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. 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. Mandatory programs 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. Federal checkoff programs are authorized and operated by federal statute for commodity program. State checkoff programs may also exist, authorized by state legislation, to promote and market products within the state. Checkoff programs attempt to improve the market position of the covered commodity by expanding markets, increasing demand, and developing new uses and markets.

Currently, the USDA Agriculture Marketing Service oversees 22 research and promotion boards, which consist of large and small producers, importers, and other commodity stakeholders. Board members and their staff help carry out the checkoff programs and direct the day-to-day management responsibilities. The board members are nominated by the industry and appointed by the Secretary of Agriculture. Board members help bring a wealth unique perspectives that contribute to the common goal of promoting their commodity to more consumers.


Challenges

Checkoff programs have been challenged in court on several occasions. Challengers argue that the requirement that they pay mandatory assessments in accordance with a checkoff program unlawfully forces them to pay for speech that they do not support. In its first opportunity to hear the issue, the U.S. Supreme Court ruled that assessments for promotion that were part of a broader regulatory framework included in a marketing order were legal and did not violate the First Amendment. In a later decision, the Court decided that assessments for a generic mushroom promotion program violated the First Amendment because they were directed primarily at generic advertising that some producers did not support.  In a third checkoff decision, the Court determined advertisements promoting beef as a generic commodity were government speech, thus 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.

These decisions have led to growing uncertainty among circuit courts and district courts. In Ranchers Cattleman Action Legal Fund United Stockgrowers of America v. Perdue, a Montana District Court found that the advertisements of a State Beef council may violate the First Amendment’s prohibition of government compelled private speech and granted an injunction. The Court held that the Montana Beef council must obtain affirmative consent from checkoff payers to retain a portion of the Beef Program Checkoff funds for its advertising campaigns. Without affirmative consent, the portion of the assessment collected under the Beef Checkoff Program that would normally be retained for use by the Montana Beef Council will go to the Cattlemen’s Beef Board. Recently, the Ninth Circuit Court of Appeals upheld the preliminary injunction against the beef checkoff program.

This development may cause significant changes in the structure of agriculture checkoff programs. Similar battles challenging checkoff programs have also taken place in state courts.

In May 2019, the USDA’s Agricultural Marketing Service amended the Soybean Promotion, Research, and Consumer Information Order and the Beef Promotion and Research Order to clarify that a producer can choose to redirect their checkoff assessments to the national program when allowed by state law. The Beef and Soybean Orders authorize the collection of assessments from cattle and soybean producers. The assessments are collected by a state board or council that retains a portion of the assessments. The state boards or councils then forward the remainder of the assessments to the Cattlemen’s Beef Board or United Soybean Board, which administer the national programs.  Under both programs, producers are allowed, unless precluded by state law, to “redirect” the portion of assessments retained by a state board or council to the national program. To redirect the funds, a producer must be in a state where there is no law requiring the assessment to be directed to a state board or council, or a state where the law requires an assessment and allows for a refund.