A guest post by Basel Musharbash
Over the past three years, the USDA has been trying to revitalize enforcement of a long-dormant law designed to protect farmers and ranchers from abuse and malfeasance by meatpackers called the Packers and Stockyards Act. Specifically, the USDA has been doing this by promulgating regulations which identify specific practices that violate the Act’s broad prohibitions on deception, unjust discrimination, and the imposition of undue or unreasonable prejudices and disadvantages against livestock producers. Since this process involves an agency and regulations, a lot of folks are wondering what last week’s Supreme Court decision overturning “Chevron deference” — a judicial principle related to when judges should defer to agency interpretations of law — might mean for the USDA’s efforts.
Notwithstanding some bold claims by Big Ag lobbyists, the real answer is: Not much. The USDA’s rules are exercises of discretionary authority that Congress expressly delegated to the USDA in the Packers and Stockyards Act. If ever challenged, they will be reviewed under the deferential standard of “reasonableness” that — as Loper Bright affirms — has always applied and will continue to apply to all such exercises of delegated authority by federal agencies. The USDA should proceed full steam ahead with its efforts to protect farmers and vindicate the will of Congress in passing the Packers and Stockyards Act: To “free the [producer] of livestock from the fear that the channel through which [their] product passe[s]” might — “through discrimination, exploitation, overreaching, manipulation, or other unfair practices” — deprive them of “a fair return for [their] product.”
What Are the USDA’s New Rules and Why Do They Matter?
The Packers and Stockyards Act is the “Farmers and Ranchers Bill of Rights,” establishing broad protections for farmers and ranchers against abuse and malfeasance by meatpackers. It was passed in 1921 amidst deep concerns — expressed by legislators on both sides of the aisle — about growing concentration in the meatpacking industry and the threat of a rising oligarchy of “food dictators.” In the early 1900s, a “Meat Trust” of five dominant packers — Armour, Swift, Morris, Cudahy, and Wilson — held over 82% of cattle, 76% of calve, 61% of hog, and 86% of sheep and lamb slaughter markets nationwide. Not only that, but these “Big Five” packers had also leveraged their power to seize control “over the principal substitutes for meat such as eggs, cheese and vegetable products,” and “were rapidly extending their power to cover fish and nearly every kind of foodstuff.” “The unequal condition” which this control engendered between “the man who sells in the yard and the man who buys [in it],” lawmakers warned, did not only drive livestock growers to “financial ruin and disaster,” but also threatened “the equal, inalienable rights of the producer and consumer.”
To remedy these problems, Congress passed what lawmakers called “a most comprehensive measure” to “assure fair competition and fair trade practices in livestock marketing.” Going “further than any previous law in the regulation of private business,” according to legislators, the Packers and Stockyards Act prohibited meatpackers from using “any unfair, unjustly discriminatory, or deceptive practice,” from imposing “any undue or unreasonable preference or . . . prejudice” on any “particular person or locality,” and from engaging in any course of business “for the purpose or with the effect of manipulating or controlling prices.” Simultaneously, the Act instructed the Secretary of Agriculture to implement its provisions through both rulemaking and prosecutions before the USDA’s in-house tribunals, including by “mak[ing] such rules, regulations, and orders as may be necessary to carry out the provisions of [the] Act.”
Starting in the 1980s, however, judicial activism turned the Packers & Stockyards Act into a practical dead letter. Relying on hazy (and substantively wrong) claims about the Act’s “purpose” and assorted “policy considerations,” judges began “reach[ing] beyond the Act’s clear and unambiguous text” to raise the burden of proof on plaintiffs — farmers, ranchers, and government enforcers — in ways that became practically insurmountable. In particular, they held that, to bring claims under the Act, farmers and enforcers had to prove not only that, for example, a practice was “unfair,” but also that it was likely to “harm competition” in relevant markets. Courts disagreed about what exactly this “harm-to-competition” requirement meant, but the result was all the same. Since farmers did not have the resources to deeply investigate the meatpacking business and systematically identify practices that were likely to undermine “competition” in livestock markets, the judges’ artificial new requirement effectively shut the courthouse door on them.
For a long time, the USDA — which, again, is charged by law with enforcing the Packers and Stockyards Act — did nothing about this situation. Since the Biden administration took office, however, the USDA has sought to fulfill its statutory responsibilities and identify, through rulemaking, specific practices that meet all the elements of a violation of the law’s prohibitions on deception, unjust discrimination, and the imposition of undue or unreasonable prejudices and disadvantages. Specifically, following thorough investigations into the workings of livestock markets, the USDA’s rules establish the following:
- That meatpackers violate the Act’s prohibition on “deceptive” practices when they employ false or misleading statements to make, modify, perform, enforce, terminate, or refuse a contract with a livestock producer.
- That poultry integrators specifically violate the Act’s prohibition on “deceptive” practices when they hide certain facts about the poultry-growing contracts they offer to farmers, which farmers need to understand, evaluate, and compare the contract offers of different integrators on the merits.
- That meatpackers violate the Act’s prohibition on “unjustly discriminatory” practices and on subjecting producers to “undue or unreasonable … prejudice[s] or disadvantage[s]” when they discriminate against livestock producers based on (1) their race, color, religion, sex (including gender identity and sexual orientation), disability, marital status, or age; or (2) their membership in a farmer cooperative.
- That poultry integrators violate the Act’s prohibition on “unfair, unjustly discriminatory, or deceptive” practices — as well as certain other duties the Act imposes on meatpackers — when they (1) use tournament systems to cut contract growers pay; (2) fail to provide growers with certain information they need to fairly compare their own performance against that of others in the integrator’s tournament compensation system; or (3) require their contract growers to make extensive new capital investments without disclosing the purpose, financial incentives, and projected returns of the new investment.
Naturally, the dominant meatpackers and their lobbyists don’t like any of this, and they may well decide to sue the USDA to try to block these new rules from taking effect. This brings us to the main question on many people’s minds in light of the Supreme Court’s decision in Loper Bright last week: Just how will the courts review the USDA’s new rules?
What Did Loper Bright Actually Change About Judicial Review of Agency Rulemaking?
To answer that question, we need to get some clarity about what Loper Bright actually did first. Loper Bright overruled a case from the 1980s case called Chevron v. Natural Resources Defense Counsel. Chevron dealt with how judges should decide lawsuits challenging an agency-promulgated rule on the ground that the rule is inconsistent with the statute it implements. Specifically, it instructed courts that, when the statute could be read to mean multiple things (or is “ambiguous”), they should uphold the agency’s rulemaking as long as it is consistent with any one of those meanings. Loper Bright overturned this doctrine — which had come to be known as “Chevron deference” — and gave the courts a new set of principles for how to review agency actions for lawfulness.
Loper Bright said that judges should exercise “independent judgment in determining the meaning of statutory provisions” in most cases, but it carved out certain areas where judges should still defer to agencies. In particular, Loper Bright instructed that judicial review of agency rulemaking must be deferential when a statute “expressly delegate[s]” to an agency the authority to “give meaning to a particular statutory term,” to “fill up the details of a statutory scheme,” or to implement a statutory provision that “leaves agencies with flexibility,” such as a phrase that requires regulated entities to act “appropriately” or “reasonably.” In that circumstance, the Court said, judges should uphold agency rules as long as (1) they fall “within the boundaries of the [agency’s] delegated authority,” and (2) reflect “reasoned decisionmaking.”
This “reasonableness” standard of judicial review, as the Court has recently explained in a different case, is quite “narrow.” It permits courts to determine only whether the agency “examined the relevant data” and “articulated a satisfactory explanation” for its decision, including a “rational connection between the facts found and the choice made.” This is the standard under which the USDA’s rulemakings under the Packers and Stockyards Act will be reviewed if they are challenged in court by the meatpackers’ lobby — and it is the same standard that would have applied to those rulemakings before Loper Bright.
How Does Loper Bright Apply to the USDA’s Rules?
If ever challenged, the USDA’s rulemakings will be reviewed for reasonableness under the “abuse of discretion” standard articulated in Loper Bright and prior cases. As noted above, the provisions of the Packers and Stockyards Act expressly delegate to the USDA the authority to make all “rules, regulations, and orders” that “may be necessary to carry out the provisions” of the Act. In crafting this statutory scheme, Congress envisioned an agency that would “keep pace with the changes . . . in industry,” accumulate experience, and educate the courts on the “methods [of] distribution and manufacture . . . of the great packers of the country.” Toward these ends, the role of the USDA under the Packers and Stockyards Act was molded after the role of the Federal Trade Commission (FTC), an agency created to “maintain [legislative] control” of, and “guard . . . against judicial encroachment” on, the enforcement of the FTC Act’s prohibition on “unfair methods of competition.”
Like the FTC under the FTC Act, the USDA was vested with the jurisdiction, power, and duty to conduct quasi-judicial hearings and enforce the Packers and Stockyards Act against any packer which “the [Department] has reason to believe . . . has violated or is violating [the Act].” The powers of the FTC to pursue enforcement investigations, subpoena information from regulated entities, and publish advisory opinions and industry reports were likewise “made applicable” to the USDA. More broadly, in passing the Packers and Stockyards Act, Congress was careful not to choose terms that had already been defined by the courts. Instead, Congress borrowed sweeping utility-regulation and unfairness concepts from the Interstate Commerce Act and the FTC Act (e.g., “unjust discrimination,” “undue or unreasonable prejudices,” and “unfair or deceptive practices or devices”) that have long been recognized to leave agencies with substantial discretion.
In these ways, Congress sought to give the USDA wide latitude to interpret and administer what legislators called the “more or less definite,” yet still “flexible,” terms of the Packers and Stockyards Act in a manner that “keep[s] pace with the progress of industry,” and is entitled to judicial deference. With the text of Section 202 of the Act, Congress distinguished between fair and unfair, just and unjust, reasonable and unreasonable, due and undue conduct by meatpackers — and it tasked the USDA with policing the boundary. To fulfill this responsibility, Congress gave the USDA “complete inquisitorial, visitorial, supervisory, and regulatory power over the packers, stockyards, and all activities connected therewith.” To balance these powers, Congress imposed checks to ensure the USDA would be accountable to it, and that the USDA’s decisions would be reviewable by federal courts of appeals. Since 1921, Congress has conducted vigorous oversight of the USDA’s administration of the Packers and Stockyards Act — always with the purpose of spurring more effective enforcement.
Against this background, it is clear that the Packers and Stockyards Act “delegated” to the USDA the principal authority to “fill up the details” of the its statutory scheme and give meaning to its “flexible” statutory provisions. Accordingly, the USDA’s new rules under the Act will be reviewed by the courts like exercises of delegated discretion have always been reviewed — only for whether they are supported by “reasoned decisionmaking.” If anyone doubts that these rules do reflect such reasoned decisionmaking — and identify practices that truly satisfy the elements of a Packers and Stockyards Act violations as established by the courts — including the “harm-to-competition” requirement — they’re welcome to read through the hundreds of pages of fact-findings the USDA issued to support each rule.
Conclusion
In short, the USDA has never needed Chevron to obtain deferential judicial review of its regulations under the Packers and Stockyards Act. It is entitled to such deference from the courts by virtue of the plain text of the statute. The agency should not be fazed by Loper Bright — much less by empty saber-rattling from dominant meatpackers and their front groups.
Basel Musharbash is an antitrust attorney and principal at Antimonopoly Counsel in Paris, TX.
