Checkoff Programs – An Overview

Background

Checkoff programs – also referred to as research and promotion programs – promote and provide research and information for a particular agricultural commodity without reference to specific producers or brands. For example, the “Got Milk?” campaign was funded by checkoff assessments.  The term “checkoff” is derived from historical programs that were not mandatory; producers marked a checkoff box if they wished to contribute to the program.  The programs have evolved to now include mandatory programs that do not have such forms, but the name has remained.  Producers and handlers usually finance these programs from assessments charged on a per unit basis of the marketed commodity.  While these programs have basic similarities, they can differ considerably in terms of legal and regulatory boundaries, administration, and operation.

Federal Regulatory Authority

In checkoff programs, administrative agencies such as USDA/FDA/EPA have been given authority by Congress to create regulations implementing the requirements of the federal law.  In 2024, the Supreme Court of the United States issued two rulings that are expected to have a major impact on how judges decide cases challenging those regulations and that agency authority.

Loper Bright Enters. v. Raimondo, 144 S. Ct. 2244 (2024) overruled the long-standing doctrine of deference established in Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984). Chevron deference was a two-step process that clarified how and when federal courts should defer to an agency regulation interpreting a statute.  Chevron only applied in situations where a court had determined that the statutory language the agency was interpreting was ambiguous.  If it was ambiguous, the court would consider whether the agency’s interpretation of the statutory language was “reasonable”.  If it was reasonable, the court was required to defer to the agency’s interpretation. If it was not, the court would overrule the interpretation.

Loper Bright formally overturned Chevron. In a 6-3 decision, the Supreme Court held that “courts may not defer to an agency interpretation of the law simply because a statute is ambiguous[.]” Following the ruling, courts are instead required to exercise independent judgment in determining whether an administrative agency has acted within its statutory authority.  Courts may still seek guidance from the agencies involved, but courts will no longer be required to defer to an agency’s interpretation of a statute.

In Corner Post, Inc. v. Bd. of Governors of the Fed. Rsrv. Sys., 144 S. Ct. 2440 (2024), the Supreme Court extended the period of time during which a party may file a lawsuit challenging federal agency actions. According to 28 U.S.C.S. § 2401(a), the six-year statute of limitations began to run when an administrative agency’s action was “final.”  In Corner Post, the Supreme Court ruled that an action becomes “final” when a plaintiff suffers an injury, rather than when a “final regulation” is released. This ruling expands the potential for plaintiffs to challenge federal agency rules and regulations that have been final for over six years.

While the full effect of these two rulings remains to be seen, it is highly likely that the agricultural industry will be impacted by the Supreme Court’s decisions. Importantly, the rulings fundamentally change how courts will resolve lawsuits challenging agency regulations for misinterpreting the agency’s statutory authority. Impacts are most likely to be felt in areas of the law, such as checkoff programs, dominated by statutes with relatively ambiguous language where Congress has relied on agency regulations to fill in specifics.

Basic Types of Programs

Currently, the USDA Agricultural Marketing Service (AMS) oversees 21 research and promotion boards, which consist of large and small producers, importers, and other commodity stakeholders.  Of those 21 programs, twelve operate under and are administered under authority provided by a federal statute specific to the commodity.  For example, the Soybean Research and Promotion program operates under the authority of the Soybean Promotion, Research, and Consumer Information Act.  Programs for eggs, beef, cotton, dairy, fluid milk, pork, potatoes, mushrooms, Haas avocados, watermelons, and popcorn are also authorized by a specific statute for the respective commodity.  The remaining nine programs operate under the authority of the Commodity Promotion, Research, and Information Act of 1996, often referred to as the “generic promotion law.”  Programs for lamb, Christmas trees, blueberries, honey, mangoes, peanuts, paper and paper-based packaging, softwood lumber, and sorghum operate under the authority of the generic promotion law.

Regardless of the statutory authority, the day-to-day management of each program is overseen by a research and promotion board and its staff are overseen by AMS.  The board members are nominated by the industry and appointed by the Secretary of Agriculture.  Board members help bring a wealth of unique perspectives that contribute to the common goal of promoting their commodity to more consumers.  Note that programs such as those for beef and soybeans operate in a statutory and regulatory framework that contains both a federal board and numerous state-level entities known as “Qualified State Beef Councils” and “Qualified State Soybean Boards.”  Additionally, there are checkoff programs that fall outside the orbit of the above-mentioned checkoff programs that are overseen by AMS.  For example, states like Arkansas, Mississippi, Missouri, and California operate statutorily-authorized state-level programs for rice.  It bears noting that many states have state-law authorized programs for beef and soybeans that operate in tandem, and sometimes in addition to, the federally-authorized programs for beef and soybeans.

Challenges

Checkoff programs have been challenged in courts and in USDA administrative proceedings in various ways over the past decades.  In particular, a variety of constitutional challenges have been brought against different checkoff programs.  The primary constitutional argument has centered on the argument that the programs violate the First Amendment of the U.S. Constitution because the programs require individuals to subsidize speech, such as advertisements, with which they do not agree.  On occasions this issue has been before the U.S. Supreme Court.

The U.S. Supreme Court had its first opportunity to hear the issue in Glickman v. Wileman Bros. & Elliott, Inc., 521 U.S. 457 (1997), the Court ruled that promotion assessments part of a broader regulatory framework were legal and did not violate the First Amendment because the decisions were made by the majority, and this is a species of economic regulation that deserves the same validity presumption afforded to policy decisions made by Congress.  In a later decision, United States v. United Foods, Inc., 533 U.S. 405 (2001), the Court found that assessments for a generic mushroom promotion program violated the First Amendment because the regulatory framework was directed primarily at generic advertising that some producers did not support.  In a third checkoff decision — Johanns v. Livestock Mktg. Ass’n, 544 U.S. 550 (2005), the Court determined advertisements promoting beef as a generic commodity were government speech and not susceptible to First Amendment compelled-subsidy challenges.  The Court did, however, hold open the possibility that the beef checkoff program could be unconstitutional if it is shown that the advertisements are attributable to individual producers who disagree with the message. Following Johanns, First Amendment challenges to checkoff programs were unsuccessful.

In 2016, new litigation was initiated in the United States District Court for the District of Montana — Ranchers Cattleman Action Legal Fund United Stockgrowers of America v. Perdue.  In this case, the plaintiffs primarily allege that the collection of a portion of the federally mandated dollar-per head of cattle violates the First Amendment because the operation of several states’ Qualified State Beef Councils fall outside the government speech test set forth in Johanns.  In April 2018, the Ninth Circuit affirmed the issuance of the preliminary injunction by the District Court. However, in March 2020, the District Court granted summary judgement in favor of the USDA, which was affirmed by the Ninth Circuit.