At the end of 2016, the U.S. Department of Agriculture’s (USDA) Grain Inspection, Packers and Stockyards Administration (GIPSA) proposed a rule to “clarify the conduct or action . . . that GIPSA considers unfair, unjustly discriminatory, or deceptive and a violation of section 202(a) of the [Packers and Stockyards] Act” (the P&S Act, codified at 7 U.S.C. § 192(a)). 81 Fed. Reg. 92,703 (Dec. 20, 2016). The proposed rule also included criteria to be used to determine “whether conduct or action by packers, swine contractors, or live poultry dealers constitutes an undue or unreasonable preference or advantage in violation of section 202(b) of the P&S Act” (codified at 7 U.S.C. § 192(b)). Id. Finally, the proposed rule also included various examples of conduct that, notably, did not require likelihood of harm to competition to establish a violation of sections 202(a) or (b) of the P&S Act. See id. at 92,722-723.
While the proposed rule drew support from agricultural producers as providing greater protection against potential inequities in bargaining with packers, swine contractors, and live poultry dealers (e.g., an imbalance in bargaining power), others noted that “the breadth of the proposed regulation would suppress innovative contracting because regulated entities would fear the increased risk of litigation presented by ambiguous terms in the proposed rule” as “producers and growers might be emboldened to sue for any perceived slight.” 82 Fed. Reg. 48,603 (Oct. 18, 2017) (emphasis added).
In abandoning the proposed rulemaking, GIPSA explained that “the proposed rule could have the unintended consequence of preventing future market innovations that might better accommodate rapidly evolving social and industry norms,” id. at 48,604, which is at odds with the federal regulatory policy pronounced in an Obama era executive order directing agencies to “identify and use the best, most innovative, and least burdensome tools for achieving regulatory ends.” Executive Order 13,563 § 1(a) (Jan. 18, 2011).
Finally, it is worth noting that GIPSA also withdrew the interim final rule promulgated contemporaneously with the aforementioned proposed rule. The interim final rule (IFR) was intended to amend the P&S Act implementing regulations “to state that a finding of harm or likely harm to competition was not needed to find a violation of sections 202(a) or (b)” of the P&S Act. 82 Fed. Reg. 48,594 (Oct. 18, 2017) (emphasis added). GIPSA explained that the IFR was withdrawn “because of serious legal and policy concerns related to its promulgation and implementation” – primarily: the fact that GIPSA’s interpretation “embodied in the IFR is inconsistent with court decisions in several U.S. Courts of Appeals, and those circuits are unlikely to give GIPSA’s proposed interpretation deference.” Id. at 48,596.
Thus, the status quo remains and GIPSA will continue to evaluate whether certain practices or conduct are unfair or deceptive on a case-by-case basis.