EXECUTIVE SUMMARY:  The Eleventh Circuit Court of Appeals recently created a loophole to the Packers & Stockyards Act (“PSA” or the “Act”).  The Act prohibits price manipulation.  The jury in the case, Pickett v. Tyson, found Tyson manipulated prices.  The Eleventh Circuit threw out the verdict because it said Tyson had a good reason to manipulate prices, or a “legitimate business justification.”  That language is not included in the Act.  It is a loophole enabling massive unlawful conduct. 

PROPOSED LANGUAGE IN AMENDMENT:  This amendment to the Senate version of the Farm Bill is expected to be sought on the Senate floor.

Any single or multiple act, practice, course of business or device shall be unlawful regardless of any alleged business justification.

A full reproduction of 7 U.S.C. 192(a) appears at the end of this fact sheet.

RATIONALE:  Price manipulation is prohibited by the Act in clear language.  The act states:

“It shall be unlawful for any packer… to… [e]ngage in any course of business or do any act for the purpose or with the effect of manipulating or controlling prices…”.  7 U.S.C. 192(e).

The reason a packer manipulated price is irrelevant.  A packer wants to manipulate price to make money or to buy better cattle cheaper.  Price manipulation is simply wrong, disrupting markets, harming producers, and wrongfully enriching packers.

In Pickett v. Tyson, the jury found Tyson manipulated cattle prices for eight years causing $1.28 billion in damages to cattle producers.  The court required the jury to also find Tyson had no legitimate business justification to manipulate price, because Tyson argued it needed to use the manipulating practice to procure sufficient cattle of a particular quality.  The jury rejected Tyson’s argument, saying it had no excuse for price manipulation.  The 11th Circuit held for Tyson, saying the jury was required to find Tyson had a good reason to manipulate prices.  The 11th Circuit holding is illogical, and finds no support in the Act.

A bank robber’s reason for robbing a bank is because he/she needs or wants the money.  One could argue that the robber will foster commerce when spending the money.  But the law does not recognize that defense because the conduct was simply wrong.

This amendment to the Act will restore the 85-year old law to its original intent of preventing price manipulation.

PRODUCER SUPPORT – Over 170 organizations support these changes, as evidenced by two letters sent to the Senate in January and August 2007.

CURRENT LANGUAGE: The statute currently states this:

§ 192. Unlawful practices enumerated

It shall be unlawful for any packer or swine contractor with respect to livestock, meats, meat food products, or livestock products in unmanufactured form, or for any live poultry dealer with respect to live poultry, to:

(a) Engage in or use any unfair, unjustly discriminatory, or deceptive practice or device; or

(b) Make or give any undue or unreasonable preference or advantage to any particular person or locality in any respect, or subject any particular person or locality to any undue or unreasonable prejudice or disadvantage in any respect; or

(c) Sell or otherwise transfer to or for any other packer, swine contractor, or any live poultry dealer, or buy or otherwise receive from or for any other packer, swine contractor, or any live poultry dealer, any article for the purpose or with the effect of apportioning the supply between any such persons, if such apportionment has the tendency or effect of restraining commerce or of creating a monopoly; or

(d) Sell or otherwise transfer to or for any other person, or buy or otherwise 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; or

(e) Engage in any course of business or do any act 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; or

(f) Conspire, combine, agree, or arrange with any other person (1) to apportion territory for carrying on business, or (2) to apportion purchases or sales of any article, or (3) to manipulate or control prices; or