[Federal Register Volume 63, Number 175 (Thursday, September 10, 1998)]
[Proposed Rules]
[Pages 48450-48451]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-24329]


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 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
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  Federal Register / Vol. 63, No. 175 / Thursday, September 10, 1998 / 
Proposed Rules  

[[Page 48450]]


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DEPARTMENT OF AGRICULTURE

Grain Inspection, Packers and Stockyards Administration

9 CFR Part 201

RIN 0580-AA65


Prohibition on the Non-Reporting of Price as a Condition of the 
Purchase or Sale of Livestock

AGENCY: Grain Inspection, Packers and Stockyards Administration 
(GIPSA), USDA.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: The Department of Agriculture (USDA) has received information 
that some livestock transactions are conditioned on an agreement that 
the transaction price not be reported to public or private reporting 
services. USDA is concerned that the non-reporting of price as a 
condition of the purchase or sale of livestock may result in inaccurate 
and incomplete price information, adversely affecting the price 
discovery process. Therefore, USDA is considering a proposed rulemaking 
that would prohibit, as a violation of the Packers and Stockyards Act 
(P&S Act), the non-reporting of price as a condition of the purchase or 
sale of livestock. In order to assess the need for regulatory action, 
this Advance Notice of Proposed Rulemaking invites comments from all 
interested parties.

DATES: Comments concerning this potential regulatory action must be 
received on or before December 9, 1998.

ADDRESSES: An original and two copies of all comments may be sent to 
the Deputy Administrator, Packers and Stockyards Programs, GIPSA, USDA, 
Stop 3641, 1400 Independence Avenue, SW, Washington, D.C. 20250-3641. 
Comments may also be sent by fax to (202) 205-3941 or by e-mail to 
[email protected].

FOR FURTHER INFORMATION CONTACT: Daniel L. Van Ackeren, Director, 
Office of Policy/Litigation Support at (202) 720-6951.

SUPPLEMENTARY INFORMATION: The Packers and Stockyards Programs (P&S), 
GIPSA, monitors and regulates purchases and sales of livestock in 
interstate commerce. The Market News Service, Agricultural Marketing 
Service, USDA, and other public and private reporting entities collect 
and disseminate reported spot market transaction prices for cattle and 
other livestock. This price information is used by livestock industry 
members to evaluate the purchase or sale price of livestock.
    Currently, the price reporting system is voluntary; neither party 
to a sale is required to report a spot market transaction price. 
Because the reporting system is voluntary and some prices may not be 
reported by the parties to the transaction, the prices reported to 
Market News Service and other price reporting services may not reflect 
the highest and lowest prices paid for livestock. As a result, the 
prices reported by Market News Service and other price reporting 
services may not be complete. Many sellers may make decisions on when 
or at what price to sell based on the prices reported by these 
reporting services. Consequently, conditioning the purchase or sale of 
livestock on non-reporting of prices may be an unfair trade practice in 
violation of the P&S Act. Additionally, a regulation that prohibits 
non-reporting of price as a condition of the purchase or sale of 
livestock may enhance the availability and accuracy of complete market 
information.
    The livestock industry has a vested interest in the accuracy and 
completeness of price information. The importance of price information 
to the livestock industry, particularly small cattle producers, was 
made evident during the public hearings held by the USDA Advisory 
Committee on Agricultural Concentration.1 This perspective 
was echoed in the comments 2 filed in response to the 
petition 3 for rulemaking filed by the Western Organization 
of Resource Councils.
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    \1\ The substance of the hearings conducted by the Advisory 
Committee is contained in Agricultural Marketing Service, USDA, 
Concentration in Agriculture: A Report of the USDA Advisory 
Committee on Agricultural Concentration (June 1996).
    \2\ Comments filed in response to WORC's petition are available 
for review in the Office of the Deputy Administrator, Packers and 
Stockyards Programs, GIPSA, USDA. GIPSA's analysis of the petition 
and comments is available on GIPSA's Internet site (http://
www.usda.gov/gipsa/lateadd/lateadd.htm) or by contacting the Deputy 
Administrator, Packers and Stockyards Programs, GIPSA, USDA, Stop 
3641, 1400 Independence Avenue, SW, Washington, D.C. 20250.
    \3\ 63 Fed. Reg. 1845-59 (January 14, 1997). WORC's petition is 
also available on GIPSA's Internet site (http://www.usda.gov/gipsa/
lateadd/lateadd.htm).
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    As early as 1991, P&S received complaints from cattle sellers that 
some sales were conditioned on the seller not reporting the price to 
Market News Service. The sellers complained that buyers were 
conditioning the purchase of higher quality cattle on a commitment not 
to report the price to Market News Service. Because the highest prices 
may not be reported, the reported prices may not reflect the prices 
actually paid for cattle. Consequently, higher quality cattle purchased 
in other sales may obtain lower prices than would be obtained if 
sellers were permitted to report the actual price obtained in all 
sales.
    Conversely, sellers of livestock may request that buyers make a 
commitment not to report low prices. Because the lowest prices may not 
be reported, the reported prices may not reflect the prices actually 
paid for some cattle. Consequently, lower quality cattle purchased in 
other sales may obtain higher prices than would be obtained if buyers 
were permitted to report the actual price paid in all purchases.
    In addition to affecting the prices (including the low, high, and 
average prices) reported by Market News Service and other price 
reporting services, conditioning the purchase or sale of livestock on 
the non-reporting of prices may serve to give the buyers a competitive 
advantage over the sellers of livestock in the form of greater market 
information. Because the buyers of livestock generally are parties to 
more purchase transactions than are the sellers of livestock, the 
buyers may have more market information available to them than do the 
sellers. As a result, sellers of livestock may rely more heavily on 
publicly reported prices when making their sales decisions. Buyers, on 
the other hand, may supplement the market information they have 
assimilated from other purchases (including the purchase prices of

[[Page 48451]]

transactions that are not reported) with reported market prices, which 
may give them an advantage over sellers.
    Because conditioning the purchase or sale of livestock on non-
reporting of prices may be an unfair trade practice in violation of the 
P&S Act, P&S is considering taking regulatory action to prohibit non-
reporting of price as a condition of the purchase or sale of livestock 
on spot market transactions. The Agency is interested in receiving 
information from members of the public, segments of the livestock 
industry (including producers, marketing firms, packers, associations, 
etc.), academia, and industry consultants on this issue. The Agency is 
particularly interested in receiving information from small entities 
that would be affected by regulatory action. Small entities are defined 
as firms that meet the following standards: (1) beef cattle feedlots 
with annual receipts of $1.5 million or less; (2) beef cattle 
producers, except feedlots, and producers of hogs, sheep, goats, and 
horses or other equines, with annual receipts of $500,000 or less for 
beef cattle, hog, sheep, goat, and horse or other equine sales; and (3) 
meat packing plants with 500 employees or less.
    We are seeking information on how frequently conditioning the 
purchase or sale of livestock on the non-reporting of prices occurs and 
how different segments of the industry are affected by this practice. 
The information received in response to the following questions will be 
considered in determining whether this practice violates the P&S Act 
and whether regulatory action is warranted.
     Do you use reported market prices in making livestock 
purchase or sales decisions? If so, how do you use reported market 
prices? For example, do you use reported market prices to determine 
what purchase price to bid or what sales price to offer? If so, how? Do 
you use reported market prices to determine whether to accept or reject 
a buyer's bid or a seller's offer? If so, how?
     Do you encounter or engage in non-reporting of price as a 
condition of purchasing or selling livestock? If so, please describe 
the circumstances under which this practice occurs, the frequency with 
which it occurs, whether you participate in this practice, and the 
business reasons for your decision. When this practice occurs, are the 
prices higher, lower, or about the same as concurrent reported prices?
     What benefits, if any, would a prohibition on non-
reporting of price as a condition of the purchase or sale of livestock 
have on your business? The livestock and meat packing industries? The 
accuracy of reported market prices? Prices paid for livestock? The 
quality of livestock available for purchase or sale? The price 
discovery process? Competition? Please describe the bases for your 
conclusions.
     What harm or costs, if any, would a prohibition on non-
reporting of price as a condition of the purchase or sale of livestock 
have on your business? The livestock and meat packing industries? The 
accuracy of reported market prices? Prices paid for livestock? The 
quality of livestock available for purchase or sale? The price 
discovery process? Competition? Please describe the bases for your 
conclusions.
     Do you have available any economic, statistical, or other 
research relevant to the use and effects of non-reporting of price as a 
condition of the purchase or sale of livestock? If so, please provide 
us with a copy of the research and a brief summary of the conclusions.
    USDA is seeking extensive public comment from all sectors of the 
livestock and meat packing industries concerning the practice of non-
reporting of price as a condition of the purchase or sale of livestock. 
We strongly encourage participation in this important process.

    Dated: September 3, 1998.
James R. Baker,
Administrator.
[FR Doc. 98-24329 Filed 9-9-98; 8:45 am]
BILLING CODE 3410-EN-P