1. Do the two tests described in this proposed rule appropriately guide enforcement of “unfair practices” under section 202(a) of the P&S Act?

The two tests in question are proposed in, first, § 201.308(a) and (b) which would protect against injuries to market participants from unfair practices and, second, proposed § 201.308(c) and (d) which would protect the market from unfair practices.

Yes. The USDA’s administration of the Packers and Stockyards Act cannot be effective unless known and potential injury to market participants is the focus of complaint investigation, market surveillance, and regulatory intervention. This administration must occur in a timely manner when injury is first made known or suspected – not years later. An injured party rarely achieves redress in the types of cases covered by the Act, especially if sought after the injurious action occurs. In any case, redress is nearly impossible without the intervention of federal agencies such as the USDA.

We know these unfair practices are pervasive and endemic, so there is no waiting to see. The proposed rule rightly seeks to prevent unfair practices, so injury does not take place. The characteristics of these types of unfair practices are well known and can be identified and tracked by the agency under the current scope of authority with existing resources.

2. What modifications to the proposed rule would be appropriate to meet the goals of the P&S Act?

2.A. Unfair practices are widespread, pervasive, and persistent within the livestock and poultry industry. While the proposed rule expands the USDA’s policies about what is actionable or not, the overall effort is not adequate to the curtail unfair practices, injury, and market failure due to market participants being extremely vulnerable to retribution by various means including through exclusion from the market altogether. If agency action is dependent on voluntary reporting, few unfair practices will be discovered. Anonymous reporting is not helpful since the alleged unfair actor(s) will always know who the complainant likely is. Thus, the proposed rule should recognize that a historical pattern and practice by certain actors or group of actors already constitutes de facto evidence of potential unfair practices in the market resulting in ongoing and potential injury to market participants. The commentor is aware that a test for historical patterns and practices may implicate nearly every entity that holds power in the market, but this is so. The proposed rule should allow the agency to act on behalf of unknown and unidentified injured or potentially injured market participants even in the absence of a specific complaint. Otherwise, nothing changes.

2.B.  The core deficiency with the proposed rule is that it is contemplated in isolation from other USDA policies that work against fair practices in the agricultural community.

For instance, the USDA mandate for Radio Frequence Identification (RIFD) of ruminant livestock is a significant burden on small producers, resulting in an unfair practice promulgated by the USDA that favors large feed lots, livestock aggregators, and meat processors. Under the guise of food safety benefits, small market participants are burdened with large upfront costs for monitoring equipment and software, ongoing expenses for tags, monitoring, and maintenance, permanent recordkeeping burdens, and the threat of enforcement action. No one believes the safety of the US meat supply is improved by this new measure – even if the equipment works, which is unlikely. Large export and import firms benefit from the system at the expense of the economic sustainability of small entities. Thus, the USDA is itself imposing unfair practices and interfering with fair markets.

Another example is the disparate treatment afforded small and medium sized meat processing plants, which report unreliable inspection regimens and impractical enforcement of rules that only prevent affordable local meat processing of livestock raised on small farms and ranches. Simultaneously, large processors are heavily supported by USDA inspectors and inspection rules, even at exceedingly high processing speeds, and may even self-inspect their own operations. Since local and regional economies depend on access to slaughter and processing to support the success of localized food systems, the USDA’s mistreatment of small processors represents an unfair practice and interference in the fair functioning of competitive markets.

The USDA’s preference for concentration of ownership and control, the result of which is the dominant control of 85% of the meat processing industry by four global conglomerates, is the most unfair practice of all. These entities have successfully eliminated most of the United States’ small and medium size independent feedlots, slaughter, and processing plants. In many cases, these dominant entities purchased thriving operations only to close them and destroy the physical infrastructure to prevent their restoration and re-use. This deliberate destruction of competition over a period of decades was supported or tolerated by federal regulators, including the FTC, USDA, FDA, state regulators, and others. This widespread unfair practice has stripped the wealth and wealth-building capacity from the American Heartland and delivered it to the wealthy shareholders of wealthy corporations. As such, the proposed rule merely nips at the heals of the systemic problem underpinned by longstanding USDA action and inaction. If market participants are only lukewarm regarding the potential benefits of the proposed rule, it is because so many other rules and enforcement priorities would have to change simultaneously to have any impact on the reality of the patently unfair American livestock and meat processing markets.

Although tangential to Stockyards and Packers, the US dairy industry is another example of runaway concentration of ownership and rampant unfair practices. The Capper-Volstead act exempted cooperatives, as they existed in the 1930’s, from laws curtailing collective decisions on production of supply and market pricing set by collective decision-making through open collusion by cooperative members. The Capper-Volstead exclusion made sense when hundreds of small producers in a trade area could accidentally produce excess milk that drove prices down below profitable levels which could lead to dumping and farm failures. However, the USDA and FTC and other federal and state agencies allowed cooperatives to engage in unfair and anti-competitive behavior against other cooperatives. This lead to a severe concentration of milk pooling and processing capability within each region, to the extent that in many areas none or only one milk pooling entity controls all milk collection, veterinary services, and processing. Alabama, for instance, has no milk pooler and depends on one entity in Kentucky. The entire state of Texas has one milk pooler that controls all price and access to processing. In Colorado, only eighty-seven dairies are left in the state, huddled in three counties in the northeast corner, and all of them are dependent on the DFA (Dairy Farmers of America) coop for milk collection. Noncompliance by a dairy with the DFA’s price, supply, and other demands may result in the termination of milk collection. No tanker truck tomorrow, so turn off the cows. Furthermore, only DFA and two national retailers pasteurize and process nearly all the liquid milk into ingredients and packaged dairy goods. The ability of the DFA coop to eliminate all other competition is de facto proof of unfair and anti-competitive practices. That DFA and its retailer-processors can claim that this behavior is “legal” under Capper-Volstead is an empty boast. Even DFA coop-member dairies have sued their own coop over unfair practices. One lawsuit resulted in a settlement of over $150 million from DFA, which the coop appears to have agreed to in order to avoid providing internal documents as part of the lawsuit discovery process. The USDA has been instrumental in creating this lock on the US dairy market and the destruction of small and medium-sized dairy farms and milk processing plants. The potential improvements to enforcement against unfair practices in the Stockyards and Packers industry should be measured against the agency’s longstanding promotion and protection of regional dairy monopolies at the expense of rural economic and social vitality.

The unaddressed problem in the meat industry is implicit collusion between meat processors and large meat wholesales and retailers. When access to processing is controlled by the entities that control the sales contracts to retailers, and to wholesale suppliers to retailers, the only path through the gatekeepers to retail shoppers and institutional users is the dominant meat processors. Four processors control 85% of meat processing, and ten large retailers control 70% of retail sales. Institutional buyers such as hospitals, universities, corporate campuses, school systems, correctional facilities and the military comprise most of the rest of the market for meat.

The small number of remaining independent processors, even with their combined capacity, results in processing backlogs of over a year. The unfair practices of limiting access to markets by producers– unless they sell livestock to the dominant processors –is part and parcel of USDA policies that support supply chain consolidation and central control. While the proposed rule may change the unfair practices imposed by large livestock aggregators and processors, it will not change the fact that large livestock processors control most of the access to the national and international market for meat, and, by that fact, are able to control overall pricing for animals, processing, and overall access to markets.

In summation, the proposed rules regarding unfair practices should be applied to the agency’s own operational priorities first and foremost, especially its policy of non-interference with (and promotion of) anti-competitive collusion and supply chain consolidation.

Window dressing will not fix a 140-year-old dysfunctional market.

3. Are the factors described in the proposed rule to contextualize the two tests appropriate? If not, are certain factors more appropriate to one or the other test?

The factors described in the proposed rule to contextualize the two tests do not adequately address the systemic unfairness in American agriculture and food systems and their captured markets. Were the context extended to the unfairness that is tolerated and encouraged by federal and state regulators, the meaningfulness and potential effectiveness of the proposed rule would be significantly improved.

4. What other relevant factors may be considered in addition to or instead of the current factors?

The entire historical record of the unfair practices and unfair markets of the livestock and poultry industry should be the context by which unfair behavior of individual market participants and collusive groups of market participants is understood and evaluated. While the US judicial system presupposes innocence until guilt is proved, the historical context and historical record of unfair behavior – whether adjudicated as legal or tolerable at the time it originally occurred – must be recognized under the proposed rule as unfair, illegal, and subject to regulatory action. The agency must recognize that if the dominant actors in the market, if they are allowing the proposed rule to be proposed at all, have already determined how they will circumvent them or at least minimize their effect. They may, in fact, have built in loopholes that will permanently enshrine their monopoly. If the agency’s intention is to proceed with piecemeal enforcement but to allow the overall market to function unfairly, as it has for a century, then the narrow focus on individual actors and individual unfair acts is sufficient for appearances. Ultimately the USDA, FTC, and state agencies need to align and coordinate their framing of the larger problem and their response to it.

5. Should the Department add regulatory text to define legitimate business justifications? If so, who should bear the burden of proof and what constitutes a cognizable justification?

All unfair actors claim legitimate business justifications. Indeed, in any one instance an unfair act may be justifiable. However, the pattern and practice of small unfair acts are how whole markets become unfair. Cargill bought, closed, and destroyed small meat processing plants across the nation for decades, likely claiming that each one was “inefficient” or “unprofitable” or “lacked an adequate skilled labor supply” or “profitable market” for its products. Nevertheless, its strategy decimated rural community economic vitality and resulted in its control of entire regional markets for some kinds of livestock processing. So, unless the regulatory text regarding “legitimate” business justifications contextualizes the alleged unfair act within long-established and well-elucidated patterns and practices, it will likely result in the status quo. Certain seemingly justifiable acts are known to be part of long-term strategies that are patently unfair and result in unfair markets. Call them out and stop them or allow the ongoing destruction of rural America.

6. Should the rulemaking consider: (a) whether the method of competition is so facially unfair that business justifications should not be entertained; (b) whether the party claiming a business justification must show that the asserted justification for the method of competition is legally cognizable, non-pretextual, and narrowly tailored to bring about a benefit while limiting the harm to the competitive process and to market participants; or (c) whether the party claiming a justification must show that the claimed benefit occurs in the same market where harm is alleged?

The concept of a countervailing market benefit is a red flag waived by bad actors. The prevalent justification is “lower consumer prices,” which has for 50+ years been allowed as a catch-all excuse for all manner of unfair practices. However, the claim of providing lower prices at the consumer point of sale (retail or institutional) must not be taken at face value. Currently meat prices have doubled over the last four years, but the price paid to producers has not increased. When industry apologists interject the talking point that “Consumers prices would be even higher than they are if, if, if…,” it should raise the USDA’s and FTC’s suspicion and trigger an audit to substantiate the claim. Spoiler: this statement never holds up to scrutiny.

Moreover, claims that an unfair practice is warranted to improve efficiency, lower labor costs, increase animal welfare, improve environmental controls, ensure food safety, etc., smarten the climate, are almost never provable. It is efficient to buy and close competing plants because closing competing plants redirects their through-put to a larger plant. However, collateral consequences include lower prices paid to farmers, lost jobs at the closed plant, low-wage no-benefit low-skilled workers hired in the larger plant, expansive manure lagoons associated with larger feed lots, lower animal welfare in holding pens and mass slaughter facilities, lower food quality and safety standards in a fast-paced processing line, etc. The proposed rule must ensure accountability for all market benefits and all associated costs and risks to the market. Every investigation should undertake a comprehensive cost-benefit analysis.

7. Does the proposed rule appropriately define what behavior is “reasonably avoidable”? Should this language be delineated more precisely or more broadly or in other ways, and if so, how?

The preponderant power of a small number of actors and groups of actors over the market ensures that few victims of their unfair practices are able to avoid the consequences of unfair acts. As stated above, in any single case there may in theory be a way to reasonably avoid the worst negative effects of unfair acts. However, it is the cumulative effect of unfair acts on individual market participants, local and regional economies, the collective ability to access to processing at fair prices, and the collective ability to access to retail and institutional markets at fair prices, that over time results in unfair markets. Each of a thousand cuts will be scared over with enough time and a second job, but that forcing desperate actions on the victims should not exonerate the unfair actor. No one sits by suffering by choice – that the duty to mitigate unfair practices falls on the victim exposes the bad faith of the proposed regulatory framework.

“Reasonably avoidable” also assumes that there are reasonable responses that mitigate the damage from unfair acts that do not in turn trigger additional unfair acts. Hell hath no fury like the meat packer called out for malfeasance.

8. Should AMS provide additional guidance around incipient harms to the market, and if so, should AMS draw from Clayton Act standards,^[134] such as whether the effect “may be substantially to lessen competition, or to tend to create a monopoly.” ^[135]

Yes, but only if the USDA is committed to an open, fair, competitive, functioning market, and will coordinate with other federal agencies such as the FTC.

9. What benefits would this proposed rule provide for producers or other persons?

Producers and producer groups, and the entire system of suppliers, buyers, and consumers that supports them, have been under sustained pressure to surrender independence to the demands of a few dominant actors who control inputs, livestock aggregation and feeding, meat processing, access to wholesalers, and access to retailers. The proof of the unfairness of this system is the unfairness of the outcome. Everyone is beholden to a few large companies and, in turn, to the demands of their shareholders for ever-increasing revenue and profits. Given the outcome of 140 years of laissez faire regulation of these markets, any amount of improved access to services and markets at a fair cost would be an improvement. However, unfairness imbues the system. The proposed rule will only be tolerated by the dominant actors if its impact can be mitigated or deprecated. The rule’s myopic focus on the Packers and Stockyards Act will do nothing to control unfair practices within all the subsidiary and support systems on which producers depend. There are unlimited ways to manipulate the market and gatekeep access to the market; incremental controls over a handful of these methods will be a minor impedance, at worst, to the dominant actors. American agriculture and its rural communities will look back in ten years to see nothing has improved.

10. What burdens would this proposed rule create for regulated entities?

If honesty, transparency, fair dealing, timely payment, and allowing farm families to make enough profit to operate their farms is a burden, then the dominant regulated entities will suffer the smallest inconvenience, if any, by complying with the modest change in enforcement. Relative to the gross imbalance of benefits that continue to accrue to the executives and shareholders of the dominant actors, any burden on them should be considered de minimis or dismissed outright.

The burden put on the remainder of market participants will consist of economic, social, and political pressure to not trigger enforcement action no matter how unfairly they are treated by dominant actors. Even those farmers who have lost everything by contracting with large entities still have their dignity and social stature to lose. For every loser, there is often, by design, a group of (temporary) winners who are encouraged to defend the system. In this game of economic musical chairs, some players always remain standing to walk to the music, ever hopeful there is a seat left for them when the vinyl stops spinning. The single most troubling burden of the current system of unfair practices is that the victims and their families must suffer in silent fearful shame or be shunned and cancelled.

Enforcement of the proposed rule must disregard claims that some collective countervailing benefit to the market supersedes the damage done to the current round of victims. One victim per month over one hundred years amounts to 1200 failed or struggling farm operations in one market in one region. In fact, that calculus adequately explains the dynamics of the loss of American family farms and the rise of fewer, larger, richer operations that are allowed to operate profitably – but only if they agree to support the methods and machinations of the dominant market actors. Otherwise, there will be no chair left open when the music stops.

11. What is your preferred way to measure countervailing benefits?

The fundamental assumption of open market competition is that winning is good and that market participants who fail to compete successfully are at fault. The proposed rule, and the USDA’s approach in general, fails to account for the extensive costs to social and economic ecosystems when any single family business does under, let along 100 years of systemic denigration of those farm failures. If the USDA continues to measure only yields, dollar value, exports, and other simplistic assessments of its success, then the USDA might as well continue to conglomerate US agriculture to one single global entity that controls all others. We see the result of these assumptions and these policies in the loss of functioning rural communities, widespread depopulation, and poverty across the heartland, due to the destruction of county-level processing, preservation and resale of food, fiber, and feed. The stability and resilience of rural American, once the envy of the world and the bulwark of our national security, has been replaced with day-to-day dependence on food deliveries from elsewhere, livestock processing elsewhere, and agricultural processing elsewhere, by workers from elsewhere. No countervailing benefit can offset the pervasive devastation wreaked by unfair market practices. Indeed, reversing the destruction of American society will take generations – but only if unfair practices are actually curtailed across the entire fabric of the economy. Enforcement of the proposed rule must weigh the historic costs of market consolidation against the incremental improvements for a handful of wealthy individual market participants from the proposed rule.

12. Should some things be categorically excluded from consideration as countervailing benefits, such as cross-market balancing?

No countervailing benefit resulting from unfair practices should ever prevent ending that unfair practice. America is owed the protection of the USDA and other state and federal agencies. The dominant actors have already taken too much and been given too much. If the proposed rule ends up giving cart blanche to the dominant entities, no one will be surprised. That is the key exemption that are depending on.

13. How would you describe conduct that is oppressive?

To be successful, or to just compete at all, a market participant must have access to retail and institutional markets. Access to markets means the profitable sale of a producer’s goods into retail and institutional markets. To enter the food and ingredient supply chain, the goods must be processed in a way that conforms to quality, quantity, and delivery standards. To meet those standards, agricultural production and livestock must be processed by an approved entity. To access to approved processing entity, a market participant must meet raw material delivery standards, timing requirements, credit payment terms, and volume minimums. Thus, market participants must have the labor, land, capital, expertise, equipment, compliance systems, inspections services, capacity and tolerance for risk required by the processor’s demands. For most, the game is rigged against them from the start.

The system currently endorsed by the USDA and other federal agencies allows dominant actors to serve as gatekeepers at every step of the value chain from soil to sale. The gatekeepers extract profit for themselves with every toll. These pervasive hidden levies on every step of the agricultural value chain are, individually and collectively, oppressive. That is the intentional design of the system, and that is what the proposed rule has to fix, or not.

Land and leases are unaffordable. Processors demand unattainable minimum quantities of animals. Only one aggregator will offer one price at any given time, essentially locking up the market. Local livestock processing has been destroyed. The ability to legally harvest and process animals on farm or in a local abattoir is heavily curtailed if not outright illegal. The only viable market for locally processed meat is direct-to-consumer since retailers collude with the dominant processors for their preferential supply chain. In dairy, milkers must use the veterinarian services dictated by the only remaining coop pooler, and accept the price offered, or risk losing milk transport and access to processing. The list of oppression points in the value chain is limitless. At every step, in a thousand cuts, the few entities that control access to market revenue take one more piece of flesh for themselves. The oppression is death by a thousand cuts.

Regulators are aware of this oppression, and public demands for government intervention are widespread and longstanding. However, the federal budget still provides $40 billion in taxpayer money to prop up the system of oppression while offering a few tens of millions to support small and new farmers and the localization of foodsheds. Even the most optimistic analysis must conclude that these minor programs with inconsistent and small amounts of funding doled out over decades will do nothing noticeable to improve the situation. In fact, given the captured market, encouraging small producers and local processors to invest personal capital in startups is simply dangerously bad advice.

14. How would this proposed rule affect competitive conditions in the livestock and poultry industries?

The proposed rule will only affect conditions in the livestock and poultry industries if it is enforced and if the enforcement is proactive, uniform, and does not depend on sacrificing the wellbeing and safety of the farmers who have been harmed or may be harmed. Market participants who have suffered or will suffer unfair practices are already suffering enough. The USDA cannot ask these people to present evidence, testify, indict, or make allegations against the same dominant actors on whom they depend for their financial livelihood, or against others in their community who can devastate their social standing. The USDA is an actor in the national mental health crisis among farmers and agricultural communities. The agency must reestablish fair competition to end this crisis.

15. Should the proposed rule treat private causes of action differently from violations of section 202(a) of the Act when enforced by the Federal Government, and if so, how?

USDA policy should be to actively support the private right of action exercised by aggrieved farmers who have been treated unfairly by dominant actors – meaning any dominant actor controlling access to the market by controlling access to any point in the supply chain, especially when that gatekeeping results in exclusion or extractive profit. The proposed rule should be used to inform the adjudicators about the nuances of unfair acts in unfair markets and explain the pervasive and ongoing nature of the predatory food and agricultural value chain. The USDA should prepare an amicus brief for all civil cases, and proactively offer expert witness for the court record.

Without civil action against bad actors, the USDA will change nothing of consequence. Without providing unwavering support for civil action undertaken by victims of unfair practices, the USDA will change nothing of consequence.

16. Would this proposed rule have any other effects on the market or market participants? If so, in what ways should they be addressed?

The proposed rule, if enforced uniformly and proactively, would signal to rural producers that their 100-year-old predicament has finally reached the point where even the USDA must recognize the dire consequences of its historical policy of promoting market concentration and control by a limited number of dominant market participants. The faith placed in any USDA rule or statement of commitment will be slight. The expectation that the needs of the dominant actors will continue to prevail will be strong. The fear of each new administration is now a generational fear. The agency’s few successful enforcement actions and civil complaints will be celebrated, to be sure, but not counted on as evidence of any substantial change. How complainants are supported or not by the USDA will be noted and remembered.

In any case, without comprehensive engagement by all federal and state agencies, and without judicial recognition of the seriousness of the violations, nothing will change. That is the expectation.

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