APCA Proposed GIPSA rule: Highlights Daryll E. Ray University of Tennessee Agricultural Policy Analysis Center Organization of Competitive Markets Annual Meeting Omaha, Nebraska August 10, 2010

APCA 2008 Farm Bill Amendments to the Packers and Stockyards Act… Established new requirements for participants in the livestock and poultry industries Required the Sec. of Ag. to establish criteria that can be used to determine violations.

APCA Three Categories of Proposed GIPSA Rule Unfair, unjustly discriminatory and deceptive practices Undue or unreasonable preference or advantage Arbitration

APCA Unfair, Unjustly Discriminatory and Deceptive Practices Reiterates GIPSA’s and Department of Justice’s position that… –Harm to competition is always SUFFICIENT to establish a violation of the P&S Act or section thereof –BUT harm to competition is NOT NECESSARY to establish a violation The long-held GIPSA & Department of Justice position has not been buttressed by the courts

APCA Unfair, Unjustly Discriminatory and Deceptive Practices Violation/breach of a contractual duty -Action or omission that would be generally considered unscrupulous, deceitful or in bad faith Retaliation by packer, swine contractor, or live poultry dealer -Including coercion, intimidation, etc. Refusal to supply statistical information to contractor used to determine compensation –Including feed conversion, feed analysis, other factors that affect performance and revenue

APCA Unfair, Unjustly Discriminatory and Deceptive Practices (cont.) Payments of premiums or applying discounts without documenting reasons/justifications Termination of contracts because of allegations of failure to comply with law/rule… -Relevant law enforcement officials should handle such violations if they are grounds for termination Misleading information regarding a material condition or terms of a contract or an arrangement

APCA Additional GIPSA Actions Under the “Unfair, Unjustly Discriminatory and Deceptive Practices” Heading Prohibit packers from purchasing livestock from other packers -New subsection designed to reduce potential price manipulation influencing prices that then become market-benchmark prices Provide notice to poultry contractors of any suspension of delivery of birds at least 90 days prior to suspension of delivery If capital investment is required, contract length should allow recouping of (at least) 80 percent of the capital investment

APCA Additional GIPSA Actions Under the “Unfair, Unjustly Discriminatory and Deceptive Practices” Heading (cont.) GIPSA to provide the opportunity for growers to make the case for rejecting a proposed capital investment made by poultry dealer -Example might be a capital investment that provides no benefits—financial or otherwise—only increases costs GIPSA to provide procedures for terminating a contract with a grower due to a breach of contract Must provide time to remedy the breach before taking action to terminate

APCA Undue or Unreasonable Preference or Advantage GIPSA to establish criteria to ensure –that identical contract terms are offered –to all producers –who can provide the required volume, kind, and quality of livestock Tournament System –Require that no poultry grower be paid less than the base pay –Must be configured among poultry growers with the same type of poultry houses

APCA Undue or Unreasonable Preference or Advantage (cont.) Disparate treatment of grower must be based on business reasons -Records must be maintained to justify differing treatment of growers Packers are prohibited from entering into exclusive purchase agreements with any dealer except its own dealers Require submission of samples of each type of contract to GIPSA, which would be put on its Web site for public viewing

APCAArbitration GIPSA would standardize the way the arbitration option, as a means to resolve disputes, is offered to producers in contracts Growers would be allowed to reject arbitration GIPSA would provide criteria to evaluate fairness of the arbitration option –Cost –Time to completion –Access to information by growers –Reasoned opinion by arbitrator

APCA Thank You