[Federal Register Volume 82, Number 200 (Wednesday, October 18, 2017)]
[Proposed Rules]
[Pages 48603-48604]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-22588]



  Federal Register / Vol. 82 , No. 200 / Wednesday, October 18, 2017 / 
Proposed Rules  

[[Page 48603]]


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DEPARTMENT OF AGRICULTURE

Grain Inspection, Packers and Stockyards Administration

9 CFR Part 201

RIN 0580-AB27


Unfair Practices and Undue Preferences in Violation of the 
Packers and Stockyards Act

AGENCY: Grain Inspection, Packers and Stockyards Administration, USDA.

ACTION: Proposed rule; notification of no further action.

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SUMMARY: The Department of Agriculture's (USDA) Grain Inspection, 
Packers and Stockyards Administration (GIPSA), Packers and Stockyards 
Program (P&SP) is notifying the public that after review and careful 
consideration of the public comments received, GIPSA will take no 
further action on the proposed rule published on December 20, 2016.

DATES: As of October 18, 2017, GIPSA will take no further action on the 
proposed rule published on December 20, 2016, at 81 FR 92703.

FOR FURTHER INFORMATION CONTACT:  S. Brett Offutt, Director, Litigation 
and Economic Analysis Division, P&SP, GIPSA, 1400 Independence Ave. 
SW., Washington, DC 20250-3601, (202) 720-7051, 
[email protected].

SUPPLEMENTARY INFORMATION: On December 20, 2016, GIPSA published in the 
Federal Register (81 FR 92703) and invited comments on a proposed rule 
to amend the regulations issued under the Packers and Stockyards Act 
(P&S Act) (7 U.S.C. 181-229c). GIPSA intended that the proposed rule 
would clarify the conduct or action that GIPSA considers unfair, 
unjustly discriminatory, or deceptive in violation of 7 U.S.C. 192(a). 
The proposed rule also identified criteria that the Secretary would use 
to determine if conduct or action by packers, swine contractors, or 
live poultry dealers constitutes an undue or unreasonable preference or 
advantage in violation of 7 U.S.C. 192(b). GIPSA published a document 
in the February 7, 2017, Federal Register (82 FR 9533) to extend the 
comment period for the proposed rule from February 21, 2017, to March 
24, 2017. GIPSA received 866 comments on the proposed rule.
    Commenters opposing the proposed rule stated that the purpose of 
the P&S Act is to protect competition, not individual competitors or 
market participants. The commenters commonly claimed that the proposed 
rule would increase litigation industry-wide. Commenters stated that if 
the requirement to show harm to competition was no longer applicable, 
the proposed rule would embolden producers and growers to sue for any 
perceived slight by a packer, swine contractor, or live poultry dealer. 
Commenters also pointed out that the proposed rule contains vague terms 
and phrases including: ``legitimate business justification,'' 
``retaliatory action,'' ``similarly situated,'' ``reasonable time to 
remedy,'' ``arbitrary reason,'' and ``but is not limited to.'' They 
argued that those terms and phrases are overbroad and create ambiguity 
regarding the conduct or action that would be permitted or prohibited. 
They speculated that this ambiguity would lead to broad interpretations 
that would make compliance difficult, and that this uncertainty would 
generate litigation.
    Also, commenters noted that the proposed rule conflicts with case 
law in multiple U.S. Courts of Appeals that have ruled that 7 U.S.C. 
192(a) and (b) only authorize a cause of action if the conduct at issue 
harms, or is likely to harm, competition. The Department of Justice 
(DOJ) filed amicus briefs with several of these courts, but DOJ's legal 
arguments failed to persuade the courts. Commenters further wrote that 
at least two of these U.S. Courts of Appeals are unlikely to grant 
deference to the proposed rule if finalized. Also, commenters argued 
that Congress considered and ultimately declined to enact legislation 
in 2007 that would have overturned the judicial decisions interpreting 
7 U.S.C. 192(a) that require a showing of harm or likely harm to 
competition.
    Producers, growers, and farm trade groups generally supported the 
proposed rule, with some exceptions. Commenters who expressed support 
often noted that many farmers invest millions of dollars of their own 
money on new--or upgrades to existing--production facilities in order 
to meet the contractual demands of packers, swine contractors, or live 
poultry dealers. Many wrote that farmers need the proposed rule to 
protect them from unfair, deceptive, or retaliatory practices that can 
cause farmers to lose their operations and investments. These 
commenters stated that this proposed rule provided long overdue 
protection to farmers and clarified to the industry the conduct or 
action that is a violation of the P&S Act.
    The proposed rule closely relates to the interim final rule (IFR) 
published in the Federal Register (81 FR 92566) on December 20, 2016, 
which stated that conduct or actions can violate 7 U.S.C. 192(a) or (b) 
of the P&S Act without a finding of harm or likely harm to competition. 
In the IFR, GIPSA formalized its longstanding interpretation of 7 
U.S.C. 192(a) and (b). In the preamble to the proposed rule, GIPSA 
explained that the rule was consistent with the IFR because proposed 9 
CFR 201.210(b) and 201.211 give examples of conduct that does not 
require likelihood of harm to competition to violate 7 U.S.C. 192(a) 
and (b). GIPSA withdrew the IFR because, among other reasons, it is 
inconsistent with court decisions in several Courts of Appeals and 
those courts are unlikely to give GIPSA's interpretation deference.
    As the comments noted, this proposed rule, like the IFR, conflicts 
with legal precedent in several Circuits. These conflicts pose serious 
concerns. GIPSA is cognizant of the commenters who support allowing the 
proposed rule and their concerns regarding the imbalance of bargaining 
power Also, we recognize that the livestock and poultry industries have 
a vested interest in understanding what conduct or actions violate 7 
U.S.C. 92(a) and (b). This proposed rule, however, would inevitably 
generate litigation in the livestock and poultry industries. Protracted 
litigation to both interpret this regulation and defend it serves 
neither the interests of the livestock and poultry industries nor 
GIPSA.
    Also, as the preamble to the proposed rule noted: ``For several 
decades, GIPSA has brought administrative enforcement actions against 
packers for violations of the regulations under the P&S Act without 
demonstrating harm or likely harm to competition.'' In the proposed 
rule itself, GIPSA linked the proposed rule to practices that are 
already violations of the regulations and statute, such as 9 CFR 
201.82, and 7 U.S.C. 228b. GIPSA also predicted that the proposed rule 
would not increase administrative enforcement actions against packers 
because GIPSA designed the regulations to follow its current 
interpretation of 7 U.S.C. 192(a) and (b). On the other hand, some 
commenters wrote that the breadth of the proposed regulation would 
suppress innovative contracting because regulated entities would fear 
the increased risk of litigation presented by ambiguous terms in the 
proposed rule. As stated previously, commenters noted producers and 
growers might be emboldened to sue for any perceived slight.
    Executive Order 13563 directs, as a matter of regulatory policy, 
that USDA identify and use the best, most innovative, and least 
burdensome tools for achieving regulatory ends; to

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account for benefits and costs, both quantitative and qualitative; and 
to tailor its regulations to impose the least burden on society, 
consistent with obtaining regulatory objectives. To the extent the 
proposed rule codified longstanding practice, the prescriptions of the 
proposed rule could have the unintended consequence of preventing 
future market innovations that might better accommodate rapidly 
evolving social and industry norms. In the past, GIPSA has approached 
the elimination of specific unfair and deceptive practices on a case-
by-case basis. Continuing this approach will better foster market-
driven innovation and evolution, and is consistent with the obligation 
to promote regulatory predictability, reduce regulatory uncertainty, 
and identify and use the most innovative and least burdensome tools for 
achieving regulatory ends.
    Therefore, after review and careful consideration of the public 
comments received, GIPSA will take no further action on the December 
20, 2016, proposed rule referenced above.

Randall D. Jones,
Acting Administrator, Grain Inspection, Packers and Stockyards 
Administration.
[FR Doc. 2017-22588 Filed 10-17-17; 8:45 am]
 BILLING CODE 3410-KD-P