USDA’s “GIPSA Rule” on Livestock and Poultry Marketing Practices

The 2008 farm bill (P.L. 110-246) included new provisions that amended the Packers and Stockyards Act (P&S Act) to give poultry and swine growers the right to cancel contracts, to require that poultry processors clearly disclose to growers additional required capital investments, to set the choice of law and venue in contract disputes, and to give poultry and swine growers the right to decline an arbitration clause that requires arbitration to resolve contract disputes. The farm bill required USDA to propose rules to implement these provisions. On June 22, 2010, the U.S. Department of Agriculture’s (USDA’s) Grain Inspection, Packers and Stockyards Administration (GIPSA) published a proposed rule to implement regulations (9 C.F.R. 201) on livestock and poultry marketing practices as mandated by the 2008 farm bill. The proposed rule, commonly referred to as the “GIPSA rule,” added new regulations to clarify conduct that violates the P&S Act. The P&S Act regulations are used by USDA to ensure fair competition in livestock and poultry markets. In what some saw as a major change from current practice, GIPSA proposed that a violation of the P&S Act does not require a finding of “harm or likely harm to competition.” The proposed rule set criteria for “unfair, discriminatory, and deceptive practices” and “undue or unreasonable preference or advantages” that violate the P&S Act. The proposed rule also included arbitration provisions to ensure that contract growers have a meaningful opportunity to participate in arbitration and the right to decline arbitration. According to proponents of the proposed rule implementing the farm bill provisions, the rule brought fairness to contracts and reshaped interactions between producers and large meat packers and poultry processors. Opponents argued that the proposed rule went far beyond the intent of Congress in the 2008 farm bill, and that the rule altered business practices to the detriment of producers, consumers, and the industries. USDA issued a final rule on December 9, 2011, which went into effect on February 7, 2012. The final rule, a significant modification of the proposed rule, included four provisions that address, respectively, suspension of the delivery of birds, additional capital investments, remedy of breach of contract, and arbitration. In November 2011, before USDA finalized the GIPSA rule, Congress passed the Consolidated and Further Continuing Appropriations Act, 2012 (P.L. 112-55), which prohibited USDA from finalizing or implementing the most contentious parts of the rule. Congress continued to enact such appropriations riders in FY2013, FY2014, and FY2015. In addition, the FY2013 and FY2015 appropriations acts included language to rescind three provisions that USDA had finalized in 2011. These were the definition of the “suspension of delivery of birds,” the 90-day notification period required when a poultry company intends to suspend the delivery of birds to a grower, and the provision that made the rule applicable to live poultry. In February 2015, USDA removed the three provisions from its regulations. For the first time in four years, the enacted Consolidated Appropriations Act, 2016 (P.L. 114-113) did not include a GIPSA rider prohibiting USDA from finalizing and implementing rules on livestock and poultry marketing. Also, the GIPSA rules were addressed during the debate over the 2014 farm bill. Section 12102 of the House-passed 2013 farm bill (H.R. 2642) permanently prohibited USDA from finalizing or implementing GIPSA provisions that have been temporarily halted in appropriations acts. The Senate-passed farm bill (S. 954) did not contain a similar provision. The House GIPSA provision was not included in the conference report for the Agricultural Act of 2014 (P.L. 113-79).