[Congressional Record Volume 152, Number 20 (Thursday, February 16, 2006)]
[Senate]
[Pages S1428-S1429]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. HARKIN (for himself, Mr. Enzi, and Mr. Thomas):
  S. 2307. A bill to enhance fair and open competition in the 
production and sale of agricultural commodities; to the Committee on 
Agriculture, Nutrition, and Forestry.
  Mr. HARKIN. Mr. President, today I, along with Mr. Enzi and Mr. 
Thomas are introducing the ``Competitive and Fair Agricultural Markets 
Act of 2006.'' This legislation seeks to even the playing field for 
agricultural producers by strengthening and clarifying the Packers and 
Stockyards Act of 1921 and the Agricultural Fair Practices Act of 1967 
and requiring better enforcement of both laws by USDA.
  A quick lesson in agricultural history makes clear that producers are 
no stranger to a marketplace often tilted against them. Roughly 100 
years ago, rapid consolidation and collusive practices by meatpacking 
and railroad and other companies prompted Congress to eventually pass 
several new laws designed to ensure a competitive and fair marketplace 
for agricultural producers. Because earlier legislation was seen as 
lacking to protect livestock and poultry producers. Congress passed the 
Packers and Stockyards Act in 1921 to prohibit packers and processors 
from engaging in unfair, unjustly discriminatory, or deceptive 
practices.
  Consolidation is happening in all sectors of agriculture and having a 
negative effect on producers and consumers across the Nation. 
Consolidation in itself is not a violation of the Packers and 
Stockyards Act, but when some entities become larger and more powerful 
that makes enforcement of the Packers and Stockyards Act absolutely 
critical for independent livestock and poultry producers. The 
statistics speak for themselves. Today, only four firms control 84 
percent of the procurement of cattle and 64 percent of the procurement 
of hogs. Economists have stated that when four firms control over 40 
percent of the industry, marketplace competitiveness begins to decline. 
Taken together with fewer buyers of livestock, highly integrated firms 
can exert tremendous power over the industry.
  The dramatic changes in the marketplace are alarming, and I have 
expressed my concerns to USDA on several occasions--but they showed 
hardly

[[Page S1429]]

any concern and even less action. The Grain Inspection, Packers and 
Stockyards Administration (GIPSA) at USDA has the responsibility to 
enforce the Packers and Stockyards Act. For years, I have had doubts 
whether GIPSA was effectively enforcing this important law. Concerned 
by the lack of action by GIPSA, I asked USDA's Inspector General to 
investigate this matter. Recently, the Inspector General issued a 
report on GIPSA that confirmed these concerns. The report described 
widespread inaction, agency management actively blocking employees from 
conducting investigations into anti-competitive behavior and a scheme 
to cover up the lack of enforcement by inflating the reported number of 
investigations conducted.
  The Inspector General's troubling findings reveal gross mismanagement 
by GIPSA. This failure is not just at GIPSA but includes high-level 
officials at USDA who did nothing to identify and correct problems 
within GIPSA. Today, the legislation I introduce will reorganize the 
structure in how USDA enforces the Packers and Stockyards Act. This 
legislation will create an office of special counsel for competition 
matters at USDA. This office will oversee more effective enforcement of 
the Packers and Stockyards Act and other laws and focus attention on 
competition issues at USDA by removing unnecessary layers of 
bureaucracy. The new special counsel on competition would be appointed 
by the President with advice and consent from the U.S. Senate. Some 
would argue that this reorganization is not needed, especially given 
that USDA has agreed to make the necessary changes recommended by the 
recent Inspector General's report. However, what is important to 
remember here is that USDA has a long history of agreeing to making 
changes and then never following through with them. The Inspector 
General made recommendations to improve competition investigations in 
1997 and the Government Accountability Office made similar 
recommendations again in 2000. It is 2006, yet those recommendations 
were never implemented and GIPSA is in complete disarray. In addition, 
no one above the level of deputy administrator at GIPSA seemed to have 
any idea that any problems were going on, despite the fact I was 
sending letters to the Secretary of Agriculture pointing out that USDA 
was failing to enforce the law. A change is needed.
  In addition to the creation of a special counsel, this legislation 
also makes many important clarifications to the Packers and Stockyards 
Act so that producers need not prove an impact on competition in the 
market in order to prevail in cases involving unfair or deceptive 
practices. Court rulings have created many hoops for producers to go 
through in order to succeed in cases where they were treated unfairly. 
For example, the United States Eleventh Circuit Court of Appeals ruled 
that a poultry grower operation failed to prove how its case involving 
an unfair termination of its contract adversely affected competition. 
The court indicated that the grower had to prove that their unfair 
treatment affected competition in the relevant market. That is very 
difficult to prove and was never the intent of the Packers and 
Stockyards Act.
  This legislation also makes modifications to the Packers and 
Stockyards Act so that poultry growers have the same enforcement 
protections by USDA as livestock. Currently, it is unlawful for a 
livestock packer or live poultry dealer to engage in any unfair, 
unjustly discriminatory or deceptive practice, but USDA does not have 
the authority to enforce and correct such problems because the 
enforcement section of the law is absent of any reference to poultry. 
This important statutory change is long overdue. In addition, to better 
reflect the integrated nature of the poultry industry, this legislation 
also ensures that protections under the law extend to all poultry 
growers, such as breeder hen and pullet operations, not just those who 
raise broilers.
  The Agricultural Fair Practices Act of 1967 was passed by Congress to 
ensure that producers are allowed to join together as an association to 
strengthen their position in the marketplace without being 
discriminated against by handlers. Unfortunately, this Act was passed 
with a clause that essentially abolishes the actual intent of the law. 
The Act states that ``nothing in this Act shall prevent handlers and 
producers from selecting their customers'' and it also states that it 
does not ``require a handler to deal with an association of 
producers.'' This clause in effect allows handlers to think of any 
reason possible under the sun not to do business with certain 
producers, as long as the stated reason is not because they belong to 
an association. Currently, the Agricultural Fair Practices Act focuses 
on the right of producers to join together without discrimination for 
having done so.
  I propose to expand the Agricultural Fair Practices Act to provide 
new needed protections for agricultural contracts. As I have mentioned 
earlier, consolidation in all sectors of agriculture is reducing the 
number of buyers of commodities and for the very few who are left, many 
require contracts to conduct business. Some producers have little or no 
choice but to contract with a firm with questionable practices or face 
leaving the industry they have known for their whole lives.
  This amendment to the Agricultural Fair Practices Act requires that 
contracts be spelled out in clear language what is required by the 
producer. This legislation prohibits confidentiality clauses by giving 
producers the ability to share it with family members or a lawyer to 
help them make an informed decision on whether or not to sign it. It 
prevents companies from prematurely terminating contracts without 
notice when producers have made large capital investments as a 
condition of signing the contract. And it only allows mandatory 
arbitration after a dispute arises and both parties agree to it in 
writing. Producers should not be forced to sign contracts with 
arbitration clauses thereby preventing them from seeking legal remedy 
in the courts.
  History is repeating itself--in fact consolidation in the industry is 
even worse today. Producers deserve to have a fair and evenhanded 
market in which to conduct business. They should not be at the mercy of 
unfair and heavily consolidated markets that spurred Congress to enact 
legislative reforms, such as the Packers and Stockyards Act, years ago. 
This legislation won't be able to turn back the clock, but it will 
strengthen laws and enforcement of them so that markets operate more 
fairly.
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