Copy of AFF Sentinel V21 #34-Regulation By Whim or Injurious Intent?
- Steve Dittmer
- Jul 22
- 8 min read
USDA’s Proposed Competition Rule Is An Insidious Attempt to Undermine & Wreck the Beef Industry From Top to Bottom
Steve Dittmer | AFF Sentinel
Colorado Springs, CO
Originally sent to subscribers 08/23/24
Pour yourself another cup of coffee or, if it’s evening when you’re reading this, a belt of bourbon might be appropriate, because this is a long piece. But it is necessary to consider this all together and your comments are due soon. The extension has given you until Sept. 11 to file comments. On second thought, you might want that bourbon regardless of the time of day.
The legions of lawyers at USDA have made multiple attempts to clarify further -- beyond the typical enforcement carried out for over 100 years -- “any unfair, unjustly discriminatory, or deceptive practice” in cattle marketing. Their latest effort throws a lot of verbiage at the phraseology but little clarity to most of the country’s marketing system. In the process, they could threaten a system hammered out over decades among all the participants in the beef marketing chain to serve consumers around the world.
Instead, the paragraphs of legal mumbo jumbo provide acres and acres of opportunities for lawyers to conjure up potential new offenses, to hamper and harass the efforts of innovative people in the entire beef production chain to continuously improve the safety and quality of animal products for consumers.
In fact, a federal judge just rejected such an effort to dictate to private companies how to run their businesses. For decades, companies have used noncompete agreements to protect proprietary intellectual property and training invested in employees. The FTC trotted out a 570-page proposed rule that would eliminate most noncompete agreements, (“Lina Khan Loses on Noncompetes,” Wall Street Journal, 8/22/24)..
Interestingly, the FTC decided such agreements violated the Federal Trade Commission Act’s prohibition against “unfair methods of competition.”
Phraseology sound a bit similar?
The Journal said FTC Chair Lina Kahn had used volumes of rule-making to rewrite the (enabling) law to impose her policy views on thousands of businesses.
The Journal pointed out the FTC’s succinct encapsulation of leftist, progressive theory:
“The FTC argued that Congress’s failure to forbid rule-making against alleged `unfair methods of competition’ confers tacit permission.”
Bet the FTC really hates that enumerated powers in the Constitution. You know, the section that restricts the federal government to certain functions and puts the rest off limits.
And we don’t recall any section that requires Congress to do things federal agencies think it should do.
In fact, Judge Ada Brown spelled it out: “The role of an administrative agency is to do as told by Congress, not to do what the agency thinks it should do.”
We’re lucky in that USDA’s proposed rule is ”only” nearly 30 pages long, with supporting documents and data covering another 70 pages.
Incredibly, in all those pages are repetitive and legally flowery intentions to prevent and prohibit unfair or deceptive practices but no real descriptions of real world practices that they would prosecute. Several times they use as an example packers not paying for livestock or meat. That’s been illegal and easy to define for most of 100 years.
That’s such a lame example, we wonder if they can’t be more specific because the lawyers really don’t understand our mostly successful but admittedly complex livestock and meat marketing system.
In the Rules “fact sheet,” USDA trumpets the new reporting Dashboard, the detailed figures on “actual net premiums and discounts” under formula arrangements and detailed quality grade price distribution. That’s important information and a step forward for transparency. But what good will it be if truckloads of threatening and labyrinthine legal warnings and attacks on branded programs do away with any marketing methods but cash sales?
In fact, KLA has posited that the language poses enough risk for the industry that alternative marketing arrangements would dry up and USDA would use the excuse to mandate a percentage of cash sales. After all, this new Rule would go against the rulings of eight different appellate courts holding that a finding of harm has to affect the marketplace, not just one individual case.
There are paragraphs regarding vertical integration which veer closely to giving examples or specifics but do not.
Below are some samples of verbiage from the Proposed Rule, in different typeface for clarity.
The proposed rule referred to their previous attempts to define the practices they didn’t like.
“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]
Not really very helpful in describing a crime, and the courts have not found very persuasive.
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.”
One might have thought that during four years of appropriations riders prohibiting action on these proposals, it might have dawned on USDA that Congress didn’t like these concepts. And taxpaying businesses that would be regulated and restricted by such rules opposed them.
“…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.[“
We believe the “handful” has actually been eight different courts. This provision of multiple courts is part of the body of legal opinion that J. Dudley Butler hated and tried as GIPSA administrator to find a way to negate. This latest USDA proposal is another run at the same issue.
“When you have a term like ‘unfair’ or `unreasonable’ or `undue prejudice,’ that’s a … a plaintiff lawyer’s dream,” Butler said. “If we can get in front of a jury on that, we don’t get thrown out on what we call summary judgment because that’s a jury question,” he explained (“Plaintiff Lawyer’s Dream to Straitjacket,”AFF Vol. 6, #24, 08/19/09).
Way back then, Butler wanted to nail down definitions so the rules for packers were explicit. The courts’ rulings that a case had to “prove that the actions of a packer had adverse effects on competition,” and requirements that damages had to be proven kept the cases out of federal court, where the real money for plaintiff attorneys was.
But many felt that “allowing lawsuits because someone feels damaged but requiring no proof of damage is inviting hundreds of dubious lawsuits.”
“III B …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]”
Unfair? Interferes with competing on the merits? Have they forgotten they have tried by government edict to forbid packers from paying premiums on carcasses? Have they ever heard of the so-called GIPSA rule?
“…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.”
That is a direct attempt to just run over the consistent opinions of multiple court decisions. They want to create the opportunity for any individual who thinks he or she has been mistreated to file a complaint or lawsuit.
“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.’”
What kind of rule defines required or prohibited actions in terms like “close to a violation,” “is contrary to their spirit,” “not in fruition” but “their incipiency,” i.e. direction leaning towards or “deemed undesirable?” That means if the regulator’s breakfast didn’t set well or they’re in a bad mood, one could be found in violation. This is not government. This is reminiscent of petty tyrants in feudal times, ruling by whim.
III-D
Among the factors the Secretary may consider when halting a practice prior to harm occurring are whether the practice offends public policy because it has indicia of oppressiveness, such as evidence of anticompetitive intent or purpose, or absence of an independent legitimate business reason for the conduct.
“Offends public policy?” What public policy? The rule is to be spelled out pursuant to Congressional direction. What other “public policy” is to be considered in a case? “Indicia of oppressiveness?” Are we talking slavery or race or economic strata or political power? What relevance does oppression, in the usual context of the word, have to do with marketing livestock?
Moreover, this proposal extends to horizontal, vertical, and other market relationships because, historically, the Department has found that practices like certain vertical and horizontal information sharing are likely to harm competition, and therefore unfair practices prohibited by the P&S Act.[123] USDA regulations under the P&S Act (in part to address concerns relating to market agencies as regulated under title III of the Act) have also prohibited certain forms of vertical integration, common or interlocking ownership, financing, or management relationships owing to conflict of interest and impacts on market integrity and market access.[124]
This paragraph is the closest one to getting down to brass tacks, to getting at what this government agency believes it needs to snuff out. Over a hundred pages of verbiage and they finally get down to what they want to destroy: the branded beef programs, the breed-sponsored beef brands, the antibiotic-free programs, the coop programs, the packer sponsored programs -- essentially the programs hammered out by cattlemen and packers, breed associations, foodservice operators and retailers to advance beef quality and safety.
Oppression. Interlocking ownership. Financing. Management relationships. This tone, attacking these factors -- sounds like this was written by some animal activist group who wants to destroy the beef industry, not a government agency concerned about the lightest regulation necessary to ensure fairness and a smooth-working market. Not every cattle operation participates in these programs. But the huge steps in quality and safety, the remarkably high percentage of product in the very highest grades, the ability of the industry to satisfy consumers during difficult economic times and high prices are largely the result of these programs. That’s what the government wants to throttle.
USDA’s stated intention is to make things clear. But much of this proposed rule appears to be a finely crafted rabbit warren of nebulous possibilities only teams of lawyers, and likely bewildered judges, can sort out for the next few decades -- only after having first wrecked our marketing system.
They’ve trotted out voluminous legal and regulatory background, past P&S rulings, USDA intentions -- past and present -- but providing, in cowboy parlance, nothing to hang your hat on for most of the document.
The only thing they’ve really made clear is their desire to cut the legs out from under the beef industry.
Oh, and to put context on all this, remember USDA’s stated priorities: “Advancing racial justice, equity and opportunity;” “Addressing climate change;” “Tackling Food and Nutrition Insecurity” and “More, Better and New Market Opportunities,” as spelled out on their opening web page, USDA .
To read everything and get the link to comment, click here:
Comments are now due by Sept. 11 (their website has not been updated for the extended comment period) at regulations.gov or Click Here:
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