Written by: Amie Alexander, JD/MPS Candidate, William H. Bowen School of Law

The Organization for Competitive Markets and individual farmers filed a brief in support of petition for review in the United States Court of Appeals for the Eighth Circuit of the United States Department of Agriculture’s 2017 withdrawal of the Farmer Fair Practices Rules. You can read the brief in its entirety here.

Background on the Farmer Fair Practices Rules

The 2008 Farm Bill issued to the United States Department of Agriculture (the Department) a directive to promulgate regulations to strengthen protections for farmers under the Packers and Stockyards Act.  The Packers and Stockyards Act (the Act) was passed in 1921 and prohibits agricultural corporations from engaging in “unfair, unjustly discriminatory, or deceptive” practices (See 7 U.S.C. §§ 202(a) and (b)). An Interim Final Rule published in December 2016 formalized the Department’s interpretation that claimants under this portion of the Act are not required to prove “competitive injury,” or that the unfair conduct at issue distorts competition in the market as a whole. Instead, “unfair, unjustly discriminatory or deceptive practices” or those giving “undue or unreasonable preferences or advantages” would be per se violations of the law.  Additionally, a Notice of Proposed Rulemaking was issued in December 2016 that provided specific examples of “unfair practices” that would establish criteria the Department would consider when reviewing claims under this section of the Act.

Petitioners argue that the Farmer Fair Practice Rules were intended to protect farmers with bargaining power and safe harbor from the fear of retaliation in a market that is becoming increasingly more concentrated with fewer packers and processors. Petitioners argue that by withdrawing the Farmer Fair Practice Rules, the Department has ignored Congress’s 2008 Farm Bill statutory directive in violation of the Administrative Procedure Act (APA). Specifically, Congress required the Department to “promulgate regulations…to establish criteria that the Secretary will consider in determining…whether an undue or unreasonable preference or advantage has occurred in violation of” section 202(b) of the Act, “as soon as practicable, but not later than 2 years after” the 2008 Farm Bill’s enactment. Petitioners ask the Court to vacate the withdrawal of the Rules and require the Department to comply with the statutory mandate.

Withdrawal of the Farmer Fair Practices Rules

Shortly after the passage of the 2008 Farm Bill, the Department’s Grain, Inspection, Packers and Stockyards Administration (GIPSA) initiated rulemaking and issued proposed regulations in June 2010. The majority of those regulations, including a provision defining competitive injury, were withdrawn in 2011.  Almost five years later, USDA revisited the issue and  published the Interim Final Rule and Notice of Proposed Rulemaking, the Farmer Fair Practice Rules, in December 2016.

The Interim Final Rule contained a provision confirming that claimants under sections 202(a) and (b) of the Act need not establish competitive injury. This was in contrast to the interpretation of some courts of appeal, but reflected the Department’s interpretation of the Act. The Department provided that this provision would increase the ability of producers and growers to enforce sections 202(a) and (b) so as to “reduce instances of unfair, unjustly discriminatory, or deceptive practices or devices and undue or unreasonable preferences, advantages, prejudices, or disadvantages and increased efficiencies in the marketplace.” The simultaneously issued Notice of Proposed Rulemaking setting forth a list of the types of conduct or actions, and specific examples of such, that the Department would interpret as unfair, unjustly discriminatory, or deceptive in violation of section 202(a) of the Act. This provision was intended to provide clarity to what types of acts and practices would be in violation of the Act and was a direct response to the 2008 Farm Bill’s statutory mandate.

The Department rescinded the Interim Final Rule in October 2017, giving few explanations for doing so. First, the Department cited “serious legal and policy concerns” related to the provision’s promulgation and implementation due to the risk of increased litigation. Further, the Department pointed to conflicting case law interpreting the section in multiple courts of appeal. Finally, the Department provided that it should have solicited another round of comment in order to comply with APA requirements to establish good cause in the Interim Final Rule.   At the same time, the Department announced it would take no further action regarding the Notice of Proposed Rulemaking, again citing the risk of increased litigation.

Plaintiffs argue that by withdrawing the Farmer Fair Practices Rules, the Department violated the APA by unlawfully withholding agency action by failing to comply with the 2008 Farm Bill statutory mandate to promulgate regulations explaining criteria used to determine whether actions are unreasonably prejudicial under section 202(b) of the Act by June 2010. Second, plaintiffs argue the Department violated the APA by acting arbitrarily and capriciously in failing to adequately explain its grounds for reversing course and withdrawing the Rules. The plaintiffs reason that although the Department “purports to stand by the Rules’ logic, that facilitating increased enforcement of the Act would deter packers and processors from engaging in unfair and unlawful practices,” the Department now abandons increased enforcement efforts, and therefore acted in the absence of reasoned decision-making.

Plaintiffs ask the Court to vacate the withdrawal of the Farmer Fair Practices Rule and order the Department to issue the regulations.