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American Meat Institute Says USDA Proposed Rule on 'Undue Preferences' Constitutes Regulatory End-Run Around Judicial Rulings

Friday, June 18, 2010

Washington, D.C. – A proposed rule that attempts to change dramatically the way livestock are procured and marketed in the U.S. meat industry is a “regulatory end-run” around judicial rulings that would have a severe and detrimental impact on livestock producers and the meat industry, according to the American Meat Institute (AMI).

If finalized, the rule could dismantle many business models for livestock marketing and procurement. For example, packers who own cattle feedlots would no longer be permitted to sell their livestock to other packers and would instead be forced to sell their cattle only to the packing division of the their company. The same would apply to pork companies that raise pigs.  Not only would this harm meat companies with livestock production divisions, it would harm other packers who have come to rely on them as a source for animals.  According to AMI Senior Vice President of Regulatory Affairs and General Counsel  Mark Dopp, “USDA is attempting to turn the clock back on the livestock and meat marketing practices that have made the U.S. meat production system the envy of the world and that have delivered the most abundant and affordable meat products available to the American consumer.”

In an outline of the rule, USDA details its thinking about the current legal standard when asserting a claim under the Packers and Stockyards Act.  In that regard, USDA wrote “The court decisions that require proof of harm or likelihood of harm to competition in order to prove any violation of section 202(a) or (b) of the Act creates an unreasonable standard that may be difficult to meet.”  The outline complains that a number of U.S. circuit courts of appeals have not given “deference” to USDA’s interpretation of sections of the Packers & Stockyards Act, asserting that the proposed regulations would constitute “a material change in circumstances that would warrant judicial reexamination of this issue.”     

According to Dopp, however, these rationalizations ignore the fact that USDA has presented its interpretation of the statute to several federal appellate courts and they have been repeatedly rejected, including rulings as recently as December 2009 and again in May 2010.  In the 2009 case Wheeler v. Pilgrim’s Pride Corp., the United States Court of Appeals for the 5th Circuit was particularly pointed in rejecting USDA’s arguments, writing, “The Government has appeared here as amicus to contend that the courts have had the PSA wrong and that it should be construed to make unfair practices unlawful without regard to competition.  It urges Chevron deference, but that is unwarranted where Congress has delegated no authority to change the meaning the courts have given to the statutory terms, as the Eleventh and Tenth Circuits have held.”

“Courts have affirmed that our industry is dynamic and competitive and have rejected USDA’s arguments repeatedly.  Now, in the face of repeated judicial rejection of their arguments, USDA is engaging in a regulatory end-run and attempting to change the law through administrative fiat.  This is not an appropriate role for the Department to play and could potentially cause harm and enormous disruption,” Dopp added.

For more information about competition in the meat industry, including a compilation of the studies and reviews that have been done during the last two decades, visit http://www.themarketworks.org/.

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