the prohibitions in 202(d) and (e) of the Act. 58 However, “fair trade practices” has a different connotation, going beyond practices that cause (or tend to cause) competitive injury to include practices that harm market participants, specifically producers, as well as other regulated entities and consumers. This term invokes a standard of equitable unfairness, which does not implicate market conditions, competition, efficiency, or consumer welfare. 59 USDA has long viewed keeping a marketplace free from abusive conduct for participants as part and parcel of maintaining a fair competitive landscape even if the unfair practice is directed at only a few individuals or firms. To the extent that violations of P&S Act section 202(a) require a showing of “harm to competition” under the P&S Act, that would necessarily have to cover both competitively unfair conduct and market abuses.
57 Spencer Livestock Comm'n Co. v. USDA , 841 F.2d 1451, 1455 (9th Cir. 1988), citing H.R. Rep. No. 1048, 85th Cong., 2d Sess., reprinted in 1958 U.S. Code Cong. & Admin. News 5212, 5213.
58 7 U.S.C. 192.
59 See Michael C. Stumo & Douglas J. O'Brien, “Antitrust Unfairness vs. Equitable Unfairness in Farmer/meat Packer Relationships,” 8 Drake J. Agric. L. 91 (2003); see, also Swift & Co. v. United States , 308 F.2d 849, 853 (7th Cir. 1962) (noting that the petitioner claimed that the P&S Act would be violated if its practice was “contrary to good morals because characterized by deception, fraud, had faith or oppression[.]”). See also interpretations of unfair practices in various Federal and State contexts, such as the recent guidance by the U.S
L. 91 (2003); see, also Swift & Co. v. United States , 308 F.2d 849, 853 (7th Cir. 1962) (noting that the petitioner claimed that the P&S Act would be violated if its practice was “contrary to good morals because characterized by deception, fraud, had faith or oppression[.]”). See also interpretations of unfair practices in various Federal and State contexts, such as the recent guidance by the U.S. Department of Transportation 85 FR 78707 (2020). Other commentary concurs. See Michael Kades, “Protecting Livestock Producers and Chicken Growers,” Washington Center for Equitable Growth , May 5, 2022, https://equitablegrowth.org/research-paper/protecting-livestock-producers-and-chicken-growers/; Peter C. Carstensen, “The Packers and Stockyards Act: A History of Failure to Date,” The CPI Antitrust Journal (2) (2010), available at https://www.competitionpolicyinternational.com/assets/Uploads/CarstensenAPR-2.pdf; Herbert Hovenkamp, “Does the Packers and Stockyards Act Require Antitrust Harm?” (Philadelphia: Faculty Scholarship at Penn Law, 2011), available at https://scholarship.law.upenn.edu/faculty_scholarship/1862.
D. Court Decisions
Courts for decades have made it clear that section 202 of the P&S Act reaches beyond the antitrust laws. 60 That is consistent with USDA's approach to enforcement since the earliest days of the Act. As discussed extensively in section III.A. below, USDA has enforced the Act to prohibit a wide range of unfair practices that harm individual market participants. 61
60 See, e.g., In re Pilgrim's Pride, 728 F.3d 457, 460 (5th Cir. 2013): “violations of the PSA are not strictly limited to the traditional antitrust realms of price-fixing conspiracies and monopolization”; Swift & Co. v. US , 393 F.3d 247, 253 (7th Cir. 1968): section 202's prohibitions “are broader and more far-reaching than the Sherman Act or even section 5 of the Federal Trade Commission Act”; Swift & Co. v. US , 308 F.3d 849, 853 (7th Cir
457, 460 (5th Cir. 2013): “violations of the PSA are not strictly limited to the traditional antitrust realms of price-fixing conspiracies and monopolization”; Swift & Co. v. US , 393 F.3d 247, 253 (7th Cir. 1968): section 202's prohibitions “are broader and more far-reaching than the Sherman Act or even section 5 of the Federal Trade Commission Act”; Swift & Co. v. US , 308 F.3d 849, 853 (7th Cir. 1962): section 202 is “broader in scope than antecedent legislation such as [the Sherman Act, section 2 of the Clayton Act, section 5 of the FTC Act, and section 3 of the Interstate Commerce Act]”.
61 See, e.g., Michael Kades, “Protecting Livestock Producers and Chicken Growers,” Washington Center for Equitable Growth, May 5, 2022; https://equitablegrowth.org/research-paper/protecting-livestock-producers-and-chicken-growers/; Peter C. Carstensen, “The Packers and Stockyards Act: A History of Failure to Date,” The CPI Antitrust Journal (2) (2010), available at https://www.competitionpolicyinternational.com/assets/Uploads/CarstensenAPR-2.pdf; see also Herbert Hovenkamp, “Does the Packers and Stockyards Act Require Antitrust Harm?” (Philadelphia: Faculty Scholarship at Penn Law, 2011), available at https://scholarship.law.upenn.edu/faculty_scholarship/1862.
AMS has observed that rising market concentration and the growth of vertical contracting in the late 1990s and early 2000s—including insufficient USDA enforcement of the Act—led to increased private actions under the P&S Act. 62 Starting in the 1970s, Congress expanded the Act to authorize private rights of action in Federal court, which could be filed with respect to livestock starting in 1976, and with respect to poultry starting in 1987. 63 By the late 1990s and early 2000s, the Federal courts faced private cases making claims based on alleged unfair practices
Act—led to increased private actions under the P&S Act. 62 Starting in the 1970s, Congress expanded the Act to authorize private rights of action in Federal court, which could be filed with respect to livestock starting in 1976, and with respect to poultry starting in 1987. 63 By the late 1990s and early 2000s, the Federal courts faced private cases making claims based on alleged unfair practices. In the majority of these cases the Federal courts did not rely upon the opinions of USDA's Judicial Officer, and have come to conflicting conclusions about how to interpret section 202(a) and (b) of the Act. 64 And indeed, notably commencing in 2005 with the Eleventh Circuit's decision in Pickett v. Tyson Fresh Meats, Inc., a handful of Circuits have held that private litigants could establish conduct is “unfair” in violation of section 202(a) only with evidence that the behavior caused competitive injury as a marketwide harm. 65 The courts incorporating a competitive injury requirement point to the P&S Act's “antitrust origins,” although those courts also readily acknowledge that the P&S Act is broader than the antitrust laws.
62 Peter C. Carstensen, “The Packers & Stockyards Act: A History of Failure to Date,” The CPI Antitrust Journal (April 2010), available at https://www.competitionpolicyinternational.com/assets/Uploads/CarstensenAPR-2.pdf; see also, generally, Leonard, Christopher, “The Meat Racket ” (2014); see also, e.g., C. Robert Taylor, “Legal and Economic Issues with the Courts' Rulings in Pickett v. Tyson Fresh Meats, Inc., a Buyer Power Case,” American Antitrust Institute Working Paper No. 07-08, Feb. 2007, available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1103635 (last accessed April 2024). See, e.g., IBP, Inc. v. Glickman , 187 F.3d 974, 978 (8th Cir. 1999).
63 Sec. 308, 7 U.S.C. 209; Sept. 13, 1976, 90 Stat. 1250, Public Law 94-410; Nov. 23, 1987, 101 Stat. 918, Public Law 100-173
sh Meats, Inc., a Buyer Power Case,” American Antitrust Institute Working Paper No. 07-08, Feb. 2007, available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1103635 (last accessed April 2024). See, e.g., IBP, Inc. v. Glickman , 187 F.3d 974, 978 (8th Cir. 1999).
63 Sec. 308, 7 U.S.C. 209; Sept. 13, 1976, 90 Stat. 1250, Public Law 94-410; Nov. 23, 1987, 101 Stat. 918, Public Law 100-173.
64 See, generally, John Shively, “Competition Under the Packers and Stockyards Act: What Now?” 15 Drake J. Agric. L. 419 (Fall 2010).
65 Wheeler v. Pilgrim's Pride Corp., 591 F.3d 355 (5th Cir. 2009) ( en banc ); Been v. O.K. Industries, Inc., 495 F.3d 1217 (10th Cir. 2007); London v. Fieldale Farms Corp., 410 F.3d 1295 (11th Cir. 2005); Pickett v. Tyson Fresh Meats, Inc., 420 F.3d 1272 (11th Cir. 2005).
Courts that apply a standard with a competitive-injury component, however, are far from unanimous in their interpretation of the P&S Act's prohibitions, generally, and of competitive injury, specifically. The Been v. O.K. Industries, Inc. adopted the competitive injury requirement, it had previously found violations of section 202 for failure to pay ( Hays Livestock ), market agent's loan to packer, which was a conflict of interest, ( Capitol Livestock ), and failing to disclose a change in grading system ( Excel ). 66
66 Even some decisions that have required competitive injury define it more broadly than what might be required to establish antitrust injury. See e.g., Wheeler, 591 F.3d at 370 n.5 (Jones, J., concurring) (regulation needed “to curb practices that resulted in producers receiving far below the reasonable value of their live poultry”); id. at 370 (“the PSA was intended to prevent the abuse of monopoly”); Been, 495 F.3d at 1234 (manipulation of prices constitutes competitive injury).
Some decisions seemingly apply a higher standard than what the antitrust laws require
370 n.5 (Jones, J., concurring) (regulation needed “to curb practices that resulted in producers receiving far below the reasonable value of their live poultry”); id. at 370 (“the PSA was intended to prevent the abuse of monopoly”); Been, 495 F.3d at 1234 (manipulation of prices constitutes competitive injury).
Some decisions seemingly apply a higher standard than what the antitrust laws require. In Pickett, after a jury found that Tyson's vertical supply restrictions adversely affected competition by artificially reducing Tyson's purchase price for cattle, the court required the plaintiff to further rebut Tyson's claimed countervailing justifications in order to establish harm to competition. In London v. Fieldale Farms Corp., the court invoked a Sherman Act standard in holding that a plaintiff must show that the defendant's unfair, discriminatory, or deceptive practice adversely affects or is likely to adversely affect competition, 67 but the case also quoted with approval Armour& Co. v. United States, 68 which held that a violation of section 5 of the FTC Act—which is broader than the Sherman Act—would be sufficient. As discussed below, section 5 reaches conduct that does not violate the Sherman Act, and liability under section 5 does not depend on demonstrable anticompetitive effects or proof of the defendant's market power. The Act reaches practices “not merely in their fruition, but also in their incipiency” if they “could lead to trade restraints and practices deemed undesirable” and also “conduct which, although not a violation of the letter of the antitrust laws, is close to a violation or is contrary to their spirit.” 69 In Been, the court similarly required that the plaintiffs show that the “specific practices have the effect of injuring competition or are likely to do so,” but then it went further, requiring more than courts ordinarily require to prove even a Sherman Act violation
duct which, although not a violation of the letter of the antitrust laws, is close to a violation or is contrary to their spirit.” 69 In Been, the court similarly required that the plaintiffs show that the “specific practices have the effect of injuring competition or are likely to do so,” but then it went further, requiring more than courts ordinarily require to prove even a Sherman Act violation. In Been, plaintiffs had to show the practices resulted in both lower prices for producers and higher prices for retail consumers. 70 Finally, Wheeler v. Pilgrim's Pride Corp. held that “an anti-competitive effect is necessary” to prove a violation of section 202(a) of the P&S Act, despite citing with approval Farrow v. U.S. Dep't of Agr., 71 where the court held that harm to competition merely “can be found” sufficient to demonstrate violation of the P&S Act. Moreover, the courts' varying interpretations of section 202(a)—including those that have required competitive injury—apply inconsistent legal standards to the evidence. Or, as it has been observed: “courts' application of the harm-to-competition test is inconsistent with their own antitrust rules that they claim to be applying.” 72 Simply, “harm to competition” fails even its basic function as the judicial stand-in for well-articulated contours of a prohibition on unfair practices.
67 London v. Fieldale Farms Corp., 410 F.3d 1295, 1303 (11th Cir. 2005).
68 Armour & Co. v. United States, 402 F.2d 712 (7th Cir. 1968).
69 E.I. du Pont de Nemours v. Fed. Trade Comm'n (Ethyl) , 729 F.2d 128, 136-37 (2d Cir. 1984).
70 Been v. O.K. Industries, Inc., 495 F.3d 1217, 1232 (10th Cir. 2007). Also, there seems to be no consideration of the fact that price manipulation is an express violation of section 202(d) and 202(e) of the P&S Act.
71 760 F.2d 211, 214 (8th Cir. 1985)
United States, 402 F.2d 712 (7th Cir. 1968).
69 E.I. du Pont de Nemours v. Fed. Trade Comm'n (Ethyl) , 729 F.2d 128, 136-37 (2d Cir. 1984).
70 Been v. O.K. Industries, Inc., 495 F.3d 1217, 1232 (10th Cir. 2007). Also, there seems to be no consideration of the fact that price manipulation is an express violation of section 202(d) and 202(e) of the P&S Act.
71 760 F.2d 211, 214 (8th Cir. 1985).
72 Michael Kades, “Protecting Livestock Producers and Chicken Growers,” Washington Center for Equitable Growth, May 5, 2022, https://equitablegrowth.org/research-paper/protecting-livestock-producers-and-chicken-growers/.
At the same time, other courts have either explicitly rejected a competitive injury requirement or have found violations without addressing the impact on competition. 73 Disagreement among the courts over the need for competitive injury and what the term means makes enforcement difficult and has created a legal patchwork in which different rules apply depending on the presiding circuit. The lack of consistent legal standards has adversely affected the Department's ability to maintain fair and competitive livestock and poultry markets and ensure producers can obtain the full value of their products and services. Livestock and poultry industries are inherently interstate activities, with activities, services, and trading regularly occurring across multiple states and in regional and national markets. Much like the FTC's policy statements have defined its national approaches to unfair practices and unfair methods of competition, a workable rule governing how the prohibitions on unfair practices will operate and be enforced is important for providing clarity to market participants and for AMS to effectuate its nationwide statutory obligation to ensure fair and competitive livestock, meat, and poultry markets, and ensure livestock producers and poultry growers can secure the full value for their products and services. 74
73 See, e.g., M & M Poultry v. Pilgrim's Pride Corp., No
practices will operate and be enforced is important for providing clarity to market participants and for AMS to effectuate its nationwide statutory obligation to ensure fair and competitive livestock, meat, and poultry markets, and ensure livestock producers and poultry growers can secure the full value for their products and services. 74
73 See, e.g., M & M Poultry v. Pilgrim's Pride Corp., No. 2:15-CV-32, 2015 WL 13841400, at *8 (N.D.W. Va. Oct. 26, 2015); Triple R Ranch, LLC v. Pilgrim's Pride Corp., 456 F. Supp. 3d 775, 778 (N.D.W. Va. 2019); Hedrick v. S. Bonaccurso & Sons, Inc., 466 F. Supp. 1025, 1031 (E.D. Pa. 1978).
74 Michael Kades, “Protecting Livestock Producers and Chicken Growers,” Washington Center for Equitable Growth, May 5, 2022; https://equitablegrowth.org/research-paper/protecting-livestock-producers-and-chicken-growers/.
The cases mentioned above all applied different standards despite all claiming to have derived their standards from the Act and the caselaw. These opinions gave little or no guidance on the practices that would satisfy their standards. Moreover, in the cases adopting a competitive injury requirement, the litigants did not offer an affirmative definition of “unfair” like the criteria in the proposed rule. Those courts never addressed whether “unfair” applies to harms typically treated as unfair practices under the FTC Act.
This ambiguity and inconsistency across judicial interpretations of the statute impedes enforcement of the Act under section 202(a) because to date neither the Department nor the public have had appropriate clarity on the meaning of “unfair” under the P&S Act. Further, to the extent courts have limited application of the P&S Act's protections against unfair practices to anticompetitive or unfair conduct that causes competitive injury, those courts' decisions are contrary to both the legislative text and Congressional intent
a) because to date neither the Department nor the public have had appropriate clarity on the meaning of “unfair” under the P&S Act. Further, to the extent courts have limited application of the P&S Act's protections against unfair practices to anticompetitive or unfair conduct that causes competitive injury, those courts' decisions are contrary to both the legislative text and Congressional intent.
For over a decade, USDA has received repeated calls from the public to address these court decisions which frustrate the purposes of the Act, 75 although USDA 76
75 See, e.g., Farm Action et al., “Letter to Bruce Summers,” April 5, 2022, available at https://farmaction.us/wp-content/uploads/2022/04/Letter-re-Unfair-Practices-in-Violation-of-the-Packers-and-Stockyards-Act.pdf and https://farmaction.us/2022/04/07/dear-usda-issue-the-packers-and-stockyards-rules-now/ (last accessed April 2024); Sarah Carden, “The Fall of Antitrust, the Rise of Corporate Power: Impacts of Market Concentration on Farmers and Ranchers,” Farm Action, March 2022, available at https://farmaction.us/wp-content/uploads/2022/04/P-S-Act-Report-for-ABA-Farm-Action.pdf; Hon. Keith Ellison, et al., “Letter to Hon. Tom Vilsack,” December 21, 2021, on file at USDA, referenced in Hon. Thomas Vilsack, “Letter to State Attorneys General Ellison, Hill, and Colleagues,” Sept. 26, 2022, available at https://www.usda.gov/media/press-releases/2023/07/19/usda-launches-historic-partnership-bipartisan-state-attorneys and https://www.usda.gov/media/press-releases/2023/07/19/usda-launches-historic-partnership-bipartisan-state-attorneys (last accessed April 2024); Claire Kelloway and Sarah Miller, “Food and Power: Addressing Monopolization in America's Food System,” Open Markets Institute, Sept. 21, 2021 https://www.openmarketsinstitute.org/publications/food-power-addressing-monopolization-americas-food-system (last accessed April 2024); see also John Shively, “Competition Under the Packers and Stockyards Act: What Now?” 15 Drake J. Agric. L. 419 (Fall 2010); C
re Kelloway and Sarah Miller, “Food and Power: Addressing Monopolization in America's Food System,” Open Markets Institute, Sept. 21, 2021 https://www.openmarketsinstitute.org/publications/food-power-addressing-monopolization-americas-food-system (last accessed April 2024); see also John Shively, “Competition Under the Packers and Stockyards Act: What Now?” 15 Drake J. Agric. L. 419 (Fall 2010); C. Robert Taylor, “Legal and Economic Issues with the Courts' Rulings in Pickett v. Tyson Fresh Meats, Inc., a Buyer Power Case,” American Antitrust Institute Working Paper No. 07-08, Feb. 2007, available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1103635 (last accessed April 2024); United States Department of Justice, United States Department of Agriculture, (May 2010), Public Workshops Exploring Competition in Agriculture, https://www.justice.gov/archives/atr/events/public-workshops-agriculture-and-antitrust-enforcement-issues-our-21st-century-economy-10 (“As a state regulator, when I enforce my state's unfair or deceptive practices act on behalf of consumers, I don't have to demonstrate that that deceptive act injured every consumer in the state. I only have to demonstrate that one consumer. I think what we do owe our—we owe our producers at least as much as we owe the individual consumers of our respective states and a fair reading of 202(a) shouldn't require the rancher to demonstrate harm to everyone.” “The only way to protect the cash market is to halt the growth of captive supplies and possibly even roll back practice. As it should be, the language of Section 2(a) and (b) of the Packers & Stockyards Act does not require the finding of harm to the industry. .
dividual consumers of our respective states and a fair reading of 202(a) shouldn't require the rancher to demonstrate harm to everyone.” “The only way to protect the cash market is to halt the growth of captive supplies and possibly even roll back practice. As it should be, the language of Section 2(a) and (b) of the Packers & Stockyards Act does not require the finding of harm to the industry. . . How is it that if I strong-arm someone out in the hall I could be put in jail, but if a—but to receive just and due compensation for my hard work and efforts, I have to prove that there is an injury to the industry and not just to myself? That's a pretty ridiculous test to overcome.” “Now, I understand the Packers and Stockers Act is being undermined by this proof to harm to competition. When they're cheating all of these farmers out here, they're getting a monetary advantage in the market. . . And that's the excuse that the Federal judges say that we—you know, that we can't have this law enforced”).
76 See, e.g., North American Meat Institute Issue Statement on President Biden's Executive Order & USDA's Proposed Changes to Packers & Stockyards Rules, July 9, 2021, available at https://www.meatinstitute.org/press/north-american-meat-institute-issues-statement-president-bidens-executive-order-usdas (last accessed April 2024).
Consistent with Executive Order 14036, this proposed rule would, however, make those changes. 77 Specifically, it would provide regulatory clarity in the face of these conflicting interpretations so as to more fully and effectively enforce section 202(a)'s prohibition on unfair practices. To do so, it proposes to establish clearer tests and frameworks with which to apply section 202(a)'s prohibition on unfair practices, provide guidance to those hearing enforcement cases as to what unfairness means, and, in circumstances when competition is relevant, provide a framework for assessing the impact of a practice on the competitive environment
n 202(a)'s prohibition on unfair practices. To do so, it proposes to establish clearer tests and frameworks with which to apply section 202(a)'s prohibition on unfair practices, provide guidance to those hearing enforcement cases as to what unfairness means, and, in circumstances when competition is relevant, provide a framework for assessing the impact of a practice on the competitive environment. USDA intends with this proposed rule to provide clearer standards for the Department, courts, and private parties to use in understanding what conduct the P&S Act prohibits.
77 Executive Order No. 14036 “Promoting Competition in the American Economy,” July 2021, available at https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-competition-in-the-american-economy/.
III. The Proposed Rule
In this proposed rulemaking, AMS proposes separate comprehensive rules intended to protect both market participants and the market from harm. 78 In the very first docket under the P&S Act in 1922, the Secretary stated: “It is not the purpose of the Act to destroy business, but to require the observance of the public's interests in the conduct of business by conforming to standards laid down in the law.” 79 In other words, the Act is broader than an antitrust law; it is a comprehensive regulation of the poultry and livestock industry that enforces norms of fair behavior for the public benefit. Thus, since passage of the Act, the Department has taken the position that section 202(a) could be violated if a challenged practice injures the market to the detriment of the public interest, or if it injures market participants without any specific harm to the market. Often, in the Department's view, a challenged practice could cause both kinds of injuries in unison.
78 Although using different terms, this understanding is consistent with the consensus academic literature
on 202(a) could be violated if a challenged practice injures the market to the detriment of the public interest, or if it injures market participants without any specific harm to the market. Often, in the Department's view, a challenged practice could cause both kinds of injuries in unison.
78 Although using different terms, this understanding is consistent with the consensus academic literature. See, e.g., Michael Kades, “Protecting Livestock Producers and Chicken Growers,” Washington Center for Equitable Growth, May 5, 2022, https://equitablegrowth.org/research-paper/protecting-livestock-producers-and-chicken-growers/; Peter C. Carstensen, “The Packers and Stockyards Act: A History of Failure to Date,” The CPI Antitrust Journal (2) (2010), available at https://www.competitionpolicyinternational.com/assets/Uploads/CarstensenAPR-2.pdf; Herbert Hovenkamp, “Does the Packers and Stockyards Act Require Antitrust Harm?” (Philadelphia: Faculty Scholarship at Penn Law, 2011), available at https://scholarship.law.upenn.edu/faculty_scholarship/1862.
79 Kansas City Live Stock Exchange v. Armour and Company and Fowler Packing Company , Docket No. 1 (August 30, 1922).
For example, a supply broker was found to have engaged in both an unfair and deceptive practice in agreeing to provide a hidden “kickback” that affords unduly preferential treatment to a powerful retailer at the expense of rival retailers. Indeed, the practice was unfair both in the sense that it specifically injured the rival retailers, who were forced to pay discriminatorily higher broker fees, and in the sense that it harmed competition because the hidden competitive advantage bestowed upon the powerful retailer tampered with the competitive process for procuring supply
nt to a powerful retailer at the expense of rival retailers. Indeed, the practice was unfair both in the sense that it specifically injured the rival retailers, who were forced to pay discriminatorily higher broker fees, and in the sense that it harmed competition because the hidden competitive advantage bestowed upon the powerful retailer tampered with the competitive process for procuring supply. 80 This comprehensive analytical approach, which the Secretary applied in cases as diverse as failure to pay in full 81 and price cutting, 82 never required the Secretary to draw distinctions between unfair conduct that injures producers, unfair conduct that injures competition, or unfair conduct that caused both kinds of injury. But in analyzing these cases the Judicial Officer determined harm to an individual or harm to competition in each separate administrative case rather than a specific “test” or “rule.”
80 Trunz Pork Stores v. Wallace , 70 F.2d 688 (2d Cir. 1934).
81 De Jong Packing Co. v. U.S. Dep't of Agric., 618 F.2d 1329, 1337 (9th Cir. 1980): agreeing that failing to pay for condemned cattle within one business day following sale was an “unfair practice”. The violations in this case occurred in 1972 and 1974. Id. at 1333.
82 See Wilson & Co. v. Benson , 286 F.2d 891, 895 (7th Cir. 1961).
In building the analytical framework for this proposed rule, USDA considered, in addition to the forgoing, the contemporaneous statutory history of section 5 of the FTC Act, which bans both unfair methods of competition and unfair or deceptive acts or practices. While Congress never limited the scope of the P&S Act's “unfair practices” to “unfair methods of competition,” the first FTC Act was purportedly so limited. The amendments to the FTC Act in 1938 reflected Congress's intent to make the scope of the FTC Act more aligned with the P&S Act's broader scope.
A standard should be consistent and consistently applied, so this proposed rule would explain the P&S Act in terms more widely understood
the P&S Act's “unfair practices” to “unfair methods of competition,” the first FTC Act was purportedly so limited. The amendments to the FTC Act in 1938 reflected Congress's intent to make the scope of the FTC Act more aligned with the P&S Act's broader scope.
A standard should be consistent and consistently applied, so this proposed rule would explain the P&S Act in terms more widely understood. USDA has found the framework of the FTC Act and the FTC's policy statements useful in understanding the past century of USDA's administrative and Federal caselaw.
Thus, for this proposed rule, USDA employs an analytical structure similar to that presently used by the FTC and proposes two analyses. First, proposed § 201.308(a) and (b) would protect against injuries to market participants from unfair practices. Second, proposed § 201.308(c) and (d) would protect the market from unfair practices. When the Secretary considers whether an injurious practice rises to the level of an unfair practice, either or both approaches may be relied on.
Although the proposed tests are distinct, in the context of the P&S Act, they are not mutually exclusive. Just as it has always been true that an unfair practice can be simultaneously injurious to individual market participants and to market conditions more generally, an unfair practice under this proposed rule may be unfair to an individual market participant (under proposed
Thus, based on the statutory language, administrative case law, and Federal case law, this proposed regulation clarifies that unfair acts under the P&S Act apply to harms to market participants and harms to the market. The scope of section 202(a) is similar to section 5 of the FTC Act, which prohibits both unfair and deceptive acts or practices and unfair methods of competition. Further, the operative definition of harm to market participants (substantial harm, not reasonably unavoidable, and not outweighed by benefits) is analogous to the codified definition of unfairness under the FTC Act
harms to the market. The scope of section 202(a) is similar to section 5 of the FTC Act, which prohibits both unfair and deceptive acts or practices and unfair methods of competition. Further, the operative definition of harm to market participants (substantial harm, not reasonably unavoidable, and not outweighed by benefits) is analogous to the codified definition of unfairness under the FTC Act. The operative definition for harm to the market is analogous to the principles the FTC has adopted in that context (collusive, coercive, predatory, restrictive, deceitful or exclusionary method of competition that may negatively affect competitive conditions).
A. Proposed § 201.308(a) and (b)
USDA proposes the addition of § 201.308(a) and (b) as a comprehensive rule for unfair practices with respect to market participants.
The proposed test under § 201.308(a) for whether a practice unfairly injures market participants is similar to the FTC's test for consumer protection injuries. Under the FTC Act, an unfair practice is an act or practice that “causes or is likely to cause substantial injury to consumers that is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition.” 83 Harm to competition is not part of the test. Although section 202(a) of the P&S Act's authority precedes the FTC's 1980 policy statement and subsequent Congressional amendments to the FTC Act, the FTC's current approach offers useful pillars around which to anchor P&S case law that has developed over the years. 84
83 15 U.S.C. 45(n).
84 See Michael Kades, then of Washington Center for Equitable Growth, reaching a similar conclusion in “Protecting Livestock Producers and Chicken Growers,” chapter 3, Washington Center for Equitable Growth, May 5, 2022, https://equitablegrowth.org/research-paper/protecting-livestock-producers-and-chicken-growers/; see also, Peter C
law that has developed over the years. 84
83 15 U.S.C. 45(n).
84 See Michael Kades, then of Washington Center for Equitable Growth, reaching a similar conclusion in “Protecting Livestock Producers and Chicken Growers,” chapter 3, Washington Center for Equitable Growth, May 5, 2022, https://equitablegrowth.org/research-paper/protecting-livestock-producers-and-chicken-growers/; see also, Peter C. Carstensen, “The Packers and Stockyards Act: A History of Failure to Date,” The CPI Antitrust Journal (2) (2010), available at https://www.competitionpolicyinternational.com/assets/Uploads/CarstensenAPR-2.pdf; see also Herbert Hovenkamp, “Does the Packers and Stockyards Act Require Antitrust Harm?” (Philadelphia: Faculty Scholarship at Penn Law, 2011), available at https://scholarship.law.upenn.edu/faculty_scholarship/1862 .
USDA thus proposes under § 201.308(a) that a practice is unfair if the practice (1) causes or is likely to cause substantial injury to one or more market participants, which (2) the participant or participants cannot reasonably avoid, and which (3) the regulated entity that has engaged in the act cannot justify by establishing countervailing benefits to the market participant or participants or to competition in the market that outweighs the substantial injury or likelihood of substantial injury. Application of these three elements, when combined, explain the outcome of a great many of the cases brought under the P&S Act, and provide a clear and workable standard for adjudicating many kinds of unfairness claims.
The simplest example that illustrates the principles underlying these proposed provisions is the failure to pay for meat, 85 live poultry, 86 or livestock. 87 First, it causes a substantial injury to the seller or grower
combined, explain the outcome of a great many of the cases brought under the P&S Act, and provide a clear and workable standard for adjudicating many kinds of unfairness claims.
The simplest example that illustrates the principles underlying these proposed provisions is the failure to pay for meat, 85 live poultry, 86 or livestock. 87 First, it causes a substantial injury to the seller or grower. When a seller or grower delivers product to a regulated entity and the entity arbitrarily refuses to pay, the seller or grower loses the value of the product, and they lose the opportunity to use the capital from selling their product to grow more food, invest in their farm, or process more products. Second, they cannot avoid this breach of contract. Instead, they must either engage in costly litigation or settle for less than they are owed. Finally, there is no benefit to the market for the purchaser to fail to pay for the product they received. If this practice is adopted by all purchasers, the sellers become increasingly less efficient as trust fails and less livestock, meat, and poultry is produced. Thus, even if the seller or grower is eventually paid, and suffers no loss of business, the regulated entity's failure to pay when due can still cause substantial, unavoidable market injury. That is, in the aggregate, even a small delay suffered by many producers produces a substantial harm.
85 In Re: Rotches Pork Packers, Inc. & David A. Rotches., 46 Agric. Dec. 573, 579 (1987).
86 In Re: Empire Kosher Poultry, Inc., No. P & S Docket No. D-10-0109, 2010 WL 7088565, at *6 (U.S.D.A. July 20, 2010), aff'd Empire Kosher Poultry, Inc. v. U.S. Dep't of Agric., 475 F. App'x 438, 444 (3d Cir. 2012).
87 Courts that examine the history of the P&S Act often overlook that failure to pay in full was an “unfair practice” under the Act for many decades before Congress clarified that delay of a single payment for livestock was an unfair “practice” under the P&S Act in 1976. For example, in In re: Eastern Meats, Inc., 21 Agric
ltry, Inc. v. U.S. Dep't of Agric., 475 F. App'x 438, 444 (3d Cir. 2012).
87 Courts that examine the history of the P&S Act often overlook that failure to pay in full was an “unfair practice” under the Act for many decades before Congress clarified that delay of a single payment for livestock was an unfair “practice” under the P&S Act in 1976. For example, in In re: Eastern Meats, Inc., 21 Agric. Dec. 134, 141, (1962), the Judicial Officer found “without a doubt” failing to timely pay the full amount agreed for a single shipment of meat was “an unfair and deceptive practice and device” and cited administrative cases. And, in In Re: Mid-W. Veal Distributors, d/b/a Nagle Packing Co., & Milton Nagle, 43 Agric. Dec. 1124, 1138 (U.S.D.A. July 13, 1984) USDA's Judicial Officer noted it had been held consistently in cases arising under both title II and title III of the P&S Act that failure to pay, when due, for livestock constitutes a violation of sections 202(a) and 312(a) of the P&S Act., citing In re Rosenthal, 36 Agric. Dec. 210 (1976); In re San Jose Valley Veal, Inc., 34 Agric. Dec. 966 (1975); In re Sebastopal Meat Company, Inc., 28 Agric. Dec. 435, (1969), aff'd, 440 F.2d 983 (9th Cir. 1971); In re Nolan E. Poovey, Jr., 27 Agric. Dec. 1512 (1968); In re Joe Doctorman & Son, Inc., 28 Agric. Dec. 840 (1969); In re S.M. Jamison, 28 Agric. Dec. 581 (1969); In re Neil Harlan, 25 Agric. Dec. 5 (1966); In re Royce Lehman Moore, 26 Agric. Dec. 230 (1967); In re Augustin Brothers Co, 27 Agric. Dec. 350 (1968); In re R.J. & C.W. Fletcher, Inc., 23 Agric. Dec. 1400 (1964); In re Rosenthal Packing Co., 19 Agric. Dec. 971 (1960); In re Harry Thomas, 35 Agric. Dec. 490 (1976).
Similar principles have guided the Secretary's interpretation for the entire history of the Act. In the 1956 decision in In re: Central California Livestock, Inc
Dec. 230 (1967); In re Augustin Brothers Co, 27 Agric. Dec. 350 (1968); In re R.J. & C.W. Fletcher, Inc., 23 Agric. Dec. 1400 (1964); In re Rosenthal Packing Co., 19 Agric. Dec. 971 (1960); In re Harry Thomas, 35 Agric. Dec. 490 (1976).
Similar principles have guided the Secretary's interpretation for the entire history of the Act. In the 1956 decision in In re: Central California Livestock, Inc. d/b/a Machlin Meat Packing Company, the Judicial Officer held that accord and satisfaction could not be a defense to the failure to pay for livestock because a refusal to abide by contract terms that occurs after the livestock is slaughtered leaves the seller or grower with no other remedy than to sue. If a refusal to pay is not based upon a bona fide dispute, but rather is a deliberate policy of contract noncompliance, then it is “obvious that by the activities in issue the respondent engaged in or used an unfair practice” in violation of section 202(a) of the Act. 88 And “[n]ot only was it unfair to the sellers but it was unfair competitively with respect to other packers.” 89
88 In re: Central California Livestock, Inc. d/b/a Machlin Meat Packing Company, 15 Agric. Dec. 97, 110 (1956).
89 Id.
Even in 1956 those principles were not a new application of section 202(a). In 1937, USDA Secretary Wallace found that discounting the agreed upon price for a defect (so-called oily hogs) undiscoverable until after slaughter rather than as a condition of the contract was an “unfair, unjustly discriminatory, and deceptive practice” in violation of section 202(a) of the Act. 90
90 Secretary of Agriculture v. Scala Packing Company, Inc., Bureau of Animal Industry Docket No. 581 (January 7, 1937).
Congress drafted the Act to provide every participant in the industry due consideration, and honest, transparent, and equitable treatment
a condition of the contract was an “unfair, unjustly discriminatory, and deceptive practice” in violation of section 202(a) of the Act. 90
90 Secretary of Agriculture v. Scala Packing Company, Inc., Bureau of Animal Industry Docket No. 581 (January 7, 1937).
Congress drafted the Act to provide every participant in the industry due consideration, and honest, transparent, and equitable treatment. Accordingly, dishonest, hidden, and inequitable practices that injure market participants, like mis-weighing, are unfair because the producer or grower suffers a substantial injury that they cannot avoid. For example, a producer delivers their product for the regulated entity to establish the grade, weight, and payment. The producer's loss of physical control of the animal is
Some elements of the dangers of unavoidable injuries have informed prior rulemaking. For example, when USDA required packers to pay on actual hot weights—the weight before the carcass is cooled to storage temperatures—in 1968, USDA noted that allowing packers to set shrinkage amounts for a projected weight after refrigeration (a cold weight) was an unfair and deceptive practice: “In these instances, the packer decides what shrinkage factor he will use. . . The farmer is not in a position to bargain freely on the basis of a full understanding of the contract terms which are within the control of the packer and can only accept or reject the bid offered by the packer.” 91 Market participants are often at the mercy of regulated entities, who often pay based on factors that the livestock seller or poultry grower is unable to personally witness or negotiate, thus making their injury from the use of variable cold weights or shrinkage unavoidable.
91 Purchase of Livestock by Packers on a Carcass Grade, Carcass Weight, or Carcass Grade and Weight Basis, 33 FR 2760, 2761 (Feb. 9, 1968)
nts are often at the mercy of regulated entities, who often pay based on factors that the livestock seller or poultry grower is unable to personally witness or negotiate, thus making their injury from the use of variable cold weights or shrinkage unavoidable.
91 Purchase of Livestock by Packers on a Carcass Grade, Carcass Weight, or Carcass Grade and Weight Basis, 33 FR 2760, 2761 (Feb. 9, 1968).
Even absent an express rule, the principles maintaining that unjustified practices that produce unavoidable injury violate section 202(a) of the Act have been, and still are, applied in “unfair practices” cases. 92
92 E.g. In Re: Excel Corp., No. P. & S. Docket No. 99-0010, 2003 WL 205562, at *31 (U.S.D.A. Jan. 30, 2003) (finding that producers were likely injured by Respondent's failure to notify hog producers of its undetectable change in lean formula, and regardless, the practice impeded competition); In Re: Stull Meats, Inc., 49 Agric. Dec. 309, 329 (U.S.D.A. Feb. 15, 1990) (finding in a commercial bribery case that “the type of violations alleged and proven in this case are not only unfair to the firm being overcharged for its purchases . . . but also to the competitors . . . who are not in a position to gain entry . . . unless they are willing to make the same illegal inducements to its agent”); c.f. In Re: Cedar Vale Sale Barn, Inc., Doyle Hawkins & Jerry Mullins., 52 Agric. Dec. 546, 554 (1993) (check kiting poses a great risk to the sellers of livestock); In Re: Great Am. Veal, Inc. A Corp., & Thomas Burke, an Individual, 48 Agric. Dec. 183, 198 (U.S.D.A. Jan. 19, 1989) (holding that dissipating the statutory trust “enacted to protect livestock sellers” was unfair).
The final factor in the proposed regulation at § 201.308(a) is that the conduct does not violate section 202(a) of the Act if regulated entities prove that countervailing benefits to producers, growers, or to competition outweigh the harm
Individual, 48 Agric. Dec. 183, 198 (U.S.D.A. Jan. 19, 1989) (holding that dissipating the statutory trust “enacted to protect livestock sellers” was unfair).
The final factor in the proposed regulation at § 201.308(a) is that the conduct does not violate section 202(a) of the Act if regulated entities prove that countervailing benefits to producers, growers, or to competition outweigh the harm. In practice, the question is whether the regulated entity can show benefits of the alleged unfair conduct outweigh the injury or likely injury.
The proposed rule allows the consideration of not only harm to the market, but also likely harm to Congressional policy goals concerning the structure of agricultural markets over and against possible countervailing benefits to other producers or the market. 93 Congressional policy goals have included, for example, supporting new, beginning, and military veteran producers. 94
93 Michael Kades, “Protecting Livestock Producers and Chicken Growers,” chapter 4, Washington Center for Equitable Growth, May 5, 2022, https://equitablegrowth.org/research-paper/protecting-livestock-producers-and-chicken-growers/.
94 See, e.g., “How to Start a Farm: Beginning Farmers and Ranchers,” available at https://www.farmers.gov/your-business/beginning-farmers (last accessed April 2024); Congressional Research Service, “Farm Bill Primer: Beginning and Underserved Producers,” May 2022, available at https://crsreports.congress.gov/product/pdf/IF/IF12096/2.
Balancing allegedly unfair conduct against countervailing benefits is not a new consideration for the Secretary. For example, when examining the allegedly unfair and discriminatory preferences given to one group of sellers over others in In re: IBP, Inc. (57 Agric. Dec. 1353 (U.S.D.A. July 31, 1998)), the Department considered whether right of first refusal of the contract terms was “worth extra payment” and whether the contract was profitable for both the buyers and the sellers of livestock
r the Secretary. For example, when examining the allegedly unfair and discriminatory preferences given to one group of sellers over others in In re: IBP, Inc. (57 Agric. Dec. 1353 (U.S.D.A. July 31, 1998)), the Department considered whether right of first refusal of the contract terms was “worth extra payment” and whether the contract was profitable for both the buyers and the sellers of livestock. Preferences for lengthening extra delivery times justified higher payments (even if higher payment was not proven), and so concluded that the practice was not unduly discriminatory. 95
95 The Judicial Officer also considered the specific right of first refusal a practice that was likely to harm competition in violation of section 202 of the P&S Act. While the 8th Circuit agreed with the legal statements of the Judicial Officer—specifically that the Act prevents likely harm to competition—the court disagreed with the factual conclusions and reversed. IBP, Inc. v. Glickman, 187 F.3d 974, 978 (8th Cir. 1999).
Accordingly, when examining the practice, “actual competition carried on in good faith by normally fair methods not `heretofore regarded as opposed to good morals because characterized by deception, bad faith, fraud, or oppression['] . . . is a fact which must be given substantial weight . . . .” 96 Unfair practices under section 202 is not only a matter of unfair market conditions; the intention and results of the unfair acts and practices are relevant. 97 For example, if a company intends to act to monopolize, even if the intended mechanism would not achieve it, the practice would be unfair. Moreover, some practices have no benefit, even if unintentional: mis-weighing, failing to pay when due for livestock or meats, failure to maintain a bond, and insolvency.
96 Swift & Co. v. Wallace, 105 F.2d 848, 856 (7th Cir. 1939).
97 See Armour & Co. v. United States, 402 F.2d 712, 717 (7th Cir. 1968).
B
ze, even if the intended mechanism would not achieve it, the practice would be unfair. Moreover, some practices have no benefit, even if unintentional: mis-weighing, failing to pay when due for livestock or meats, failure to maintain a bond, and insolvency.
96 Swift & Co. v. Wallace, 105 F.2d 848, 856 (7th Cir. 1939).
97 See Armour & Co. v. United States, 402 F.2d 712, 717 (7th Cir. 1968).
B. Evaluation of Potential Injury to Market Participants
To date, no court has disagreed with the principle that the P&S Act not only reaches practices that directly injure, such as failures to pay and changes to the terms of payment without notice, but also acts that are likely to cause injury. Congress designed the Act to prevent actual monetary loss 98 and those practices are “unfair” even though they require no evidentiary showing of completed injury. Even courts that have adopted the competitive injury standard have affirmed that the Act does not require actual harm. The Fifth Circuit stated, the “Act is designed to `. . . prevent potential injury by stopping unlawful practices in their incipiency. Proof of a particular injury is not required.' ” 99 Those potential injuries may be any injury the Act was designed to prevent, including financial loss to sellers. 100
98 See In re: Arizona Livestock Auction, Inc., 55 Agric. Dec. 1121 (U.S.D.A. Nov. 21, 1996) (finding that the purpose of title III of the Act was “to protect the producer or seller from monetary loss”).
99 Bowman v. United States Dep't of Agric., 363 F.2d 81, 85 (5th Cir. 1966) (finding the Department's insolvency standard was not an abuse of discretion).
100 Id.
Therefore, the Department has taken the view that some practices must be stopped before they harm market participants. 101 For example, a packer operating while insolvent or without a bond can present a great risk of potential harm to the livestock sellers who may find that their livestock is being used to finance a packer's operations
solvency standard was not an abuse of discretion).
100 Id.
Therefore, the Department has taken the view that some practices must be stopped before they harm market participants. 101 For example, a packer operating while insolvent or without a bond can present a great risk of potential harm to the livestock sellers who may find that their livestock is being used to finance a packer's operations. 102 If the undercapitalized packer fails, even with the rights of a floating trust, livestock sellers are vulnerable to protracted litigation and non-payment. The livestock seller's ability to participate in the market would be imperiled, the magnitude of potential injury would be great, and without prior knowledge of the insolvency, the seller's ability to freely
101 See In Re: Corn State Meat Co., Inc.; Terrance P. (Terry) Prince, Jr. & James L. Wiggs., 45 Agric. Dec. 995, 1023 (U.S.D.A. May 8, 1986); c.f. In Re: Danny Cobb & Crockett Livestock Sales Co., Inc., 48 Agric. Dec. 234, 234 (U.S.D.A. Feb. 13, 1989) (finding bonds protect against incipient violations); In Re: Paul Rodman & David Rodman, 47 Agric. Dec. 885, 903-04 (U.S.D.A. May 27, 1988) (finding there is a duty to prevent all unlawful acts under the P&S Act, including the potential losses from failing to maintain a custodial account).
102 For an example of how under-capitalization can force producers to finance the operation of a livestock buyer, see Van Wyk v. Bergland, 570 F.2d 701, 704 (8th Cir. 1978).
As another example, an exclusive agreement between packers and livestock dealers not to bid against one another might severely restrict the ability of other livestock sellers to participate in the market, because packers would not accept offers from other livestock dealers or from sellers directly. 103 The agreement is an unfair practice, among other reasons, because it injures sellers by restricting them from making offers and thus tends to subvert market forces
stock dealers not to bid against one another might severely restrict the ability of other livestock sellers to participate in the market, because packers would not accept offers from other livestock dealers or from sellers directly. 103 The agreement is an unfair practice, among other reasons, because it injures sellers by restricting them from making offers and thus tends to subvert market forces. Proposed § 201.308(a) recognizes that although a specific injury has not occurred, the potential for injury is so great that the Secretary must stop the practice in advance. 104
103 See 9 CFR 201.70; Swift & Co. v. United States, 393 F.2d 247 (7th Cir. 1968).
104 A similar analysis would be if a group of packers conspire to force stockyards to sell on the basis of a “subject” sales terms—that is, granting the packer the right to refuse to honor the purchase after a delivery inspection at the packing plant rather than on the basis of an “as is” sales term—then that behavior is likely to interfere with the free exercise of decision making by market participants. See De Jong Packing Co. v. U.S. Dep't of Agric., 618 F.2d 1329, 1337 (9th Cir. 1980).
Proposed § 201.308(b) is intended to explain those instances where likely or potential harms to producers rise to violations of the P&S Act, and so this rulemaking sets out factors or criteria that attempt to cover that broad scope. Thus, the Secretary retains the statutory authority to identify and regulate unfair practices or devices in a manner not predicted by this proposed rule, either through subsequent rulemaking or in particular enforcement matters.
First, proposed § 201.308(b)(1) includes consideration of the extent to which the practice may impede or restrict the ability to participate in a market, interfere with the free exercise of decision-making by market participants, tend to subvert the operation of competitive market forces, deny a covered producer the full value of their products or services, or violate traditional doctrines of law or equity
oposed § 201.308(b)(1) includes consideration of the extent to which the practice may impede or restrict the ability to participate in a market, interfere with the free exercise of decision-making by market participants, tend to subvert the operation of competitive market forces, deny a covered producer the full value of their products or services, or violate traditional doctrines of law or equity.
This is not entirely dissimilar from comment (g) in the Restatement (Third) of Unfair Competition, which noted that unfair practices are not merely a matter of antitrust harms:
Courts continue to evaluate competitive practices against generalized standards of fairness and social utility . . . . An act or practice is likely to be judged unfair only if it substantially interferes with the ability of others to compete on the merits of their products or otherwise conflicts with accepted principles of public policy recognized by statute or common law. 105
105 Restatement (Third) of Unfair Competition section 1 (1995).
Thus, proposed § 201.308(b)(1) provides standards to evaluate when a practice under § 201.308(a) is likely to cause a substantial injury.
Second, proposed § 201.308(b)(2) provides a clarification of “substantial injury” by considering the magnitude of a likely injury that the Secretary must halt: an injury may be substantial if it causes significant harm to one market participant or if it imposes a small harm to many market participants. AMS does not propose to eliminate from regulatory oversight those injuries that the Department has deemed in past cases as substantial. A single failure to pay, for even a relatively small amount of money, is sufficiently substantial for USDA to bring administrative action against a regulated entity, and to be a basis for an order of the Secretary to cease and desist. Notably, an injury that does not harm a market participant is not a violation of the Act. 106
106 See In Re: Arizona Livestock Auction, Inc., 55 Agric. Dec
antial. A single failure to pay, for even a relatively small amount of money, is sufficiently substantial for USDA to bring administrative action against a regulated entity, and to be a basis for an order of the Secretary to cease and desist. Notably, an injury that does not harm a market participant is not a violation of the Act. 106
106 See In Re: Arizona Livestock Auction, Inc., 55 Agric. Dec. 1121 (1996) (finding that injury to a cow did not result in any injury the Act was designed to prevent).
Third, in proposed § 201.308(b)(3) AMS proposes considering the extent to which the producer would have to take unreasonable steps to avoid injury. An injury is not reasonably avoidable solely because the practice has been disclosed. A market participant is also not required to take unreasonable steps, such as exiting the market or making unreasonable additional investments or efforts, to avoid the harm. The harder it is for market participants to escape the injury, the more likely the harm would be to occur and the more likely that it would not be reasonably avoidable.
Again, returning to failure to pay, it would be unreasonable for a livestock seller to cease selling livestock on the open market to prevent themselves from being victims of a breach of contract or to ask them to accept revised contract terms after delivery of the livestock. To determine otherwise would undermine the regulatory purpose, which is to give the producers of livestock, and the growers of poultry, the opportunity to receive the fair value of their participation in the market. Nor would it benefit consumers to encourage producers to leave the market or accept substandard payment terms that would discourage appropriate market participation.
C. Proposed § 201.308(c) and (d)
AMS proposes § 201.308(c) and (d) as a comprehensive rule with respect to markets
estock, and the growers of poultry, the opportunity to receive the fair value of their participation in the market. Nor would it benefit consumers to encourage producers to leave the market or accept substandard payment terms that would discourage appropriate market participation.
C. Proposed § 201.308(c) and (d)
AMS proposes § 201.308(c) and (d) as a comprehensive rule with respect to markets.
Unfair practices are not only those that injure producers, but also those that may negatively impact competition because they injure or tend to injure competition or competitive market conditions. AMS takes the position in this proposed rulemaking that harmful methods of competition under the P&S Act are similar to the practices that the FTC and the courts have long recognized as either anticompetitive or unfair: collusive, coercive, predatory, restrictive, deceitful or exclusionary methods of competition that may negatively affect competitive conditions.
Congress intended the prohibitions in section 202(a) (and, also, section 312(a)) of the P&S Act to go further than the prohibition in section 5 of the FTC Act against “unfair methods of competition.” 107 Not only did the P&S Act address deceptive practices before the FTC Act did so, but it also includes many prohibitions that the FTC Act does not. In that breadth, there has been no real dispute that the P&S Act should prohibit at least as much as the FTC Act itself. 108 Thus, as the Ninth Circuit explained, “section 202(a) should be read liberally enough to encompass the types of anti-competitive practices properly deemed `unfair' by the Federal Trade Commission.” 109 The FTC has long prosecuted collusive, coercive, predatory, restrictive, deceitful or exclusionary actions that tend to negatively affect competitive conditions as unfair methods of competition. 110 Moreover, USDA has regularly cited FTC precedent in interpreting the P&S Act. 111 As the Ninth Circuit has noted, “While sec
ive practices properly deemed `unfair' by the Federal Trade Commission.” 109 The FTC has long prosecuted collusive, coercive, predatory, restrictive, deceitful or exclusionary actions that tend to negatively affect competitive conditions as unfair methods of competition. 110 Moreover, USDA has regularly cited FTC precedent in interpreting the P&S Act. 111 As the Ninth Circuit has noted, “While sec. 202 of the Packers and Stockyards Act may have been made broader than antecedent antitrust legislation in order to achieve its 112
107 61 Cong. Rec. 1805-06.
108 Been v. O.K. Indus., Inc., 495 F.3d 1217, 1241 (10th Cir. 2007) (Hartz, J. concurring) (“[I]t would be somewhat surprising if `unfair practices' under the PSA had a narrower meaning than `unfair methods of competition' in the FTCA.”).
109 Armour and Company v. United States, 402 F.2d 712 (7th Cir. 1968).
110 E.I. du Pont de Nemours & Co. v. F.T.C., 729 F.2d 128, 137 (2d Cir. 1984) (citing examples: FTC v. Texaco, Inc., 393 U.S. 223, 89 S.Ct. 429, 21 L.Ed.2d 394 (1968); Atlantic Refining Co. v. FTC, 381 U.S. 357, 85 S.Ct. 1498, 14 L.Ed.2d 443 (1965); FTC v. Brown Shoe Co., 384 U.S. 316, 86 S.Ct. 1501, 16 L.Ed.2d 587 (1966); FTC v. Beech-Nut Packing Co., 257 U.S. 441, 42 S.Ct. 150, 66 L.Ed. 307 (1922), FTC v. National Lead Co., 352 U.S. 419, 77 S.Ct. 502, 1 L.Ed.2d 438 (1957), FTC v. Cement Institute, 333 U.S. 683, 68 S.Ct. 793, 92 L.Ed. 1010 (1948), Sugar Institute, Inc. v. United States, 297 U.S. 553, 56 S.Ct. 1629, 80 L.Ed. 859 (1935), FTC v. R.F. Keppel & Bro., Inc., 291 U.S. 304, 54 S.Ct. 423, 78 L.Ed. 814 (1934), FTC v. Motion Picture Advertising Service Co., 344 U.S. 392, 73 S.Ct. 361, 97 L.Ed. 426 (1953)).
111 Armour & Co. v. United States, 402 F.2d 712, 722 (7th Cir. 1968); see also In Re: Ozark Cnty. Cattle Co., Inc., et. al., 49 Agric. Dec. 336 (1990); In Re: Corn State Meat Co., Inc.; et. al., 45 Agric. Dec. 995, 1012 (1986).
112 De Jong Packing Co. v. U.S. Dep't of Agric., 618 F.2d 1329, 1335 (9th Cir. 1980)
Picture Advertising Service Co., 344 U.S. 392, 73 S.Ct. 361, 97 L.Ed. 426 (1953)).
111 Armour & Co. v. United States, 402 F.2d 712, 722 (7th Cir. 1968); see also In Re: Ozark Cnty. Cattle Co., Inc., et. al., 49 Agric. Dec. 336 (1990); In Re: Corn State Meat Co., Inc.; et. al., 45 Agric. Dec. 995, 1012 (1986).
112 De Jong Packing Co. v. U.S. Dep't of Agric., 618 F.2d 1329, 1335 (9th Cir. 1980).
Thus, AMS proposes § 201.308(c) to capture at least conduct that would violate the antitrust laws, conduct that would constitute an unfair method of competition under the FTC Act, and conduct that courts or administrative officers have held violates the P&S Act's unfairness prohibition. Practices that do violate the antitrust laws therefore are within the umbra of this rulemaking. So too is “conduct which, although not a violation of the letter of the antitrust laws, is close to a violation or is contrary to their spirit,” 113 and practices that “not merely in their fruition, but also in their incipiency . . . could lead to . . . trade restraints and practices deemed undesirable.”
113 Ethyl, 729 F.2d at 136-37.
Conduct falls within proposed § 201.308(c) if it harms competition or has the tendency to negatively affect competitive conditions, impairs market participants' ability to compete, or reduces the likelihood of potential or nascent competition, notwithstanding that it may or may not yet have done so. If the practice is analyzed similarly to an antitrust violation, the Secretary will, where appropriate, consider any buyer- or seller-side anticompetitive effect on price (including the price paid to producers), output, quality, choice, innovation, bargaining power in the market for services or products, the imposition or presence of entry barriers, the imposition or presence of information asymmetries, the entrenching or extending of a dominant position, or the distortion of the competitive process, among other anticompetitive or competitively unfair effects
price (including the price paid to producers), output, quality, choice, innovation, bargaining power in the market for services or products, the imposition or presence of entry barriers, the imposition or presence of information asymmetries, the entrenching or extending of a dominant position, or the distortion of the competitive process, among other anticompetitive or competitively unfair effects. 114 In some cases, it is not necessary to measure the effect on competitive conditions expressly because the conduct, is a per se violation, or otherwise on its face tends to distort, impair, or frustrate the competitive process, including of price discovery. Moreover, section 202 of the P&S Act prohibits unfair competition in its incipiency, consistent with the FTC Act and the Clayton Act.
114 See, generally, Merger Guidelines, (2023), U.S. Department of Justice and Federal Trade Commission, https://www.ftc.gov/system/files/ftc_gov/pdf/2023_merger_guidelines_final_12.18.2023.pdf; FTC, Policy Statement Regarding the Scope of Unfair Methods of Competition Under Section 5 of the FTC Act, 9 (Nov. 10, 2022).
D. Evaluation of Potential Injury to the Market
Because the courts have been clear that behavior that is likely to harm competition violates the P&S Act, AMS proposes standards with respect to injuries that are likely to harm the market. Like other statutes, such as the FTC Act and the Clayton Act, the P&S Act prohibits competition harms in their incipiency. 115 The antitrust laws recognize a wide range of harms, which this proposed rule would fully encompass. 116 Because the Act is intended to protect the market from harm and protect producers and consumers from unfair practices, there does not need to be any proof that any harm to the market has yet occurred: only that the threat the Act is designed to prevent is likely.
115 Daniels v. United States, 242 F.2d 39, 42 (7th Cir. 1957) (“It is the duty of a regulatory agency to prevent potential injury by stopping unlawful practices in their incipiency
ket from harm and protect producers and consumers from unfair practices, there does not need to be any proof that any harm to the market has yet occurred: only that the threat the Act is designed to prevent is likely.
115 Daniels v. United States, 242 F.2d 39, 42 (7th Cir. 1957) (“It is the duty of a regulatory agency to prevent potential injury by stopping unlawful practices in their incipiency. Proof of a particular injury is not required.”).
116 See, generally, Merger Guidelines, (2023), U.S. Department of Justice and Federal Trade Commission, https://www.ftc.gov/system/files/ftc_gov/pdf/2023_merger_guidelines_final_12.18.2023.pdf; FTC, Policy Statement Regarding the Scope of Unfair Methods of Competition Under Section 5 of the FTC Act, 9 (Nov. 10, 2022).
Accordingly, AMS proposes standards in § 201.308(d) for the Secretary to consider when examining practices that likely pose a threat to the competitiveness of markets. These standards include (1) the extent to which the practice impedes or restricts the ability to participate in a market; tends to subvert the operation of competitive market forces; interferes with the free exercise of decision-making by market participants; violates traditional doctrines of law or equity; or has indicia of oppressiveness, such as evidence of anticompetitive intent or purpose or absence of an independent legitimate business reason for the conduct; and (2) the extent to which the practice tends to foreclose or impair the opportunities of market participants, reduces competition between rivals, limits choice, distorts or impedes the process of competition, or denies a market participant the full value of their products or services
nce of anticompetitive intent or purpose or absence of an independent legitimate business reason for the conduct; and (2) the extent to which the practice tends to foreclose or impair the opportunities of market participants, reduces competition between rivals, limits choice, distorts or impedes the process of competition, or denies a market participant the full value of their products or services.
Thus, proposed § 201.308(d) addresses harms that are likely to threaten markets, including “acts and practices which, when full blown would violate the Sherman Act and the Clayton Act.” 117 These include several practices that have been directly found to constitute incipiency violations by the Federal courts or in FTC administrative proceedings, which the FTC details in full in its policy statement regarding the scope of unfair methods of competition under section 5 of the FTC Act. 118 The Secretary may also consider violations of other laws and equity. Thus, when considering harm to markets, the proposed rule allows the consideration of harm that is cognizable under laws that further policy goals concerning the structure of agricultural markets. 119 The proposed rule recognizes that regulatory enforcement may take into account policies such as increasing market diversity through new, beginning, and military veteran producers, 120 and increasing supply chain resiliency including through investing in new and expanded meat and poultry processing. 121 Moreover, USDA's 122
117 Fed. Trade Comm'n v. Motion Picture Advertising Service Co., 344 U.S. 39

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Source: Frix Law Library, https://www.frixlaw.com/law-library/statutes/FR_PRORULE_2024-14042. Check the current official text before relying on it. Not legal advice.