[Federal Register Volume 86, Number 211 (Thursday, November 4, 2021)]
[Proposed Rules]
[Pages 60779-60781]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-23945]


 ========================================================================
 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. 86, No. 211 / Thursday, November 4, 2021 / 
Proposed Rules  

[[Page 60779]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

9 CFR Part 201

[Doc. No. AMS-FTPP-21-0052]
RIN 0580-AB26


Poultry Grower Ranking Systems; Withdrawal of Proposed Rule

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule; withdrawal.

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SUMMARY: The United States Department of Agriculture's (USDA) 
Agricultural Marketing Service (AMS) is withdrawing a proposed rule 
published in the Federal Register on December 20, 2016. The proposed 
rule would have identified criteria that the Secretary of Agriculture 
(Secretary) could consider when determining whether a live poultry 
dealer's use of a system for ranking poultry growers for settlement 
purposes is unfair, unjustly discriminatory, or deceptive or gives an 
undue or unreasonable preference, advantage, prejudice, or 
disadvantage. Proposed amendments would also have clarified that, 
absent demonstration of a legitimate business justification, failing to 
use a poultry grower ranking system in a fair manner after applying the 
identified criteria is unfair, unjustly discriminatory, or deceptive 
and a violation of the Packers and Stockyards Act, regardless of 
whether it harms or is likely to harm competition. The Secretary has 
determined to withdraw the 2016 proposed rule and develop revised 
proposals pertaining to poultry grower ranking systems.

DATES: The proposed rule published at 81 FR 92723 on December 20, 2016, 
is withdrawn as of November 4, 2021.

FOR FURTHER INFORMATION CONTACT: S. Brett Offutt, Chief Legal Officer/
Policy Advisor, Packers and Stockyards Division, USDA AMS Fair Trade 
Practices Program, 1400 Independence Ave. SW, Washington, DC 20250; 
Phone: (202) 690-4355; or email: [email protected].

SUPPLEMENTARY INFORMATION: A proposed rule published at 81 FR 92723 on 
December 20, 2016, would have identified criteria the Secretary could 
consider when determining whether a live poultry dealer's use of a 
poultry grower ranking system for ranking poultry growers for 
settlement purposes is unfair, unjustly discriminatory, or deceptive or 
gives an undue or unreasonable preference, advantage, prejudice, or 
disadvantage. Further, the 2016 proposed rule would have amended 
regulations under the Packers and Stockyards Act (regulations) to 
clarify that, absent demonstration of a legitimate business 
justification, failure to use a poultry grower ranking system in a fair 
manner after applying the identified criteria is unfair, unjustly 
discriminatory, or deceptive and a violation of section 202(a) of the 
Packers and Stockyards Act, 1921, as amended and supplemented (Act), 
regardless of whether it harms or is likely to harm competition.
    The December 2016 proposed rule published by USDA's former Grain 
Inspection, Packers and Stockyards Administration (GIPSA) was a 
modification to an earlier GIPSA proposed rule (75 FR 35338; June 22, 
2010) that included requirements regarding a live poultry dealer's use 
of a poultry grower ranking system when determining payment for grower 
services. The 2010 proposed rule would have required live poultry 
dealers paying growers on a tournament system to pay growers raising 
the same type and kind of poultry the same base pay and would have 
required that growers be settled in groups with other growers with like 
house types. Upon review of public comments received both in writing 
and through public meetings held during the comment period in 2010, 
GIPSA elected not to finalize the 2010 proposed rule, and instead 
modified the earlier proposal, published the modification in the 
December 2016 proposed rule, and requested further public comment.
    The comment period for the December 2016 proposed rule was 
originally scheduled to close on February 21, 2017. GIPSA extended the 
comment period until March 24, 2017 (82 FR 9533; February 7, 2017), 
consistent with the memorandum of January 20, 2017, to heads of 
executive departments and agencies from the Assistant to the President 
and Chief of Staff entitled ``Regulatory Freeze Pending Review.'' In 
total, GIPSA received 239 comment submissions on the December 2016 
proposed rule. A number of submissions included lists of signatories or 
multiple copies of identical form letters signed by different 
individuals.
    In November 2017, responsibility for GIPSA activities was 
transferred to AMS, which now administers the Packers and Stockyards 
Act and regulations, and which has assumed responsibility for this 
rulemaking.
    Comments submitted on the December 2016 proposed rule, as well as 
comments submitted in response to a related Packers and Stockyards 
proposed rule (85 FR 1771; January 13, 2020) and input from the 
industry, reflected both support for and opposition to the December 
2016 proposals.
    Comments on the December 2016 rule were submitted by individual 
poultry growers and processors, associations representing poultry 
growers and processors, other livestock producers and producer 
associations, individual consumers and consumer advocacy groups, and 
other interested entities. Many grower and consumer commenters 
supported proposals, saying the criteria in proposed Sec.  201.214 
offered tools with which poultry growers and family farms could protect 
themselves from severe economic losses under potentially unfair 
contract terms. Commenters further suggested adoption of the proposed 
rule and its grower protections would strengthen rural economies and 
the U.S. poultry industry's position in the global marketplace. Some 
commenters said that provisions of the proposed rule would help level 
the playing field between poultry growers and processors by giving 
growers greater contracting power. Other commenters said the proposed 
criteria for evaluating contract terms would ensure farmers can 
continue to operate with basic protections under the law. A comment 
from an animal welfare organization supported the proposed rule because 
they believe its provisions would protect growers who speak out about 
inhumane practices from retaliation.

[[Page 60780]]

    Some commenters expected the rule to make changes they would have 
considered more favorable to growers, such as the abolition of grower 
ranking systems. According to one commenter, ``a tournament system is 
itself an undue preference in any case where the farmer's pay is 
penalized based on input factors that affect farmer performance beyond 
their control.'' Other commenters supported the proposed rule, but 
asked USDA to provide a codified list of behaviors that in and of 
themselves would be violations of the Act, including clear examples of 
actions that may be unfair, discriminatory, or deceptive; a non-
exhaustive list of Section 202(a) violations; or provisions clarifying 
that failing to comply with 9 CFR 201.100 is inherently unfair, 
unjustly discriminatory, or a deceptive practice. Several commenters 
also recommended requiring live poultry dealers to disclose critical 
information regarding acquiring, handling, processing, and quality of 
poultry to all producers in the tournament if such information is 
disclosed to one. Commenters suggested this type of information would 
allow growers to make better-informed decisions about entering into 
production contracts.
    Many commenters, while supportive of the proposed rule generally, 
opposed inclusion of the criterion (proposed Sec.  201.214(d)) that 
would have allowed the Secretary of Agriculture to consider whether a 
live poultry dealer has demonstrated a legitimate business 
justification for use of a poultry grower ranking system that might 
otherwise be unfair, unjustly discriminatory, or deceptive; give an 
undue or unreasonable preference or advantage to any poultry grower; or 
subject any poultry grower to an undue or unreasonable prejudice or 
advantage. Commenters asserted that this criterion could offer live 
poultry dealers a ``loophole'' through which they could justify actions 
that otherwise might be considered violations of the Act. These 
commenters recommended this criterion be eliminated from the proposed 
rule. Several commenters further speculated that the vagueness of the 
term ``legitimate business justification'' could lead to increased 
litigation and expense as courts attempt to interpret its meaning, and 
further that every judge or jury could interpret the term differently.
    One commenter wrote that the use of the ``legitimate business 
justification'' is a recognized ``monopoly defense'' that is unfounded 
and misplaced in the proposed rule. According to the commenter, 
Sections 202(a) and (b) of the Act were designed by Congress to address 
wrongful and unlawful acts ``not of the anti-trust variety.'' The 
commenter asserted the defense should not be included in the proposed 
rule because the term ``monopoly'' does not appear in Sections 202(a) 
and (b) of the Act, whereas Sections 202(c) through (e) clearly address 
anti-trust related unlawful practices. The commenter cited examples of 
``unfair practices'' under the Act where proof of competitive injury is 
not required, such as failure to pay livestock sellers ``before the 
close of the next business day'' following livestock purchases (see 
Sec. 409), or late payments to a poultry grower (see Sec. 410). The 
commenter argued that the Secretary has no authority to effectively 
amend the Act by proposing to inject the monopoly defense into the 
regulations. According to the commenter, such inclusion exceeds the 
legal authority granted the Secretary under the Act, violates the 
separation of powers as established by the United States Constitution, 
defies Congressional intent, and practically guarantees litigation 
against the Secretary for violation of the Administrative Procedures 
Act. Further, the commenter claimed that use of the ``legitimate 
business justification'' defense would embolden poultry integrators to 
``wrench away what few rights growers have left.''
    A number of poultry grower commenters opposed the December 2016 
proposed rule entirely, some saying the rule is simply unnecessary. 
Others asked that USDA not force changes on the poultry grower ranking 
system they claimed has worked well for decades. Commenters contended 
changing the system could eliminate growers' incentive to maximize 
efficiency and adopt innovative production practices, and that such 
changes would unfairly reward mediocre performers who do not invest 
effort and capital into continuously improving production.
    A number of commenters stated that proposed criteria were too 
vague, citing for example the terms ``fair manner'' in proposed Sec.  
201.210(b)(10), ``pattern or practice'' in the introductory paragraph 
of proposed Sec.  201.214, and ``sufficient business information'' and 
``informed business decisions'' in proposed Sec.  201.214(a). 
Commenters asked USDA instead to identify specific behaviors that would 
be considered violations of the Act to eliminate confusion for 
contracting parties.
    Comments from several poultry processors and associations 
representing poultry and other meat and food processing industries 
opposed the proposed rule for various economic and legal reasons. A 
number of commenters said the rule ``ran afoul'' of Executive Order 
13771 \1\ regarding regulatory reform in that GIPSA's impact analysis 
predicted administering and litigating the rule would be costly, 
although GIPSA did not quantify benefits of the rule. Some commenters 
speculated that actual costs of litigating the rule could be much 
higher than GIPSA's estimates because the inclusion of vague regulatory 
terminology would increase uncertainty for contracting parties and 
invite further litigation. Commenters asserted the proposed rule was 
unsound because it was premised on the ``fatally flawed'' interim final 
rule titled ``Scope of Sections 202(a) and (b) of the Packers and 
Stockyards Act'' (81 FR 92566, December 20, 2016) that was published by 
GIPSA on the same date as the proposed Poultry Grower Ranking Systems 
rule. Commenters claimed the ``Scope'' rule erroneously asserted that 
claimants do not need to demonstrate injury to competition to establish 
a violation of Sections 202(a) and (b) of the Act.
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    \1\ Executive Order 13771--Reducing Regulation and Controlling 
Regulatory Costs (January 30, 2017)--has since been rescinded by 
Executive Order 13992--Revocation of Certain Executive Orders 
Concerning Federal Regulation (January 20, 2021).
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    A number of commenters said the proposed rule was arbitrary and 
capricious in that GIPSA failed to provide investigative data or 
evidence of any actual problems with the current grower ranking systems 
or of any need for regulatory intervention, basing its proposed actions 
rather on anecdotal complaints.
    A few commenters objected to GIPSA's use of an example in the 
rule's preamble that processors might supply non-comparable inputs to 
growers. Commenters pointed out that in the rule's economic impact 
analysis GIPSA stated it had no evidence processors have done this. 
Other commenters warned that USDA should not base the proposed criteria 
on the assumption that processors intentionally provide non-comparable 
inputs to growers. Those commenters explained it is in the best 
interest of processors that all their poultry growers receive high 
quality inputs (animals, feed, veterinary medicines) to ensure a 
reliable flow of high-quality poultry to plants. For that reason, 
according to these commenters, processors are unlikely to intentionally 
target and sabotage their growers, as suggested by other commenters.
    Several commenters suggested that GIPSA incorrectly assumed in its 
impact analysis that growers carry most of the risk related to poultry 
production. According to commenters, processors

[[Page 60781]]

carry a greater proportion of the risk because they supply most of the 
production inputs. Further, these commenters asserted that vertically 
integrated processors are in a better position than growers to assume 
most of the risk because those processors can operate on a more 
efficient scale than growers.
    According to the comment from an association of chicken production 
and processing companies, GIPSA's regulatory impact analysis projected 
decreased certainty for regulated entities and increased risk of 
litigation due to the proposed rule. This commenter suggested the 
regulation should instead increase certainty for regulated entities and 
decrease risk of wasteful litigation.
    Some commenters maintained that the provisions of the proposed rule 
would establish an ``unprecedented level of government intervention'' 
that would have negative ramifications for the industry and consumers. 
Others insisted that the rule contradicted the Packers and Stockyards 
Act's provisions and intent,\2\ exceeded the Congressional mandate of 
the 2008 Farm Bill,\3\ and/or conflicted with court precedence with 
respect to competitive harm.
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    \2\ Some commenters asserted that the Act protects individual 
growers from the effects of competitive harm, while other argued 
that a violation of Section 202(a) or (b) has not occurred unless 
there is harm to multiple individuals in the market. One commenter 
argued that the Act provides clear authority to USDA to clarify 
terms and interpret the Act's intent.
    \3\ Provisions of Title XI of the Food, Conservation, and Energy 
Act of 2008 (2008 Farm Bill; Pub. L. 110-234) require the Secretary 
of Agriculture to establish criteria to consider when determining 
whether the Packers and Stockyards Act has been violated.
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    A comment from a federation of turkey producers opposed the 
proposed rule. The commenter asserted that the proposed rule failed to 
recognize important distinctions between broiler chicken and turkey 
production in matters such as breeder diversity, production cycle 
length, gender segregation, and farm and facility size. The commenter 
said proposed requirements intended to address broiler production 
issues would not always be applicable to turkey production models and 
could prove to be injurious to the turkey industry. The commenter 
recommended that USDA rescind the proposed rule and pay significant 
attention to the effects on turkey production in future rulemaking 
attempts.
    Several commenters, although purportedly responding to the proposed 
rule, submitted comments that were outside the scope of this particular 
rulemaking. For example, commenters offered suggestions about 
alternative contract production and pay methods the industry could 
adopt or discussed issues related to cattle production and marketing. 
Several commenters criticized GIPSA for disregarding public input about 
systematic abuses suffered by contract poultry growers. According to 
commenters, such abuses were described by participants in a May 2010 
USDA/Department of Justice-sponsored workshop held to better understand 
industry concerns. Other commenters addressed provisions of the two 
other rules GIPSA published on December 20, 2016, including the 
previously mentioned ``Scope of Sections 202(a) and (b) of the Packers 
and Stockyards Act,'' and the proposed rule titled ``Unfair Practices 
and Undue Preferences in Violation of the Packers and Stockyards Act'' 
(81 FR 92703).
    AMS values the input of all commenters. AMS finds that many of the 
comments on the proposed rule--both supportive and opposed--identified 
reasonable concerns regarding the proposed regulation's structure and 
language. These concerns included uncertainties about USDA's method for 
applying criteria and vague criteria language. AMS recognizes that 
differences in broiler and turkey production systems need fair 
consideration. Moreover, the proposed rule may not have adequately 
addressed information imbalances between contracting parties. In light 
of these comments, AMS prefers to reexamine regulatory requirements, 
specific potential violations, general criteria, and recordkeeping 
aspects, as well as the structure, of a rule regarding poultry 
production contracts.
    Because of the breadth of this reexamination, AMS concludes that 
this proposed rulemaking is unable to address many of the commenters' 
concerns without material changes. AMS intends to consider further the 
issues raised by the commenters, as well as study any developments 
since publication of the proposed rule. Following those activities, we 
plan to issue and solicit comments on a new regulatory proposal 
pertaining to poultry grower ranking systems. Therefore, we are 
withdrawing the December 2016 proposed rule.

    Authority: 7 U.S.C. 181-229c.

Erin Morris,
Associate Administrator, Agricultural Marketing Service.
[FR Doc. 2021-23945 Filed 11-3-21; 8:45 am]
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