Legal Checkup on Checkoffs: What is a “Checkoff”?
This blog post is the first part of a “Legal Checkup on Checkoffs” series that will address numerous legal issues involving federal and state commodity research and promotion programs, commonly referred to as “checkoff” programs. This article focuses on the basics of what exactly is a “checkoff” program, including the primary legal issues that have arisen over the past decades.
Checkoff 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. Producers and handlers of various agricultural commodities 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 Checkoff Programs
Currently, the USDA Agricultural Marketing Service (AMS) oversees twenty-one research and promotion boards at the federal level, which consist of large and small producers, importers, and other commodity stakeholders. These range from commodities like dairy, beef, and soybeans, to honey, watermelons, softwood lumber, and potatoes. The number has been higher than twenty-one in the past and could increase in the future depending on whether new programs – hemp, for example – are approved by AMS or created via legislation. An updated list of current AMS-overseen checkoff programs is available here.
Of those twenty-one 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, available here, operates under the authority of the Soybean Promotion, Research, and Consumer Information Act, available here. Programs for eggs, beef, cotton, dairy, pork, potatoes, watermelons, and popcorn are also authorized by a specific statute for the respective commodity. The remaining programs operate under the authority of the Commodity Promotion, Research, and Information Act of 1996, available here, 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) which in turn is overseen by AMS. The board members are nominated by the industry in the manner prescribed in the applicable law and then appointed by the Secretary of Agriculture.
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.” These state councils will be addressed in further detail in a subsequent article in this series. That said, “Qualified State Beef Councils” are addressed as part of Legal Checkup on Checkoffs: “Redirection” and Producer Refunds Under the Beef Checkoff, available here.
State Checkoff Programs
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. Other examples include an apple checkoff in Michigan and table grapes in California. Many states have state-law authorized programs for beef and soybeans that operate in independently of the federally-authorized programs for beef and soybeans.
Checkoff programs have been challenged in courts and in USDA administrative proceedings in various ways on numerous occasions over the past decades. As far back as 1941, a Michigan apple producer brought challenged the constitutionality of the apple checkoff program (expressly a tax under state law). Since that time, a variety of constitutional challenges have been brought against different checkoff programs on a variety of grounds. The primary constitutional argument has centered on the argument that the programs violate the First Amendment of the U.S. Constitution by mandating the challengers to pay a mandatory assessment to pay for speech with which they disagree. On three occasions this issue has been before the U.S. Supreme Court.
In its first opportunity to hear the issue, the U.S. Supreme Court ruled in Glickman v. Wileman Bros. & Elliott, Inc., 521 U.S. 457 (1997) that assessments for a tree fruit promotion that were part of a broader regulatory framework included in a marketing order were legal and did not violate the First Amendment. Just four years later, the Court decided in United States v. United Foods, Inc., 533 U.S. 405 (2001) 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.
At that point, the future of checkoff programs appeared to be in great jeopardy. The ensuing years would confirmed this reality. Following United Foods, constitutional challenges were brought to numerous programs and a raft of federal courts determined that the programs violated the First Amendment.
Then, 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 thus not violative of the First Amendment. 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. Johanns breathed new life back into checkoff programs. Federal courts vacated their previous holding in light of Johanns and subsequent First Amendment challenges to checkoff programs failed in light of the Johanns decision.
However, 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 R-CALF, 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.
Checkoff programs are an integral component of the agricultural industry, collectively providing a billion dollars or more annually at the state and federal levels in funding to support research, education, and information activities. The programs have faced – and survived – numerous legal challenges over the past decades. Future articles will focus on ongoing legislative, regulatory, and judicial developments involving federal and state checkoff programs. Hopefully, this article helps provide a foundation to understanding the legal issues discussed in those future articles.
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