Industry won’t rule out legal battle over USDA’s competition regulations

Supporters praised the latest rule for protecting farmers from discrimination and retaliation.

BY: MARCIA BROWN, Politico pro agriculture

Creating a level playing field for small and mid-sized farmers and ranchers has become a centerpiece of Biden’s domestic policy agenda as he seeks to win over rural voters and lower prices for consumers at the grocery store.

The meat industry is threatening legal action in response to the Agriculture Department’s latest attempt to promote competition in the meat and poultry industry.

“We are considering a lawsuit on this final rule and on the next proposed rule on harm to competition,” said Sarah Little, a spokesperson for the North American Meat Institute, which represents meat, pork and poultry processing companies.

On Tuesday, the Agriculture Department finalized a rule banning companies from discriminating and retaliating against farmers and ranchers. The rule is the second in a suite of regulations President Joe Biden directed USDA to write in his 2021 competition executive order, prompting a wave of industry outrage.

A lawsuit could derail the Biden administration’s attempt to finalize an ambitious regulatory agenda designed to promote competition and fair markets in the highly-consolidated meat and poultry industry. Legal action could clog up the regulations long enough for an incoming administration to roll them back.

“Congress never intended to give the agency such broad-ranging authority over meat industry contracts and practices, regardless of their effect on competition — and the courts have agreed,” added NAMI president Julie Anna Potts in a statement.

Creating a level playing field for small and mid-sized farmers and ranchers has become a centerpiece of Biden’s domestic policy agenda as he seeks to win over rural voters and lower prices for consumers at the grocery store. USDA has spent billions shoring up local and regional food supply chains, building out rural broadband and other infrastructure projects as well as devoting more federal procurement contracts to small and mid-sized suppliers.

Biden’s enforcement agencies across the federal government have also sought to rebuke large meatpacking companies and others in the food supply chain for illegal conduct, with mixed results. Although the Justice Department lost a criminal antitrust case against poultry executives, the feds have gone after predatory contract schemes in poultry and supported a farmers’ lawsuit to eliminate barriers to repairing their equipment. For its part, the Federal Trade Commission has sued pesticide manufacturers for anticompetitive conduct and sought to block a merger of the two of nation’s largest traditional grocery retailers.

This week’s rule prohibits discrimination and retaliation against farmers based on race, gender, religion, membership in a farmer cooperative and other characteristics. The new regulation also bans big agricultural companies from retaliating against farmers and ranchers who report potential violations of antitrust or other laws to law enforcement. USDA plans to enforce the rule through collaboration with the DOJ, its online portal for farmer complaints, market data monitoring and occasional compliance inspections.

The National Chicken Council, which represents poultry processing companies, said Biden’s “anti-business regulatory agenda” would impose substantial costs on companies and chicken growers.

The group warned that Biden’s pitch to voters in Thursday’s State of the Union address would fall flat.

“The public on Thursday night will hear charges of ‘shrinkflation’ and ‘deflation’ levied against American businesses, deflecting the blame to our country’s food producers as the reason for high grocery prices,” said NCC President Mike Brown. “Instead, this administration should be looking in the mirror at the root cause: ‘Bidenomics,’ their failed policies and unnecessary regulation after regulation.”

Industry groups like NCC and NAMI also dispute the Biden administration’s claim that their markets are highly concentrated, pointing out that market consolidation hasn’t budged in decades. The White House, on the other hand, dismisses that argument with data that shows four meatpackers control more than 80 percent of the beef industry and dominate in other proteins.

The industry has long opposed regulatory changes in the meat and poultry industry. The Biden administration’s regulatory proposals are based in part on rules proposed during the Obama administration, when Agriculture Secretary Tom Vilsack served his first stint at the department. Then, the rules also faced stiff opposition, and industry enjoyed support from Democrats and Republicans who imposed a legislative rider for years, blocking USDA’s work on new regulations. Finally completed in the twilight of President Barack Obama’s second term, the Trump administration and a sympathetic Congress rolled them back.

In this latest spat over regulatory details, the industry did pocket some wins. The final rule no longer includes the term “market vulnerable individual,” which critics said in public comments was too “vague.” Instead, USDA will rely on characteristics like race, gender or membership in a farmer cooperative in applying the new regulatory protections from discrimination or retaliation.

The National Cattlemen’s Beef Association acknowledged USDA’s efforts to compromise but said it still has qualms with the rule.

“We continue to urge USDA to ensure this rule remains focused on its stated objective—with which we wholeheartedly agree—and does not stray into extraneous, unrelated subject matter discussed in the proposal’s preamble,” said Ethan Lane, NCBA vice president of government affairs.

Even as USDA’s agenda has sparked fury within the food industry, the Biden administration’s anti-monopoly supporters and some farmers are urging officials to finalize yet more rules strengthening the Packers and Stockyards Act, a 1921 agricultural competition law. The much-anticipated “harm to competition” rule , which is expected to be proposed later this year, would make it easier for farmers and ranchers to seek legal redress under the law. Supporters have said that without new regulations, much of the money the administration has spent on independent meatpacking and domestic fertilizer production could be wasted as larger companies buy out emerging competitors.

Others say that they are reserving judgment on the rule until they know more about how USDA will impose compliance.

“If we don’t have good enforcement, it’s just more of the same,” said John Boyd, founder of the National Black Farmers Association.

Still, the rule’s backers say it helps reinforce the new standards established in USDA’s first finalized competition rule, which requires poultry companies to be more transparent about business risks in their contracts with farmers. Aaron Johnson, policy co-director for Rural Advancement Foundation International, called the new rule a “vital companion” to the first.

“The packer cartel is so fearful that they will have to treat producers honestly, they are lobbying unscrupulous members of Congress to defund Packers and Stockyards enforcement,” said Gilles Stockton, a Montana rancher, (Montana Cattlemen’s Association director), and leader with the Western Organization of Resource Councils livestock competition campaign team. “That tells us that these proposed rules are on the right track.”