[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]
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Proposed Rules
Federal Register
________________________________________________________________________
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is withdrawn as of November 4, 2021.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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