Packers and Stockyards Act; Nullified by Judcial Activism! – Must We Let It Rest in Peace?

Thomas F. “Fred” Stokes
Executive Director

The Rule doesn’t reinvent the Packers and Stockyards Act of 1921 (PSA) but rather reinvigorates it”, so says David Domina, OCM General Counsel of the Proposed GIPSA Rule published on the federal register June 22, 2010. The rule was issued pursuant to the 2008 Farm Bill to clarify and interpret the 89 year old Packers and Stockyards Act, but the PSA (sometimes called the producer’s protection act) may well be nullified by judicial activism rather than reinvigorated by the GIPSA Rule.

PSA came into being to protect livestock producers during a period of rampant abuses by meat packers. At the time, the packing industry was under the ruthless domination of five firms: Armour, Cudahy, Morris, Swift, and Wilson who controlled some 70% of the meatpacking business. They used their concentration and resultant market power to unduly enrich themselves to the detriment of both livestock producers and consumers.

The PSA was intended to curb these abuses and provide for a more competitive and equitable market for livestock and poultry. But the PSA has fallen short of its intended purpose due to lack of clarity and proper promulgation and judicial distortions. The Food, Conservation and Energy Act of 2008 (Farm Bill) tasked USDA with writing a rule which would further promulgate and clarify the PSA.

When the rule was published on the federal register on June 22 of last year, there was a spontaneous wailing and gnashing of teeth by the meat packers and pork and poultry integrators. Aided and abetted by their political minions, lobbyists and farm publications influenced by their big advertising buys, they precipitated a veritable firestorm of opposition.

While the packers have been opposed to most every aspects of the GIPSA Rule; their strongest opposition is to the provision that would reverse the several appellate court rulings requiring a showing of harm to competition before considering damages to an individual or class. The relevant part of PSA reads:

Section 202. 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;

Since at least 2005, federal appellate courts have ruled that this provision requires a showing of harm to competition before harm to an individual could be claimed. Nothing in the plain language above supports such rulings and both the U. S. Department of Justice and USDA have so stated in several Amicus Briefs filed with these courts. Yet, these rulings have been the basis for reversing a number of jury verdicts for plaintiffs.

Last October, the OCM General Counsel and three other attorneys, initiated an appeal to the U. S. Supreme Court (Alton T. Terry v. Tyson Farms, Inc.) in an effort to settle the matter. The high court declined to hear the appeal on January 21st. In so doing, the Supreme Court declined to make a supreme decision on whether the law means what it says, or whether judicial
activism by pro-big business judges will stand. No action by the Supreme Court is, in fact, a pro-big business ruling.

The American Meat Institute (AMI), lobbying mouthpiece for the meat packers, commissioned a “study” by Informa (formerly Sparks Commodities) which predicting an apocalyptic outcome if the Rule is finalized. According to this study;

“Companies in the United States that produce, process, distribute and sell meat and poultry products would lose more than 30,000 jobs if the proposed GIPSA rule were implemented. In addition, almost 74,000 jobs in supplier and ancillary industries will also be lost”.

The AMI study ignores the fact that 100,000 head feedyards reduce jobs by eliminating nineteen 5,000 head feedyards, and that killing 1 million cattle a year in a single plant eliminates thousands of jobs in the 5-10 plants that are put out of business by the giant. It also ignores the fact that whole towns, and implement dealers, and repair shops, and grocery stores, and car dealerships are pushed out of business by this “efficiency”.

AMI’s Informa study continues with its the-sky-will-fall prediction, forecasting the loss of 21,000 producers and a total economic harm of $14 billion. However, AMI has a plan for our salvation, a method of escape;— just take out one little portion of the Rule!

“The provision that removes the burden for litigants to show competitive injury in order to seek damages is by far the largest area of concern. Informa finds that nearly 75% of the expected economic damage arising from this proposed rule can be tied directly to this provision.”

The several judicial rulings are portrayed by packers and integrators as settled law and fiercely defended as their shield against any accountability for their acts. They and errant court rulings ignore the Supreme Court’s Chevron Decision regarding due deference to the administrator of the law. In a letter to USDA Secretary Vilsack, Iowa’s Senator Harkin makes this point:

“A cardinal principle is that the courts are to give deference to the interpretation of laws by the federal agencies that are charged with implementing and administering them. Specifically, for instance, GIPSA is to be accorded deference in its interpretation, spelled out in the proposed rule, that the P&S Act protects individual producers against “unfair, unjustly discriminatory, or deceptive practices or devices” without a necessity of showing such conduct has an impact on the broader market.”

It is important that the currently proposed GIPSA Rule be finalized with the provision pertaining to harm to competition intact and that the question regarding judicial deference be resolved.

Some respected folks in these issues take the view that proving harm to competition under PSA is possible, especially in a class action suit. However, in the history of the Act just one class action suit, Pickett v Tyson, produced a $1.3 billion jury verdict. But, the appellate courts also took away that award to the livestock industry;— claiming inadequate proof of harm to competition.

The PSA’s words do not require proof of harm to competition. No court has ever said so; they merely applied pro-business activism and read this requirement (borrowed from Sherman Act cases) into the law.

This is a perversion of PSA and a big and unnecessary impediment to justice for harmed producers. So long as judges can use this highly suspect interpretation of PSA to continue to reverse jury decisions favoring harmed livestock and poultry producers; taking away awarded damages and saddling them with court costs, Section 202 of the Packers and Stockyards Act of 1921 stands null and void. Producers will remain unprotected and alone.FS