The Organization for Competitive Markets hosted a discussion Wednesday at the Westin Crown Center in Kansas City, Mo. about the proposed rule put forth by USDA's, Grain Inspection, Packers and Stockyards Administration. GIPSA is proposing to add several new sections to the regulations under the Packers and Stockyards Act, 1921, which would describe and clarify conduct that violates the act and allow for more effective and efficient enforcement by GIPSA. The proposed regulations would clarify conditions for industry compliance and provide for a fairer market place.
National Farmers Union President Roger Johnson was one of the speakers. He says NFU supports this rule and says it's all about fairness in the marketplace.
"It is fundamental that when you have folks in a marketplace that have unequal market power that you have rules that describe how business ought to be conducted," Johnson said. "So that you don't have those folks with enormous market power being able to unfairly exercise it to the detriment of other folks in the market."
Recently a report commissioned by the American Meat Institute made claims of significant job losses and negative economic impact if the rule goes into effect. Johnson says that much of what undergirded that story was the assumption that prices would go up for the consumer resulting in decreased purchases. Fundamental to that assumption was their assertion that the change would cause damage to the marketplace so profound that it would shake the industry. Johnson says they think this is a gross over-exaggeration of what would happen.
"For many, many years under the Packers and Stockyards Act if a producer was damaged you had a right to seek redress," Johnson said. "It was only in 2005 that a judicial decision was finalized that said something different."
What it said was if you as a producer are harmed, you had to prove that not only was that harm intentional on the part of the packer, but that harm was so serious, so significant, that it impacted the entire marketplace. Johnson says that was never the intent of the Packers and Stockyards Act and was not the interpretation until the court ruling five years ago.
"These rules return the presumption on that case to what it used to be for many, many years," Johnson said. "So the allegation that adopting these rules is somehow going to create all this enormous uncertainty and lead to an enormous increase in lawsuits being filed we think is laughable. That wasn't the case in all those years up until 2005, so why would one expect that suddenly because this rule implements an intent that was there from the beginning and was the practice for many, many years suddenly you're going to end up with a different conclusion."
Johnson says fundamentally fairness in the marketplace is what is at stake and that producers should not be able to be discriminated against.
"There is no other place that I can think of in the marketplace where if I as a producer am asked to sign a contract, I am prohibited from taking that contract to my lawyer or to share it with anyone else before I sign it," Johnson said. "That is an example of onerous market power that is being exercised in sectors of the meat industry in the marketplace today that simply needs to go away."
The deadline to submit comments on the proposed rule is Nov. 22.