INTRODUCTION:  Some courts have recently created a loophole preventing enforcement of the Packers & Stockyards Act (“PSA” or the “Act”).  The 10th and 11th Circuit Courts of Appeals added new language to the 85 year old Act requiring USDA and farmers to prove “harm to competition” to prevail, in addition to proving a practice or act is “unfair, unjustly discriminatory, or deceptive.”   This additional proof requirement eliminates liability for many practices causing harm to individual farmers because harm to overall competition is difficult and expensive to prove.  Other portions of the Act cover harm to competition as well, but activist judges have changed the language of the law.

CURRENT LANGUAGE IN SENATE AG COMMITTEE BILL: 

Section 202(a) of the Packers & Stockyards Act, 1921 (7 U.S.C. 192(a)), is amended by inserting “, regardless of whether the practice or device causes competitive injury” after “device”.

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

RATIONALE:  

This language rejects an Eleventh Circuit Court of Appeals decision which added this “competitive harm” proof requirement not found in the Act, enabling packers to avoid responsibility for otherwise unlawful conduct.  The PSA has been greatly weakened, and producer rights are at risk.  USDA and farmers cannot enforce the Act’s prohibitions against unfair, unjustly discriminatory and deceptive acts or practices if courts add extra-statutory requirements of proving not only harm to a producer, but harm to competition in the whole industry.

Harm to Individual vs. Harm to Overall Competition:  Harm to an individual (individual harm) is fundamentally different that harm to competition in an entire industry (competitive harm).   Here are examples:

• London v. Fieldale Foods – wrongful contract termination – An African American poultry grower’s contract was wrongfully terminated by Fieldale Foods.  Mr. London had been called to testify in a deposition as a witness in a discrimination case, Mr. London testified truthfully, and the testimony was adverse to Fieldale.  Fieldale then terminated Mr. London’s contract, causing devastating harm to his business and family.  The 11th Circuit ultimately ruled that Mr. London had to prove harm not only to himself, but to competition in the whole industry.  This new requirement finds no linguistic support in the PSA, and is illogical. 
• Deception in quality payment:  If a packer changes or manipulates its grade and yield specifications upon which producer payment is made, and the impact is directed to one producer, there is no harm to competition but the producer is harmed.  The Act prevented this harm before the 11th Circuit change in the law.
• Misrepresentation:  If a packer misrepresents or inflates contract revenue expectations to a single producer to induce the signing of a contract, the PSA is violated, the harm is individualized to that producer, and harm to the entire industry should be irrelevant.
• Retaliation for reporting price:  Packer refuses to buy from producer because producer reports prices to USDA, and packer does not want prices reported because the prices are high and will drive up the reported average higher.  This may not show a competitive injury if the volume of the prices would not, individually, have affected the USDA weighted average.  But the producer is harmed.
• Changing contract terms:  Integrator promises to pay producer based upon a contract understanding that producer relies upon in getting a loan, and and to sign the contract.  Then integrator changes pricing formula to detriment of producer.  This harms the individual producer, but not necessarily competition in the whole industry.
• Retaliation:  Producer refuses to comply with improper demands of a packer that packer will not put in writing because of impropriety.  Packer refuses to buy from producer because producer will not "play ball."  This is an individualized injury but not a competitive harm to the whole industry.
• False advertising:  Integrator advertises in brochures to sign up producers in contracting campaign.  Advertisements are false.  This may not harm competition generally in the United States.  But it is a recognized unfair trade practices claim under FTC Act and insurance laws.
• Viewing the weighing of animals: PSA regs require integrators to allow producers to watch birds being weighed.  However this regulation may be invalid with the competitive harm requirement.  A processor can thus violate the law without fear of liability.
• Misrepresentation is a recognized "unfair trade practice" under FTC Act and insurance rules of many states.  But it is an individual harm, not overall competitive harm.

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

PACKERS AND STOCKYARDS ACT, applicable 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