5146 Federal Register / Vol. 90, No. 10 / Thursday, January 16, 2025 / Rules and Regulations 

DEPARTMENT OF AGRICULTURE 

Agricultural Marketing Service 

9 CFR Part 201 

[Doc. No. AMS–FTPP–22–0046] 

RIN 0581–AE18 

Poultry Grower Payment Systems and 

Capital Improvement Systems 

AGENCY: Agricultural Marketing Service, 

U.S. Department of Agriculture. 

ACTION: Final rule. 

SUMMARY: This final rule by the United 

States Department of Agriculture’s 

(USDA or the Department) Agricultural 

Marketing Service (AMS or the Agency) 

amends the Agency’s regulations under 

the Packers and Stockyards Act, 1921 

(P&S Act or Act). The Act protects fair 

trade, financial integrity, and 

competitive markets for poultry. The 

final rule prohibits certain payment 

practices under poultry grower ranking 

systems (commonly known as 

tournaments) in contract poultry 

production for broiler chickens, requires 

live poultry dealers (LPDs) to adopt 

policies and procedures for operating a 

fair ranking system for broiler growers, 

and requires LPDs to provide certain 

information to broiler growers when the 

LPD requests or requires the grower to 

make additional capital investments. 

These regulations will increase 

transparency and address deception and 

unfairness in broiler grower payments, 

tournament operations, and capital 

improvement systems. 

DATES: This rule is effective July 1, 

2026. 

FOR FURTHER INFORMATION CONTACT: S. 

Brett Offutt, Chief Legal Officer/Policy 

Advisor, Packers and Stockyards 

Division, USDA AMS Fair Trade 

Practices Program, 1400 Independence 

Ave. SW, Washington, DC 20250; 

phone: (202) 690–4355; or email: 

s.brett.offutt@usda.gov. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Executive Summary 

II. Background 

III. Summary of the Proposed Rule and 

Changes in the Final Rule 

IV. Provisions of the Final Rule 

V. Comment Analysis 

VI. Regulatory Analysis 

I. Executive Summary 

The current broiler chicken industry 

is highly susceptible to both unfairness 

and deception. Within the last 40 years, 

the poultry industry has become highly 

integrated, with most LPDs operating as 

‘‘integrators’’ who frequently own or 

control all segments of the production 

process except growout. The growout 

stage of the production process consists 

of growers raising young poultry to 

harvest size under poultry growing 

arrangements (contracts). To pay the 

grower, most LPDs, which will also be 

referred to as ‘‘integrators’’ throughout 

this rule, use a relative performance or 

poultry grower ranking system, 

commonly known as a tournament. 

Under the tournament system, poultry 

growers compete against one another to 

determine payment for their services. As 

discussed throughout this rule, growers 

cannot reasonably avoid certain 

practices that cause them harm. 

Additionally, growers lack access to 

certain information, which inhibits their 

ability to meaningfully understand, 

negotiate, and enforce poultry growing 

contracts with LPDs, including in 

relation to capital investments that LPDs 

request. 

The Packers and Stockyards Act, 

1921, as amended (P&S Act or the Act) 

(7 U.S.C. 181 et seq.), authorizes USDA 

to issue regulations and orders to 

prohibit unfair and deceptive practices 

by LPDs. 

In a June 8, 2022, advance notice of 

proposed rulemaking (ANPR), AMS 

sought comments and information to 

inform policy development and future 

rulemaking regarding the use of poultry 

grower ranking systems (87 FR 34814, 

June 8, 2022)). Commenters expressed 

both support and concern about the use 

of tournaments in poultry production, 

with the majority expressing support. 

Other commenters, especially advocacy 

associations, objected to the current 

tournament payment system, stating 

that tournament systems do not fulfill 

the integrators’ claimed purposes and 

that the tournament payment systems 

exemplify the manipulative and unjust 

practices that Congress designed the Act 

to prevent. These commenters cited 

integrators’ arbitrary, unjust, or punitive 

distribution of inputs and production 

variables, potentially punitive 

manipulation of the group composition, 

and penalties for small deviations below 

average performance. Some of these 

ANPR commenters also stated that the 

rulemaking could help address 

bargaining power imbalances for 

growers by providing proper 

enforcement, minimum base pay, and 

other provisions. 

Trade organizations commented on 

the ways input variability affects pay 

and that LPDs lack incentives to take 

action to reduce unpredictability in 

grower inputs and pay outcomes. AMS 

has observed that monitoring and 

intervention to remedy unpredictability 

requires an LPD to expend effort and 

incur cost, and that the LPD does not 

directly benefit from the increased 

fairness to growers. Without an explicit 

prohibition on unfair variability, LPDs 

lack compelling incentives to operate 

their tournament system contracts fairly. 

Comments in response to the ANPR, 

other available data and information, 

and AMS’s Packers and Stockyards 

Division’s (PSD) expertise provided the 

basis for a proposed rulemaking. 

On June 10, 2024, AMS published the 

proposed rule, Poultry Grower Payment 

Systems and Capital Improvement 

Systems, in the Federal Register (89 FR 

49002). In response to the proposed 

rule, AMS posted 755 comments, some 

with multiple signatories, over a 60-day 

comment period. Comments were 

submitted by a variety of stakeholders, 

including farmers’ coalitions, 

government entities, advocacy 

organizations, industry trade 

organizations, processors, producers, 

and other individual interested parties. 

Stakeholders commented on the 

proposed rule, as well as several 

specific questions containing alternate 

proposals. The proposed rule covered, 

among other things, rate of 

compensation for growers, transition 

and implementation costs, the proposed 

duty of fair comparison, and reasonable 

recoupment for required additional 

capital investments. Farmers’ coalitions, 

advocacy associations, government 

entities, and unaffiliated individual 

commenters broadly supported the 

proposed rule, while the regulated trade 

organizations and LPDs opposed the 

proposed rule. Live poultry growers 

both supported and opposed the 

proposed rule. Many growers who 

support the rule raised concerns of 

unfairness within the tournament 

system, including that pay rates are 

influenced by factors outside growers’ 

control, that growers are forced to make 

new capital investments that have poor 

to nonexistent return while putting 

growers in more debt, and that growers 

must compete against fellow growers in 

an unfair manner. Those growers who 

opposed the proposed rule felt that the 

tournament system does a good job of 

rewarding effort, and that the rule 

would upset this system by shifting 

money away from high-performing 

growers and by reducing overall bird 

quality. However, several growers that 

opposed the rule expressed concern that 

LPDs force growers to make additional 

capital investments that do not produce 

an economic return for the grower. 

Section 407(a) of the P&S Act (7 

U.S.C. 228(a)) authorizes the Secretary 

of Agriculture (the Secretary) to make 

rules and regulations as necessary to 


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Federal Register / Vol. 90, No. 10 / Thursday, January 16, 2025 / Rules and Regulations 5147 

1USDA, NASS, 2022 Census of Agriculture: 

United States Summary and State Data, volume1, 

part 51, issued February 2024 pp. 51 and 411. 

https://www.nass.usda.gov/Publications/AgCensus/ 

2022/Full_Report/Volume_1,_Chapter_1_US/ 

usv1.pdf. 

2 Growout period is defined as the period of time 

between placement of poultry at a grower’s facility 

and the harvest or delivery of such animals for 

slaughter, during which the feeding and care of 

such poultry are under the control of the grower. 

3MacDonald, James M. ‘‘Financial Risks and 

Incomes in Contract Broiler Production.’’ Amber 

Waves August 04, 2014. https://www.ers.usda.gov/ 

amber-waves/2014/august/financial-risks-andincomes-in-contract-broiler-production/ (last 

accessed 12/13/2023). 

4Nigel Key, Christopher Burns, and Greg Lyons, 

‘‘Financial Conditions in the U.S. Agricultural 

Sector: Historical Comparisons,’’ EIB–211, U.S. 

Department of Agriculture, Economic Research 

Service (2019), https://www.ers.usda.gov/webdocs/ 

publications/95238/eib-211.pdf?v=4876.5 (In 2017, 

compared to other commodity categories 

considered, poultry farms showed the greatest share 

of farms in extreme financial stress—around four 

times that of larger-scale general livestock and 

specialty crop, fruit, nut, and vegetable producers 

and twice that of large-scale grain and oilseed 

producers. Moreover, the percentage of poultry 

farmers in extreme financial stress has been 

increasing since 2006). 

5For a discussion the difficulty in adapting of 

broiler grow houses for other purposes see Tom 

Vukina and Porametr Leegomonchai. ‘‘Oligopsony 

Power, Asset Specificity, and Hold-Up: Evidence 

from the Broiler Industry.’’ American Journal of 

Agricultural Economics 88 (2006). 

carry out the provisions of the Act (7 

U.S.C. 181 et seq.), and the Secretary 

has delegated the responsibility for 

administering the Act to AMS. See 7 

CFR 2.22(a)(3)(iii) (delegating authority 

to administer the Act from the Secretary 

to the Under Secretary for Marketing 

and Regulatory Programs); 7 CFR 

2.79(a)(17) (in turn, delegating authority 

to administer the Act from the Under 

Secretary to the Administrator, 

Agriculture Marketing Service). Under 

this authority, AMS issues this rule to 

carry out the provisions of section 407 

of the Act, as well as provisions of 

sections 202(a) (7 U.S.C. 192(a)) (which 

prohibits ‘‘any unfair, unjustly 

discriminatory, or deceptive practice or 

device’’), 401 (7 U.S.C. 221) (which 

requires an LPD to ‘‘keep such accounts, 

records, and memoranda as fully and 

correctly disclose all transactions 

involved in his business’’), and 410 (7 

U.S.C. 228b) (which bans the failure to 

pay ‘‘the full amount due [to the] 

poultry grower on account of such 

poultry’’). 

In this final rule, AMS amends 9 CFR 

part 201, subpart N, by adding several 

new provisions, including: § 201.106 

regarding LPD responsibilities for the 

design of broiler grower compensation 

arrangements; § 201.110 regarding the 

fair operation of broiler grower ranking 

systems; § 201.112 regarding disclosure 

requirements for LPDs when requesting 

additional capital investments from 

broiler growers; and § 201.290 regarding 

severability. In particular, the Agency is: 

• Prohibiting LPDs from discounting 

or reducing a grower’s rate of 

compensation as disclosed in the broiler 

growing arrangement based on the 

grower’s grouping, ranking, or 

comparison to others (§ 201.106(a)). 

• Establishing that it is a presumptive 

violation of the Act when aggregate 

gross annual payments based upon a 

grouping, ranking, or comparison of 

growers exceeds 25 percent of total 

gross payments to growers in a complex 

on an annual-calendar year basis 

(§ 201.106(b)). 

• For each of the three calendar years 

following the publication date of the 

above-referenced provisions, requiring 

LPDs to submit certain documentation 

to the Secretary when any contract 

modification or renewal subject to the 

prohibition on discounts results in a 

decrease in the prior annual-calendar 

year’s complex-wide average gross 

payment to the grower (§ 201.106(c)). 

• Establishing a duty of fair 

comparison that requires LPDs to design 

and operate their broiler grower ranking 

system to provide a fair comparison 

among growers, with particular 

attention to certain factors in the 

methods of comparison, including the 

distribution of inputs and flock 

production practices, the time period of 

the comparison, the conditions and 

circumstances for the comparison, the 

reasonableness of efforts to resolve 

disputes, and how the LPD will 

compensate growers when the LPD 

cannot conduct a fair comparison 

(§ 201.110(a)). 

• Requiring LPDs to establish and 

maintain written documentation of their 

processes for the design and operation 

of a broiler grower ranking system that 

is consistent with the duty of fair 

comparison and to retain all relevant 

written records for five years 

(§ 201.110(b)). 

• Requiring LPDs to provide growers 

with a Capital Improvement Disclosure 

Document when an LPD requests that a 

grower make an additional capital 

investment and requiring that LPDs 

make reasonable efforts to assist the 

grower in translating the document, as 

well as ensure that the grower is aware 

of their right to request translation 

assistance (§ 201.112). 

• Introducing a severability clause 

that specifies that it is USDA’s intent 

that the provisions in subpart N remain 

in effect even if any provision or 

component of any provision is deemed 

unenforceable (§ 201.290). 

II. Background 

A. Vertical Integration and Market 

Power 

Today, the broiler chicken industry is 

highly vertically integrated. That is, a 

single entity owns or controls nearly all 

the steps of production and distribution, 

with the only partial exception being 

the growout stage, during which broiler 

growers raise chicks on their farms to 

slaughter weight. The USDA National 

Agricultural Statistics Service’s (NASS) 

Census of Agriculture (Agricultural 

Census) reported that 96.2 percent of 

broilers were raised and delivered under 

production contracts between LPDs and 

independent farmers, or broiler 

growers.1 Under a production contract, 

the LPD provides the grower chicks, 

feed, and veterinary treatment services, 

which the grower uses to grow out the 

flock. The LPD maintains ownership of 

the chickens throughout the production 

process. The grower provides the 

poultry growing facility, flock 

management, labor, and utilities 

required during flock growout.2 At the 

end of growout, the LPD collects and 

weighs the mature poultry and pays the 

broiler grower for their services. 

To grow broiler chickens on a 

commercial scale, a grower must make 

a substantial initial investment in 

housing. Over time, LPDs may request 

or require that growers make additional 

capital investments to upgrade housing 

and equipment, which are intended to 

improve efficiency or respond to 

customer preferences (e.g., relating to 

the use of antibiotics or other animalraising concerns) during the contracting 

relationship. Growers generally finance 

these long-term assets against much 

shorter-term production contracts.3 This 

exposes growers to financial risk and 

uncertainty around debt repayment and 

the recoupment of their investments. 

For example, compared to other 

commodity producers, broiler growers 

registered among the highest share of 

farms in extreme financial stress, 

measured as carrying a term debt 

coverage ratio less than one and a debtto-asset ratio greater than 55 percent.4

Growers are thus dependent on LPDs— 

who control most aspects of a grower’s 

production—to recoup their substantial 

initial and continuing investments.5

Growers also currently receive little to 

no information about the purpose, 

process, and outcomes expected around 

such investments. 

Currently, most LPDs operate with the 

benefit of substantial market power and 

bargaining power in local markets to 

purchase grower services. Broiler 

grower operations must be close 

(usually less than 50 miles) to an LPD’s 


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5148 Federal Register / Vol. 90, No. 10 / Thursday, January 16, 2025 / Rules and Regulations 

6Final Judgment, United States v. Koch Foods, 

Inc., No. 23–cv–15813, Dkt. No. 23 (N.D. III. Feb. 

12, 2024). See also, Zimmerman, Sarah, 

‘‘Department of Justice, ‘‘Justice Department Files 

Lawsuit and Proposed Consent Decree to Prohibit 

Koch Foods from Imposing Unfair and 

Anticompetitive Termination Penalties in Contracts 

with Chicken Growers,’’ https://www.justice.gov/ 

opa/pr/justice-department-files-lawsuit-andproposed-consent-decree-prohibit-koch-foodsimposing. 

7For example, a grower without an accurate 

projection of future income may forgo making an 

expenditure that costs less long-term, e.g., making 

a bundled purchase for two pieces of equipment at 

a reduced per-unit price. Instead, if they don’t know 

if they can afford a future purchase, they purchase 

the minimum amount—one piece of equipment at 

a time at a higher unit price—to sustain operations 

short-term. 

8Numerous commenters described how they 

would make all of the upgrades recommended by 

the LPD technician and inexplicably place last 

compared to other growers: ‘‘Six months of down 

time spent installing several more thousands of 

dollars of equipment. We’ve grown two flocks since 

then and have failed to make enough money to even 

pay the bank each time. We’ve had to take out a 

loan to even survive our day-to-day life and are 

behind on all farm bills. We do everything the 

company tells us, but when we finish in the 

negative, were given all kinds of reasons for why 

our birds weren’t good enough. When speaking 

with other farmers and techs from other companies, 

we’re told that our weight and feed conversions are 

good, but a couple of farms seem to continuously 

have unexplained successful numbers. Basically, 

were losing money that goes to pay the ones at the 

top. On one flock, 12 farms were pitted against each 

other. Two farms performed at a level so high that 

isn’t believable, and three farms performed below 

the bottom level we can be paid at. The integrator 

took the bottom three farms out of the tournament 

calculation and compared the remaining farms 

without them. How fair is it that they drop the 

bottom farms, but not the top ones? This resulted 

in the farms that were close to average being pushed 

down and making less money because the average 

was raised considerably with the highflyers 

included and the bottom places excluded. The 

company tells us that this helps us, but it doesn’t. 

We’ve made the decision to sell because we can’t 

continue to put our children through this’’). 

feed mills, hatcheries, and processing 

plants due to the costs of transporting 

feed to the grower’s farm and the costs 

(including death loss) associated with 

transporting finished chickens from the 

grower’s farm to the processing plant. 

This results in poultry production that 

is often localized and regionally 

concentrated. Most growers have few 

LPDs in their area with whom they can 

contract. Even where multiple LPDs are 

present, there can be significant costs 

associated with switching to a different 

LPD, including adjustments for 

differences in technical specifications 

that LPDs may require. To switch LPDs, 

a grower may need to invest in new 

equipment and learn to apply different 

operational techniques for different 

breeds, target weights, and growout 

programs. Facility-specific investments 

may inhibit the ability of growers to 

switch to a competing LPD where 

different facility specifications are 

required. Growers have recently 

complained of at least one LPD 

penalizing growers that are trying to 

switch to an LPD’s competition. AMS 

referred the complaint to the 

Department of Justice for enforcement 

under the Packers and Stockyards Act. 

The Department secured a consent 

decree that stopped the conduct, 

prohibited its recurrence, and 

compensated the harmed growers.6

Owing to the vertical integration in 

the system, LPDs exercise substantial 

control over growers’ operations 

through the provision of inputs, control 

over production practices, their 

tournament settlement and comparison 

practices, and their level of performance 

in relation to communication and 

dispute resolution. In this rule, AMS 

uses the term ‘‘inputs’’ to mean 

resources supplied by LPDs, such as 

chicks or feed. Inputs often vary among 

growers, which impacts the growers’ 

flock performance, thereby unfairly 

skewing relative performance measures. 

Likewise, LPDs determine production 

practices on growers’ farms, and those 

production practices affect growers’ pay. 

AMS uses the term ‘‘production 

practices’’ to refer to features of the onfarm production process that are 

determined by the LPD, such as density 

of bird placement (number of chicks 

delivered or placed with a grower per 

square foot of broiler housing), age at 

harvest, and weight at harvest. These 

practices greatly impact grower 

compensation. If LPDs fail to apply 

production practices evenly across 

grower participants in tournaments, that 

unevenness also unfairly skews relative 

performance measures. 

Additionally, information asymmetry 

in poultry contracting arrangements 

contributes to market inefficiencies and 

unfair and deceptive practices. 

Asymmetric information occurs when 

one party to a contract has more critical 

information than the other party. 

Information asymmetry leads to market 

failure in the broiler production 

industry as growers lack the information 

needed to make informed business 

decisions, whereas LPDs know what 

each grower makes. This increases 

LPDs’ to set contractual terms in ways 

that benefit themselves, while the 

grower lacks the information needed to 

effectively negotiate compensation for 

the provision of growout services or to 

make a comparison and switch to a 

competitor that offers more competitive 

terms. Another feature of this 

information asymmetry is that while 

LPDs know the amounts they have fixed 

for grower compensation, growers do 

not know this amount, which can span 

a wide range. Similarly, LPDs know the 

distribution of inputs as well as which 

growers may be grouped together for 

settlement in the complex, while 

growers cannot easily track that 

information. Exploiting this information 

asymmetry, LPDs can adjust down 

compensation in ways that are difficult 

for growers to know or competitively 

discipline the LPD, e.g., by switching 

out. As highlighted by grower comments 

and based on AMS’s experience in 

evaluating grower concerns in this area, 

without an accurate projection of 

purposes, processes, and outcomes 

related to capital improvement 

programs, growers cannot accurately 

and effectively evaluate their allocation 

of resources to cover necessary 

expenses 7 or engage in rational 

decision-making around whether to 

pursue (or resist) additional capital 

investments to improve and protect 

their own financial interests. 

Additionally, having widely variable 

income prevents growers from knowing 

which elements under their control they 

can adjust, and how to adjust them, to 

correspondingly increase compensation. 

This can cause growers to futilely 

expend extraneous resources that do not 

yield proportionate increases in 

performance and compensation.8

Information asymmetry also facilitates 

abusive practices, whereas the provision 

of information would help growers and 

AMS identify and halt those practices 

sooner. Disclosure is not an absolute 

defense. Acts or practices can be unfair 

or deceptive and violate section 202(a) 

of the Act even if they have been 

disclosed. 

LPDs often use incomplete contracts 

in broiler production. When a contract 

is incomplete, the LPD interprets 

material terms in their favor as the 

grower lacks the ability to require a 

fairer interpretation. Contracts are 

incomplete when key terms basic to its 

functioning are vague or missing. 

Incomplete contracts magnify risks with 

respect to the performance of the other 

contractual party, leading to other 

potential inefficiencies. For example, 

broiler production contracts regularly 

disclaim LPD responsibility for input 

quality or usability. Nor do they provide 

enforceable detail around LPD 

management of tournament operations, 

including tournament groupings or 

dispute resolution expectations. 

Moreover, the complexity of such pay 

systems makes it difficult for growers to 

fully understand the potential range of 

payments they are likely to receive or 

the ways in which LPD performance or 

nonperformance may affect that pay, 

preventing them from properly 


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Federal Register / Vol. 90, No. 10 / Thursday, January 16, 2025 / Rules and Regulations 5149 

9See, e.g., Luke Herrine, ‘‘Cutthroat Business,’’ U. 

of Alabama Legal Studies Research Paper 

Forthcoming, Aug. 2024, available at https://

papers.ssrn.com/sol3/papers.cfm?abstract_

id=4936628; Michael Kades, ‘‘Protecting livestock 

producers and chicken growers,’’ Washington 

Center for Equitable Growth (May 2022); Peter C. 

Carstensen, ‘‘The Packers and Stockyards Act: A 

History of Failure to Date,’’ The CPI Antitrust 

Journal (2) (2010), available at https://

www.competitionpolicyinternational.com/assets/ 

Uploads/CarstensenAPR-2.pdf; Herbert 

Hovenkamp, ‘‘Does the Packers and Stockyards Act 

Require Antitrust Harm?’’ (Philadelphia: Faculty 

Scholarship at Penn Law, 2011), available at https:// 

scholarship.law.upenn.edu/faculty_scholarship/ 

1862. 

10There is some inconsistency in the use of 

payment terms across broiler contracts at different 

companies or complexes. Most grower contracts 

define the term base pay rate as it is described in 

this paragraph. However, some contracts instead 

use the term base pay when referring to a fixed 

amount plus the performance adjustment. 

11See, e.g., ‘‘Settlement Administrator Angeion 

Group Announces Proposed Settlement In Broiler 

Grow-Out Services Class Action,’’ PR Newswire 

(2024), https://www.prnewswire.com/news-releases/ 

settlement-administrator-angeion-groupannounces-proposed-settlement-in-broiler-growout-services-class-action-302252706.html (In 2024, 

some of the largest LPDs agreed to settle grower 

claims that the LPDs conspired with rivals to 

suppress pay by agreeing not to hire growers from 

each other. Multiple commenters also described the 

difficulty in switching.); United States Department 

of Justice, United States Department of Agriculture, 

(May 2010), Public Workshops Exploring 

Competition in Agriculture, https://

www.justice.gov/archives/atr/events/publicworkshops-agriculture-and-antitrust-enforcementissues-our-21st-century-economy-10. 

12See, e.g., ‘‘How the Tournament System 

Works,’’ National Chicken Council (informing 

farmers that: ‘‘1 All farmers are provided the same 

quality of chicks, the same feed, and access to 

veterinary care. 2 Farmers who invest in more 

advanced facilities, as well as use the best 

management practices will likely produce higher 

quality chickens more efficiently. 3 Farmers receive 

a base pay (per their contract) and potentially a 

bonus, based on the health and quantity of the flock 

(tournament system).’’); available at https://

www.chickencheck.in/faq/tournament-system/ (last 

accessed May 22, 2024). 

13 Knoeber and Thurman show that tournaments 

shift most of the risks of broiler production from 

broiler growers to LPDs relative to a fixed payment 

system. See Knoeber, C.R. and W.N Thurman. 

‘‘ ‘Don’t Count Your Chickens . . .’: Risk and Risk 

Continued 

evaluating the fairness of the contract 

before signing. Preventing LPDs from 

injuring producers using these contracts 

is among the purposes of the Act.9

Contracts may be viewed as complete, 

with no material gaps, if the contract 

terms include the substantive legal, 

practical, and economic promises, 

obligations, and contingencies needed 

to operate in a poultry growing 

arrangement. These terms should be 

verifiable and legally enforceable. 

Finally, contracts that require 

investments in contract-specific assets 

give rise to the hold-up problem. The 

economic concept of hold-up refers to a 

situation in which one or both parties to 

a transaction must make investments in 

such contract-specific assets, and the 

two parties may be unable to cooperate 

efficiently due to incomplete or 

asymmetric information and the 

inability to write, enforce, or commit to 

contracts. Once a party becomes locked 

into a transaction by making a 

transaction-specific investment, they 

lose bargaining leverage and become 

vulnerable to exploitation by the other 

party. Hold-ups occur in broiler 

production due to market failures 

associated with incomplete grower 

information, contract-specific 

investments, market power, relative 

capital leverage, as well as insufficient 

enforcement of law intended to 

maintain market integrity and prevent 

market abuses—including unfair 

breaches of contract. Growers are 

commonly unable to exercise contract 

rights to remedy LPD performance 

failures owing to the risk of hold-up and 

to the necessity of timely remedies 

when dealing with living birds. 

Examples from grower complaints 

include failure to correct improper or 

insufficient feed delivery, the delivery 

of successive inputs that are lower 

performing, or tournament groupings 

that are suspect. 

B. Tournament Practices 

Since the 1990s, the broiler industry 

overwhelmingly uses the tournament 

system to compensate growers. As 

discussed above, under a tournament 

system the contract between the broiler 

grower and the LPD provides for 

payment to the grower based on a 

grouping, ranking, or comparison of 

broiler growers delivering broilers to the 

same company during a specified period 

(usually one week). AMS will refer to 

this as a settlement group. Under a 

typical tournament system, the broiler 

grower receives a fixed payment per 

pound of broilers produced, that LPDs 

often call a ‘‘base pay rate,’’ plus a 

calculation adjustment that is supposed 

to be based on how efficiently, 

compared to other growers, the grower 

used the resources provided by the LPD 

to produce each pound of broilers 

(informally referred to as a performance 

adjustment).10 LPDs typically calculate 

the performance adjustment primarily 

by comparing the feed conversion ratio 

(i.e., the quantity of feed consumed by 

the flock divided by the weight of the 

flock delivered) to the average ratio of 

all growers in the tournament settlement 

group. Broiler growers whose feed 

conversion ratio is less than the average 

ratio for that tournament settlement 

group receive a bonus above the base 

pay rate, while those whose costs are 

above the average incur a discount from 

the base pay rate. 

LPDs benefit from the tournament 

system in several ways. The tournament 

system provides LPDs control and 

certainty over total grower 

compensation as a group. For each 

tournament, the LPD knows and sets the 

total compensation that will be paid per 

pound of broilers produced by the 

group. In other words, the LPD is never 

concerned about paying an excess bonus 

for an individual flock because the LPD 

allocates the pool of payments among 

growers through performance 

adjustments for growers relative to the 

floating average performance (i.e., in 

today’s system, amounts above, or 

deductions from, the base pay rate). 

LPDs (and growers, as discussed below) 

also get the benefit of utilizing a floating 

average (relative to external shocks, 

such as weather, as noted below) to 

incentivize performance. However, the 

tournament system comes at a cost to 

growers: that of seeing payment for the 

services they provide reduced for 

reasons outside of their control yet 

within the control of the LPD. This 

outcome is magnified by the fact that 

growers cannot easily switch over to a 

competitor LPD—even if the competitor 

LPD offers more attractive 

compensation—due to the high barriers 

to switching imposed partly by LPDs.11

LPDs have long claimed that 

tournaments systems reward growers 

financially for their experience, skill, 

effort, and investments in up-to-date 

and efficient housing and equipment.12

The extent to which the tournament 

actually incentivizes additional grower 

effort and expenditure of resources, and 

whether those efforts and expenditures 

were necessary and fair to growers, 

depends on a range of factors, including 

the magnitude of the tournament but, in 

some circumstances, also the design of 

the housing specification (e.g., the use 

of automation and other technology), 

the type of bird being raised (e.g., some 

require special efforts), the availability 

of other payment incentives, and the 

absence of arbitrary distortions in the 

allocation of payments, among other 

factors. In theory, provided that all 

growers in a tournament grouping were 

treated materially the same and the 

variables within the tournament 

grouping were within the control of the 

growers, a tournament system could 

insulate growers to some degree against 

external shocks that affect all growers in 

the grouping. This is because, in this 

scenario, performance is based on an 

average that floats and adjusts to the 

particular external circumstances that 

all growers in the pool experienced 

during the period.13 In reality, the 


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5150 Federal Register / Vol. 90, No. 10 / Thursday, January 16, 2025 / Rules and Regulations 

Shifting in the Broiler Industry,’’ American Journal 

of Agricultural Economics 77 (August 1995) p. 486– 

496. 

14United States v. Cargill Meat Solutions Corp., 

1:22–cv–01821–ELH (D. Md. July 25, 2022) (WayneSanderson), pars. 153–56, available at https://

www.justice.gov/media/1238931/dl?inline; AMS– 

FTPP–22–0046–0913 (‘‘As a third-generation 

contract poultry farmer, this is one of the most 

unstable times I have witnessed or heard about with 

the growers in the majority. For many years we 

have been paid based on the tournament system, 

and for several years I viewed it to be fair, but no 

longer. Currently, we as growers compete against 

each other on a weekly basis to see who has the best 

cost. The list used to be really tight on what cost 

of top versus bottom grower, but in our complex 

alone, that is no longer the case. The top grower is 

making a healthy check, while those below average 

are not making enough to cover the cost of 

production and overhead. It is no longer the ones 

that put in the effort of hard work that are 

successful in this business’’); Transcript, United 

States Department of Justice, United States 

Department of Agriculture, Public Workshops 

Exploring Competition in Agriculture: Poultry 

Workshop May 21, 2010, Normal, Alabama. Lee 

Schrader and John Wilson, ‘‘Broiler Grower Survey 

Report,’’ in Farmers’ Legal Action Group, Assessing 

the Impact of LPD Practices on Contract Poultry 

Growers, ed. Farmers’ Legal Action Group (FLAG 

Survey) (September 2001). http://www.flaginc.org/ 

publication/assessing-the-impact-of-LPD-practiceson-contract-poultry-growers/ (In 1999, Lee Schrader 

of Purdue University and John Wilson of Duke 

University surveyed over a thousand broiler 

growers in ten of the largest broiler-growing states 

(Alabama, Arkansas, Delaware, Georgia, Maryland, 

Mississippi, North Carolina, South Carolina, Texas, 

and Virginia). Based on AMS’ experience, the 

survey results still provide a relevant reflection of 

the views of growers today, including companies’ 

representations about compensation to growers). 

15See ‘‘A Bird’s Eye View of How Chicken 

Farmers Are Paid,’’ National Chicken Council 

(informing farmers that: ‘‘All farmers are guaranteed 

a base pay from the chicken company per their 

contract.’’; ‘‘No matter what, farmers get paid.’’; and 

‘‘Bonuses are given to farmers who raise healthy 

flocks and invest in their farm. This is referred to 

as the tournament system.’’); available at https://

www.chickencheck.in/faq/tournament-system/ (last 

accessed May 22, 2024). 

16MacDonald, James M. 2014, Technology, 

Organization, and Financial Performance in U.S. 

Broiler Production, EIB–126, USDA Economic 

Research Service, https://www.ers.usda.gov/ 

webdocs/publications/43869/48159_

eib126.pdf?v=1829.6 (Half of respondents with two 

integrators in their area and over a third of those 

with three integrators asserted that they could not 

shift to another integrator). 

tournament system does not sufficiently 

protect from external shock. A range of 

shocks and factors external to the 

growers—some of which are within the 

control of the LPD—still adversely affect 

the overall weight of the broilers in a 

tournament and thereby reduce the 

compensation for all participating 

growers. 

AMS has concluded that several 

widely adopted aspects of LPDs’ 

operations are unfair, deceptive, or both. 

First, without a clearly stated base pay 

rate, LPDs deceive growers regarding 

their actual minimum pay. The 

complexity and unpredictability of 

LPDs’ current operation of tournaments 

makes it difficult for growers to clearly 

understand before entering into a 

contract the minimum amount they 

could actually receive under the 

contract.14 For example, base pay can 

be, but is not commonly, a guaranteed 

minimum pay.15 Second, if performance 

pay—particularly performance pay that 

is based on comparisons with other 

growers—is substantial relative to total 

compensation, the arbitrary lottery-like 

aspects in a tournament system 

operation will, in most circumstances, 

undermine its effectiveness as a 

compensation scheme because 

compensation outcomes will not reflect 

the effort or performance of growers, 

and is unfair and deceptive. Third, 

arbitrary or unjustly discriminatory 

distribution of inputs, production 

practices, tournament groupings, or 

communications and dispute 

resolution—as key aspects of LPD 

performance under the contract—also 

can create a system in which 

compensation does not reflect the effort 

or performance of growers, deprives 

growers of the full amount due for their 

performance, and is unfair. These 

provisions are meant to be 

complementary and mutually 

reinforcing. AMS explains each of these 

concerns in greater detail below, under 

section IV., ‘‘Provisions of the Final 

Rule.’’ 

As noted above, many broiler growers 

operate in regions with just one to two 

LPDs.16 The local competitive 

conditions result in higher-risk, lowerpaying grower contracts that commonly 

subject the grower to arbitrary and 

unfair payment; in particular, these 

contracts do not guarantee growers an 

adequate minimum base pay rate, flock 

placements and stocking densities, or 

length of contract in relation to the loan 

obligations commonly necessary to 

engage in broiler growing. Because LPDs 

control the distribution of inputs and 

assignment of production practices, 

growers repeatedly tell AMS that they 

experience unfair and deceptive 

operation of the contract. The typical 

tournament contract introduces levels of 

complexity and uncertainty for growers 

in the calculation of their compensation 

and in evaluating growers’ return on 

investments so as to render the payment 

system unfair and deceptive. 

Furthermore, under that payment 

system, growers are commonly unable 

to discover unscrupulous conduct by 

LPDs, compare offers from competing 

LPDs, and plan and manage their 

businesses effectively. LPDs also say 

growers will operate ‘‘independently’’— 

i.e., their individual effort will produce 

commensurate higher compensation— 

though in practice their comparisonbased compensation pay is heavily 

dependent on the LPD’s inputs and 

comparison method, close supervision, 

responsiveness, and the performance of 

others in their LPD-determined 

settlement group. 

AMS concludes that the ‘‘incentive 

system’’ in its current form does not 

excuse the unfair and deceptive 

operation of tournament systems 

because factors outside of the grower’s 

control impact performance. Without 

adequate regulation under the current 

system, LPDs fail to provide fair 

compensation for the grower’s effort and 

deceive the grower regarding 

tournament operation and pay. 

C. Debt and Financial Vulnerabilities 

Requests by LPDs for growers to make 

additional capital investments are a 

pervasive part of the broiler growing 

industry such that Congress required 

that LPDs disclose the possibility of 

such requests to growers in their 

contracts (7 U.S.C. 197a(b)). These 

additional capital investment requests 

occur against a backdrop of significant 

financial vulnerability for growers, 

which implicates issues of potential 

unfairness and deception. Under this 

system of capital improvement, the LPD 

requests—and indeed, in practice, 

largely requires—growers to invest in 

housing improvements with little to no 

information regarding the purposes, 

processes, outcomes, or likely return to 

be achieved by the investment. These 

omissions of material information 

critical to growers’ decision-making is 

unfair and deceptive. These additional 

capital investments are highly 

particularized, which leaves the growers 

investing in projects and investments 

that may be used only for growing 

broilers with a particular LPD. Growers 

have long complained to AMS that they 

face a perpetual cycle of debt owing to 

successive requests by LPDs for 

additional capital investments, 

suppressing their returns and leaving 

them even more vulnerable to the range 

of abuses outlined above. 

Indeed, the Figures below show a 

declining rate of return on assets and 

higher debt to asset ratios carried by 

poultry operations compared to cattle, 

dairy, and hog operations. 

BILLING CODE P 


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ddrumheller on DSK120RN23PROD with RULES4ER16JA25.001</GPH> ER16JA25.002</GPH>

Figure 1: Rate of return on equity for poultry growers has been declining for 

growers from around 5 percent in 1995 to 2.5 percent in 2022, compared to upwardtrending returns for cattle, dairy, and hog producers (with values scaled freely to show the 

trend in each panel)* 

Cattle 

-1 

-1.5 

-2 

-2.5 

-3 

1995 2000 2005 2010 2015 2020 

10 

5 

0 

Hogs 

-f995 2000 2005 2010 2015 2020 

-5 

1995 2000 2005 2010 2015 2020 

15 

10 

5 

0 

-5 

Poultry 

1995 2000 2005 2010 2015 2020 

Year 

* U.S. Department of Agriculture, Economic Research Service. ARMS Farm Financial and Crop 

Production Practices (1996 - 2022) (Analysts retrieved information through the ARMS APL Poultry farms showed 

declining net farm income; livestock income (e.g., receipts from broiler contract fees); lower working capital to 

expense ratio, which reached negative values in 2016 and 2018; and declining return on farm equity. For 

conciseness, analysts only present figures showing return on farm equity and debt to asset ratios.) 

Figure 2: Debt to asset ratio for poultry growers exceeds that for cattle, dairy, and hog 

producers* 

1995 2000 2005 2010 

Year 

2015 

Commodity • Cattle • Dairy • Hogs + Poultry 

2020 

*U.S. Department of Agriculture, Economic Research Service. ARMS Farm Financial and Crop Production 

Practices (1996 - 2022) (Analysts retrieved information through the ARMS APL Poultry farms showed declining 

net farm income; livestock income (e.g., receipts from broiler contract fees); lower working capital to expense ratio, 

which reached negative values in 2016 and 2018; and declining return on farm equity. For conciseness, analysts only 

present figures showing return on farm equity and debt to asset ratios.) 
5152 Federal Register / Vol. 90, No. 10 / Thursday, January 16, 2025 / Rules and Regulations 

BILLING CODE C 

The higher debt to asset ratios carried 

by poultry operations are driven, in 

part, by LPD requests for additional 

capital investments and are also 

facilitated, partially, by loan guarantees 

authorized under Federal law. 

Additionally, the gains from upgrades 

commonly flow to LPDs, and so 

growers’ higher debt levels are not 

always supported by efficiency gains 

that would result from the additional 

capital investments. Under those 

circumstances and because of the 

willingness of lenders to loan due to 

guarantees, when growers are asked by 

LPDs to make additional capital 

investments without critical information 

about their purposes, processes, or 

outcomes, they are deprived of key 

information relating to those decisions. 

This practice is both deceptive and 

unfair because it deprives growers of 

their ability to identify fundamentally 

coercive or otherwise unfair capital 

improvement programs at an early 

enough time to seek AMS enforcement 

assistance in halting them, if 

appropriate. 

Accordingly, AMS adopts this final 

rule prohibiting practices that, in AMS’s 

view, violate the Act. The overall 

tournament system is highly 

problematic for poultry growers, and it 

is crucial to implement some guardrails 

for the industry to prevent unfair and 

deceptive contracting practices. 

III. Summary of the Proposed Rule and 

Changes in the Final Rule 

In the June 2024 proposed rule, AMS 

proposed amending 9 CFR 201, subpart 

N, by adding several new provisions: 

§ 201.106 regarding LPD responsibilities 

for the design of broiler grower 

compensation arrangements; § 201.110 

regarding the fair operation of broiler 

grower ranking systems; § 201.112 

regarding disclosure requirements for 

LPDs when requesting additional capital 

investments from broiler growers; and 

§ 201.290 regarding severability. 

AMS proposed adding § 201.106, 

titled ‘‘Broiler Grower Compensation 

Design,’’ to prohibit the reduction, or 

discounting, of any compensation rate 

under the broiler growing arrangement 

based on a grower’s performance 

relative to other growers. The proposed 

provision would have required broiler 

grower arrangements to clearly state the 

grower’s rate of compensation and not 

reduce that rate based on the grower’s 

performance relative to other growers. 

The arrangement could provide for the 

rate of compensation to be increased 

based on that comparison. 

AMS proposed adding § 201.110, 

titled ‘‘Operation of Broiler Grower 

Ranking Systems,’’ to prevent unfair and 

deceptive practices in LPDs’ operation 

of ranking systems for broiler growers. 

Proposed paragraph (a)(1) would have 

required LPDs to design and operate 

their poultry grower ranking system to 

provide a fair comparison among 

growers, and under proposed paragraph 

(a)(2), the Secretary would evaluate 

specific factors to determine if the 

poultry grower ranking system is 

reasonably designed to deliver a fair 

comparison among growers. Proposed 

§ 201.110(a)(3) also included a 

requirement that, when LPDs could not 

conduct a fair comparison, they must 

compensate growers through a noncomparison method. Proposed 

paragraph (b)(1) would have required 

documentation regarding the processes 

(policies and procedures) the LPDs must 

establish and maintain for the design 

and operation of poultry grower ranking 

systems for broiler growers that is 

consistent with the duty of fair 

comparison. Under proposed paragraph 

(b)(2), LPDs would have been required 

to review their compliance with these 

processes, and under proposed 

paragraph (b)(3) they would have been 

required to retain all written records 

relevant to their compliance for no less 

than 5 years from the date of record 

creation. 

AMS proposed adding § 201.112, 

titled ‘‘Broiler Grower Capital 

Improvement Disclosure Document,’’ 

detailing in proposed paragraph (a) that 

an LPD would be required to provide 

the grower with a Capital Improvement 

Disclosure Document (Disclosure 

Document) upon requesting that the 

grower make an additional capital 

investment. Paragraph (b) of the 

proposed regulation described the 

disclosures that the LPD would be 

required to include in the Disclosure 

Document. These disclosures included a 

justification of the request, financial 

incentives for the grower, specifications 

for construction, and a thorough 

analysis of the grower’s projected 

returns. 

Lastly, AMS proposed adding 

§ 201.290, titled ‘‘Severability,’’ to 

ensure that if any provision of subpart 

N or component of any provision is 

declared invalid, or if the applicability 

of any of these provisions to any person 

or circumstances is held invalid, the 

validity of the remainder of this subpart 

or the applicability thereof to other 

persons or circumstances shall not be 

affected. Such a provision is typical in 

AMS regulations that cover several 

different topics and was proposed here 

as a matter of housekeeping. 

Upon consideration of public 

comments on the proposed rule, AMS 

has modified the proposed provisions as 

follows: 

• Revised proposed § 201.106 by 

designating the proposed text as 

paragraph (a) and adding the paragraph 

heading ‘‘Rate transparency.’’ 

• Added a new § 201.106(b), 

‘‘Excessive variability,’’ that establishes 

a presumptive violation of the Act when 

aggregate gross annual payments based 

upon a grouping, ranking, or 

comparison of growers exceeds 25 

percent of total gross payments to 

growers in a complex on an annualcalendar year basis. 

• Added a new § 201.106(c), 

‘‘Transition,’’ that requires that LPDs, 

for each of the three calendar years 

commencing with and including the 

rule’s effective date, submit to AMS a 

copy of the prior and modified contract 

and any LPD Disclosure Document 

prepared under § 201.102 for any 

modified or renewed contracts under 

specified conditions. 

• Simplified proposed 

§ 201.110(b)(1)(i) and (ii) (concerning 

LPDs’ processes for determining inputs 

and production practices) by removing 

the subparagraphs that itemized each 

component of the required processes. 

• Simplified proposed 

§ 201.110(b)(1)(iii) (concerning LPDs’ 

processes for grower comparison 

flexibility) by removing subparagraphs 

(A) through (C) and placing those 

requirements into three simple 

paragraphs: (b)(1)(iii), ‘‘League 

composition;’’ (b)(1)(iv), ‘‘Evaluation 

period;’’ and (b)(1)(v), ‘‘Noncomparison.’’ Accordingly, AMS also 

redesignated proposed 

§ 201.110(b)(1)(iv), ‘‘Communication 

and cooperation,’’ as paragraph 

(b)(1)(vi). 

• Removed proposed § 201.110(b)(2), 

‘‘Compliance review’’ and redesignated 

proposed § 201.110(b)(3), ‘‘Record 

retention,’’ as paragraph (b)(2). 

• Revised proposed § 201.112(a) and 

(b) to include the paragraph headings 

‘‘Disclosure requirement’’ and 

‘‘Disclosure contents,’’ respectively. 

• Revised proposed § 201.112(b)(1) 

through (3) to remove the term 

‘‘relevant’’ as a technical change, along 

with conforming grammatical edits. 

• Revised proposed § 201.112(b)(5) to 

clarify that, in addition to disclosing 

any required or approved manufacturers 

or vendors, the Capital Improvement 

Disclosure Document must disclose all 

financial benefits, if any, that the LPD 

or other affiliated persons receives from 

the use of the required or approved 

manufacturer or vendor. 

• Revised proposed § 201.112(b)(6) as 

a technical stylistic change. 


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17Federal Trade Commission, Policy Statement 

on Unfairness, 1980, https://www.ftc.gov/legallibrary/browse/ftc-policy-statement-unfairness (last 

accessed Oct. 2024); Federal Trade Commission, 

Policy Statement on Deception, 1983 available at 

https://www.ftc.gov/system/files/documents/ 

public_statements/410531/831014deceptionstmt.

pdf (last accessed Oct. 2024); Federal Trade 

Commission: Policy Statement on the Scope of 

Unfair Methods of Competition Under Section 5 of 

the Federal Trade Commission Act, Nov. 2022, 

available at https://www.ftc.gov/legal-library/ 

browse/policy-statement-regarding-scope-unfairmethods-competition-under-section-5-federal-tradecommission (last accessed Oct. 2024). 

Spencer Livestock Comm’n Co. v. USDA, 841 

F.2d 1451, 1455 (9th Cir. 1988); Armour & Co. v. 

United States, 402 F.2d 712 (7th Cir. 1968) 

(‘‘Section 202(a) should be read liberally enough to 

take care of the types of anti-competitive practices 

properly deemed ‘unfair’ by the Federal Trade 

Commission (15 U.S.C. 45) and also to reach any 

of the special mischiefs and injuries inherent in 

livestock and poultry traffic’’). 

18Michael Kades, ‘‘Protecting livestock producers 

and chicken growers,’’ Washington Center for 

Equitable Growth (May 2022). 

• Added a new § 201.112(c) to require 

the LPDs to make reasonable efforts to 

ensure that growers are aware of their 

right to request translation assistance 

and to assist the grower in translating 

the Capital Improvement Disclosure 

Document. 

Section IV. below explains in detail 

AMS’s reasons for making these 

changes. 

IV. Provisions of the Final Rule 

Throughout this final rule, AMS’s 

analysis of unfair and deceptive trade 

practices in poultry contracts is 

informed by prior P&S Act case law, 

States’ unfair and deceptive practice 

laws, and, in particular, the Federal 

Trade Commission (FTC)’s 

encapsulation of principles governing 

unfairness, unfair methods of 

competition, and deception.17 AMS 

looks to the FTC’s policy statements 

owing to the FTC’s extensive experience 

enforcing prohibitions against unfair 

practices, unfair methods of 

competition, and deception arising 

under the FTC Act, which are similar to 

provisions prohibiting unfair and 

deceptive practices under section 202(a) 

of the P&S Act. Like section 202(a) of 

the Act, section 5 of the Federal Trade 

Commission (FTC) Act also prohibits 

unfair and deceptive practices and 

unfair methods of competition. In 1980, 

1983, and 2022, the FTC adopted the 

aforementioned policy statements 

summarizing its longstanding 

approaches to these matters under its 

cases. While recognizing that the P&S 

Act is broader than the FTC Act, AMS 

references these policy statements 

because they offer useful guidance 

owing to the similarity of the statutory 

provisions and case law histories.18 In 

addition, AMS recognizes the benefits to 

the practical application of this final 

rule by grounding it on the wellunderstood principles of unfairness, 

unfair methods of competition, and 

deception as identified in the FTC 

policy statements. It is for these reasons 

that the FTC Act has, in part, informed 

this final rule. 

A. Broiler Grower Compensation Design 

(§ 201.106) 

AMS is finalizing new § 201.106, 

‘‘Broiler grower compensation design,’’ 

with two notable changes from the 

proposed rule. In the final rule, AMS is 

retaining § 201.106 as proposed and 

designating it as paragraph (a), ‘‘Rate 

transparency.’’ AMS is adding 

paragraph (b), ‘‘Excessive variability,’’ 

and paragraph (c), ‘‘Transition.’’ 

Paragraph (b) adds a presumption 

against excessive variability in 

performance compensation to growers 

competing in a tournament. Paragraph 

(c) provides for grower protections 

during the transition from the existing 

payment systems to systems compliant 

with this final rule. Each paragraph will 

be discussed further below. 

Most large LPDs today include a 

tournament component as part of their 

grower compensation arrangements. 

Under this type of arrangement, if a 

grower’s feed conversion ratio (i.e., the 

quantity of feed consumed by the flock 

divided by the weight of the flock 

delivered) is above the average of other 

growers in the tournament, the grower 

receives a bonus; if the grower is below 

average, the LPD reduces the grower’s 

compensation. Under the tournament 

system, the contract between the grower 

and LPD provides for payment to the 

grower based on a grouping, ranking, or 

comparison of growers delivering 

broilers to the same company during a 

specified period. These pay rates are 

generally expressed in cents per pound. 

Applying these adjustments, whether 

positive or negative, significantly affects 

growers’ effective rates of compensation 

and net income. 

In its current form, the tournament 

system operates unfairly and 

deceptively. Without clearly stated base 

rates of compensation, the complexity of 

the tournament makes it difficult for 

growers to clearly understand the 

minimum amount they could be paid. 

Moreover, compensation based on 

relative performance when LPDs control 

the operation of the tournament (such as 

the distribution of inputs and 

assignment of production practices) 

creates the potential for growers’ 

performance to be determined by factors 

outside their control, thereby making 

the tournament system an ineffective 

incentive system that is arbitrary and 

unfair to growers. The tournament 

system also introduces considerable 

complexity and uncertainty for growers 

in calculating their anticipated total 

compensation and evaluating the 

potential return on their investments. 

Furthermore, if the comparisoncompensation factor (i.e., the bonus or 

deduction) is a large percentage of total 

compensation, that variance in total 

grower compensation is no longer a 

legitimate business but simply shifts 

economic risk from processors onto 

poultry growers without a demonstrable 

countervailing benefit. Without 

additional guardrails, the current 

tournament system creates significant 

risk of deception or unfairness for 

growers under the Act. 

AMS has not found any evidence that 

poultry tournament systems that 

include deductions from the base pay 

rate or excessive variability in grower 

compensation provide a benefit to 

growers or competition in the market for 

grower services that outweighs the harm 

to growers. Deductions in other 

livestock contracts commonly reflect 

performance attributes of the animal 

itself, which is owned by the producer. 

Here, the producer provides a service 

with no ownership interest in or role in 

the selection of the animal. These 

deceptive and unfair payment practices 

create an unfair competitive advantage 

for LPDs at the expense of growers. 

Therefore, the widespread adoption of 

these types of contracts has frustrated 

fair competition, instead of enhancing 

it. Such discounting and pay variability 

also reflect the market power and 

bargaining power of the LPD in dictating 

contract terms. 

Section 201.106 will provide growers 

with greater clarity and protection 

regarding the minimum payments they 

can expect under broiler growing 

arrangements. This rule prohibits a 

range of unlawful behavior by 

establishing a threshold presumption 

against excessive pay variability, 

establishing a transition period to 

preserve existing pay, and making 

minimum pay clear for growers. This 

rule will better enable growers to 

compare contract terms, evaluate 

revenue generation, and assess the value 

of additional capital investments. 

i. Section 201.106(a)—Rate 

Transparency 

AMS is finalizing new § 201.106(a), 

which prohibits the reduction of any 

rate of compensation under the broiler 

growing arrangement on account of the 

grower’s grouping, ranking, or 

comparison to other growers. This 

provision is identical to that which was 

proposed, except that the provision is 


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19 In contrast to contributions by the grower, LPDs 

contribute much more significantly to overall 

performance by furnishing the inputs, e.g., genetics, 

feed, nutrition, sex of chicks, and close supervision 

of the grower’s managing production. 20 89 FR 49002, 49011–49012 (June 10, 2024). 

now designated paragraph (a), with the 

paragraph heading ‘‘Rate transparency.’’ 

Under this provision, the broiler 

growing arrangement must clearly state 

the compensation rate. The arrangement 

may not provide for mechanisms or 

calculations that would reduce the 

compensation rate based on the grower’s 

performance relative to other growers, 

but it can provide for the rate to be 

increased based on the grower’s 

performance relative to others. The 

broiler growing arrangement could 

provide for the compensation rate to be 

increased based on the broiler grower’s 

performance relative to others, but in no 

event could the rate be decreased or 

discounted by that comparison. 

‘‘Rate of compensation’’ refers to any 

payment amount that the LPD utilizes to 

compensate the grower under a broiler 

growing arrangement, which could 

include ‘‘base pay,’’ ‘‘minimum pay,’’ or 

any other rate defined in the contract. 

That rate would have to be prominently 

and clearly defined as the guaranteed 

level of pay a grower will receive if the 

grower performs to the minimum 

specifications of the relevant provisions 

of the contract. To the extent that a 

broiler growing arrangement had more 

than one rate of compensation, none of 

the rates could be reduced or 

discounted by a comparison. Under 

existing AMS regulations, a broiler 

growing arrangement must include all 

payment terms in the contract (9 CFR 

201.100(c)(2)). 

Under section 202 of the P&S Act, 

AMS concludes that the practice of 

discounting disclosed ‘‘base’’ pay rates 

in broiler contracts is an unfair and 

deceptive practice. This practice forces 

growers to estimate potential earnings 

using contractually stated ‘‘base’’ pay 

rates that, under the tournament system, 

only half of the settlement group can 

achieve. This unfair and deceptive 

practice obscures the value of the 

contract, thereby frustrating 

comparisons with competing LPD 

contracts in markets where growers are 

fortunate enough to have more than one 

or two LPDs to contract with. 

AMS expects that, under this 

regulation, LPDs will still be able to 

elicit a competitive level of performance 

using a broiler compensation design that 

conforms to the requirements of this 

final rule. The LPD could reward 

performance for feed efficiency relative 

to the growers in the settlement with a 

minimum base pay rate per pound and 

an upward adjustment to the payment 

formula. Depending upon the facts and 

circumstances, mere compliance with 

this regulation does not absolve an LPD 

of its other legal obligations. A 

compensation structure without a 

penalty or reduction from a true 

guaranteed minimum pay rate may 

still—if the facts demonstrate it—result 

in other violations of the Act. 

ii. Section 201.106(b)—Excessive 

Variability 

In the final rule, AMS is adding new 

paragraph (b), ‘‘Excessive variability,’’ 

which establishes a presumption that an 

LPD has violated section 202 of the Act 

when aggregate gross annual payments 

based upon a grouping, ranking, or 

comparison of growers exceed 25 

percent of total gross payments to 

growers in a complex on an annualcalendar year basis. AMS is adopting 

this approach because excessive 

variance in total grower compensation 

arising from comparison-based 

compensation would, generally, create 

excessive variability that is deceptive 

because growers cannot reasonably 

assess the risk they are undertaking or 

forecast, predict, or budget their 

business operations. Further, excessive 

pay variance makes compensation 

dependent on arbitrary criteria, random 

factors, or other criteria that the grower 

cannot control or affect. When the 

comparison performance pay too 

substantially affects compensation, it is 

unfair. 

When growers perform reasonably 

under the terms of the production 

agreement, excessive variability in 

performance pay arises at least in part 

due to LPD-controlled factors or 

unavoidable inherent natural variability. 

These factors are outside of the grower’s 

control and cannot be completely offset 

by grower effort or skill. LPDs design 

ranking systems to allocate grower 

payments based upon grower effort and 

skill. When factors other than grower 

effort and skill are comingled with the 

metrics used to allocate pay, the 

practice is ripe for potential abuse and 

unfairness because excessive variability 

in performance payments unfairly 

reduces compensation to growers. This 

unfairness to growers is particularly 

pronounced owing to high indebtedness 

among growers, which leaves them 

more financially vulnerable to harms 

from excessive income variability that 

does not reasonably reflect their own 

efforts.19 That pay variability also 

frustrates growers’ ability to accurately 

assess, or reasonably control, their rates 

of compensation and the overall 

financial risk they undertake under a 

broiler growing arrangement, which is 

particularly problematic given the risk 

they bear. The injury is not offset by 

attendant benefits, since the practice 

tends toward distorting the market’s 

true pay amount and reducing growers’ 

ability to accurately assess, or 

reasonably control, their finances and 

make informed business decisions. 

Though § 201.106(a) addresses the 

problem of reductions to rates of 

compensation that arise owing to 

groupings, rankings, or comparisons of 

growers, it does not alleviate all 

potentially unfair aspects of the 

tournament system or of the integrated 

model of broiler production. The 

proposed rule indicated that AMS 

intended to engage in case-by-case 

enforcement to remedy other aspects of 

tournament system unfairness, 

including issues arising from excessive 

variability in payments. In addition to a 

prohibition on discounting rates of 

compensation, the proposed rule 

particularly highlighted the potential 

importance of a 25 percent presumption 

on total compensation based on a 

grouping, ranking, or a comparison (the 

tournament) to total of base pay rate 

plus performance compensation. As 

AMS indicated in the proposed rule, 

this approach could alleviate extreme 

variability as an aspect of existing 

tournament system unfairness. 

In the proposed rule, AMS included 

questions containing additional 

proposals. One such proposal solicited 

comment on whether it is 

presumptively unfair for comparisonbased compensation to equal or exceed 

25 percent of total (base pay rate plus 

comparison-based) compensation for 

any grower and asked a range of 

questions around the appropriateness of 

the specific threshold, how to calculate 

it, and how it would affect the 

industry.20 These questions included 

highlighting the role of the 25 percent 

presumption as a potentially binding 

constraint, and how LPDs might 

respond to the prohibition introduced in 

§ 201.106(a) by modifying the 

compensation structures in grower 

contracts. AMS’s questions indicated 

that it could raise base pay and/or limit 

performance payments—thus reducing 

the difference between top and bottom 

performing growers—without increasing 

total grower compensation 

expenditures. It also left open the 

possibility that LPDs could potentially 

adjust their compensation structures in 

other ways, such as by providing noncomparison-based incentives to growers 

they might seek to reward (such as per 

pound or per square foot compensation 

for housing known to provide 

efficiencies to the LPD) or deploy other 


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21United States v. Cargill Meat Solutions Corp., 

1:22-cv-01821–ELH (D. Md. July 25, 2022). 

incentives (such as fixed performance 

bonuses). 

In response to the proposed rule, 

growers and advocate commenters 

overwhelmingly supported the need for 

additional limitations on excessive 

variability in payment arising from rates 

of compensation, with a particularly 

strong endorsement of the 25 percent 

limitation on performance. Commenters 

underscored the importance of this 

limitation for some of the reasons that 

AMS indicated in the proposed rule: 

that it is necessary to protect growers 

from unfair reductions in payments. 

To incentivize grower effort, LPDs 

allocate grower pay using relative 

performance metrics; however, grower 

effort alone is an insufficient 

determinant of grower performance. 

Growers’ performance depends on many 

factors, some of which are under the 

control of growers while others are not. 

Some known factors, including a 

grower’s skill and effort, are within a 

grower’s control. Other factors are 

outside a grower’s control, such as feed 

quality, chick quality, and the skill or 

other efforts of other growers in the 

comparison group. Even if all these 

known factors are accounted for, there 

is still some unavoidable inherent 

natural variation in performance that 

would explain growers’ performance 

volatility, flock to flock, even if all the 

known factors remain constant. The 

nature of this variability creates harm to 

growers in reduced performance 

payments. 

The use of flock performance metrics, 

specifically feed conversion, as a proxy 

to grower effort is imperfect. Feed 

conversion itself is affected by variables 

beyond grower effort. AMS is not aware 

of existing technological innovations 

that could serve to better isolate grower 

effort, which is exclusively under 

grower control. That is not to say flock 

performance metrics serve no purpose 

in assessment of grower effort and 

allocation of grower payments. AMS’s 

experience in analyzing performance 

payments suggest that ranking systems 

can be a useful and reasonably equitable 

mechanism for pay allocation with 

proper regulation and in proper 

magnitude. Within a reasonably 

contained range—i.e., presumptively 25 

percent of total compensation—the 

tournament may offer a reasonable 

benefit to growers by enabling LPDs to 

efficiently measure grower performance 

and guard against natural forms of 

variability that would arise were 

compensation fixed rather than floating 

(i.e., the comparison-based average of 

growers). Yet at too high a level, the 

potential harms of comparison-based 

compensation (performance pay 

dominating grower pay allocation 

without rewarding commensurate 

differences in effort) outweigh the 

potential benefits. That is unfair under 

section 202(a) of the Act because 

compensation under the tournament 

becomes correlated to input distribution 

(and other circumstances under the 

control of the LPD, such as flock 

production practices or responsiveness 

to complaints), which is commonly 

arbitrary—or, in some cases when not 

arbitrary, can be punitive. Some growers 

who comply with the contract and are 

unfairly penalized for factors beyond 

their control suffer unavoidable harm; 

they are denied the full amount due for 

their growout services. While growers 

can benefit from participation in the 

tournament, excessive pay variability 

can cancel out those benefits as they are 

outweighed by the harms. 

Based on previous analysis of grower 

compensation data for a small sample of 

broiler complexes, AMS is not aware of 

any complex with performance 

payments that are as much as 26 percent 

of total payments. Additionally, in 

United States v. Cargill Meat Solutions 

Corp., commonly referred to as ‘‘WayneSanderson,’’ the final judgment also 

contains a 25 percent limitation on 

performance payments.21 The WayneSanderson settlement is significant 

because it was agreed to by one of the 

largest market participants and has not 

caused any demonstrable harm to the 

company or to the market, nor is there 

any evidence that it disincentivized 

grower effort or lowered performance. 

While Wayne-Sanderson had agreed to 

a 25 percent limitation on performance 

payments, this final rule establishes that 

performance payments above 25 percent 

are presumed to be unfair. This is 

because performance pay variability 

causes injury to growers when the 

magnitude of performance pay is so 

excessive. That is, the performance pay 

significantly affects whether the grower 

is successful, yet the amount depends 

on unavoidable variance and does not 

reflect grower performance. In those 

circumstances, compensation no longer 

correlates to factors within grower 

control, such as their effort and 

expertise. This deprives growers of the 

value, both real and expected, of their 

services. The vast majority of 

commenters who addressed the topic of 

comparison-based compensation 

endorsed the idea of 25 percent as an 

appropriate level for a presumption of 

this type. 

We note that this presumption will 

provide guardrails in helping LPDs set 

and maintain performance pay 

standards that achieve appropriate 

goals, such as rewarding effort and skill 

against a floating average that adjusts for 

common circumstances, like weather, 

without unduly denying growers the 

expected value of their growout 

services. This clarity will guide LPDs 

that need to modify existing contracts to 

comply with this final rule, such as with 

§ 201.106(a). For example, absent the 

existence of § 201.106(b), LPDs could 

comply with § 201.106(a) by decreasing 

base pay and excessively increasing the 

proportion of pay that is dependent on 

performance compensation. Such 

contract modifications would 

supercharge pay variance in the 

tournament while penalizing growers 

under the guise of complying with 

reforms designed to improve 

transparency and fairness. The 

presumption under § 201.106(b) helps 

ensure continuity in compensation at an 

aggregate level because it guards against 

excessive variability of performance pay 

relative to total pay. To stay within the 

presumptive boundary set by 

§ 201.106(b), an LPD must set a 

reasonable compensation rate for any 

new base payment under the contract. 

AMS underscores that nothing in the 

rule prevents LPDs from providing other 

forms of incentive compensation to 

growers for reasons other than relative 

performance, such as payments for 

improved facilities or utility subsidies. 

Overall, the 25 percent presumption 

against excessive variability is useful to 

provide clarity and consistency around 

when AMS may seek to investigate for 

case-by-case compliance and enhances 

the fairness and transparency of 

compensation rates in broiler growing 

arrangements. As such, it reflects a 

logical outgrowth of the proposed rule. 

Separately, AMS notes that it also 

expects to examine for excessive 

variability other forms of performance 

payments that are based on how 

efficiently a grower uses inputs 

supplied by the LPD: such payments 

could emerge as a method for evading 

this provision’s purpose. Examples of 

such performance payment systems 

include what are commonly called fixed 

metric performance payments, which 

predate the current tournament, 

whereby growers’ performance 

payments are tied to their individual 

achievement of certain fixed metrics 

around efficient use of inputs. AMS 

expects to examine these types of 

performance systems for excessive 

variability for similar risks of 

unfairness, including because the LPD 

provides the inputs and production 


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practices and in those circumstances 

would be setting the fixed metrics. 

In review of the presumption, AMS 

will consider other complex-specific 

incentives as requested by the LPD that 

would otherwise not be appropriate to 

consider as part of the rates that make 

up base payment. For example, energy 

incentives may be considered 

differently because they vary 

significantly based on geographic 

location, and so would result in 

somewhat different application of the 

provision for growers at different 

complexes. Where a relatively high 

degree of variability in performance pay 

exists, even within the 25 percent, due 

in part to energy incentive payments, 

AMS may examine whether the 

tournament is unfair. 

To rebut the presumption of 

unfairness triggered when comparison 

compensation payments exceed 25 

percent of total compensation, the LPD 

may affirmatively demonstrate (i) that a 

given tournament’s compensation 

system allows all growers to be 

economically successful without the 

need to receive any payments based 

upon a grouping, ranking, or 

comparison of growers that exceed the 

amount covered by the presumption; (ii) 

that payments to all growers that exceed 

the amount covered by the presumption 

are sufficient to reflect the increased 

risk of variability to all growers under 

that system; and (iii) that the system is 

not otherwise unfair or deceptive. The 

Agency would examine any rebuttal on 

a case-by-case basis to comport with the 

purposes of the presumption to prevent 

LPDs from engaging in unfair or 

deceptive practices or devices that harm 

poultry growers. 

AMS adopted this provision after 

considering the case-by-case 

presumption set forth in the proposed 

rule and public comments that urged 

AMS to instead establish a greater 

limitation on excessive variability of 

payments arising from performance, 

especially comparison-based, 

compensation. Public comment 

regarding this provision, and AMS’s 

response to those comments, are 

discussed in greater detail below in 

section V., ‘‘Comment Analysis.’’ 

iii. Section 201.106(c)—Transition 

In the final rule, AMS is also adding 

new § 201.106(c), which requires that, 

for any contract modification or renewal 

subject to § 201.106(a) that results in a 

grower receiving less than the prior 

year’s complex-wide average gross 

payment, the LPD must submit a copy 

of the prior contract and the modified 

contract, as well as any LPD Disclosure 

Document prepared under § 201.102 

with respect to the prior and the 

modified contract, to the Secretary. 

AMS will monitor contracts to 

identify signs of the unfair exercise of 

LPD bargaining power during this 

transition period. These could include, 

for example, a predatory method of 

competition whereby an LPD seeks to 

lower pay across the entire complex or 

discriminatory or retaliatory conduct 

that seeks to lower the pay of some 

subset of growers. Unfair conduct by the 

LPD could potentially arise where the 

LPD seeks to undermine contractually 

agreed-upon earnings from the previous 

contract irrespective of the tournament. 

One way for AMS to identify such 

conduct could be through LPD 

Disclosure Documents (currently 

required under existing 9 CFR 201.102), 

which would be required if LPDs 

modify or replace contracts in seeking 

compliance with this rule. The recordkeeping and reporting requirements in 

this final rule will further help identify 

any potential illicit exertions of market 

power by allowing AMS to closely 

scrutinize contract modifications that 

jeopardize grower welfare during the 

transition period. 

In keeping with the requirements in 

§ 201.102(d)(2), AMS expects LPDs to 

explain why the annual gross payment 

averages for the previous five years may 

not provide an accurate representation 

of projected future payments. AMS also 

expects a distinct explanation of how 

any changes the LPD is proposing under 

the new contract are necessary to 

comply each part of final § 201.106. 

That is, changes made to comply with 

§ 201.106(a) and (b) should be 

explained. AMS strongly encourages 

LPDs to explain changes needed to 

comply with § 201.106(b) first, and then 

apply a conversion scale from whatever 

updated approach is adopted to comply 

with § 201.106(a). 

AMS will evaluate the reported 

contract modifications and associated 

documentation to assess grower welfare, 

given that growers will be particularly 

susceptible to economic hold-up 

concerns. In particular, AMS will 

consider the following variables: (1) the 

number of flock placements annually; 

(2) the stocking density; and (3) the 

distributional range of payments. If, 

upon consideration of these variables, 

AMS identifies contract modifications 

that negatively impact grower welfare or 

that include supply reductions from the 

complex, the Agency will closely 

scrutinize the modifications, including 

rates, for fairness and reasonableness. 

It is crucial that growers are 

meaningfully informed about the terms 

of the grower arrangements and the 

expected compensation for their 

services so that they can make 

financially sound decisions and identify 

potential economic hold-up. The 

reporting requirements will only be in 

effect for three years including and from 

the effective date of this rule. 

During the three-year transition 

period, LPDs must evaluate average 

grower compensation at the complex 

level for each of the three calendar years 

commencing with and including the 

rule’s effective date to determine if they 

need to submit their contract to AMS for 

review. The rule requires LPDs to use 

the average grower compensation across 

the complex, because this analysis 

shows if an LPD has cut grower 

compensation overall. The rule uses 

averages because performance-based 

compensation is unpredictable on a 

grower-by-grower basis and because 

using total grower compensation at the 

complex would be overinclusive. For 

example, grower turnover might skew 

an analysis based on total grower 

compensation. This makes the 

§ 201.106(c) method of evaluation 

comparable to how unfair levels of 

performance-based compensation are 

defined under § 201.106(b). 

AMS chose a transition period of 

three years for several reasons. First, it 

is nearly impossible to evaluate the 

changes to grower pay made to contracts 

within 180 days or even a single year 

with any level of confidence. Many 

contracts are three, five, or ten years in 

length, so it may take up to a year of 

payments to even begin evaluating the 

financial effect of changes. Reviewing 

payments within a 180-day period may 

not indicate what growers would earn in 

a year and would be limited in scope 

and value; any conclusions based on 

that limited review would be 

speculative, and violations of the Act 

cannot be based on speculation. After a 

full year of operation following contract 

modification, the realization of grower 

performance outcomes and practical 

application of the compensation 

structure are known and translated into 

actual grower payments. This will 

facilitate AMS’s analysis of the actual 

distribution of grower payments and 

overall level of compensation that 

resulted from the new compensation 

structure and allow for a more fulsome 

evaluation of fairness concerns. It also 

allows AMS to consider the market 

environment as context for LPD actions. 

Additionally, this new rule may 

necessitate adjustments to the 

compensation structures used in grower 

contracts, and it will take time for 

growers to become used to the new 

regulation. AMS needs to look at how 

the overall market is adjusting to this 

new reality and prevent evasion during 


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that adjustment period. For example, an 

LPD may make a series of small contract 

changes, which would require AMS to 

review the overall market adjustments, 

not just the initial changes. Failure to 

capture the full implications of the 

transition period would put growers at 

risk from LPD market power and 

bargaining imbalances between LPDs 

and growers. 

AMS underscores that this is a 

monitoring and reporting requirement, 

owing to the ongoing risk to growers 

that the contracts could be modified and 

re-modified during this transition 

period. This contract review will help 

the Agency decide whether to conduct 

more specific oversight and enforcement 

while the new regulatory regime is 

implemented. 

Three years is the period of financial 

information that banks request from 

borrowers, such as growers, and so it 

provides a reasonable period for AMS to 

engage in these market-monitoring 

activities. After three years, AMS agents 

will continue to monitor contracts and 

ensure they are following the 

requirements of this final rule, but LPDs 

will not need to submit contract 

modifications. 

In the proposed rule, we asked for 

public comment on this issue, and 

received overall support for a provision 

to protect growers that rely on existing 

contracts from holdups and potential 

market abuse. Specifically, we asked the 

following question: ‘‘To minimize 

transition risks to growers, should AMS 

include a requirement that LPDs submit 

to AMS for review any contracts 

modified or revised to comply with new 

§ 201.106?’’ 17 The comments received 

in response to this specific question 

were mixed in their support and are 

addressed below in sections V.A.iv. and 

v. 

Because the Secretary will subject the 

updated contracts to close scrutiny for 

unfairness, the Secretary would seek 

access to the dealer’s business records. 

During any investigation, AMS may 

examine any changes to average annual 

gross payment per pound for growers in 

the complex and any changes to average 

payment per square foot increased. Each 

investigation will consider the 

individual facts and circumstances of 

each situation, as these considerations 

are important in examining whether 

growers were held at least no worse off 

during the contract modification 

process. Although the final rule is 

designed to benefit growers and reduce 

unfair and deceptive practices, growers 

face a significant risk of unfair practices 

owing to the risk of hold-up when they 

may be required to change their 

contracts so that LPDs comply with this 

rule. Based on AMS’s experience 

implementing rules, LPDs may seek 

during any compliance and 

implementation period to extract 

changes to the contract unrelated to the 

regulatory requirements of this rule. The 

purpose of providing contracts to AMS 

is to identify unfair practices or 

otherwise unlawful reductions to 

payment that are favorable to LPDs and 

harmful to growers. 

B. Operation of Broiler Grower Ranking 

Systems (§ 201.110) 

AMS is finalizing new § 201.110, 

‘‘Operation of broiler grower ranking 

systems,’’ which regulates how LPDs 

operate ranking systems (i.e., 

tournaments) for contract broiler 

growers, establishing a duty of fair 

comparison when calculating 

comparison-based compensation among 

a group of poultry growers in a 

settlement group. This section contains 

factors for the Secretary to consider 

when evaluating whether LPDs have 

abided by the duty of fair comparison 

requirement. When LPDs are unable to 

make a fair comparison for one or more 

growers, they are required to use a noncomparison compensation method as 

specified in the contract. LPDs are 

required to document how they design 

and operate their poultry grower 

ranking systems in a manner that is 

consistent with the duty of fair 

comparison. The documentation must 

show that LPDs take measures to 

mitigate the impact of inequitable 

distribution of inputs and flock 

production practices on grower 

performance and, hence, comparisonbased compensation. 

The purpose of the rule is to ensure 

that comparison-based compensation 

reflects grower effort, not factors that 

injure the grower, such as feed or chick 

quality or timing of feed delivery that 

are outside of grower control but within 

the control of LPDs. The problem this 

rule seeks to address is how LPDs 

manage variation in quality or timing of 

inputs, flock production practices, and 

how LPDs handle growers’ concerns 

(i.e., groupings, responsiveness to 

problems). AMS certainly believes that 

rewarding grower effort is fair, but 

unfair and deceptive comparison 

systems are not. 

For example, breeding hens have a 

lifecycle of 50 weeks. They produce 

optimal chicks between weeks 20–34, 

but they also produce chicks that have 

value outside the optimal window. The 

LPD has a financial incentive to grow all 

these chicks to maturity, and thus will 

distribute a mix of higher and lower 

quality chicks in any one settlement 

period to its growers. Those growers 

receiving a higher proportion of 

suboptimal chicks are disadvantaged in 

a relative comparison to growers who 

received a higher proportion of optimal 

chicks. 

In theory, LPDs would provide 

uniformly high-quality inputs (such as 

chicks and feed) and appropriate 

production practices (such as flock 

density) to all growers to ensure 

maximum efficiency, product quality, 

and profit. LPDs would also ensure 

tournament groupings are reasonably 

random or otherwise not biased and 

would also reasonably control for 

problems that growers faced (such as 

accidental delivery of the wrong feed). 

However, inputs are natural systems 

and, therefore, variation in input quality 

necessarily exists. This variation in 

input quality affects performance. 

Moreover, human error can be present 

in vertically integrated systems as well, 

for example, the accidental delivery of 

feed designed for older birds. LPDs want 

to obtain the full value from all usable 

inputs and are not inclined to dispose 

of lower quality chicks or feed to ensure 

growers only get the highest quality 

inputs. Thus, LPDs routinely distribute 

lower quality, lesser performing inputs 

to their contract growers, even though 

growers who receive those inputs will 

likely receive lower compensation than 

their peer growers in the same 

tournament that receive higher quality, 

higher performing inputs. Within a 

given poultry complex (group of 

growers serving a single processing 

plant), a significant share of each 

grower’s compensation is determined by 

their rank in tournaments between 

growers at the complex, even though a 

proportion of performance variation 

across growers is attributable to 

variation in inputs, including feed and 

chick quality, timing of feed delivery 

and flock pick-ups. 

LPDs purport that this system works 

to promote fair competition in the 

market for grower services. From an 

LPD’s perspective, as outlined in several 

public comments, a grower receiving 

poorly performing inputs and a low 

rank in one tournament is how the 

system works; over the long term, 

according to the commenter, the grower 

will likely receive better-performing 

inputs that help to balance out one 

tournament’s losses. LPDs also stated in 

their public comments that they have no 

incentive to furnish a grower with 

poorly performing inputs and/or 

otherwise mistreat growers. 

In practice, LPDs assertions do not 

bear out. LPDs have limited financial 

incentive to expend extra efforts to 

evenly distribute optimal inputs and 

production practices across growers in a 


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22See, e.g., ‘‘How the Tournament System 

Works,’’ National Chicken Council (informing 

farmers that: ‘‘1 All farmers are provided the same 

quality of chicks, the same feed, and access to 

veterinary care. 2 Farmers who invest in more 

advanced facilities, as well as use the best 

management practices will likely produce higher 

quality chickens more efficiently. 3 Farmers receive 

a base pay (per their contract) and potentially a 

bonus, based on the health and quantity of the flock 

(tournament system).’’); available at https://

www.chickencheck.in/faq/tournament-system/ (last 

accessed May 22, 2024). 

23 Dozier III, W.A., et al. ‘‘Stocking Density Effects 

on Growth Performance and Processing Yields of 

poultry settlement pool or even to some 

extent to promptly address problems. 

LPDs have not provided supporting 

evidence that long-term provision of 

inputs balance out uniformly. Even if 

over the long-term the variability, on 

average, balances out, there will be 

growers who do not benefit from the 

balancing or for whom the balancing 

comes too late to address the harms 

caused by variability. LPDs’ assurances 

of long-term balancing out do not 

provide comfort to the grower facing 

decreasing ability to pay for immediate 

operating expenses—and who does not 

have the extra cash to buffer one 

tournament’s losses. Furthermore, under 

the current compensation system, LPDs 

have little motivation to limit 

performance variability, exercise 

appropriate care in input distribution, 

or generally create reasonable 

uniformity regarding other aspects of 

tournament operations. 

As growers and grower advocacy 

organizations have asserted, LPDs often 

provide the ‘‘noisy’’ grower (who 

exercises their dissatisfaction or seeks 

redress for bad treatment) ‘‘bad’’ or 

otherwise inappropriate or untimely 

inputs or flock production practices, or 

even organize them into comparison 

groupings designed to adversely affect 

their performance. This can even occur 

for those seeking timely assistance or 

correction for supposedly inadvertent 

mistakes (e.g., feed delivered to new 

chicks that is designed for older birds, 

and hence is not edible by the younger 

birds). Growers have consistently 

reported over the years that LPDs 

commonly exercise punitive control 

over inputs, production practices, 

tournament groupings, and the 

availability of assistance for ordinary 

problems. These circumstances suggest 

an environment characterized by 

unavoidable unfairness and oppressive 

methods that adversely affect growers’ 

and even LPDs’ ability to compete on 

the merits. Growers who receive bad 

treatment cannot competitively 

discipline an LPD by negotiating better 

terms or choosing a different LPD. They 

must accede to continued poor 

treatment by the LPD. 

LPDs’ practice of basing grower 

compensation on factors beyond 

growers’ control distorts the competitive 

market for grower services. LPDs 

possess power—whether regionally, 

within the contract relationship with 

growers who depend on that 

relationship to pay down debt, and/or 

through information asymmetry (i.e., 

through knowing detailed information 

about inputs and growers’ finances 

while growers know relatively little). 

This power allows them to reduce 

growers’ compensation to unfair levels 

they know growers can barely bear; in 

turn, growers’ reduced financial 

stability further reduces their 

countervailing power. Another feature 

of this practice is that LPDs are not 

actually allocating more funds to better 

compensate higher-performing growers: 

they fix overall compensation to their 

growers from tournament to tournament 

and deduct pay from those who 

performed below the average to reward 

those who performed above average. In 

so doing, they prevent growers from 

actually earning compensation 

commensurate to services—a 

circumstance that numerous 

commenters described experiencing but 

possessed little recourse to 

counterbalance, i.e., ‘‘Take it or leave 

it.’’ This practice further erodes the 

competitive conditions in the market for 

grower services. Numerous commenters 

discussed how just a few below-average 

rankings caused them to not be able to 

afford operational expenses and perform 

worse and worse; and/or exit. By basing 

compensation on factors outside of 

actual grower services, LPDs also distort 

the actual price signal for grower 

services. And, by fixing overall 

compensation and deducting from the 

bottom to reward the top, they prevent 

honest competitors that actually allocate 

more funds for better-performing 

growers. Altogether, AMS believes these 

are unfair and deceptive practices under 

the Act. 

LPDs harm growers when they 

compare growers where inputs, 

production practices, tournament 

groupings, and assistance are not 

equitably distributed. Grower pay 

becomes undeservedly low and fosters 

unlawful variability in both 

performance and compensation that 

have no relationship to the grower’s 

work, initiative, or skill. Growers have 

no control over how inputs, production 

practices, tournament groupings and 

assistance are allocated, owing to the 

vertically integrated model of broiler 

chicken production. Unfair comparisons 

do not benefit growers or competition, 

and indeed frustrate the LPDs’ claimed 

purpose of the tournament structure. 

The tournament is a form of 

performance payment that is intended 

to incentivize grower deployment of 

effort, skill, and investment to foster 

more efficient use of the inputs 

provided by the LPD. Purportedly, 

tournaments capture actual differences 

in grower performance during a given 

period, while adjusting for overall 

conditions affecting performance, such 

as adverse weather conditions, that 

affect all growers in the complex. The 

rule sets out reasonable alternatives to 

these harms that do not undermine the 

benefits to growers from the vertically 

integrated production system or from 

using comparisons to establish flexible 

baselines for evaluating grower 

performance, within its appropriate 

limits. 

AMS notes that growers get paid by 

the pound and start with a static 

number of chickens. Thus, they have 

contractually inherent incentives to 

grow their chickens to the target weight 

and to minimize the death loss of 

chickens, even in the absence of a 

performance payment. Yet AMS also 

acknowledges that ensuring growers’ 

use of the minimum amount of inputs, 

such as feed, to achieve maximum 

growout is also an important part of the 

overall mix of cost efficiencies. AMS 

agrees, to the extent that the pool of 

growers in a tournament is sufficiently 

random and that the necessary 

conditions for equitable comparison are 

met, a tournament may spur growers to 

operate more efficiently as they seek 

higher comparison-based compensation, 

while reasonably guarding against 

commonly shared external conditions. 

Yet as discussed in the proposed rule 

and reflected in comments from grower 

groups and others, those conditions are 

often not met. Nor, indeed, are arbitrary 

or inequitable differences in inputs and 

production practices inherently 

essential features required to deliver the 

benefits of the poultry industry’s 

vertically integrated production and 

comparison-based performance 

compensation system. In fact, arbitrary 

or inequitable practices undermine 

these benefits, producing instead 

arbitrary or otherwise inequitable 

grower pay differences that run contrary 

to the industry’s avowed purpose of the 

tournament system.22

Because the tournament system 

determines a component of grower pay, 

LPD practices that impair a fair 

comparison of grower performance 

cause a misallocation of performance 

compensation, thereby unfairly 

reducing the compensation that may 

otherwise be due to some growers. 

Studies 23 have shown that differences 


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Federal Register / Vol. 90, No. 10 / Thursday, January 16, 2025 / Rules and Regulations 5159 

Heavy Broilers,’’ Poultry Science 84 (2005): 1332– 

1338; Puron, Diego et al. ‘‘Broiler performance at 

different stocking densities.’’ Journal of Applied 

Poultry Research 4.1:55–60 (1995). Burke, William 

and Peter J. Sharp. ‘‘Sex Differences in Body Weight 

of Chicken Embryos.’’ Poultry Science 68.6 (1989): 

805–810; Beg, Mah, et al. Effects of Separate Sex 

Growing on Performance and Metabolic Disorders 

of Broilers. Diss. Faculty of Animal Science and 

Veterinary Medicine, Sher-e-Bangla Agricultural 

University, Dhaka, Bangladesh, 2016; Wilson, H.R. 

‘‘Interrelationships of Egg Size, Chick Size, 

Posthatching Growth and Hatchability.’’ World’s 

Poultry Science Journal 47.1 (1991): 5–20; 

Washburn, K.W., and R.A. Guill. ‘‘Relationship of 

Embryo Weight as a Percent of Egg Weight to 

Efficiency of Feed Utilization in the Hatched 

Chick.’’ Poultry Science 53.2 (1974): 766–769; 

Weatherup, S.T.C., and W.H. Foster. ‘‘A Description 

of the Curve Relating Egg Weight and Age of Hen.’’ 

British Poultry Science 21.6 (1980): 511–519; 

University of Kentucky/Kentucky Poultry 

Federation, Poultry Production Manual, https://

afs.ca.uky.edu/poultry/production-manual 

(uky.edu), last accessed 08/21/2023. 

in production practices and inputs, such 

as stocking density, slaughter weight, 

bird gender, and breeder flock age, can 

impact the performance metrics used in 

determining the performance 

adjustments in tournament payment 

systems. If LPDs provide all growers in 

a tournament group similar-quality 

inputs and compare growers using 

similar flock production practices, or if 

they take steps to balance these 

differences over time or otherwise 

adjust pay to account for the relevant 

differences, these production factors 

under LPD control are unlikely to 

unfairly affect growers. 

However, when LPDs rank growers 

who received lower quality (i.e., lesser 

performing) inputs or less favorable 

flock production practices against 

growers who received higher quality 

(i.e., higher performing) inputs or more 

favorable flock production practices the 

former group will likely receive lower 

pay than the latter group due to factors 

beyond their control. The ranking in the 

tournament will not reflect the grower’s 

actual performance; it will reflect the 

inputs and flock distribution practices 

the grower received and the grower’s 

performance relative to that of other 

growers. This is an unfair practice 

unless the LPD took effective steps to 

make appropriate adjustments to the 

compensation structure for this 

settlement group to reasonably 

neutralize the impact of the inequitable 

distribution of inputs and flock 

production practices within the ranking 

group. The problem this section of the 

rule addresses is how tournaments can 

be designed to effectively counteract the 

impact of inequitable tournament 

practices and lead to a fair comparison 

in poultry ranking systems. 

Some LPDs have taken steps to design 

their compensation systems to 

appropriately account for the 

maldistribution of inputs and 

production practices within a poultry 

ranking group. In response to the 

Advance Notice of Proposed 

Rulemaking that preceded the proposed 

rule for this final rule, LPDs and their 

trade associations described different 

steps LPDs have taken to correct for the 

inequitable distribution of inputs and 

production practices among growers 

and resulting comparisons. A meat 

industry trade organization indicated 

that LPDs are known to reduce 

unpredictability in grower outcomes by 

having contracts that evaluate 

performance over multiple flocks and 

adjust pay for factors outside growers’ 

control. For example, some LPDs adjust 

payments for different densities of birds 

placed or provide credits for excess 

seven-day death loss. 

Complementing these examples, AMS 

investigations have also found that some 

LPDs will attempt to ensure that broiler 

growers do not receive chicks from 

young laying hens too often because this 

can negatively affect growers’ 

tournament performance. Some LPDs 

will communicate and correct ordinary 

problems on a timely basis. This helps 

growers avoid unintentionally punitive 

outcomes than would otherwise be the 

case. Yet, while LPDs assert that quality 

communication and fair operation are 

universal, AMS has found through 

interviews and comment review that 

LPD behavior currently depends 

extensively on the goodwill of the LPD, 

commonly via the manager of the local 

complex, and LPDs are not uniformly 

consistent in addressing issues that lead 

to unfair outcomes. Some local 

complexes make discretionary decisions 

that harm growers. 

For instance, while LPDs regularly 

maintain extensive grower manuals, 

LPDs are not obligated to have their 

manuals address the range of situations 

that undermine a fair comparison or 

monitor whether the local complexes 

comply with that manual in practice. 

Growers need a poultry ranking system 

that meets a reasonably reliable 

standard. For there to be fair payments 

under sections 202(a) and 410 of the 

Act, LPDs must properly adjust their 

comparison-based compensation 

systems used in poultry grower ranking 

systems. Rules, like this final rule, must 

reasonably neutralize the impact of 

inequitable distribution of inputs and 

flock distribution practices on poultry 

grower compensation. 

Because different inputs and flock 

production practices affect performance 

under the tournament, LPD decisions 

are an outsized component of grower 

payments. When an LPD operates a 

tournament that uses arbitrary or 

inequitable delivery of inputs and 

production practices without 

establishing systems to mitigate material 

differences in inputs and production 

practices among growers in a 

comparison group or otherwise 

reasonably neutralize comparison 

impacts, the LPD has committed an 

unfair and deceptive practice under the 

Act. Such a practice is unfair because it 

uses criteria outside the growers’ control 

to evaluate their performance. It is 

deceptive because it purports to 

evaluate growers on their effort when in 

fact it does not, often leading to 

payment rates that are wildly 

fluctuating and unpredictable. The duty 

of fair comparison established in this 

rule also arises out of the Act’s 

prohibitions on unfair practices, unjust 

discrimination, the manipulation of 

prices, and failure to pay. Comparisonbased compensation systems can be 

used to proactively cause harm to one 

or more growers by placing them in 

grower settlement groups that are 

inappropriate based on distribution of 

inputs or flock production practices. 

LPDs likewise can use league 

composition (i.e., the formation of 

settlement groups) to manipulate prices 

downward for a given grower or group 

of growers. Finally, such practices can 

lead to a failure to pay for services 

provided. Violations of the Act include 

an LPD failing to maintain policies and 

procedures necessary to document the 

company’s compliance with those fair 

comparison duties, owing to the Act’s 

recordkeeping authorities (7 U.S.C. 221). 

AMS is adding a new § 201.110, 

‘‘Operation of broiler grower ranking 

systems,’’ to regulate LPDs’ operation of 

poultry grower ranking systems (i.e., 

tournaments) for broiler growers. 

Paragraph (a) establishes an LPD duty of 

fair comparison in tournaments. This 

duty of fair comparison requires LPDs to 

structure their tournament system to 

provide a fair comparison among 

growers. AMS acknowledges that 

sometimes a fair comparison is not 

possible due to unforeseen differences 

in inputs or other circumstances, in 

which case an LPD must compensate 

growers through a non-comparison 

method specified in the contract that 

reflects a reasonable compensation to 

the grower for its services. Paragraph (b) 

establishes basic documentation that 

LPDs must maintain regarding how they 

design and operate their poultry grower 

ranking systems for broiler growers. 

i. Section 201.110(a)—Fair Comparison 

Paragraph (a)(1) requires LPDs that 

use comparison-based compensation 

systems for their poultry growers to 

design and operate their poultry grower 


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24Poultry grower ranking system means a system 

where the contract between the live poultry dealer 

and the poultry grower provides for payment to the 

poultry grower based upon a grouping, ranking, or 

comparison of poultry growers delivering poultry 

during a specified period. 

ranking system (i.e., comparison-based 

compensations system) in a way that 

provides a fair comparison among 

growers. This final rule uses in various 

places the definition of ‘‘poultry grower 

ranking system’’—commonly called the 

tournament contract—already set forth 

in PSD regulations at § 201.2.24

Recognizing that LPDs have long 

claimed that tournament contracts are 

designed to promote efficiency, not 

frustrate it, AMS has written this rule to 

affirm the duty to fairly compare 

growers. Specifically, this rule requires 

LPDs to advance a fair comparison 

among growers in a poultry ranking 

group based on grower effort and skill. 

Measuring performance based on input 

quality—which is outside of the 

grower’s control—is unfair and 

deceptive. LPDs have a multitude of 

means to maintain fair comparisons. 

This includes correcting for: input 

quality variations, inappropriate feed 

type delivery, gaps in feed delivery, 

variation in production practices such 

as flock density, pick-up time or pickup weight across the comparison group. 

LPDs can manage fair comparisons 

through extending the period over 

which the comparisons are made, 

adjusting payment for certain inputs or 

production practice differences, or 

removing growers from tournaments 

where a fair comparison is not possible. 

LPDs can ensure league composition 

(ranking groups) are reasonably random 

and robust enough to establish a fair 

comparison baseline. LPDs can also 

establish processes for responding to 

complaints in a timely manner or 

making appropriate adjustments to 

comparisons. But LPDs violate the Act 

when they do not design and operate 

their comparison poultry compensation 

system in a manner that delivers a fair 

comparison among growers within any 

given ranking group. 

Paragraph (a)(2) of § 201.110 

establishes the factors the Secretary will 

consider in determining whether an 

LPD reasonably designed or operated its 

poultry grower ranking system to 

deliver a fair comparison among 

growers or whether the LPD must utilize 

a non-comparison compensation 

method. This provision establishes a 

violation for either the LPD’s failure to 

design or failure to operate a poultry 

grower ranking system to deliver a fair 

comparison among growers. In the first 

instance, AMS could bring an 

enforcement action for an LPD’s failure 

to design the ranking system in a 

manner that would deliver a fair 

comparison; such an action would be 

based upon the processes set forth in the 

documentation required under 

paragraph (b) of this section. In the 

second instance, AMS could bring an 

enforcement action based upon an 

LPD’s failure to operate the ranking 

system in a manner consistent with the 

duty of fair comparison. Such a failure 

could be because the LPD was not 

following the documented processes or 

because in practice the documented 

processes do not deliver a fair 

comparison. The factors listed in 

§ 201.110 (a)(2)(i) through (vi) are 

designed to establish what constitutes 

reasonable delivery of a fair comparison. 

That is, the Secretary will examine these 

factors when determining whether the 

LPD has reasonably designed or 

operated their ranking system. 

Reasonableness should be viewed as an 

objective test that accounts for growers’ 

contract expectations, basic 

considerations of equity, and the LPD’s 

ability and willingness to prevent harms 

to growers resulting from factors outside 

growers’ control. However, it should 

also provide some flexibility to LPDs to 

achieve distinct goals provided they are 

well-designed, justified, and not 

otherwise unfair or deceptive. 

Paragraphs (a)(2)(i) and (ii) of 

§ 201.110 address whether an LPD’s 

distribution of inputs and assignment of 

flock production practices caused 

material differences in performance that 

growers cannot avoid, and whether the 

LPD made appropriate adjustments to 

compensation. Fair comparison of 

growers requires that growers do not 

receive a distribution of inputs or 

assignment of production practices that 

cause material differences in 

performance from other growers to 

whom they are being compared and are 

caused by factors outside of a grower’s 

control. Material differences in 

performance are differences that 

meaningfully (from the perspective of 

the grower) impact grower payments. 

To comply with these requirements, 

LPDs must identify inputs and flock 

production practices under their control 

that impact grower payment and ensure 

that these factors do not meaningfully 

impact grower payments. LPDs also 

must improve their monitoring of how 

inputs and flock production practices 

are allocated across growers, and, as 

appropriate, adjust such allocations to 

reduce the unequal distribution among 

growers within a settlement group or 

across a given time period. An LPD 

could still provide certain growers with 

different inputs, for example because an 

LPD believed certain growers were 

better at raising particular types or 

quality of birds (e.g., chicks from older 

hens), provided it adjusted 

compensation if material differences in 

performance affected the comparison. 

The LPD would also be free to use a 

non-comparison method for those 

growers. 

LPDs must adjust how grower pay is 

calculated if a fair comparison is 

impractical due to unavoidable 

inequitable allocations. For example, 

the LPD may determine that a five-flock 

average may be appropriate for 

determining a grower’s pay when the 

LPD provided chicks for that grower are 

later discovered to be diseased, and no 

fair comparison is reasonably possible, 

practical, or appropriate for that grower 

within the tournament for that flock. 

Any adjustment to how grower 

compensation is determined must use a 

non-comparison method specified in the 

contract that reflects reasonable 

compensation to the grower for its 

services. The contract should set forth 

the preferred approach(es) of the parties. 

Ensuring that agreed-to payment 

adjustments are fair will be part of 

regular AMS poultry compliance 

reviews. An average of the last five 

settlements by the grower is considered 

a non-comparison method for the 

purpose of the tournament settlement 

that the grower is being excluded from, 

even though the average is affected by 

the previous comparisons (unless 

unusual facts and circumstances call 

into question the fairness of such an 

approach). 

Section 201.110(a)(2)(iii) addresses 

whether the designated time period 

used in an LPD’s comparison is 

appropriate, including whether the LPD 

uses one or more groupings, rankings, or 

comparisons of growers to mitigate the 

effects of any differences in inputs over 

the designated time period. Fair 

comparison of growers does not require 

that LPDs provide all growers precisely 

equal inputs and identical production 

practices for each flock. This rule 

permits LPDs to minimize production 

inefficiencies that would arise from a 

standard requiring strict equality in 

inputs, while avoiding an unfair 

comparison of grower performance. If 

the LPDs compare growers fairly over 

reasonable period of time, randomly 

selecting inputs is one way, in most 

cases, to minimize the effect of the 

flock-to-flock variance in inputs. 

Companies may use non-random 

distribution, including temporarily 

correct for what would otherwise be an 

inequitable distribution of inputs under 

an otherwise random system, provided 

they ensure comparisons are fair. 


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AMS considers a period of one year 

or less to be a reasonable timeframe 

across which to compare growers’ 

performance because it provides 

sufficient time to limit variation from 

one event while ensuring that LPDs treat 

growers fairly over a reasonable 

timeline. The one-year period coincides 

with commonly used five-flock averages 

and with one-year comparisons used in 

some live poultry growing 

arrangements. 

Paragraph (a)(2)(iv) of § 201.110 

addresses whether conditions and 

circumstances outside the control of the 

LPD render comparison impractical or 

inappropriate. A settlement group may 

have differences in LPD-provided 

inputs, LPD-assigned production 

practices, or other factors beyond the 

control of LPDs and growers that render 

a reliable comparison impossible. The 

Secretary will consider the facts and 

circumstances applicable to each case. 

One example might be the previously 

described situation where an LPD 

unknowingly delivered chicks to a 

grower that are later discovered to be 

diseased so that no fair comparison is 

possible. 

Section 201.110(a)(2)(v) addresses 

whether an LPD has made reasonable 

efforts to resolve in a timely manner 

grower concerns regarding the LPD’s 

exercise of discretion over the 

implementation of its fair comparison 

processes. In determining compliance 

with this requirement, through 

compliance reviews or in response to a 

complaint, AMS will consider whether 

an LPD has demonstrated enough 

responsiveness and commitment to 

resolving legitimate concerns to avoid 

potential secondary harm to the grower. 

What constitutes ‘‘reasonable efforts’’ 

and ‘‘timely’’ resolution of a grower’s 

concerns will depend on the facts and 

circumstances of each case, with 

particular attention placed on whether 

and how the situation adversely impacts 

the fairness of the comparison(s) for the 

grower. For example, if a grower raises 

immediate and urgent concerns about 

feed quality, such as the delivery of feed 

meant for older chicks than the grower 

has, the LPD should have in place 

processes to—and in fact, actually— 

resolve this concern as soon as possible 

to minimize any additional undue 

damage to the grower’s flock due to lack 

of proper nutrition. If a grower raises 

concerns about feed persistently being 

delivered late or in an insufficient 

quantity, the Agency will examine the 

LPD’s ‘‘reasonable efforts’’ taken to 

adjust the delivery method. 

Additionally, an LPD is prohibited from 

retaliating against a grower in any 

manner for raising concerns as to 

whether a fair comparison method was 

used. 

Lastly, § 201.110(a)(2)(vi) states that 

the Secretary shall consider any other 

factor relevant to a fair comparison 

among broiler growers in a poultry 

ranking system. This provision gives 

AMS the authority to address any other 

facts or circumstances that adversely 

affected the fairness of the design or 

operation of the poultry grower ranking 

system. AMS will determine 

compliance by examining the facts and 

circumstances, and in particular, 

whether the LPD took specific actions to 

undermine the comparison process. For 

example, this prong allows AMS to 

consider whether an LPD’s intentional 

grouping of certain growers in a poultry 

ranking group to manipulate or 

adversely affect comparison-based 

outcomes constitutes a violation of the 

Act. 

When determining whether an LPD 

has designed and operated its broiler 

grower ranking system to provide a fair 

comparison among growers, AMS will 

consider the fair comparison factors set 

forth in § 201.110(a)(2) against how and 

to what degree comparison factors 

account for total grower compensation. 

When relative grower performance pay 

accounts for a very small portion of 

grower compensation, AMS expects 

differences in inputs and flock 

production practices to cause fewer 

material differences in pay. AMS 

expects this dynamic to operate on a 

sliding scale; the smaller the role of 

comparison pay in total grower 

compensation, the smaller the effect of 

variations in inputs and flock 

production practices on total 

compensation. AMS will also consider 

the design of the formula to determine 

its impact on the magnitude or 

distribution of compensation, if any. 

In some situations, differences among 

LPD-provided inputs, LPD-assigned 

flock production practices, or factors 

beyond the control of both LPDs and 

growers make a reliable comparison 

impossible, impractical, or 

inappropriate for one or more growers. 

In such cases, § 201.110(a)(3) requires 

that an LPD must fairly compensate 

growers through a non-comparison 

method specified in the contract that 

reflects reasonable compensation to the 

grower or growers for their services. For 

example, if an LPD is unable to pick up 

a flock in a timely manner because of 

processing disruptions (as occurred 

during the COVID–19 pandemic), the 

LPD may remove the grower from the 

settlement rather than compare that 

grower’s flock performance against 

growers delivering flocks of a 

significantly different age. In such cases, 

the LPD must compensate the grower 

using a reasonable non-comparison 

alternative. Multiple approaches could 

be considered reasonable depending on 

the circumstances, and LPD costs are an 

appropriate consideration as part of 

those particular facts and 

circumstances. AMS is aware that LPDs 

often pay the grower an amount equal 

to the average rate they received over 

their previous five flocks. The noncomparison method is intended to fairly 

compensate the grower. Therefore, 

absent special circumstances where a 

rationale and an agreement to do 

otherwise are reasonable and 

appropriate (and documented as such), 

the non-comparison compensation 

method needs to equal or exceed the 

pay that the comparison-based 

compensation rate would have 

delivered. AMS will rely on the 

documentation of written processes set 

out in § 201.110(b), as well as the facts 

and circumstances of specific 

occurrences, to evaluate compliance. 

ii. Section 201.110(b)—Documentation 

Paragraph (b) of § 201.110 details the 

documentation an LPD must establish 

and maintain of its processes for the 

design and operation of its poultry 

grower ranking system for broiler 

growers that is consistent with the duty 

of fair comparison. This paragraph has 

changed considerably from the 

proposed rule to provide greater 

flexibility in meeting the terms of this 

regulation. AMS also revised paragraph 

(b) in response to commenters’ concerns 

that the specific documentation 

requirements laid out in the proposed 

rule were very similar to documentation 

requirements delineated in existing 

regulations at § 201.102(b) and that 

burdening LPD service technicians with 

increased paperwork would take away 

from their core responsibilities of 

attending to the production needs of 

growers. 

In the final rule, § 201.110(b) sets 

forth documentation requirements 

regarding LPDs’ duty to ensure the fair 

design and operation of broiler grower 

ranking systems. Under section 401 of 

the Act, AMS is authorized to prescribe 

‘‘the manner and form in which such 

accounts, records, and memoranda shall 

be kept’’ whenever the Secretary finds 

that the records of an LPD do not fully 

and correctly disclose the LPD’s 

business transactions (7 U.S.C. 221). 

Paragraph (b)(1) requires that LPDs 

establish and maintain written 

documentation of their processes for the 

design and operation of a poultry 

grower ranking system that is consistent 

with the duty of fair comparison. This 

rule requires documentation to include 


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written processes, referred to as policies 

and procedures, regarding the process 

for (i) inputs under LPD control, (ii) 

flock production practices (iii) league 

composition, (iv) the evaluation period, 

(v) non-comparison factors, and (vi) LPD 

communication and cooperation with 

growers. These processes must provide 

a general description of the items that 

the rule requires to be included, with 

sufficient detail to provide a typical user 

of the documentation—such as a local 

poultry complex manager that directs 

the operation of the complex’s 

tournament—with an understanding of 

how duty of fair comparison is to be 

operationalized within this complex’s 

poultry grower ranking systems. 

To simplify the documentation 

requirements and minimize paperwork 

burdens for poultry complex service 

technicians, AMS revised paragraph 

§ 201.110(b)(1)(i), ‘‘Inputs under live 

poultry dealer control,’’ from what was 

proposed by removing subparagraphs 

(b)(1)(i)(A) through (E), which 

delineated detailed requirements 

pertaining to identification, 

management, and adjustment of 

differences in input distribution to 

growers, and how LPDs adjust 

compensation calculations based on the 

inputs a grower receives. In the final 

rule, paragraph (b)(1)(i) contains no 

subparagraphs and simply requires that 

the LPD’s written processes include 

how and when the LPD assigns, adjusts, 

or otherwise accounts for similarities 

and differences of quality and quantity 

in the delivery of inputs to growers. The 

removal of subparagraphs (A) through 

(E) simplifies the requirement by 

including one all-encompassing 

requirement that LPDs must explain 

how they assign, adjust or otherwise 

account for similarities and differences 

of quality and quantity in the delivery 

of inputs to growers. Revised paragraph 

(b)(1)(i) clearly requires that LPDs 

address all the ways that variation in 

inputs can impact a poultry growing 

ranking system, while giving LPDs 

flexibility in how to mitigate the impact 

of uneven distribution of LPD-provided 

inputs on fair comparison in the 

tournament and, hence, comparisonbased grower pay. In sum, AMS 

determined that the deleted 

subparagraphs were not needed to 

establish that LPDs must explain in 

their written documentation how they 

account for the possible distortions and 

resulting inequities that can manifest in 

poultry grower ranking systems when 

they fail to properly account for 

variations in inputs. 

Under paragraph (b)(1)(i), LPDs are 

required to create a written process for 

how and when the LPD assigns, adjusts, 

or otherwise accounts for similarities 

and differences of quality and quantity 

in the delivery of inputs to growers. 

This provision requires LPDs to have a 

defined process governing how they 

will ensure the duty of fair comparison 

is met. Such a process needs to explain 

how the LPD will operate its poultry 

complex and its related poultry grower 

ranking system, so growers have fair 

opportunity to compete on a level 

playing field in individual flock 

settlements or in a comparison 

settlement that stretches beyond 

individual flocks, where the impact of 

variation in quality, quantity, or timing 

of inputs may be significantly reduced 

or eliminated. LPDs unfairly harm 

growers when they distribute inputs in 

a manner that disadvantages a grower 

relative to other growers in said 

tournament(s) and base their 

compensation accordingly. Growers 

cannot control the nature of the inputs 

they receive from their LPD, whether 

that be quality of chicks or feed, 

appropriateness of feed delivered for 

stage of growth, gaps in feed delivery, or 

delivery of veterinary services. Receipt 

of low-quality, insufficient, or 

inappropriate inputs can unfairly 

impact growers’ performance in 

tournaments if the LPD does not have 

appropriate processes in place for 

mitigating such variation in input 

delivery. LPD processes required under 

paragraph (b)(1)(i) must include ongoing 

accounting and monitoring of inputs 

supplied to each producer using 

objective measures of quality and 

performance that are generally accepted 

in the industry. Such monitoring and 

accounting should aim for as minimal 

variation as possible in input delivery 

quality or quantity across the members 

of one or more grower poultry ranking 

groups, and appropriate mechanisms for 

detecting and correcting for input 

variations in a timely manner. Such 

processes should address key areas of 

concern, including allocation of chicks 

that differ in quality and performance, 

variation in quality or quantity of feed, 

or variation in medication across grower 

groupings. LPDs may include policies 

and procedures for balancing disparity 

of inputs either within a single flock or 

over multiple flocks as appropriate and 

feasible. 

In the final rule, AMS also simplified 

§ 201.110(b)(1)(ii), ‘‘Flock production 

practices,’’ from that which was 

proposed. AMS removed subparagraphs 

(b)(1)(ii)(A) through (E), which 

described, in detail, the processes LPDs 

must include in the design and 

operation of their poultry grower 

ranking systems pertaining to 

assignment of flock density at delivery, 

timing of pick-up, adjustment of 

comparison based on different 

assignment flock production practices, 

and adjustment of compensation 

calculations based on the grower’s 

receipt of specific flock production 

practices. In the final rule, paragraph 

(b)(1)(ii) contains no subparagraphs and 

simply requires that written processes 

include how and when the LPD assigns, 

adjusts, or otherwise accounts for 

differences in production practices. The 

removal of subparagraphs (A) through 

(E) simplifies the requirement by 

including one all-encompassing 

requirement that LPDs must explain 

how they assign, adjust, or otherwise 

account for similarities and differences 

regarding assignment of flock 

production practices. Revised paragraph 

(b)(1)(ii) clearly requires that LPD 

address the ways that variation in flock 

production practices assigned to 

growers can impact a poultry growing 

ranking system, while providing 

flexibility on the appropriate processes 

LPDs can establish to mitigate the 

negative impact LPD-assigned 

production practices can have on fair 

comparison in the tournament(s) and, 

therefore, comparison-based grower pay. 

In sum, AMS determined that the 

deleted subparagraphs were not needed 

to establish that LPDs must explain how 

they account for the possible distortions 

and resulting inequities that can 

manifest in poultry grower ranking 

systems when LPDs fail to account for 

variations in flock production practices. 

Under paragraph (b)(1)(ii), LPDs must 

maintain written documentation of its 

processes for how and when the LPD 

assigns, adjusts, or otherwise accounts 

for differences in production practices 

across growers in a poultry ranking 

system. Similar to paragraph (b)(1)(i), 

such processes should include ongoing 

monitoring of how flock production 

practices are allocated across different 

growers in one or more poultry grower 

ranking systems, and mechanisms for 

adjusting for disparities in flock 

production allocations in a reasonable 

time frame such that additional harm 

does not result. Such processes 

governing flock production processes 

should cover how and when the LPD 

assigns density at delivery; how and 

when the LPD manages pickup of birds 

with respect to slaughter weight and 

bird age; how and when the LPD adjusts 

how a grower is compared to other 

growers with different assigned flock 

production practices or otherwise 

adjusts the flock production practices 

the grower receives; any steps the LPD 

takes to adjust compensation 


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calculations based on suboptimal 

allocation of flock production practices 

to growers; and how and when the LPD 

minimizes, adjusts, or otherwise 

accounts for differences in production 

practices. LPDs can unfairly manipulate 

grower payments when they compare 

growers even within a single 

tournament settlement group within 

which the LPD has assigned different 

types of production practices to growers 

in the group. Under this rule, LPDs must 

develop policies and procedures that 

describe the processes for ongoing 

accounting and monitoring of LPDdetermined flock production practices 

allocated to each producer. The LPD’s 

processes must provide a consistent 

approach to minimize differences in 

production practice assignments and 

describe methods to compensate 

growers for differences that result in 

harms. 

In the final rule, AMS also simplified 

paragraph (b)(1)(iii) of § 201.110 from 

what was proposed. In the final rule, 

AMS removed subparagraphs (A) 

through (C) from paragraph (b)(1)(iii) 

and instead separated out the 

requirements into three distinct 

paragraphs: (b)(1)(iii), ‘‘League 

composition;’’ (b)(1)(iv), ‘‘Evaluation 

period;’’ and (b)(1)(v), ‘‘Noncomparison.’’ 

Under the final rule, paragraph 

(b)(1)(iii), ‘‘League composition,’’ 

requires LPDs to create written 

processes governing league 

composition, which is how LPDs assign 

groups of growers to settlement groups. 

AMS revised this paragraph for 

simplicity and readability. Formerly, the 

provision was contained in paragraph 

(b)(1)(iii)(C), reading, ‘‘If the live poultry 

dealer groups growers for settlement in 

any manner other than the one used in 

recent settlements, how the dealer 

determines such groupings.’’ Settlement 

groupings, also called league 

composition, are most commonly based 

on their chronological availability for 

slaughter within the complex but could 

also be based on housing type or other 

commonalities across a group of 

growers. Generally, the settlement 

grouping is determined by flock 

placement timing, which commonly 

varies based on the timing needs of the 

growers. For example, growers may 

need additional time between flocks for 

cleaning, maintenance, vacation, or 

other similar reasons. 

Paragraph (b)(1)(iii) of this rule serves 

to identify practices or circumstances 

that diverge from these ordinary reasons 

for determining settlement groupings. 

While legitimate reasons exist for 

deviating from a strict chronological 

availability-based grouping, this 

provision is principally meant to ensure 

that LPDs do not use league 

composition to interfere with fair 

comparison by intentionally grouping 

specific growers together to lower the 

pay of one or more members of the 

settlement group, or to otherwise 

manipulate pay to deliberately benefit 

certain growers over others. 

Under § 201.110(b)(1)(iv) of the final 

rule, ‘‘Evaluation period,’’ the LPD is 

required to maintain written 

documentation of how it establishes a 

reasonable time period over which the 

LPD evaluates the duty of fair 

comparison. This provision was 

proposed with slightly different 

phrasing as paragraph (b)(1)(iii)(A). This 

provision requires the LPD to describe 

its process for how it determines the 

number of settlement groupings over 

which grower comparisons will be 

made. The duty of fair comparison 

requires that LPDs design and operate 

their poultry growing ranking systems to 

provide a fair comparison among 

growers. This means that the 

comparison must genuinely reflect effort 

by the growers, not variability in inputs 

or flock production practices, which are 

outside of the growers’ control and thus 

not criteria that form the basis of a fair 

comparison. It may be that over the 

course of a year variations in inputs or 

flock production practices will cancel 

each other out. The evaluation period 

must account for the length of its 

growers’ contracts and the reasonable 

expectation of renewal. If the duty of 

fair comparison requires five flocks, 

then the contracts need to span at least 

five flocks, or if they do not, there must 

be a very high likelihood that the 

contract will be renewed such that the 

growers will receive the five flocks and 

thus be subject to a fair comparison that 

evens out fluctuations in input quality 

or quantity or flock production 

practices. 

In the final rule, § 201.110(b)(1)(v), 

‘‘Non-comparison,’’ requires that an 

LPD’s written processes explain when 

the LPD might remove a grower from a 

ranking group, and how the LPD will 

compensate growers removed from a 

ranking group to satisfy the noncomparison compensation method 

required under § 201.110(a)(3). This 

provision was proposed as paragraph 

(b)(1)(iii)(B) in similar language. There 

are myriad reasons why an LPD may 

decide to remove a grower from a 

ranking group. For example, LPDs may 

not have enough comparable growers 

with which to make a reliable 

comparison in the current grouping and 

may use growers settling in previous 

periods to make a reliable comparison. 

Likewise, a specific grower may have 

received undesirable inputs or an 

assignment of production practices that 

materially impacted the grower’s 

performance, necessitating the removal 

of the grower from the grouping and 

compensation under a non-comparison 

compensation method. Under this 

provision, the LPD is required to 

explain how and when the LPD removes 

a grower from a ranking group because 

the grower received unfavorable inputs 

or production practices and how it will 

fairly compensate such growers through 

a non-comparison compensation 

method. 

In the final rule, § 201.110(b)(1)(vi), 

‘‘Communication and cooperation,’’ is 

very similar to the provision as 

proposed, with the only notable change 

being the paragraph designation: in the 

proposed rule, the paragraph was 

designated paragraph (b)(1)(iv); in the 

final rule, the paragraph is designated 

paragraph (b)(1)(vi). This paragraph 

requires LPDs to create written 

processes for how the LPD will resolve 

a grower’s concerns with the LPD’s 

exercise of discretion over the 

implementation of the policies required 

by this section, including the timeliness 

of the resolution. A tournament system 

cannot be fair if it fails to permit 

growers to contest, without fear of 

retribution, negligent or malicious 

actions taken by the LPD that may 

impact grower performance. The rule 

provides flexibility on how LPDs can 

satisfy this requirement. A range of 

procedures are available, such as timely 

communication with complex 

management, communication with LPD 

headquarters, and grower councils, 

wherein disputes are resolved with 

input from other growers. The 

implementation of processes to manage 

and resolve grower disputes can serve to 

alert LPDs to potential unfairness in 

their comparison of growers and enable 

them to resolve issues in a timely 

manner. 

In the final rule, AMS removed 

proposed § 201.110(b)(2), ‘‘Compliance 

review.’’ In the proposed rule, this 

paragraph delineated detailed 

compliance review procedures for the 

processes set out in paragraph (b)(1) of 

this section. AMS removed this 

requirement in response to comments 

that such self-audits are a somewhat 

burdensome requirement for LPDs that 

can be eliminated with minimal effect 

on effective compliance. Rather than 

requiring self-audits, AMS will review 

the policies and procedures required 

under § 201.110(b)(1) through its 

ongoing compliance review process. 

This will ensure regular review of LPDs’ 

compliance with the provisions of this 


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25Additional information on reporting violations 

of the P&S Act can be found here: https://www.ams.

usda.gov/services/enforcement/psd/reportingviolations (last accessed 11/13/2023). 

26MacDonald, James M. 2014, Technology, 

Organization, and Financial Performance in U.S. 

Broiler Production, EIB–126, USDA Economic 

Research Service, https://www.ers.usda.gov/ 

webdocs/publications/43869/48159_

eib126.pdf?v=1829.6 (In a 2011 survey of contract 

growers, sixty percent of growers making any 

capital expenditures reported that the LPD required 

those expenditures). AMS–FTPP–22–0046–0799 

(‘‘Poultry companies require capital improvements 

that do not improve my bottom line. I must pay for 

the capital improvements, which may not be a 

capital improvement that will benefit my operation. 

It will not benefit the quality of the bird. The 

benefit is not clearly proven or explained, just I am 

required to make the improvement or get paid less 

or dropped as a grower.’’); AMS–FTPP–22–0046– 

0737 (‘‘For years, I’ve been forced to upgrade my 

farms facilities at my own expense just to maintain 

contracts. These costly and often unnecessary 

upgrades, dictated by companies like [name 

redacted], have left me in debt and struggling to 

cover basic expenses. The financial burden is 

unsustainable and has made it incredibly 

challenging to keep my farm afloat’’); AMS–FTPP– 

22–0046–0176 (‘‘For way too long these poultry 

integrators have been let off the hook for bullying, 

forcing their contract growers into making large 

investments in upgrades that will never see a 

payback beyond the initial investment to build the 

infrastructure to keep their growers under their total 

control and blaming growers for everything that 

goes wrong . . .’’). United States Department of 

Justice, United States Department of Agriculture, 

(May 2010), Public Workshops Exploring 

Competition in Agriculture, https://

www.justice.gov/archives/atr/events/publicworkshops-agriculture-and-antitrust-enforcementissues-our-21st-century-economy-10 (‘‘It’s typical 

for growers to be asked to do expensive upgrades 

on their poultry houses before this first loan of this 

building has been paid off. I know because I was 

one of those growers. The threats put before you, 

the communication, the threat is put before you, if 

you do not do this, they’re not going to bring you 

any more chickens to grow’’). 

regulation with minimal additional 

recordkeeping burden on LPDs. 

In the final rule, § 201.110(b)(2), 

‘‘Record retention,’’ mirrors that which 

was proposed, with the only notable 

change being the paragraph designation: 

in the proposed rule, the paragraph was 

designated paragraph (b)(3); in the final 

rule, the paragraph is designated 

paragraph (b)(2). This paragraph 

requires LPDs to retain all written 

records relevant to their compliance 

with paragraph (b) for no less than five 

years from the date of record creation. 

These records should be made available 

to AMS upon request. Relevant records 

include, for example, copies of existing 

processes (policies and procedures); 

written documentation of LPD processes 

used within the last five years, 

including documentation of inputs and 

flock production practices provided to 

growers; written documentation of 

league composition; written 

documentation of grower complaints 

and their resolution; board minutes 

discussing compliance with this section 

for five years from the date of the board 

meeting; current and expired grower 

contracts for five years for the date of 

last effectiveness of the contract; 

disclosures provided to growers for five 

years from the date of the disclosure is 

provided to the grower; information on 

payments to growers or other forms of 

adjustment made to ensure a fair 

tournament, etc. Under the regulation, 

LPDs must retain these records for five 

years to enable the Agency to monitor 

the evolution of compliance practices 

over time in this area and to ensure that 

records are available for what may be 

complex evidentiary cases. As noted 

earlier in this section, section 401 of the 

P&S Act authorizes AMS to prescribe 

the manner and form in which LPDs 

keep business records. This 

recordkeeping requirement will enhance 

LPD management’s ability to establish 

and monitor compliance, as well as 

AMS’s ability to supervise and enforce 

the rule. 

iii. Compliance and Enforcement 

Compliance with § 201.110(b) 

requires LPDs to retain records that 

document the LPD’s design and 

operation of broiler grower ranking 

systems in a manner that is consistent 

with the duty of fair comparison. These 

policies and procedures are necessary to 

document compliance precisely because 

the options for delivering a fair 

comparison are so diverse. Policies and 

procedures developed pursuant to this 

rule should describe the LPD’s 

framework for assigning inputs and 

LPD-determined flock production 

practices, comparing grower 

performance, and resolving growers’ 

concerns regarding the LPDs’ 

implementation of its policies and 

procedures. Recordkeeping should 

enable periodic review by the LPD to 

examine and report on the LPD’s 

compliance with its established written 

processes and, as such, with its 

compliance with the duty of fair 

comparison. 

Enforcement of § 201.110 can occur in 

several ways. Growers can contact 

AMS–PSD to submit a complaint 

regarding an alleged violation of 

§ 201.110. PSD would then investigate, 

which could lead to referral to DOJ for 

appropriate action or, where failure to 

pay is implicated, to USDA enforcement 

through administrative action.25 AMS 

will also review LPD contracts, along 

with other required records from the 

LPD, in connection with routine 

compliance reviews and investigations 

to ensure LPD compliance. Injured 

individuals also have a right to proceed 

directly in Federal court. 

C. Broiler Grower Capital Improvement 

Disclosure Document (§ 201.112) 

AMS is finalizing new § 201.112, 

‘‘Broiler grower Capital Improvement 

Disclosure Document,’’ which requires 

that LPDs provide growers with a 

Capital Improvement Disclosure 

Document (Disclosure Document). 

Paragraph (a) requires that when an LPD 

requests that a grower make an 

additional capital investment, the LPD 

must provide the grower with a 

Disclosure Document. Paragraph (b) 

describes the required disclosures in the 

Disclosure Document. AMS made slight 

modifications to provisions of paragraph 

(b), which will be described below. 

AMS also modified proposed § 201.112 

in response to public comment by 

adding a new paragraph (c), which 

requires the LPD to assist with 

translating the Disclosure Document. 

The inclusion of § 201.112 is 

necessary because LPDs often request or 

require that growers make costly 

additional capital investments, which 

may benefit LPDs and growers in some 

ways, but may also be problematic and 

unfair. The LPD requesting an 

additional capital investment may be 

deploying bargaining leverage and 

forcing the grower to bear unreasonable 

risk, and the purposes, processes, and 

outcomes of the additional capital 

investment may be opaque, 

complicated, or otherwise difficult to 

evaluate. Additional capital investments 

can also further serve to lock in growers 

to specific LPDs, making it harder to 

switch. Growers, however, are often not 

in a position to choose not to make an 

additional capital investment. Many 

growers come under significant pressure 

from LPDs to make a requested 

additional capital investment. Even 

when a grower has sufficient bargaining 

leverage to negotiate the terms of 

compensation, the LPD may not provide 

sufficient information for the grower to 

assess the full risk and reward of 

undertaking the additional capital 

investment. Indeed, based on AMS’s 

knowledge of industry disclosure 

practices and decades of hearing 

complaints from growers, growers today 

often undertake additional capital 

investments for the LPD without the 

opportunity to fully understand the 

additional capital investment’s purpose, 

design, risks, and impacts on their 

financial well-being; or, are pressured in 

some way to make those investments.26

Information asymmetry impairs 

growers’ ability to negotiate, effectively 

exercise independent decision-making 

to reject an additional capital 

investment, and, more broadly, manage 

their farming operation upon choosing 


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27MacDonald, James M. 2014. Technology, 

Organization, and Financial Performance in U.S. 

Broiler Production, EIB–126, USDA Economic 

Research Service (Roughly 22 percent of growers 

operate in a pure monopsonistic local market, and 

that 52 percent of broiler growers (farms), 

accounting for 55 percent of broilers produced and 

56 percent of total production, report having only 

one or two LPDs in their local areas). 

to make the additional capital 

investment. When information 

asymmetries prevent growers from 

evaluating whether they are able to 

recoup their investment or whether they 

can engage in other farming practices 

that could achieve the goals of the 

additional capital investment, growers 

cannot effectively protect their financial 

interests or freely exercise decisionmaking with respect to their farming 

operation. Growers and AMS may also 

be unable to identify circumstances 

where LPDs are seeking to compete 

through additional capital investment 

practices that shift or hide costs to 

growers, which subverts the competitive 

process. 

AMS has identified as deceptive those 

LPD contracting practices that fail to 

disclose key information about 

additional capital investments. Growers 

make critical investment decisions in 

reliance on the information required by 

this rule, most of which is not currently 

provided by LPDs. AMS emphasizes 

that disclosure under new § 201.112 is 

not, and is not intended to be, a remedy 

to unfairness in and of itself; rather, 

disclosure provides AMS and growers 

with information necessary to enforce 

their rights under existing § 201.216, 

‘‘Additional capital investments 

criteria,’’ and the P&S Act more broadly, 

when terms are unfair. Without 

sufficient, simple, and clear disclosures, 

growers cannot assess the benefits or 

risks of making the investment. Indeed, 

given the role of performance pay in 

determining total grower compensation 

under the tournament, some voluntary 

additional capital investments may 

seem mandatory if growers want to 

maintain existing revenue levels, even if 

growers don’t fully understand the 

purposes and expected outcomes of the 

requested additional capital investment. 

Furthermore, growers experience 

considerable pressure to accept LPDs’ 

additional capital investment requests 

given LPDs’ market power, or 

substantial bargaining power, and 

growers’ relatively weak market 

position, including commonly a lack of 

meaningful choice among LPDs. A 

majority of broiler growers cannot 

change LPDs if their current 

relationship sours.27

AMS notes that the existing regulation 

in § 201.216 is intended to allow the 

Agency to partially mitigate additional 

capital investment problems for 

growers. The existing regulation sets 

forth criteria for whether additional 

capital investments would be an unfair 

practice or other violation of the Act, 

including whether the grower can 

decide against the additional capital 

investments; whether the additional 

capital investments were a result of 

coercion, retaliation, or threats by the 

LPD; and whether the additional capital 

investments can result in reasonable 

recoupment, or adequate compensation 

for the additional capital investments, 

among other non-exhaustive criteria. 

However, AMS has found that the 

presence of the criteria alone is 

insufficient to effectively address 

problems stemming from additional 

capital investments. For example, 

insufficient information about 

additional capital investments impacts 

the criteria at § 201.216(a) that seek to 

preserve the grower’s discretion to 

decline an additional capital 

investment. Lacking sufficient 

information about additional capital 

investments, a grower cannot effectively 

assess whether they would still be able 

to compete against other growers 

without the additional capital 

investment. 

The Act requires production contracts 

to disclose the possibility of additional 

capital investment (7 U.S.C. 197a(b)). 

However, the majority of contracts 

contain no information relating to when 

or how additional capital investments 

may be required, nor the costs or risks 

of any such additional capital 

investment, nor what, if any, limits 

there are on an LPD’s ability to 

unilaterally impose additional capital 

investments that do not materially 

improve production efficiency or meet 

consumer demands. To better enable 

growers and AMS to guard against 

unfairness and to prevent deception, 

LPDs must disclose more information 

regarding the purposes, processes, and 

outcomes of additional capital 

investments they request from broiler 

growers. The disclosures must occur 

before growers take on the financial 

burden and risks of the additional 

capital investment. The provision of 

such information is not, in and of itself, 

the cure for unfairness, but rather a key 

tool for AMS and growers to halt 

abusive practices by arming them with 

the ability to identify those challenges 

sooner. The disclosures required in 

§ 201.112 accomplish these goals. 

Furthermore, the act of disclosing 

information does not, in and of itself, 

render the action lawful. Even if 

disclosed, certain actions may be unfair 

or deceptive practices under the P&S 

Act. Disclosure alone does not mitigate 

the legal or ethical ramifications of such 

practices. 

The Agency has an existing 

regulation, 9 CFR 201.216, which sets 

forth a non-exclusive list of criteria the 

Secretary may consider in determining 

if a required additional capital 

investment violates the Act. In future 

cases, the § 201.112 disclosures on 

additional capital investments will 

improve the Secretary’s analysis of 

§ 201.216. Whether the Secretary 

considers recoupment of the additional 

capital investment to be reasonable 

includes consideration of the projected 

returns under § 201.112(b)(6), the 

contract terms, and the return to an 

average grower operating under the 

LPD’s contract. AMS underscores the 

importance of length of the contract to 

secure a full opportunity for 

recoupment. AMS recognizes that 

growers in many instances cannot avoid 

the LPD’s unfair exercise of market 

power or bargaining leverage, and that 

the LPD failing to sufficiently and fairly 

compensate growers for an additional 

capital investment is not a cognizable 

benefit to growers or to competition. 

i. Section 201.112(a)—Disclosure 

Requirement 

In the final rule, paragraph (a) of 

§ 201.112 requires that when an LPD 

requests that a broiler grower make an 

additional capital investment, the LPD 

must provide the broiler grower with a 

Disclosure Document that contains the 

information required by paragraph (b) of 

this section. AMS slightly modified this 

provision from the proposed rule by 

adding the paragraph heading, 

‘‘Disclosure requirement.’’ Information 

provided in the Disclosure Document 

will help growers protect themselves at 

an earlier stage—before the 

investment—from unfair practices, by 

enabling them to report to AMS 

potentially unfair additional capital 

investment practices or bring their own 

action. Improved documentation will 

also enable AMS to take earlier and 

more effective action against 

problematic additional capital 

investment practices. Transparency will 

also enable some growers, where 

sufficient choice exists, to make better 

additional investment decisions. 

Importantly, clear disclosure of 

additional capital investment 

parameters will enhance growers’ ability 

to enforce their rights relating to unfair 

practices under § 201.216 (such as 

recoupment and discretion to refuse to 

make an additional capital investment), 

as well as other provisions of the P&S 

Act and regulations. Disclosure alone is 


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not a remedy for an additional capital 

investment that is unfair, but the 

disclosures required by new § 201.112 

will create a record that will facilitate 

the Agency’s ability to enforce the Act 

under existing § 201.216. 

This requirement applies 

prospectively to requests for additional 

capital investments. However, if the 

LPD has previously provided any 

disclosure to the grower that was 

incomplete or inaccurate, the company 

should consider revising it and 

providing an updated copy to the 

grower to minimize the risks of having 

engaged in a violation of deceptive 

practices. 

ii. Section 201.112(b)—Disclosure 

Contents 

Section 201.112(b) lists the items the 

Disclosure Document is required to 

disclose. AMS slightly modified this 

provision from the proposed rule by 

adding the paragraph heading, 

‘‘Disclosure contents.’’ The required 

disclosures must be prominently 

presented in a clear, concise, and 

understandable manner. Paragraph 

(b)(1) requires that the Disclosure 

Document provide the purpose of the 

additional capital investment for both 

the LPD and the grower and a summary 

of all research and other supporting 

material that the LPD has relied upon in 

justifying the additional capital 

investment. LPDs almost always have 

superior information regarding the 

outcomes of and risks around the 

contemplated additional capital 

investment. LPDs commonly research 

and design additional capital 

investments and usually have a plan or 

intended outcomes with respect to their 

request for the adoption of an additional 

capital investment. Growers have 

limited to no access to that information, 

yet they are often asked to expend 

hundreds of thousands or even millions 

of dollars to implement additional 

capital investments. As part of any 

assessment of risks or benefits relating 

to an additional capital investment, 

growers must be provided the 

information necessary to understand the 

intended purpose of the additional 

capital investment and have access to 

any research or other supporting 

material regarding that additional 

capital investment. For example, 

growers may make different decisions 

about their approach to additional 

capital investment depending on 

whether it is intended to be 

performance-enhancing (e.g., tunnel 

ventilation), whether it is intended to 

enable a change in the product offered 

(e.g., a switch to ‘‘No Antibiotics Ever’’), 

or whether it changes the nature of the 

controls and risks (e.g., automation and 

monitoring). Omissions of this 

information prevent growers from 

making an informed business decision, 

negotiating effectively for adequate 

compensation, or determining if and 

how the original bargain for exchange 

has been modified or altered. Thus, an 

LPD’s failure to adequately disclose this 

information is deceptive and harmful to 

growers because that failure imposes 

undue financial risk and increases the 

likelihood of a poor financial outcome 

on the investment. 

Paragraph (b)(2) of § 201.112 requires 

LPDs to provide clear additional capital 

investment financial incentives and 

schedules to growers. Under paragraph 

(b)(2), LPDs are required to disclose to 

the grower all financial incentives and 

compensation associated with the 

additional capital investment. The 

Disclosure Document shall clearly 

delineate how long such financial 

incentives or changes in grower 

compensation will last and the degree to 

which benefits accruing to growers 

making such investments are contingent 

on how widely they are adopted by 

other growers. Compensation and 

financial incentives are broad terms and 

may include changes to grower base pay 

or performance pay, payments 

specifically linked to adoption of the 

particular technology resulting from the 

additional capital investment, and any 

other changes to the economics of the 

grower’s relationship with the poultry 

company associated with making the 

additional capital investment or its 

implementation once made. Clearly 

disclosing financial incentives will 

assist the grower in assessing the 

relative risks of non-recoupment, as the 

reliability of those incentives may vary 

based on the duration of the contract 

and whether other growers are likely to 

incorporate the additional capital 

investment technology in a way that 

would make recoupment through 

performance pay less reliable. 

Paragraph (b)(3) of § 201.112 requires 

that LPDs disclose all construction 

schedules related to the request for the 

additional capital investment. Clearly 

disclosing expected grower construction 

schedules and other repayment 

schedules also will assist the grower in 

assessing incentives and risks relating to 

borrowing, construction, and payment 

timing. This disclosure will position 

growers to better analyze the business 

risk in undertaking an additional capital 

investment, including the operational 

risks relating to implementing the 

additional capital investment and risks 

of LPD strict enforcement of these 

implementation requirements. For 

example, comments (discussed in 

further detail below in section V., 

‘‘Comment Analysis’’) noted concerns 

about LPDs not being sufficiently 

lenient regarding construction 

schedules. By enabling growers to 

clearly understand each component of 

the additional capital investment 

requested by the LPD, the required 

disclosures will address key information 

asymmetries that exist between the LPD 

and the grower with respect to LPD’s 

purposes, bases, and expectations for an 

additional capital investment. Growers 

will be better positioned to evaluate the 

true costs and risks from the additional 

capital investment, as well as the 

operational implications for their 

farming enterprise. 

As proposed, paragraphs (b)(1) 

through (3) of § 201.112 included 

language requiring that LPDs describe 

within their Disclosure Document: (1) 

‘‘any relevant’’ research or other 

supporting material that the LPD has 

relied upon in justifying the additional 

capital investment; (2) ‘‘all relevant’’ 

financial incentives and compensation 

for the grower associated with the 

additional capital investment; and (3) 

‘‘all relevant’’ construction schedules 

related to the request for additional 

capital investment. After consideration 

and review of public comments, it 

became clear that the term ‘‘relevant’’ as 

proposed was ambiguous and confusing. 

Commenters expressed uncertainty 

regarding how to determine compliance 

with these requirements. Some 

stakeholders believed that the term 

‘‘relevant’’ created an ambiguous 

requirement that could result in the 

inclusion of unnecessary documents 

that may not in fact be ‘‘relevant’’ to 

satisfy the required disclosures. AMS 

finds these comments persuasive and, 

thus, AMS has struck the term 

‘‘relevant’’ from paragraphs (b)(1) 

through (3) of § 201.112. After the 

change, paragraphs (b)(1) through (3) 

require LPDs to submit: (1) all research 

and other supporting material that the 

LPD has relied upon in justifying the 

additional capital investment; (2) all 

financial incentives and compensation 

for the grower associated with the 

additional capital investment; and (3) 

all construction schedules related to the 

request for additional capital 

investment. The removal of the word 

‘‘relevant’’ will ease the burden on LPDs 

by removing ambiguity regarding which 

disclosures are required to be included 

in the Disclosure Document. This 

technical change does not increase the 

burden of the disclosure requirement; it 

merely removes ambiguous phrasing 

while retaining the same disclosure 

requirement proposed in the proposed 


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28 89 FR 49002, 49025 (June 10, 2024). 29 16 CFR 436.5(h)(6). 

30 (2) If poultry housing specifications for broiler 

growers under contract with the complex are 

modified such that an additional capital investment 

may be required, or if the 5-year averages provided 

under paragraph (d)(1) of this section do not 

accurately represent projected grower gross annual 

payments under the terms of the applicable broiler 

growing arrangement for any reason, the live 

poultry dealer must provide the following 

information: 

(i) Tables providing projections of average annual 

gross payments to broiler growers under contract 

with the complex with the same housing 

specifications for the term of the broiler growing 

arrangement at five quintile levels or by mean and 

standard deviation expressed as dollars per farm 

facility square foot. 

(ii) An explanation of why the annual gross 

payment averages for the previous 5 years, as 

provided under paragraph (d)(1) of this section, do 

not provide an accurate representation of projected 

future payments, including the basic assumptions 

underlying the projections provided under 

paragraph (d)(2)(i) of this section. 

31This mirrors language in the FTC Franchise 

Rule at 16 CFR 436(e)(2) that refers to the FTC’s 

position on Francise Disclosure Documents (FDDs), 

specifying that while the FTC requires franchisors 

to provide accurate disclosures, it does not verify 

the content of the FDD, nor does it endorse the 

franchise offering. 

rule. This change will prevent 

inconstancies in LPDs’ interpretation of 

what disclosures are required by 

paragraphs (b)(1) through (3). 

In the final rule, § 201.112(b)(4) 

requires that LPDs disclose their 

expectations regarding housing 

specifications associated with the 

additional capital investment. LPD 

housing specifications are critical 

components to any additional capital 

investment. The provision of these basic 

details regarding the additional capital 

investment will enable a grower to 

understand the workings, process, and 

design characteristics of the requested 

additional capital investment. They thus 

would enable a grower to identify 

business risks associated with 

undertaking the additional capital 

investment, as well as any unfair or 

otherwise impermissible additional 

capital investment practices prohibited 

under § 201.216. This provision remains 

unchanged from the proposed rule. 

In the final rule, AMS revised 

§ 201.112(b)(5). As proposed, paragraph 

(b)(5) required that LPDs disclose any 

required or approved manufacturers or 

vendors. In the proposed rule, AMS 

solicited comment on whether 

paragraph (b)(5) should also require the 

disclosure of any material financial 

benefits that the LPD, or any officer, 

director, employee or family member of 

any such person, receives from the use 

of the required or approved vendor.28

Commenters indicated that LPDs should 

not be allowed to require growers to use 

certain equipment or vendors, 

especially when those LPDs hold any 

amount of financial interest in those 

equipment companies or specifically 

required vendors. Therefore, in the final 

rule AMS expanded paragraph (b)(5) to 

require disclosure not only of required 

or approved manufacturers or vendors, 

but also all financial benefits that the 

LPD or any officer, director, decisionmaking employee, or close family 

member thereof receives from the use of 

the required or approved manufacturer 

or vendor. 

In the additional capital investment 

Disclosure Document, the LPD must 

disclose any required or approved 

manufacturers or vendors, and any 

financial benefits that the LPD or its 

officers (such as CEO, President, 

Secretary, etc.), members of its board of 

directors, decision-making employees, 

or close family members of any such 

person, will receive from using such a 

manufacturer or vendor. Decisionmaking employees refers to those 

employees who are involved with the 

decision-making for the additional 

capital investment and its 

implementation. A close family member 

covers an immediate or other family 

member where a reasonable person 

would question the impartiality of the 

business judgment of the decisionmaker. This component of the 

Disclosure Document applies to possible 

conflicts of interest that may influence 

specifications for required or approved 

manufacturers or vendors. 

The additional language is similar to 

an existing disclosure requirement 

under the Federal Trade Commission’s 

Franchise Rule, but requires disclosure 

of benefits from more individuals.29

AMS found this addition persuasive 

because it is designed to promote a 

similar purpose by protecting the more 

financially vulnerable party—who is 

making a significant investment—from 

incurring debt or otherwise expending 

scare resources, not solely to achieve the 

investment’s purpose, but rather as a 

reflection of the presence of a conflict of 

interest on the part of the less 

financially vulnerable party (the LPD). 

Section 201.112(b)(6) requires that 

LPDs provide a financial analysis of 

projected returns the grower can expect 

related to the additional capital 

investment, including any assumptions, 

risks, or uncertainties, sufficient to 

allow the grower to make their own 

projections. The language of the final 

rule is slightly simplified from that 

proposed to remove the hyphenated text 

and incorporate that same language 

closer to the end of the sentence. This 

technical change improves the 

readability of the provision without 

changing its meaning as proposed. This 

provision is designed to enable the 

grower to evaluate the reliability of the 

financial returns that the grower could 

receive over the duration of the contract. 

Such information would include, where 

relevant, assumptions regarding the 

expected likelihood of whether other 

growers will adopt the additional 

capital investment and the impacts on 

the reliability of returns in relation to 

the incentives. Financial analysis of 

projected returns is critical to enabling 

growers to understand the 

opportunities, and hence the risks, they 

may be taking on. For example, revenue 

projections should include assumptions 

that can be relied upon by growers in 

relation to annual flock placements, 

stocking density, and the expected 

distribution of performance pay. 

Omission of this information is central 

to the inability for growers to effectively 

identify whether they can adequately 

recoup the additional capital investment 

or whether the additional capital 

investment is otherwise unfair. 

Disclosure under § 201.112 is more 

detailed than LPD disclosure under the 

existing regulation in § 201.102(d)(2). 

The existing disclosures provide 

guidance to the grower with respect to 

the relative risks associated with 

contracting with the LPD to prevent 

deception before it harms the producer. 

The disclosures required in this final 

rule focus on ensuring that growers are 

aware of known or reasonably expected 

sources of returns, risks, and costs 

(including costs such as labor, 

operating, maintenance, and other costs 

associated with a request for an 

additional capital investment). Thus, 

§ 201.102(d)(2)(i) and (ii) 30 is a focused 

revenue disclosure, and references 

situations where contracts are modified 

due to additional capital investment or 

otherwise and requires a projection from 

LPDs when contract modifications 

dilute the value of the 5-year revenue 

tables required in § 201.102(d)(1). If 

§ 201.112 is applicable to the LPD and 

incorporates what is otherwise required 

under § 201.102(d)(2)(i) and (ii), the LPD 

can use one set of disclosures for both 

§ 201.112 and § 201.102(d)(2)(i) and (ii). 

Finally, § 201.112(b)(7) requires that 

LPDs include in the Disclosure 

Document a specific statement that the 

Disclosure Document has not been 

reviewed by USDA, and that false and 

misleading statements or material 

omissions may violate State and/or 

Federal laws.31 The statement must also 

indicate that violations of Federal and 

State laws may be determined to be 

unfair, unjustly discriminatory, or 


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32 89 FR 49002, 49025 (June 10, 2024). 

33 Ibid. 

deceptive and unlawful under the P&S 

Act, as amended. AMS does not intend 

for the Disclosure Document to be a 

means by which LPDs may waive any 

unfairness provisions in law or 

regulation. AMS maintains that a 

determination of unfairness is 

dependent on the facts and 

circumstances of each case. The 

required statement must also include 

Packers and Stockyard Division contact 

information that growers can use to 

report violations and other concerns. 

Lastly, the statement must provide 

website contact information for those 

seeking additional information on rights 

and responsibilities under the P&S Act. 

This provision is unchanged from the 

proposed rule. 

AMS underscores that the information 

required to be set out in the Disclosure 

Document is not currently provided to 

most growers or in all circumstances. 

These omissions present material risk of 

deceiving growers, as well as subjecting 

them to potentially unfair practices 

which they are unable to identify at an 

early enough stage to halt them in their 

incipiency. 

iii. Section 201.112(c)—Translation 

In the final rule, § 201.112 contains a 

new paragraph (c). In the proposed rule, 

AMS asked commenters what 

considerations, if any, AMS should take 

into account with respect to the timing, 

delivery, or readability with respect to 

the Disclosure Document.32 AMS also 

specifically asked commenters whether 

it should include a provision requiring 

that LPDs make reasonable efforts to 

assist growers in translating the 

Disclosure Document and to ensure that 

growers are aware of their right to 

request translation assistance.33 In 

response to the proposed rule, including 

specific questions posed related to 

translation, some commenters requested 

that translations of the Disclosure 

Document be made available in 

languages other than English. Therefore, 

AMS is adding paragraph (c) to 

§ 201.112, which requires that, upon 

delivery of the Disclosure Document to 

the grower the LPD must make 

reasonable efforts to ensure that the 

grower is aware of their right to request 

translation assistance and must assist 

the grower in translating the Disclosure 

Document. Reasonable efforts include, 

but are not limited to, providing current 

contact information for professional 

translation service providers, trade 

associations with translator resources, 

relevant community groups, or any 

other person or organization that 

provides translation services in the 

poultry grower’s geographic area. 

Depending on the facts and 

circumstances (such as convenience, 

expense, and timeliness of the 

translation), reasonable efforts may also 

include allowing the grower access to a 

computer-generated translation of the 

Disclosure Document and additional 

time to review any translated Disclosure 

Document. An LPD may not restrict a 

broiler grower or prospective broiler 

grower from discussing or sharing the 

Disclosure Document for purposes of 

translation with a person or 

organization that provides language 

translation services. Nothing in the rule 

prevents companies from providing a 

translation, provided it is complete, 

accurate, and not misleading. 

This addition of translation assistance 

is necessary because language barriers 

can prevent poultry growers from 

understanding the Disclosure 

Document, which would thwart the 

purpose of § 201.112. If growers do not 

have a reasonable opportunity to 

understand the Disclosure Document 

due to language barriers, the goal of 

remedying deception is thwarted. 

Notably, the translation requirements 

under § 201.102(g)(4) apply to § 201.112 

if the latter is applicable to the LPD and 

incorporates what is otherwise required 

under § 201.102(d)(2)(i) and (ii) in a 

single disclosure that meets the 

requirements of both § 201.112 and 

§ 201.102(d)(2)(i) and (ii). 

iv. Compliance and Enforcement 

Compliance with § 201.112 requires 

LPDs to include the information and 

topics described in § 201.112(b)(1) 

through (7) in the Disclosure Document 

and provide that document to growers 

when requesting an additional capital 

investment. LPDs are also required to 

inform growers of their right to request 

translation assistance and/or assist 

growers with translation of the 

Disclosure Document, if necessary. 

Enforcement of § 201.112 could occur 

in several ways. Growers could contact 

AMS (PSD) to submit a complaint 

regarding an alleged violation of 

§ 201.112. PSD would investigate, 

which could lead to a referral to DOJ for 

appropriate action or, where failure to 

pay is implicated, USDA enforcement 

through administrative action.44 As 

necessary for compliance enforcement 

or during investigations, PSD will 

review Disclosure Documents to ensure 

completeness. Injured individuals also 

have a right to proceed in Federal court. 

D. Severability (§ 201.290) 

AMS is adding § 201.290, 

‘‘Severability,’’ to subpart N to confirm 

that if any provision of this rule, any 

component of any provision, or any 

provision of subpart N is declared 

invalid or if the applicability thereof to 

any person or circumstances is held 

invalid, it is AMS’s intention that the 

validity of the remainder of the 

provision or the applicability thereof to 

other persons or circumstances shall not 

be affected thereby with the remaining 

provision, or component of any 

provision, to continue in effect. Such a 

provision is typical in AMS regulations 

that cover different topics and is 

included here as a matter of 

housekeeping. 

This rule aims to address different 

harms common in the broiler 

production industry: lack of payment 

transparency in broiler growing 

arrangements, unfairness in tournament 

operations, and lack of disclosure from 

LPDs regarding additional capital 

investments. Each of the new sections 

can operate independently in the 

absence of the others. Conduct that 

violates one section is not dependent on 

protections put in place by other 

sections. For example, if an LPD 

discounts the rate of compensation 

provided in a broiler grower 

arrangement in violation of § 201.106, 

the Agency would still be able to 

enforce this provision even if the 

provision requiring the fair operation of 

broiler grower ranking systems 

(§ 201.110) were struck down. These are 

not inextricably connected regulations: 

§ 201.110 focuses on establishing a fair 

comparison among growers in a 

tournament, while the focus of 

§ 201.106 is ensuring clear (no 

discounting) and reliable (not 

unreasonably variable) rates of 

compensation disclosed in the contract. 

As another example, if the provision 

regarding additional capital investments 

(§ 201.112) was struck, AMS would still 

retain criteria under § 201.216 to 

evaluate whether requiring an 

additional capital investment 

constitutes a violation of the P&S Act. 

AMS intends that the severability 

provision operate to the fullest extent 

possible. For example, under 

§ 201.110(b)(1), ‘‘Policies and 

procedures,’’ if the league composition 

requirement in paragraph (b)(1)(iii) is 

severed, this does not necessarily negate 

the benefits or make unenforceable the 

other processes requirements contained 

in paragraphs (b)(1)(i) (inputs under 

LPD control), (ii) (flock production 

practices under LPD control), and (iv) 

(evaluation period), etc. Similarly, AMS 

intends that the severability provision 

apply to all of subpart N. If one of the 

new regulations implemented via this 

final rule is severed, this does not make 


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Federal Register / Vol. 90, No. 10 / Thursday, January 16, 2025 / Rules and Regulations 5169 

unenforceable the existing provisions in 

subpart N. In other words, if the benefits 

of a section in subpart N remain intact 

without the unenforceable provision, 

AMS’s intent is to retain the enforceable 

provisions of the section. AMS notes 

that this discussion is illustrative and 

not exhaustive. 

V. Comment Analysis 

Overview 

The Poultry Grower Payment Systems 

and Capital Improvement Systems 

proposed rule, published on June 10, 

2024, received 758 comments, some 

with multiple signatories, over a 60-day 

comment period. Of these comments, 

671 were in clear support of the rule 

(the majority of these consisting of form 

letters from advocacy campaigns), while 

13 comments were in clear opposition 

to the rule and the remaining 74 were 

ambiguous or unclear. A variety of 

stakeholders commented on the 

proposed rule, including farmers’ 

coalitions, government entities, 

advocacy organizations, industry trade 

organizations, processors, producers, 

and other non-affiliated, individual 

parties. Topics that garnered 

considerable attention in the proposed 

rule, both positive and negative, 

included the rate of compensation, 

transition and implementation costs, the 

duty of fair comparison, and reasonable 

recoupment of required additional 

capital investments. A common theme 

among the majority of supportive 

comments, particularly by growers, was 

the fear of retaliation underlying their 

concerns about LPD practices. 

Many farmers’ coalitions, advocacy 

groups, and individual producers 

argued that LPDs would easily find 

ways to deny producers fair payment, 

especially during the industry’s 

transition to adopt the proposed 

changes. For example, while many 

commenters supported § 201.106’s 25 

percent comparison-based 

compensation presumption, most of 

these supporters requested other 

changes to the final rule, such as 

requiring performance-based pay to be 

applied at the individual level and 

pairing it with a requirement of a fair 

minimum base pay. Other common 

recommendations for financial 

safeguards included making the option 

for non-comparison-based pay more 

accessible to producers and requiring 

that producers’ contracts be long enough 

to ensure a reasonable rate of return for 

their loans. 

Another common theme among 

commenters was the fear of LPD 

retaliation against producers who made 

unfairness claims, requested noncomparison-based pay, refused to take 

on an additional capital investment, etc. 

Many individual producers shared 

personal experiences of retaliation, 

often in the form of intentionally 

unequal inputs and threatened or actual 

contract termination, for speaking out 

against unfair practices. Many 

commenters emphasized the inherent 

power imbalance between both parties, 

pointing out that producers, who carry 

high amounts of debt, depend on LPDs 

for paying down the debt. Moreover, 

commenters described feeling or 

receiving intimidation against making 

unfairness claims and pressure to 

adhere to unfair terms. For instance, 

commenters described receiving 

unexpected deductions or variability in 

pay and had no choice but to accept 

their circumstance. Commenters 

recounted struggling to make ends meet 

as a result. If they ranked lower than 

other growers for one or more 

settlements, the resulting decrease(s) in 

compensation left them unable to afford 

necessary expenses. Some commenters 

stated that experiencing these losses 

forced them to sell their families’ farms, 

driving them out of the industry 

entirely. Many commenters requested 

that the final rule include specific 

protections against retaliation for 

producers who made unfairness claims 

against their LPD or who refused to take 

on an additional capital investment 

required by their LPD. Many other 

commenters requested greater 

protections for producers who receive 

unequal inputs from their LPDs, 

describing numerous input variables 

that can be and have been exploited by 

LPDs to deliberately lower producers’ 

placement in their tournament. 

Conversely, comments in opposition, 

many from industry representatives, 

defended the current system and 

expressed concerns about the proposed 

rule. These commenters asserted that 

the rule is unfair to growers who are 

successfully operating in the current 

system and that the rule would unfairly 

punish high performers. These 

commenters also stated that the rule 

disregarded the self-interest of LPDs in 

ensuring grower success. Opposing 

commenters further stated the rule 

would be overly burdensome for the 

industry to implement. 

A. Section 201.106 

i. Transparency in Pay 

Comment: Many commenters, 

especially growers and advocacy 

organizations, highlighted the need for 

stronger protections, greater 

transparency, and a more equitable 

balance of power within the poultry 

industry. Commenters emphasized that 

greater transparency from LPDs is 

essential for a fair and equitable 

payment system. Specific concerns 

stemming from inadequate transparency 

included the inability to predict income 

due to fluctuations in flock-to-flock 

payments, and payments below the base 

price due to factors outside of growers’ 

control. Commenters also suggested 

safeguards to prevent unfair payment 

deductions related to stocking density 

and other external factors. Advocacy 

groups raised concerns about the 

potential for LPDs to exploit the system 

and drive down grower base pay. 

Other commenters, especially 

industry stakeholders, emphasized 

existing measures and cautioned against 

government intervention. These 

commenters asserted that growers face 

no uncertainty regarding income or 

input costs and opposed a fixed base 

price. They also asserted that most 

contracts already include minimum 

compensation floors and expressed 

concern that raising base pay would be 

unsustainable and lead to higher 

consumer prices. One commenter 

suggested that AMS identify and 

address potential gaps in grower 

education and outreach. 

AMS response: AMS agrees with the 

comments that asserted the need for 

stronger protections, greater 

transparency, and a more equitable 

balance of power. Accordingly, AMS 

modified the proposed § 201.106 to 

include provisions that further these 

goals. Paragraph (a) will prevent LPDs 

from reducing a poultry grower’s 

compensation based on the grower’s 

ranking, grouping, or comparison to 

others. This will improve growers’ 

ability to predict income. As discussed 

below, paragraph (b) will establish a 

presumptive limit on comparison-based 

performance pay, which will enhance 

growers’ ability to predict their income 

from a contract by reducing variability 

from that rate due to fluctuations in 

flock-to-flock payments. Paragraph (c) 

works to prevent LPDs from exploiting 

their market power and associated 

bargaining power by requiring LPDs to 

notify the Administrator if there are any 

contract modifications that result in a 

reduced payment to poultry growers. 

Existing regulation fails to protect 

poultry growers from injury in the 

manner Congress intended. Contrary to 

LPDs’ claims, growers do face 

uncertainty regarding income, because 

the payment they will receive is not 

known until the growing cycle is 

complete and all growers’ outputs are 

compared and performance payments 

are distributed. AMS has consistently 

heard reports from growers receiving 


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5170 Federal Register / Vol. 90, No. 10 / Thursday, January 16, 2025 / Rules and Regulations 

34United States v. Cargill Meat Solutions Corp., 

1:22–cv–01821–ELH (D. Md. July 25, 2022) (LPDs 

did not adequately disclose the risk inherent in the 

tournament systems to growers, so growers could 

not reasonably evaluate the range of potential 

financial outcomes, manage their risks, or compare 

competing poultry processors); AMS–FTPP–22– 

0046–0777 (‘‘[W]e were told our houses would be 

paid off raking in the money in 10 years[.] I am now 

out to twice that still in debt. . .’’); AMS–FTPP– 

22–0046–0876 (‘‘In our communications with 

growers, we have learned that when they signed 

their initial poultry contract, most had expectations 

that their contract relationship with a poultry 

company would be one of mutual respect where 

both parties shared in the risks and rewards of 

producing chicken for consumers. They expected a 

transparent system that would reward them for 

their hard work and management services. Instead, 

what they quickly found was a dictatorial system 

that gives growers an unpredictable and often 

inadequate income stream, and allows poultry 

companies to shift risks onto growers, without fairly 

sharing in the economic rewards commensurate 

with their financial investment and services 

provided’’); AMS–FTPP–22–0046–0156 

(‘‘Frequently, that deception begins even before 

poultry growers sign their contracts. It is a common 

story for growers to be attracted by unrealistic 

financial models and integrators’ promises of 

support. Once the contracts are signed, though, 

growers find themselves on the short end of a 

massive power imbalance’’). 

35MacDonald, James, Technology, Organization, 

and Financial Performance in U.S. Broiler 

Production, EIB–126, USDA Economic Research 

Service (2014), https://www.ers.usda.gov/webdocs/ 

publications/43869/48159_eib126.pdf?v=1829.6 (In 

2011, nearly a third of smaller farms and nearly a 

fifth of larger farms realized negative net farm 

income); AMS–FTPP–22–0046–0780 (‘‘I’ve been a 

poultry grower for almost 15 years and it is a shame 

that you have to have multiple jobs just to make 

ends meet. . . Everyone is struggling in this 

economy right now and we have massive debt 

loads, insurance and utilities have skyrocketed 

parts are extremely high and even just the basic 

necessities to live are at critical levels. . .’’). 

deductions or excessively variable 

compensation from LPDs such that their 

compensation does not align with the 

LPDs’ initial representations.34

Accordingly, a high percentage of 

growers’ operations have sustained net 

negative incomes—an outcome that 

growers most likely do not anticipate 

before agreeing to contract with their 

LPDs.35 Moreover, AMS has reviewed 

broiler growing contracts for decades 

during routine regulatory reviews of 

LPD’s payment practices. While many 

contracts that AMS has reviewed 

already include minimum 

compensation provisions, these 

provisions are not an industry-wide 

practice, and do not cure the deception 

or unfairness arising from deductions in 

the rates of compensation in the 

contract, especially the base price, 

because the minimum price could be far 

below the base price or even the lower 

bounds of base plus performance pay. 

Moreover, requiring that minimum 

compensation be disclosed allows 

growers who have the option of 

contracting between multiple LPDs to 

meaningfully compare their options, 

enhancing competition in the market for 

grower services in certain geographies. 

Nor is this an unworkable or 

unreasonable requirement; some LPDs 

have already adopted the reforms 

included in this final rule, and so this 

regulation builds on existing, successful 

models that that commenters said some 

LPDs have already found workable and 

effective. 

Also, contrary to some commenters’ 

claims, nothing in the regulation 

requires the base pay to be increased or 

otherwise be fixed in a manner that 

would affect supply or the price of 

chicken for consumers; rather, it is 

designed to address inadequate poultry 

grower compensation arising from 

deceptive and unfair practices by LPDs. 

Simply, § 201.106(a) enables LPDs to 

continue to set a base pay and provide 

bonuses based on a grower’s grouping, 

ranking, or comparison to others, or 

through other payment incentives 

schemes. AMS acknowledges that 

grower education and outreach may be 

useful but believes that the 

responsibility to eliminate deception 

starts with the legal responsibilities 

Congress placed on the LPDs when it 

amended the Packers and Stockyards 

Act. This includes clear contract terms 

and transparent communication 

between LPDs and growers. 

AMS notes that § 201.102 requires 

disclosure of stocking density in 

production contracts. Reductions in 

stocking density are best addressed 

under those disclosure requirements. 

AMS acknowledges that § 201.106 may 

not address every form of unfair practice 

that a grower may experience, such as 

reductions in flock placements or 

stocking density, and AMS remains 

committed to robust enforcement of 

section 202 of the Act to address the full 

range of potentially unfair practices that 

growers may face. 

AMS agrees that USDA-sponsored 

education and outreach helps growers’ 

make informed decisions. AMS is taking 

steps to increase producer education 

and outreach, including, for example, by 

establishing the farmerfairness.gov 

portal to facilitate ease of access for 

submitting complaints. AMS intends to 

expand education and outreach 

regarding this rule and other regulatory 

requirements. Disclosure and education, 

although beneficial, are unlikely to 

address unfairness because of the 

substantial difference in bargaining 

power between LPDs and growers. 

AMS’s responsibility, however, is to 

enforce the Act. Better information 

concerning an unfair practice does not 

make the practice fair, nor alleviate the 

need for regulation. 

ii. Performance Pay 

Comment: Growers and supporting 

organizations highlighted the need for a 

more balanced system that protects 

growers from income volatility and 

unfair deductions related to factors 

outside of their control. Many 

commenters explicitly endorsed a 25 

percent cap, citing the potential to curb 

the negative impacts of the tournament 

system while preserving performancebased incentives. Several advocacy 

groups supported calculating the 

variance at the individual grower level 

rather than the complex level to allow 

growers to make more informed 

financial calculations, better determine 

whether they are being treated unfairly 

by LPDs, and to limit the potential for 

favoritism and retaliation against 

individual growers. To strengthen 

fairness and transparency, commenters 

emphasized the need for objectively 

measurable bonus criteria and the 

importance of pairing the cap with a fair 

minimum base pay. One commenter 

suggested allowing exceptions for 

exceeding the 25 percent cap with 

proper justification. Another pointed to 

the bonus cap model in the turkey 

industry and a farm bureau suggested a 

20 percent pay difference between 

growers. Several commenters indicated 

that bonuses should be linked to factors 

within a grower’s control. 

Some industry representatives 

emphasized the role of performance 

incentives in driving productivity. 

Commenters argued that limiting 

performance bonuses would 

disincentivize growers and negatively 

impact productivity. Some commenters 

questioned the basis for the 25 percent 

figure. 

Many stakeholders expressed concern 

about the feasibility of case-by-case 

enforcement to ensure fair comparisonbased bonuses. Comments reveal a 

consensus among stakeholders that 

case-by-case enforcement alone is 

insufficient to guarantee fair 

comparison-based compensation. 

Advocacy organizations argued that 

case-by-case enforcement is ineffective 

and inefficient and places an undue 

burden on growers who seek redress. 

These organizations cited past instances 

in which this approach failed to 

adequately protect grower interests. One 

commenter raised a concern about caseby-case enforcement’s vulnerability to 

changing political landscapes, thereby 

creating uncertainty for growers and 

potentially discouraging them from 

reporting unfair practices. Many 

stakeholders advocated for clear 

regulations and proactive measures to 

prevent unfair bonuses rather than 


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Federal Register / Vol. 90, No. 10 / Thursday, January 16, 2025 / Rules and Regulations 5171 

36United States v. Cargill Meat Solutions Corp., 

1:22-cv-01821–ELH (D. Md. July 25, 2022); United 

States v. Cargill Meat Solutions Corp., et al. (2022). 

Proposed final judgments and competitive impact 

statement. Federal Register. Retrieved from https:// 

www.federalregister.gov/documents/2022/09/16/ 

2022-20014/united-states-v-cargill-meat-solutionscorp-et-al-proposed-final-judgments-andcompetitive-impact. 

relying solely on enforcement. For 

example, one commenter requested that 

USDA establish guidelines defining 

unfair performance payment structures, 

proposing a presumption of unfairness 

for bonuses exceeding 25 percent of 

total compensation. The commenter also 

suggested that contracts offered to 

indebted growers could serve as 

potential evidence of anti-competitive 

practices, particularly by processors 

with significant market power. 

AMS response: In the proposed rule, 

AMS specifically inquired whether it is 

presumptively unfair for comparisonbased compensation to equal or exceed 

25 percent of total compensation (base 

pay rate plus comparison-based) for any 

grower and asked a range of questions 

around the appropriateness of the 

specific threshold, how to calculate it, 

and how it would affect the industry. 

These questions included inquiries 

highlighting the role of the 25 percent 

presumption as a potentially binding 

constraint and how LPDs might respond 

in the compensation structures. 

AMS agrees with the majority of 

commenters suggesting that 

comparison-based performance pay 

should be presumptively limited in 

order to balance the interests of growers 

and LPDs and prevent unfair outcomes. 

Grower concerns regarding thin 

margins, debt load, input variability, 

and tournament composition invoke 

equity issues that must be balanced with 

performance and productivity 

incentives. While useful as an incentive 

and a means to allocate pay, flock 

performance metrics, specifically feed 

conversion, as a proxy to grower effort 

are imperfect. Feed conversion itself is 

affected by variables beyond grower 

effort. AMS is not aware of existing 

technological innovations that could 

serve to better isolate grower effort or a 

measurement that would be exclusively 

under grower control. 

Flock performance metrics serve some 

purposes in the assessment of grower 

effort and the allocation of grower 

payments. AMS’s experience in 

analyzing performance payments 

suggest that ranking systems can be a 

useful and reasonably equitable 

mechanism for pay allocation with 

proper regulation in magnitude. 

Performance payments can reward 

grower effort without being an 

unlawfully deceptive or unfair practice. 

In considering the appropriate form of 

regulation, AMS considered the variety 

of grower ranking systems currently in 

practice and the possible evolution and 

redesign of those systems, such that the 

purpose of the regulation would be 

resistant to circumvention while also 

providing an appropriate level of 

flexibility to maintain an incentive 

structure. As referenced in the proposed 

rule, a presumptive limitation on 

performance pay magnitude strikes that 

balance. As a presumption, enforcement 

will occur based on an inquiry into 

specific factual circumstances. Based on 

currently available information, a bright 

line standard is likely to be overly rigid 

and may serve to deprive successful 

growers of the expected value of their 

services. Allowing LPDs to provide a 

rebuttal to justify exceeding the 

prescribed performance pay magnitude 

is a desirable feature for growers and 

LPDs alike because payment systems 

may reflect different circumstances at 

different complexes. Again, facts and 

circumstances matter, in particular 

around the variability of performance 

for the birds in question, the housing 

specifications, etc., as 25 percent may 

still be an appropriate limit. Whether 

the LPD took appropriate measures to 

comply with the duty of fair comparison 

under § 201.110 or otherwise mitigated 

other identifiable risks of unfair 

variability relating to the larger 

magnitude of the tournament will also 

be important. To underscore, AMS 

expects the presumption will not be 

easily overcome. 

AMS acknowledges that some 

commenters preferred application of the 

presumption at the individual 

settlement level. AMS is concerned that 

application at the individual level will 

be difficult to monitor and enforce and 

could also result in overly rigid 

limitations on individual performance 

outcomes in flock settlements. That 

could dilute or distort grower 

performance incentives, including 

through capturing statistical outliers, 

which could result in restriction of 

performance payments that reduce 

aggregate grower revenue in ways that 

AMS believes are not presently 

necessary to address unfairness and 

deception under the tournament. 

Applying the presumption as an 

aggregate analysis at the complex-wide 

level offers several benefits to LPDs and 

growers. It allows smoothing of outliers 

from individual settlements and allows 

LPDs to focus on the design of the 

incentive system without requiring 

compliance on a grower-by-grower, 

individual settlement basis. An 

application at the complex-wide level 

will, nevertheless, have sufficient 

limitation on the available funds for 

comparison-based performance 

payments for individuals—owing 

simply to the constraint on funds for 

those purposes—so as to achieve the 

desired goal of right-sizing the 

magnitude of the tournament for 

individual growers. 

In considering the appropriate 

threshold at which to institute the 

presumption, AMS first reviewed a 

limited sample of existing ranking 

systems. AMS reviewed one to five 

years of confidential grower 

compensation data for four individual 

broiler complexes that AMS gathered in 

prior investigations. This sample 

included small, medium, and large bird 

sizes and some of the largest broiler 

LPDs that operate several other 

complexes across the U.S. Aggregate 

performance payments at these four 

complexes were 11.4, 17.4, 20.5, and 

25.4 percent of total grower payments. 

AMS is not aware of any complex with 

performance payments that are as much 

as 26 percent of total payments. As 

noted above, in the proposed rule, AMS 

solicited comment regarding a 25 

percent limitation on comparison or 

‘‘performance’’ payments. Additionally, 

Wayne-Sanderson Farms, one of the 

three largest LPDs, recently agreed to a 

similar performance pay limitation at 

the 25 percent.36 Governmental 

commenters noted the 25 percent cap 

has proven workable for both a major 

LPD and the growers contracted with 

Wayne-Sanderson. As numerous LPDs 

will likely need to modify contracts to 

achieve compliance under § 201.106(a) 

of this rule, finding that the industry 

upper bound of performance pay 

magnitude approaches 25 percent is also 

a relevant data point in AMS’s 

determination that 25 percent is 

appropriate as the presumptive 

threshold for this regulation. 

With respect to objectively 

measurable bonus criteria, AMS agrees 

that comparisons must be fair, and 

§ 201.110 below sets out AMS’s 

approach to mitigating comparisons 

based on inappropriate approaches to 

inputs, production practices, and 

related matters. AMS is not adopting 

further specificity with respect to bonus 

criteria in § 201.106 because AMS has 

designed this portion of the rule to 

operate in a simpler, more easily 

enforceable manner, including 

§ 201.106(a)’s prohibition on deductions 

to any rate of compensation and 

§ 201.106(b)’s limitation on the 

magnitude of performance pay overall. 


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With respect to the importance of 

pairing the cap with a fair minimum 

base pay, AMS has adopted transition 

rules under § 201.106(c) to monitor and 

guard against unfair changes to 

aggregate compensation for growers. 

AMS sets out additional views on rates 

of return below. 

AMS appreciates the commenter’s 

suggestion regarding the bonus cap 

model in the turkey industry and the 

farm bureau suggestion of a 20 percent 

pay difference between growers. AMS 

did not consider the turkey industry in 

this final rule because contracting 

practices in the turkey industry are 

more diverse, in part owing to the 

biological differences in the birds which 

to some extent mute differences in 

outcomes, and so this rule would not 

necessarily be sufficiently tailored for 

that sector. However, the comment 

underscores the reasonableness of 

AMS’s approach of a presumptive 25 

percent limitation on aggregate 

performance compensation. 

iii. Rate of Return 

Comment: Grower and grower 

association commenters expressed 

concern around ensuring a reasonable 

rate of return for their labor and 

investments. Many commenters 

expressed broad concerns of monopsony 

power suppressing grower 

compensation. Some commenters stated 

the minimum base pay should reflect 

more competitive conditions, such as 

geographies where growers have the 

option to contract with three or more 

LPDs. Commenters stated that the 

minimum base pay should be sufficient 

to allow growers to make a reasonable 

return over the course of the contract, 

provided that the grower follows the 

LPD’s required management practices 

and contract guarantees. One 

commenter suggested defining 

reasonable return as, at a minimum, 

enough net income to compensate 

poultry growers’ labor hours at the state 

minimum wage rate. Others called for 

set minimum base pay, minimum flock 

placements and flock densities 

combining to allow growers to 

comfortably make loan payments plus a 

reasonable return. Commenters called 

for a more equitable and transparent 

compensation system that guarantees a 

reasonable rate of return, provides 

greater financial security, and addresses 

the power imbalance between growers 

and LPDs. 

Grower commenters reported being 

underpaid and struggling to cover 

production costs, service debt, and earn 

a livable wage. Commenters highlighted 

a lack of adjustments for inflation, and 

penalties for factors outside their 

control as contributors to insufficient 

compensation. They assert that the 

current payment structure often makes 

necessary capital improvements 

financially risky for growers, thereby 

hindering their ability to reinvest in 

their operations. Commenters also 

claimed that the current payment 

system lacks transparency regarding 

how performance payments are 

determined, the minimum price per 

pound rates, feed quality and ingredient 

details, breeder flock age and health, 

and chick hatch times and temperatures. 

Some commenters urged AMS to 

include in the final rule a presumption 

that an LPD is in violation of the P&S 

Act if the LPD does not offer a minimum 

base pay rate that is reasonably expected 

to cover the costs of operation, service 

debt associated with initial investments 

and capital improvements, and provide 

a reasonable rate of return. Commenters 

also advocated for a fairer system of 

deductions for condemned birds, 

arguing that deductions should be based 

on the actual weight of condemned 

birds rather than the flock’s average 

weight. 

To ensure fairness and sustainability, 

commenters proposed several solutions 

to the proposed question regarding 

whether AMS should prescriptively 

require grower base pay to earn 

‘‘reasonable return,’’ assuming they 

follow production practices. Many 

commenters recommended establishing 

a minimum base pay that: (1) ensures a 

livable income and covers basic 

production costs; (2) includes 

provisions for inflation adjustments to 

maintain real income over time; (3) 

allows for debt service, enabling 

growers to invest in their operations 

without undue financial strain; and (4) 

provides an opportunity for a reasonable 

return on investment, recognizing the 

inherent risks and capital requirements 

in poultry growing. Several commenters 

suggested a shift toward a base pay 

based on square footage, potentially 

with a bonus component determined 

through a tournament system. This 

approach aims to provide a more stable 

and predictable income stream for 

growers. However, one producer 

expressed concern that square foot pay 

would lower bird quality and reduce 

animal welfare. 

Commenters also called for increased 

transparency from LPDs, including more 

detailed documentation and reporting 

requirements. This would provide 

growers with a clearer understanding of 

how their pay is calculated and enable 

better monitoring of potential unfair 

practices. Finally, commenters 

emphasized the need for mechanisms 

that protect growers from debt burdens 

and provide a greater assurance of a 

return on their investments. Suggested 

measures include limiting the financial 

burden on growers for capital 

improvements mandated by processors 

and establishing mechanisms to share 

the risks associated with market 

fluctuations or unforeseen events. 

AMS response: AMS appreciates the 

challenges that many growers face in 

negotiating fair pay, especially given the 

levels of concentration in many local 

markets, the take-it-or-leave it form of 

LPD contracts, and the prevalence of the 

reports on troubling practices in the 

poultry industry. AMS aims to promote 

an industry market structure that can 

secure payment rates and contract terms 

for all growers that: (1) ensure a livable 

income and covers basic production 

costs; (2) include provisions for 

inflation adjustments to maintain real 

income over time; (3) allow for debt 

service, enabling growers to invest in 

their operations without undue 

financial strain; and (4) provide an 

opportunity for a reasonable return on 

investment, recognizing the inherent 

risks and capital requirements in 

poultry growing. AMS also recognizes 

the value of basing payment, in many 

circumstances, on square footage, 

potentially with a bonus component 

determined through a tournament 

system. In many cases, such a 

compensation structure could create a 

more stable and predictable income 

stream for growers because there would 

be a guaranteed payment rate based on 

factor that does not change. 

This final rule seeks to make targeted 

reforms based on the information and 

strategies available to AMS at this time. 

In this final rule, AMS does not purport 

to alleviate all potential unfair aspects 

of the tournament system or of the 

integrated model of broiler production 

in concentrated markets. AMS believes 

that general principles of unfairness 

prohibit an unlawful exercise of market 

power or bargaining power that injures 

growers, including by providing returns 

that are below a reasonable return. AMS 

does not, however, identify a strict 

framework that prescribes exactly how 

to ensure competitive compensation. 

Rather, at present, AMS will apply a 

case-by-case enforcement approach to 

protect growers from unfair and 

unlawful market power or bargaining 

that denies growers reasonable 

compensation. In conducting its 

analysis, AMS expects to rely heavily on 

the facts and circumstances, including 

but not limited to: 

• Relative levels of market power 

(including the number of LPDs growers 

can contract with in a given geography, 

whether there is meaningful choice in 


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37 88 FR 83210, November 28, 2023. 

contracting practices among LPDs in a 

given locality, the extent to which risk 

or other unfair contract terms are shifted 

to growers, the extent to which contracts 

are meaningfully negotiated, etc.), and 

other differences in bargaining power 

between growers and relevant LPDs; 

• The type and nature of the unfair 

conduct (e.g., express or tacit collusion 

via information sharing, the presence of 

express or implied no-poach 

agreements, whether the tournament 

system was being utilized in a manner 

to prevent growers from negotiating or 

securing competitive compensation, the 

LPD’s treatment of days out and 

condemnation within the tournament 

system, etc.); 

• What constitutes competitive pay 

for growout services, especially in 

geographies where more LPDs are 

present; 

• The rates of payment under the 

contract; in particular, whether the base 

rate a grower can expect to receive for 

performing fully under the contract can 

ensure a reasonable return; 

• The costs of providing growout 

services over the contract, including 

appropriately and reasonably measured 

labor costs; 

• The levels of contractually 

guaranteed and otherwise relied upon 

flock placements and density; 

• Whether the length of the contract 

and reliance expectations on renewal 

are sufficient to assure reasonable 

return; 

• The inclusion of cost-of-living 

adjustments or opportunities to secure 

those adjustments in contract renewals; 

and 

• Where additional capital 

investment is required, factors relevant 

to additional capital investment, 

including those set forth in § 201.216 

and the information set forth as required 

under § 201.112. 

AMS underscores that many growers 

face high levels of local market power 

or bargaining power by LPDs, 

exacerbated by hold-up concerns arising 

from high levels of investment and 

reliance on LPDs for critical inputs. 

Moreover, growers face limited 

opportunities to avoid take-it-or-leave-it 

terms from their LPDs, including cuts to 

flocks or nonrenewals of contracts. In 

general, AMS expects this enforcement 

approach will, in practice, reinforce the 

principle that an LPD must provide a 

reasonable opportunity for a grower that 

delivers under the contract to earn a 

reasonable return over the life of the 

contract if they comply generally with 

the specified production practices. 

AMS appreciates the commenters’ 

interest in further enhancing 

transparency. AMS notes that this final 

rule increases transparency for growers 

around rates of compensation 

(§ 201.106) and additional capital 

investments (§ 201.112), and also sets 

more fair standards around, and 

enhances transparency into, LPD 

practices relating to input and 

production practice distribution. It also 

complements other regulatory initiatives 

that AMS has already finalized to 

provide transparency around 

contracting and input distribution (88 

FR 83210, November 28, 2023). AMS 

intends now to turn its focus to the 

important task of monitoring the 

implementation of existing mandates to 

evaluate the remaining gaps and needs. 

AMS also appreciates grower 

comments around the challenges that 

debt burdens place on growers and on 

the importance of more fairly sharing 

the burden of market fluctuations or 

unforeseen events. A central purpose of 

§ 201.112 is to enhance the information 

available to growers and to AMS to 

ensure the fairness of additional capital 

investments, and therefore LPDs’ 

accountability, under § 201.216 and 

section 202 of the Act. For example, an 

LPD’s failure to ensure the reasonable 

ability for a grower to recoup the cost 

of a required (including ostensibly 

requested but in practice coerced) 

additional capital investment would, on 

its own, be dispositive to show a 

violation of § 201.216. AMS recognizes 

that growers cannot avoid the unfair 

exercise of market power. Failing to 

sufficiently and fairly compensate 

growers is not a cognizable benefit to 

growers or to competition. (AMS’s 

approach is discussed below in section 

V.C.ii., ‘‘Additional capital investment 

unfairness.’’) 

With respect to new housing, as 

opposed to additional capital 

investments, AMS has also separately 

finalized the Transparency in Poultry 

Grower Contracting and Tournaments 

(Transparency Rule) rule that provides 

significantly enhanced transparency 

over the preexisting system.37 As 

described in the Transparency Rule, 

these disclosures include returns broken 

out by quintile and other information 

delivered in a disclosure document 

when the grower receives any housing 

specifications and would be 

contemplating making additional 

investments. AMS expects to monitor 

the implementation of that rule and 

would, for example, examine 

circumstances where the disclosures 

were deceptive or misleading relating to 

securing the new grower’s commitment 

to invest in housing. 

iv. Transition and Implementation 

Comment: AMS asked what risks 

growers and/or LPDs might face during 

any transition to the proposed 

§ 201.106. Concerns about transition 

and implementation risks for growers 

and LPDs centered on potential shifts in 

the market power dynamics and the 

administrative compliance burdens. 

Some commenters, especially grower 

advocates, farmers’ coalitions, and legal 

institutions, were concerned about the 

potential for LPDs to exploit the new 

regulations by arbitrarily lowering base 

pay rates. They argued that this could 

undermine the intended fairness that 

the rule aims to achieve and called for 

explicit prohibitions against such 

practices. 

A governmental commenter suggested 

that, for the duration of a reasonable 

transition period, USDA require that 

current payments remain overall 

comparable, so that LPDs cannot 

arbitrarily lower grower base pay or 

overall compensation during the 

transition period or impose other unfair 

contract terms. This commenter also 

suggested that USDA require that 

modified contracts have, at a minimum, 

the same length as the period covered 

by the grower’s initial contract. 

Advocacy associations urged USDA to 

closely monitor the industry’s transition 

and establish fair minimum rates that 

are not lower than the average pay 

under the current comparison system. 

To minimize transition risks to growers, 

one advocacy association noted that 

AMS should not require submission of 

all contracts that are modified to comply 

with new § 201.106, in order to avoid a 

bottleneck in contract negotiations. 

Instead, they recommend that AMS 

require LPDs to submit representative 

contracts that show how they are 

calculating a fair base pay. The 

commenter also suggested an 

accountability mechanism rather than a 

pre-approval process so that LPDs can 

deliver to AMS the information 

necessary for the Agency to determine 

whether contract modifications are 

happening in compliance with 

§ 201.106 and the Act. 

Another advocacy association urged 

AMS to presume undue buyer power 

exists whenever an LPD offers a grower 

in debt a contract that, based on the 

minimum income possible from the 

contract’s guaranteed flock placements, 

stocking density, and firm base price, 

does not give the grower enough income 

to pay off their debt. The commenter 

also stated that AMS should include a 

requirement that LPDs submit to AMS 

for review any contracts modified or 

revised to comply with new § 201.106 


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38 Defined as ‘‘less than the prior annual-calendar 

year’s complex-wide average gross payment to the 

grower.’’ 

and should also require all LPDs to 

submit compensation data for review. 

This data can be used as a basis for 

requiring all integrators to offer base 

prices that rise to a truly competitive 

level, and that are consistent with 

grower cash flow and loan servicing 

expectations under original contracts. 

AMS response: In response to these 

concerns, AMS is adding paragraph (c) 

to the final rule, so that if an LPD 

modifies a contract and reduces 

aggregate compensation to growers,38

the LPD must submit notice of the 

change to AMS and include copies of 

the original contract and new contract, 

as well as any related Disclosure 

Documents. AMS can then adequately 

assess that reductions in aggregate 

grower compensation does not violate 

section 202 of the Act. Aggregate 

compensation enables sufficient 

flexibility for LPDs to adjust supply and 

deliveries based on changing market 

conditions. In any case, AMS regularly 

conducts compliance reviews of LPDs. 

AMS has also considered the 

concerns that industry stakeholders 

have presented regarding the 

importance of LPDs having the ability to 

adjust payment to maintain a 

functioning market. This regulation 

allows for reductions to compensation 

that do not otherwise violate section 202 

of the P&S Act. The LPDs are required 

to submit the prior contract, the new 

contract, and any Disclosure Documents 

related thereto. This is not a timeconsuming or costly requirement as this 

information is already readily available 

to LPDs. It also does not stifle 

innovation as it does not impact novel 

contracting practices so long as they are 

fair and not deceptive. The regulation 

does not prevent contracts from being 

updated; it only requires a minimum 

level of review to ensure that the 

changes are not unfair or deceptive. 

AMS is not, at this time, specifically 

requiring that modified contracts have, 

at a minimum, the same length as the 

period covered by the grower’s initial 

contract. Instead, AMS is focusing on 

ensuring the grower compensation in 

aggregate remain unchanged for the 

initial period of compliance, as AMS 

views that factor as being at greater risk 

of immediate, unavoidable abuse from 

LPDs than the length of contract per se. 

v. Benefit, Burden, and Cost 

Comment: Several commenters 

emphasized the need for safeguards 

against LPDs leveraging their market 

power or bargaining power to offset any 

losses incurred due to the rule. They 

argued that such protections are needed 

to ensure fair compensation for growers. 

On the other hand, industry 

stakeholders were concerned about the 

administrative burden of compliance. 

Processor commenters were opposed to 

submitting revised contracts and 

compensation data to USDA on the 

grounds that it is unnecessary and could 

lead to delays and increased costs and 

stifle innovation in contract structures. 

They argued that allowing LPDs to 

adjust base pay rates, within reason, is 

necessary to maintain a functioning 

market. An industry commenter stated 

the rule would require renegotiation of 

thousands of grower contracts, a 

potentially disruptive and costly 

process. The commenter pointed to the 

potential for uncertainty, economic risk, 

and nullification of lawful contracts. 

AMS response: AMS acknowledges 

that this regulation would require 

renegotiation of many existing grower 

contracts. Due to sunk capital costs and 

thin margins, poultry growers are 

generally at a distinct disadvantage in 

the face of contract renegotiation and 

renewal. As explained in this final rule, 

however, AMS has determined the 

current structure of many contracts is 

unfair and deceptive and therefore 

unlawful under the Act. AMS is 

providing an extended effective date for 

the provisions of this final rule to 

provide additional time for LPDs and 

growers to modify contracts or 

otherwise renew under a new, legally 

compliant system. In addition, AMS 

recognizes that growers may be at risk 

of unfairness during any transition 

period and, accordingly, is adopting a 

transition requirement for LPDs to 

submit contracts upon modification or 

renewal if those contract changes result 

in decreased grower compensation. This 

requirement is designed to enable a 

smooth transition to the new system. 

AMS review will not delay contracts, as 

AMS will not be approving the contracts 

under § 201.106(c), but rather will be 

identifying unfair practices and 

potentially commencing enforcement. 

AMS’s purpose is, as commenters urged, 

to safeguard growers against LPDs 

leveraging their market power to offset 

any costs they incur due to the rule’s 

fairer and less deceptive approach to 

payment systems. 

AMS rejects the view that this rule 

would stifle innovation in contract 

structures. It provides a small number of 

basic safeguards for the protection of 

growers, but otherwise does not dictate 

the specific manner in which LPDs 

compensate growers for their services. 

AMS is aware of a wide variation of 

existing contractual approaches to 

compensation which would remain 

permissible under this final rule. For 

example, some contracts compensate on 

a per pound base rate while others use 

a square footage contract for base 

payments or a combination. 

Performance pay will still be permitted 

at an appropriate magnitude, and LPDs 

may continue to use a range of 

approaches for comparison-based pay, 

including flock-by-flock comparisons or 

longer rolling averages as some 

contracts currently do. 

LPDs are also free to adjust base pay 

rates upwards based on grouping, 

ranking or comparison, which aligns 

with some industry views that the 

tournament system, within reason, is 

necessary to maintain a functioning 

market. LPDs can also continue to 

deduct growers’ payment for 

noncompliance with contractual 

requirements, provided it is not based 

on the outcomes of the tournament. 

B. Section 201.110 

i. Input Variability 

Comment: Overall, commenters 

broadly agreed that input variability 

poses a significant challenge to fair 

grower compensation within 

performance-based payment systems. 

While commenters acknowledged the 

difficulty of controlling certain inputs 

such as chick quality, stakeholders 

disagreed on the degree of control and 

intentionality surrounding input 

variability. Generally, growers pointed 

to examples of inconsistencies that 

impacted their performance, including 

inconsistencies in chick quality and hen 

age, which suggest a lack of control and 

potential for unfair outcomes. Industry 

commenters emphasized the challenges 

of controlling the inputs, such as chick 

quality, countering that they also lack 

control over certain inputs, particularly 

when ordered in bulk, which would 

make intentional manipulation difficult. 

One commenter challenged the 

assumption that input variability is 

intentional, controllable, and material, 

and asserted that USDA lacked evidence 

to prove the assumptions. 

Regarding the impact of input 

variability on grower performance and 

fairness, commenters argued that since 

growers have limited control over key 

inputs (e.g., chick quality, feed delivery, 

or disease management), basing 

payments on performance relative to 

these inputs is inherently unfair. They 

emphasized that settlement outcomes 

under these conditions do not 

accurately reflect grower management 

skills or effort. Other commenters 

expressed concern that excessive 

variability in inputs such as chick 


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Federal Register / Vol. 90, No. 10 / Thursday, January 16, 2025 / Rules and Regulations 5175 

39See, e.g., Muir, W.M. and SE Aggrey. Poultry 

Genetics, Breeding, and BioTechnology (2003). 

40See Burke, William, and Peter J. Sharp. ‘‘Sex 

Differences in Body Weight of Chicken Embryos.’’ 

Poultry Science 68.6 (1989): 805–810; and Beg, 

Mah, et al. Effects of Separate Sex Growing on 

Performance and Metabolic Disorders of Broilers. 

Diss. Faculty of Animal Science and Veterinary 

Medicine, Sher-e-Bangla Agricultural University, 

Dhaka, Bangladesh, 2016. 

41Breeder stock age: See Washburn, K.W., and 

R.A. Guill. ‘‘Relationship of Embryo Weight as a 

Percent of Egg Weight to Efficiency of Feed 

Utilization in the Hatched Chick.’’ Poultry Science 

53.2 (1974): 766–769; Weatherup, S.T.C., and W.H. 

Foster. ‘‘A Description of the Curve Relating Egg 

Weight and Age of Hen.’’ British Poultry Science 

21.6 (1980): 511–519; Wilson, H.R. 

‘‘Interrelationships of Egg Size, Chick Size, 

Posthatching Growth and Hatchability.’’ World’s 

Poultry Science Journal 47.1 (1991): 5–20; Goodwin, 

K. ‘‘Effect of Hatching Egg Size and Chick Size 

Upon Subsequent Growth Rate in Chickens.’’ 

Poultry Science 40 (1961): 1408–1409; Morris, R.H., 

D.F. Hessels, and R.J. Bishop. ‘‘The Relationship 

Between Hatching Egg Weight and Subsequent 

Performance of Broiler Chickens.’’ British Poultry 

Science 9.4 (1968): 305–315; Peebles, E. David, et 

al. ‘‘Effects of Breeder Age and Dietary Fat on 

Subsequent Broiler Performance. 1. Growth, 

Mortality, and Feed Conversion.’’ Poultry Science 

78.4 (1999): 505–511. AMS notes additionally that 

research in this and related areas has limitations. 

It is older and results are mixed. AMS is concerned 

that publicly available research has stagnated, 

despite the introduction of new breed strains in the 

intervening years. Because integrators now own the 

genetics companies, AMS has additional concerns 

that research has, in effect, been privatized, creating 

informational asymmetries. Based on regulatory 

experience and on public comments, growers 

believe these factors affect performance. 

42 Dozier III, W.A., et al. ‘‘Stocking Density Effects 

on Growth Performance and Processing Yields of 

Heavy Broilers,’’ Poultry Science 84 (2005): 1332– 

1338; Puron, Diego et al. ‘‘Broiler performance at 

different stocking densities.’’ Journal of Applied 

Poultry Research 4.1:55–60 (1995). 

43 Dozier III, W.A., et al. ‘‘Effects of Early SkipA-Day Feed Removal on Broiler Live Performance 

and Carcass Yield.’’ Journal of Applied Poultry 

Research 11.3 (2002): 297–303. 

44Treatments may be necessary to mitigate 

disease within a single poultry house or an entire 

flock, or to boost the performance of suboptimal 

progeny from impaired breeder flocks, as described 

above. These treatments may affect the flock’s 

growth rate or mortality. See Wells, R.G., and C.G. 

Belyawin. ‘‘Egg quality-current problems and recent 

advances.’’ Poultry science symposium series. No. 

636.513 W4. 1987. (citing Spackman, D. ‘‘The 

Effects of Disease on Egg Quality.’’). 

45Hendrickson, M. et al, ‘‘The Food System: 

Concentration and Its Impacts,’’ 3, (2020), https:// 

farmaction.us/concentrationreport/, (‘‘Globally, just 

two firms control 99% of turkey genetics, 94% of 

laying hen genetics, and 91% of broiler genetics, 

and just three firms control 47% of swine genetics 

(ETC Group 2013; Shand and Wetter 2019)’’). 

health, feed delivery, and flock pickup 

within a settlement group creates 

significant financial risk for growers, 

especially over multiple flocks. 

Industry stakeholders argued that 

requiring LPDs to control all input 

variations is impractical and could lead 

to inflexible systems that ultimately 

harm growers. 

AMS response: AMS has gathered 

significant evidence from poultry 

growers that input variability in poultry 

tournaments can lead to unfair 

comparisons, and lead to inappropriate 

burdening of risk onto growers. AMS 

does not need to find that input and 

production practice variability is 

intentional, fully controllable, or 

material in all instances by the LPD to 

reach the conclusion, based on 

academic evidence, regulatory 

experience, and complaints from 

growers, that it exists and can and 

should be mitigated by LPDs. AMS has 

identified at least the following 

differences that may affect grower 

performance: breed,39 bird sex,40

breeder stock age,41 stocking density,42

consistency of feed availability,43 and 

the type and administration of 

veterinary medicines.44 AMS also notes 

that chick genetics are currently 

proprietary and largely controlled by 

two companies, one of which is owned 

by one of the nation’s largest LPDs.45

This rule aims to set conditions on 

performance-based payment systems in 

contract poultry growing such that 

poultry growers are compared based on 

factors under their control. When 

poultry companies take appropriate 

measures, as prescribed in this rule to 

ensure a fair comparison, then contract 

poultry growing reduces a significant 

amount of risk to growers because the 

LPD provides the inputs. 

The purpose of this rule is to establish 

a framework for fair comparisons to 

prevent unfair and deceptive practices 

that reduce pay. To the extent that input 

variability is creating unfairness, the 

rule requires LPDs to mitigate the 

impacts of input variability on the 

comparison. AMS recognizes that LPDs 

have an incentive to get full economic 

value of less productive chicks. Yet it is 

incumbent upon them under the 

Packers and Stockyards Act—and this 

rule’s explicit duty of fair comparison— 

to structure their comparison-based 

compensation system to make a fair 

comparison among growers. Input 

differences should not be a significant 

variable over time in the determination 

of grower compensation. As 

commenters noted, excessive variability 

in input quality, timing, and flock 

pickup can cause significant harm to 

growers, hence the inclusion of explicit 

duties imposed on LPDs in this rule 

with respect to the design and operation 

of comparison-based poultry 

compensation schemes. Furthermore, 

LPDs must institute a non-comparisonbased system when it is impossible for 

the LPD to conduct a fair comparison 

due to extenuating circumstances. 

ii. Application, Material Difference, and 

Non-Comparison Method 

Comment: While there was broad 

agreement on the importance of fair 

compensation for all growers, some 

commenters expressed concern about 

the rule’s practicality, administrative 

burdens, and potential confusion 

regarding the definition of ‘‘material 

differences in performance.’’ 

Commenters, especially farmers’ 

coalitions and advocacy groups, 

endorsed the duty of fair comparison, 

viewing it as a key step toward ensuring 

equitable treatment for growers 

operating outside of tournament 

systems. They emphasized the need for 

transparent, data-driven mechanisms 

that guarantee fair compensation 

regardless of payment model. 

Commenters both in support of and in 

opposition to the proposed rule 

requested further clarity for the 

definition of ‘‘material differences in 

performance’’ so that growers know 

when they have suffered a specific 

prohibited harm and can confidently 

request an investigation. Commenters 

also favored a presumption of 

unfairness rather than a material 

threshold for change in pay. One 

commenter asserted that any material or 

numeric threshold for change in pay 

would be inappropriate, and that AMS 

should establish the presumption that 

providing unequal inputs to growers 

within the same settlement group is 

material to grower performance, and 

another commenter advocated for the 

use of a presumption to provide greater 

clarity and notify growers of problems 

to be addressed. 

AMS response: The preamble to this 

final rule explains that ‘‘Material 

differences in performance are 

differences that meaningfully (from the 

perspective of the grower) impact 

grower payments.’’ AMS chose not to 

publish a dollar amount because a given 

change in performance may have 

disparate impacts on growers, 

depending on the ratio of performance 

pay to total pay, the overall size of the 

grower’s operation, their level of 

indebtedness, or other factors pertaining 

to a grower’s financial position. 

AMS is not adopting a presumption of 

unfairness for differences in inputs 

because there are always differences in 

inputs in natural systems. The use of a 

presumption would be overinclusive 

and unhelpful in guiding LPDs in 

improving the fairness of their 

comparisons in relation to inputs, 

production practices, and related factors 

set out in the duty of fair comparison. 

Material change in pay is a more 


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46 88 FR 83210, November 28, 2023. 

appropriate target because the 

comparison affects the grower’s pay. 

Comment: Commenters stressed the 

importance of clearly outlining noncomparison methods within production 

contracts before they become necessary 

to provide growers with a clear 

understanding of their rights and 

options should tournament-based 

comparisons become unfair or 

impractical. Both industry stakeholders 

and advocacy groups acknowledge the 

need for clearer guidance on 

determining when fair comparison is no 

longer feasible and advocated for more 

specific criteria to guide both LPDs and 

growers. Commenters also expressed 

concern that implementation should 

appropriately address growers’ 

circumstances. 

AMS response: Fair comparison of 

growers requires that growers do not 

receive a distribution of inputs or 

assignment of production practices that 

causes material differences in 

performance from other growers to 

whom they are being compared. Factors 

outside of a grower’s control should not 

meaningfully (from the perspective of 

the grower) impact grower payments. 

This is a facts and circumstances 

analysis. 

Per § 201.110(a)(3), the noncomparison method must be included in 

the contract; therefore, growers will 

know what this method is before it is 

used. Per § 201.110(b)(1)(v), ‘‘Noncomparison,’’ requires that an LPD’s 

written processes explain when the LPD 

might remove a grower from a ranking 

group, and how the LPD will 

compensate growers removed from a 

ranking group to satisfy the noncomparison compensation method 

required under § 201.110(a)(3). There 

are myriad reasons why a grower may 

need to be removed from a ranking 

group. For example, there may not be 

enough comparable growers with which 

to make a reliable comparison in the 

current grouping and the LPD may use 

growers settling in previous periods to 

make a reliable comparison. Likewise, a 

specific grower may have received 

undesirable inputs or an assignment of 

production practices that materially 

impacted the grower’s performance, 

necessitating the removal of the grower 

from the grouping and compensation 

under a non-comparison compensation 

method. Under this provision, the LPD 

must explain how and when the LPD 

removes a grower from a ranking group 

because the grower received unfavorable 

inputs or production practices and how 

it will fairly compensate such growers 

through a non-comparison 

compensation method. 

Comment: A common theme across 

comments was addressing the inherent 

power imbalance between growers and 

LPDs, including the need to protect 

growers from retaliation. Commenters 

advocated for independent compliance 

reviews, potentially involving grower 

feedback, to ensure LPDs comply with 

the duty of fair comparison. However, 

some commenters contend that such 

requirements would create excessive 

paperwork burdens for LPDs, 

potentially hindering their ability to 

address grower needs effectively. 

AMS response: AMS monitors and 

regulates power imbalances in the 

poultry industry in accordance with the 

Act and associated regulations. AMS’s 

regulations at § 201.304 prohibit 

retaliation for asserting any of the rights 

granted under the Act or part 201 or 

asserting contract rights (9 CFR 

201.304(b)(2)(vii)). AMS’s regulations 

also prohibit retaliation by LPDs against 

poultry growers for speaking with 

government officials for the purposes of 

seeking redress for grievances brought 

under the Acts (9 CFR 201.304(b)(2)(i)). 

Moreover, this regulation aims to 

prevent injury from specific practices by 

LPDs—who possess local market power 

or bargaining power over growers. Out 

of concern that the compliance review 

process will divert poultry technicians 

from their primary responsibility to 

assist poultry growers with production 

issues, AMS has simplified the 

documentation requirements under 

§ 201.110(b)(1). This new streamlined 

documentation requirement gives LPDs 

the needed flexibility to efficiently 

incorporate compliance with this rule 

into their standard business practices. 

Additionally, this section was 

streamlined in part because the 

Transparency Rule had similar 

documentation requirements.46

Comment: To refine comparisonbased payment systems, one commenter 

suggested using shorter rolling averages 

for performance comparisons; a short 

rolling average mitigates the impact of 

seasonal variations and new breeder 

flocks on grower pay, and therefore 

might create a more level playing field 

and prevent unfair disadvantages 

stemming from factors outside a 

grower’s control. Another commenter 

advocated for contract provisions that 

would automatically adjust grower pay 

or provide avenues for redress when 

external factors, such as chick quality, 

veterinary care access, and feed quality 

negatively impact performance. 

AMS response: AMS agrees that the 

duty of fair comparison requires 

integrators to use an appropriate time 

period for comparing growers. Use of an 

inappropriate time period for the 

comparison-based compensation may be 

unfair or deceptive, and therefore 

constitute a violation of the Act. The 

final regulatory text indicates that one 

factor for the Secretary to consider when 

determining if a fair comparison has 

been made in the design or operation of 

a poultry grower ranking system is 

‘‘whether the designated time period 

used in the live poultry dealer’s 

comparison is appropriate, including 

whether the live poultry dealer uses one 

or more groupings, rankings, or 

comparisons of growers to mitigate the 

effects of any differences in inputs over 

the designated time period.’’ Under the 

duty of fair comparison provision, 

growers will be compensated through a 

non-comparison method when a fair 

comparison-based compensation 

scheme is impossible. 

iii. Appeal, Dispute Resolution 

Comment: An industry stakeholder 

expressed concern that the language 

surrounding ‘‘reasonable efforts’’ was 

not detailed enough and that this could 

create uncertainty for LPDs, potentially 

leading to inconsistent application and 

legal challenges. To provide greater 

clarity and specificity regarding the 

definition of ‘‘reasonable efforts,’’ one 

commenter suggested defining the term 

through concrete examples of both 

reasonable and unreasonable behavior 

to provide clearer expectations for both 

growers and LPDs. Another commenter 

proposed specific actions that LPDs 

should take to demonstrate ‘‘reasonable 

efforts,’’ including (1) allowing for 

grower-installed feed scales to verify 

feed amounts, (2) permitting third-party 

veterinarian selection for sick flock 

assessments, (3) providing options for 

growers to independently assess LPDcontrolled inputs, and (4) offering noncomparison compensation without fear 

of retaliation. Emphasizing grower 

agency, one commenter recommended 

empowering growers with the ability to 

independently verify inputs and 

performance factors. 

An industry commenter noted that, in 

order to fairly address and resolve a 

situation, an LPD will always depend on 

the facts and circumstances of each 

case. The commenter noted that there 

are a multitude of factors for each 

situation, making a set policy or 

procedure not conducive to the dispute 

resolution process. 

AMS response: As noted above, 

fairness requires a poultry ranking 

system that meets a reasonably reliable 

standard. LPDs must properly adjust the 

comparison-based compensation 

systems used in their poultry grower 


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ranking systems to reasonably neutralize 

the impact of inequitable distribution of 

inputs and assignment of flock 

production practices on poultry grower 

compensation, as well as to reasonably 

neutralize the impact of communication 

and dispute resolution challenges that 

are not effectively and timely addressed. 

Reasonableness is intended to be 

viewed as an objective test that accounts 

for standard industry practice, growers’ 

contract expectations, basic 

considerations of equity, and the LPD’s 

ability and willingness to prevent harms 

to growers resulting from factors outside 

growers’ control. This objective test 

should also provide some flexibility to 

LPDs in particular facts and 

circumstances to achieve distinct goals 

in management of their operations, 

provided the LPD’s goals are reasonably 

designed, appropriately documented, 

and not otherwise unfair or deceptive to 

growers. 

Although ‘‘reasonable efforts’’ follows 

the typical standard applied for 

reasonable behavior in the law—what a 

reasonable person would do under 

similar circumstances—AMS also 

recognizes that enough circumstances 

are recurring in nature that an LPD 

should in many if not most cases be 

expected to have a regularized approach 

to the concern. Ultimately, what 

constitutes reasonable efforts will 

depend on the facts and circumstances 

of each case, with the LPD’s duty 

focused on the fairness of the 

comparison(s) for the grower. 

For example, if a grower raises 

immediate and urgent concerns about 

feed quality, such as the delivery of feed 

meant for older chicks than the grower 

has, the LPD should resolve this 

concern as soon as possible to minimize 

any additional undue damage to the 

grower’s flock due to lack of proper 

nutrition. Or if a grower raises concerns 

about feed consistently being delivered 

late or in an insufficient quantity, the 

Agency would examine the LPD’s effort 

to adjust the method of delivery. Failure 

to do so would likely justify placing the 

grower into a non-comparison method. 

Without a doubt, an LPD is prohibited 

from retaliating against a grower in any 

manner for raising concerns as to 

whether a fair comparison method was 

used. Whether or not reasonable efforts 

specifically include LPDs allowing for 

grower-installed feed scales to verify 

feed amounts, permitting third-party 

veterinarian selection for sick flock 

assessments, or providing options for 

growers to independently assess LPDcontrolled inputs is not something that 

AMS intends to determine in this rule 

for all circumstances. However, to the 

extent that LPDs face repeated grower 

complaints and concerns regarding 

these matters and a track record of 

problems in resolving those complaints, 

reasonable efforts under particular facts 

and circumstances could point to the 

need for solutions such as those, 

although other less intrusive options 

may also be available. 

Regarding the comment stating that 

set policies and procedures are not 

appropriate for how LPDs resolve issues 

with growers, AMS agrees that every 

growing operation is different, and LPDs 

must be careful in designing processes 

for resolving issues with growers that 

are context specific. Yet a wide range of 

problems are commonplace enough that 

LPDs should have regularized means for 

dealing with them. To strike an 

appropriate balance and enable LPD 

complex staff to retain focus on the 

important work of helping growers, 

AMS has changed the documentation 

requirements under § 201.110(b) to be 

less specific and, instead, simply 

require LPDs to describe how they 

account for similarities and differences 

in quality or quantity of inputs 

delivered to growers and how they 

account for differences in production 

practices across growers in a poultry 

grower ranking system. 

iv. Benefit, Burden, and Cost 

Comment: Commenters highlighted 

the perceived need for greater 

transparency and fairness in grower 

compensation. While grower advocates 

believe the rule is necessary to address 

systemic issues, LPDs expressed 

concern about potential cost increases 

and impacts on grower pay. Comments 

revealed a clear divide between grower 

advocates and industry representatives. 

Grower organizations argued that the 

duty of fair comparison is crucial for 

addressing the unfair and deceptive 

practice of shifting costs and risks from 

LPDs to growers. Advocacy groups 

suggested including a list of 

presumptive violations, such as 

providing unequal inputs within the 

same settlement group, to strengthen the 

rule’s effectiveness. Several commenters 

emphasized the importance of robust 

anti-retaliation protections for growers 

who report rule violations or seek noncomparison compensation. An industry 

commenter expressed concern that 

requiring non-comparison-based pay 

could lead to lower overall 

compensation for growers. 

AMS response: AMS agrees with 

commenters that the duty of fair 

comparison plays a critical role in 

addressing the unfair and deceptive 

risk-shifting of costs and risks from 

LPDs to growers. Regarding noncomparison-based pay, the rule clearly 

states that when a fair comparison-based 

system is impossible, the LPD must 

implement a non-comparison method 

for calculating pay to ensure that factors 

outside of the growers’ control do not 

cause harm to growers through 

decreased compensation for grow-out 

services. Even where adopted, noncomparison-based pay is not 

intrinsically likely to reduce average 

grower pay; the total amounts of pay are 

entirely dependent on the LPD’s 

choices, and this rule does not ban 

bonuses for increased productivity or 

greater investment. 

AMS agrees that a presumptive list of 

violations would assist with 

enforcement and has included some 

examples of potential violations in the 

appropriate section of the preamble of 

the final rule addressing the duty of fair 

comparison. Moreover, AMS agrees that 

growers cannot be retaliated against for 

reporting a violation of the duty of fair 

comparison and have indicated as such 

in this final rule. AMS included a 

prohibition against retaliation in the 

Inclusive Competition and Market 

Integrity Under the Packers and 

Stockyards Act final rule (89 FR 16092, 

March 6, 2024). LPDs cannot retaliate 

against growers for speaking with 

government officials for the purposes of 

seeking redresses for grievances brought 

under the Act. 

Comment: Several commenters were 

concerned about the feasibility of 

implementing the documentation 

requirements for the new duty of fair 

comparison. Growers emphasized the 

need to access detailed, house-specific 

data on bird weights, feed consumption, 

and other key metrics. Some other 

commenters recommended additional 

requirements pertaining to LPDcontrolled factors and assessing 

compliance, and one commenter 

recommended USDA to require LPDs to 

equally distribute inputs and adjust 

performance-based pay to account for 

differences in inputs and treatment. An 

industry commenter argued that 

requiring LPDs to control all variations 

in inputs, as implied in 

§ 201.110(b)(1)(i), would be overly 

prescriptive and impractical given the 

scale, speed, and complexity of input 

delivery. The commenters argued that 

this could lead to inflexible systems that 

would ultimately harm growers. Other 

commenters criticized the provision for 

being vague, unfounded and lacking 

necessary explanation. 

AMS response: AMS finds that 

comparison-based pay using factors 

outside growers’ control constitutes an 

unfair practice under section 202(a) of 

the Act. While it is true that inputs 

cannot be delivered on a 100 percent 


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equal basis to all growers all the time, 

that does not mean that LPDs cannot 

construct payment systems that 

appropriately account for and mitigate 

the impact of input and flock 

production variability on grower 

compensation. The LPD does not need 

to control all variations in inputs; 

instead, the rule as proposed and 

finalized here merely requires the LPD 

to account for this variation in the 

design of a comparison-based payment 

system. AMS has been careful to 

specifically not require, nor expect, that 

identical inputs are delivered to all 

growers. 

Also, the compliance reviews have 

been removed from the final rule 

because of the speed and complexity of 

the poultry growing process. Instead, 

AMS will incorporate audits of records 

pertaining to the duty of fair comparison 

into its regular audits of LPDs to lessen 

the compliance burden of this rule. 

AMS expects the duty of fair 

comparison to substantially prevent 

unfair and deceptive practices when 

comparison-based pay is linked to input 

or flock production variation. This 

provision is written with sufficient 

specificity to tackle the problem at 

hand, while also allowing LPDs enough 

flexibility to design and operate a 

comparison-based compensation system 

that causes minimal disruption to their 

business operations. In fact, several LPD 

comments indicated they already have 

processes in place for addressing 

situations where a comparison-based 

pay system is not appropriate. This rule 

is codifying what industry stakeholders 

recognize as a best practice to create a 

level playing field and uphold the 

purpose of the tournament system in 

contract poultry growing. AMS has 

created new § 201.110(b)(1)(iii), ‘‘League 

composition,’’ which requires written 

documentation regarding how LPDs 

determine groupings of growers for 

settlement. AMS has also created new 

§ 201.110(b)(1)(iv), ‘‘Evaluation period,’’ 

requiring LPDs to have a reasonable 

time period over which they shall 

evaluate the duty of fair comparison, 

and new § 201.110(b)(1)(v), ‘‘Noncomparison,’’ which requires LPDs to 

specify when they may remove growers 

from a ranking group and how they will 

compensate such growers to satisfy the 

non-comparison compensation method 

requirement under § 201.110(a)(3). This 

is meant to account for fluctuations 

across flocks while also ensuring that 

poultry growers do not face material 

harm resulting from input quality or 

timing variation. 

Comment: Some commenters asserted 

that the proposed documentation 

requirements were burdensome and 

potentially litigious. One commenter 

argued that AMS lacked authority to 

require LPDs to conduct and document 

self-audits to evaluate P&S Act 

compliance. 

AMS response: As explained above in 

section IV., ‘‘Provisions of the Final 

Rule,’’ AMS agrees that some of the 

proposed documentation requirements 

can be streamlined. In the final rule, 

AMS is focused on only the most 

important documentation requirements 

that would assist AMS in reviewing 

LPDs’ compliance with the duty of fair 

comparison. Requirements for policies 

and procedures are not new or 

particularly controversial and are used 

widely across in the financial regulatory 

context to ensure firms are appropriate 

managing risks that cannot be entirely 

eliminated through regulation or 

otherwise. The situation is similar in the 

operation of broiler growing 

arrangements, where LPDs need to 

distribute inputs, production practices, 

and manage the needs of growers. To 

the extent that an LPD improves its 

management practices through 

maintaining policies and procedures, 

that should reduce litigation risk from 

unfair comparisons. 

AMS is removing the provision 

requiring self-audits and will 

incorporate inspection of 

documentation required under 

§ 201.110(b) into its regular compliance 

process. The compliance process 

undertaken by AMS to ensure 

compliance with the Act is routine, 

flexible, and comprehensive, thereby 

making it the ideal mechanism by 

which the provisions of this section 

shall be enforced. AMS regulatory staff 

already perform regular compliance 

audits of LPDs, so they are well 

positioned to review documentation 

describing the design and operation of 

LPDs’ poultry grower ranking systems 

and ensure that it complies with the 

duty of fair comparison. 

v. Alternatives 

Comment: Several stakeholders 

offered alternative approaches to 

address unfair compensation practices 

in the poultry industry. An advocacy 

group for growers proposed exploring 

non-comparison-based compensation 

models, such as contracts based on 

square footage, to mitigate the inherent 

issues of tournament systems. Another 

group advocated for a complete ban on 

tournament systems, based on the need 

for more stable and predictable grower 

income that is decoupled from relative 

performance within a group. 

A number of commenters expressed 

concerns about LPDs manipulating 

input distribution (e.g., chick quality, 

feed) as a form of retaliation against 

growers who challenge them or refuse to 

make capital investments. One 

commenter recommended explicitly 

defining unequal inputs within a 

settlement group as an unfair practice 

under the Act. Another commenter 

argued there are no simpler alternatives 

to directly addressing unfair 

comparisons, and that focusing on 

alternative compensation models or 

banning tournament systems wouldn’t 

fully address the root issue of unequal 

bargaining power and the potential for 

exploitation within the poultry 

industry. 

AMS response: AMS is not at this 

time adopting the alternative 

approaches to address unfair 

compensation practices in the poultry 

industry because it believes that the 

final rule’s approaches are more 

effective at addressing the identified 

concerns around unfairness and 

deception given the available evidence. 

While AMS recognizes that noncomparison-based compensation 

models, such as contracts based on 

square footage, are popular with growers 

and mitigate the inherent issues of 

tournament systems, they have other 

limitations around recognizing skill, 

effort, and investment. AMS is not at 

this time, based on the available 

evidence, able to say that tournaments 

should be banned in all circumstances 

and replaced with those noncomparison methods, especially when 

AMS believes that the approaches set 

forth in this final rule, including 

prohibiting deductions and setting a 

presumption of 25 percent limitation on 

tournament magnitude, along with a 

clearer duty of fair comparison, offer a 

more narrowly tailored approach. If the 

approaches set forth in this final rule do 

not yield sufficient change in the 

treatment of growers, AMS will evaluate 

whether those facts necessitate other 

actions. 

AMS acknowledges concerns about 

LPDs manipulating input distribution 

(e.g., chick quality, feed) as a form of 

retaliation against growers who 

challenge them or refuse to make capital 

investments. In a previous final rule, 

Inclusive Competition and Market 

Integrity Under the Packers and 

Stockyards Act (89 FR 16092, March 6, 

2024), AMS specifically set out a range 

of circumstances where retaliation is 

prohibited (9 CFR 201.304(b)). 

Moreover, new § 201.110, which 

includes requirements for maintaining 

and complying with policies and 

procedures relating to input 

distribution, is designed to better 

protect growers against precisely those 

kinds of abuses. Were an LPD to adopt 


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47Federal Trade Commission, ‘‘FTC Policy 

Statement on Unfairness’’ (1980), available at 

https://www.ftc.gov/public-statements/1980/12/ftcpolicy-statement-unfairness. Last viewed October 9, 

2024. 

48H.R. Rep. No. 85–1048 (1957), reprinted in 

1958 U.S.C.C.A.N. 5212, 5213. 

49Letter from FTC Chair Lina Khan to AMS, 

‘‘Poultry Grower Tournament Systems: Fairness and 

Related Concerns,’’ Docket No. AMS–FTPP–22–046, 

at https://www.regulations.gov/comment/ 

AMSFTPP-22-0046-0143; Michael Kades, 

‘‘Protecting livestock producers and chicken 

growers,’’ Washington Center for Equitable Growth 

(May 2022). Federal Trade Commission, Policy 

Statement on Deception, (1983), https://

www.ftc.gov/system/files/documents/public_

statements/410531/831014deceptionstmt.pdf. 15 

U.S.C. 45(n); Fed. Trade Comm’n, Policy Statement 

on Unfairness, (1980), https://www.ftc.gov/legallibrary/browse/ftc-policy-statement-unfairness; Fed. 

Trade Comm’n, Policy Statement Regarding the 

Scope of Unfair Methods of Competition Under 

Section 5 of the FTC Act, 9 (2022), https://

www.ftc.gov/legal-library/browse/policy-statementregarding-scope-unfair-methods-competition-undersection-5-federal-trade-commission. 

50 15 U.S.C. 45(a)(1) (‘‘Unfair methods of 

competition in or affecting commerce, and unfair or 

deceptive acts or practices in or affecting 

commerce, are hereby declared unlawful.’’). 

51FTC comment, submitted to Regulations.gov on 

September 10, 2024, posted on September 11, 2024. 

https://www.regulations.gov/document/AMS-FTPP21-0046-12413. 

52The House of Representatives’ report on the 

P&S Act stated that the P&S Act was the ‘‘most 

comprehensive measure and extends farther than 

any previous law in the regulation of private 

business, in time of peace, except possibly the 

Interstate Commerce Act.’’ The Conference Report 

on the P&S Act stated that: ‘‘Congress intends to 

exercise, in the bill, the fullest control of the 

packers and stockyards which the Constitution 

permits . . .’’ See, Shively, J. and Roberts, J., 

Continued 

policies and procedures that permitted 

inputs to be distributed in a retaliatory 

manner and compared growers on that 

basis, it would be in violation of the 

duty of fair comparison. And, if the LPD 

failed to comply with its policies and 

procedure requiring the equitable 

distribution of inputs and compared 

growers on that basis, that would also be 

in violation. AMS underscores that 

these principles (of pay not being 

affected by unfair input distribution) 

apply regardless of whether a 

tournament is present. Indeed, as AMS 

inquired in the proposed rule and 

affirms here, a practice (including, but 

not limited to, intentional, arbitrary, or 

punitive distribution) of unequal, 

dissimilar, or inappropriate inputs or 

flock production practices would be an 

unfair practice under the Act under any 

payment system that relies upon grower 

performance relative to inputs or 

production practices provided by the 

LPD (such as feed efficiency) 

irrespective of whether the payment 

system was a tournament. 

C. Section 201.112 

i. Additional Capital Investment 

Disclosure Document 

Comment: Commenters including 

several farmers’ coalitions supported the 

proposed additional capital investment 

disclosure requirements, asserting they 

would increase transparency and reduce 

deception. Several farmers’ coalitions 

indicated the proposed transparency 

requirements should provide lenders 

with more consistent information for 

justifying investment viability, help 

prevent producers from being misled to 

make unviable investments, deter LPDs 

from making unnecessary upgrade 

requests, and may increase incentive 

pay for additional capital investments. 

However, industry associations and 

LPDs stated that it is outside USDA’s 

statutory authority under the Act to 

require disclosures for additional capital 

investment requests. One commenter 

asserted that section 401 of the Act only 

allows AMS to require LPDs to maintain 

business records for AMS’s benefit, not 

to require disclosure of records to 

growers, and that under section 401 

AMS can only prescribe the manner and 

form in which regulated entities must 

keep transaction records if the Secretary 

finds that the records ‘‘do not fully and 

correctly disclose all transactions 

involved in the dealer’s business.’’ 

Another commenter asserted that AMS 

has failed to establish that disclosures 

are always necessary to avoid an unfair 

or deceptive practice or device. 

AMS response: The Agency believes 

that the additional disclosure 

information will help mitigate the 

information asymmetry between LPDs 

and poultry growers when entering into 

an additional capital investment 

agreement. When LPDs ask contract 

poultry growers to make additional 

capital investments but fail to be 

transparent regarding the purpose, risks, 

financial incentives and rates of return, 

those growers cannot make an informed 

business decision. Any failure to 

disclose material information essential 

to making critical business decisions is 

deceptive and also inhibits growers 

from identifying unfair practices in their 

incipiency, and so violates the Act’s 

prohibition in section 202(a) against 

unfair and deceptive practices. Section 

407 of the Act specifically authorizes 

the Secretary to implement regulations 

to carry out the provisions of the Act. 

This provision is one instance of this 

authority. Accordingly, AMS disagrees 

with the notion that the Agency lacks 

statutory authority to promulgate the 

additional capital investment disclosure 

requirements. 

In this regulation, AMS enables 

growers to better detect the risks in 

contracting because the LPDs’ contracts 

will now show the grower the real value 

of the LPDs’ offer, which they obscure 

in tournament contracts. Preventing 

deception and stopping unfairness in its 

incipiency enhances competition among 

dealers by enabling growers to compare 

offers and reasonably assess entry into 

the business. Preventing unfairness and 

deception improves how markets 

function by forcing LPDs to compete for 

growers’ services based on the merits of 

the producer’s offer and prevents likely 

injuries to competition. Preventing 

deception enables growers to better 

assess their performance vis-a`-vis other 

growers. Ultimately, the conduct at 

issue is squarely within the purposes of 

the Act. Where conduct ‘‘prevents an 

honest give and take in the market,’’ it 

‘‘deprives market participants of the 

benefits of competition’’ and ‘‘impedes 

. . . a well-functioning market.’’ 47 In its 

report on the 1958 amendments to the 

Packers and Stockyards Act, the U.S. 

House of Representatives explained that 

the statute promotes both ‘‘fair 

competition and fair trade practices’’ 

and is designed to guard ‘‘against 

[producers] receiving less than the true 

market value of their livestock.’’ 48

Moreover, other agencies that enforce 

laws prohibiting unfairness and 

deception often have used disclosure to 

prevent deception. For example, the 

FTC enforces prohibitions against unfair 

practices, unfair methods of 

competition, and deceptive practices 

arising under the FTC Act.49 Effective 

disclosure is well-established as a cure 

for deceptive practices that arise from 

information gaps in the marketplace, as 

exemplified by AMS’s existing 

disclosure requirements under 

§§ 201.100 and 102, the FTC’s 

franchisor-to-franchisee disclosure 

requirements, and a range of other 

mandated disclosures by Federal and 

State regulators. Although disclosure 

will not remedy an unfair practice, 

robust disclosure can help identify such 

practices, enabling remediation of 

unfairness at earlier stages, and so help 

stop harms in their incipiency. AMS 

believes that the parallels between the 

FTC’s section 5 authority on deceptive 

and unfair practices greatly outweigh 

any differences between the statutes 

because the language of both statutes is 

similar,50 and it is generally recognized 

that Congress wrote the Act with 

broader application than the original 

FTC Act.51 It is plain from the statutory 

language Congress wrote—and in the 

floor debates and Congressional 

reports—that the Act empowered the 

Secretary to prevent unfair and 

deceptive practices, and not merely 

enforce existing antitrust law.52


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5180 Federal Register / Vol. 90, No. 10 / Thursday, January 16, 2025 / Rules and Regulations 

‘‘Competition Under the Packers and Stockyards 

Act: What Now?’’ 15 Drake Journal of Agricultural 

Law 419, 422–423 (2010); and Current Legislation, 

22 Columbia Law Review 68, 69 (1922). 

53Public Law 100–173, 101 Stat. 918. 

54See In Re: Corn State Meat Co., Inc.; Terrance 

P. (Terry) Prince, Jr. & James L. Wiggs., 45 Agric. 

Dec. 995, 1023 (U.S.D.A. May 8, 1986); c.f. In Re: 

Danny Cobb & Crockett Livestock Sales Co., Inc., 48 

Agric. Dec. 234, 234 (U.S.D.A. Feb. 13, 1989) 

(finding bonds protect against incipient violations); 

In Re: Paul Rodman & David Rodman, 47 Agric. 

Dec. 885, 903–04 (U.S.D.A. May 27, 1988) (finding 

there is a duty to prevent all unlawful acts under 

the P&S Act, including the potential losses from 

failing to maintain a custodial account). 

55See 7 CFR 1b.4 (Listing the USDA agencies and 

agency units found to have no individual or 

cumulative effect on the human environment.). 

AMS emphasizes that disclosure 

under new § 201.112 is not, and is not 

intended to be, a remedy to unfairness 

in and of itself; rather, disclosure 

provides AMS and growers with 

information necessary to enforce their 

rights under existing § 201.216, 

‘‘Additional capital investments 

criteria,’’ and the P&S Act more broadly, 

when terms are unfair. This rule is 

meant to both cure deception and to 

identify unfairness in its incipiency to 

make enforcement under § 201.106 

possible. 

A commenter grounded opposition to 

the additional capital investment 

disclosure requirement in section 401 of 

the Act and argued that section 401 

requires dealers to maintain records for 

AMS’s benefit, not for the benefit of 

growers. The commenter also argued 

that AMS is not authorized to control 

the content of the records required 

under section 401. AMS disagrees. 

Section 202 of the Act prohibits unfair 

and deceptive practices. The disclosures 

required in this rule seek to identify or 

prevent those harms. Section 401 

complements these goals to the extent 

that disclosure is based on 

recordkeeping. Section 401 statutorily 

requires LPDs to maintain complete 

records of all their business 

transactions. Moreover, LPD obligations 

to retain information do not affect 

AMS’s ability to require the LPD to 

share the information to prevent unfair 

and deceptive practices under section 

202(a) and (b) of the Act. Growers have 

informed the Agency that LPDs 

systematically withhold information 

that the LPDs possess concerning the 

design, purposes, impacts, and other 

aspects of the contracts the LPDs make 

regarding additional capital 

investments. This regulation targets 

material omissions under section 202, 

and the commenter’s assertions 

regarding section 401 ignore how 

additional capital investment requests 

fit into the business relationship 

between LPDs and growers. When an 

LPD asks a grower to make an additional 

capital investment, that is 

fundamentally a request to modify the 

contract that the grower must consider 

under circumstances where the LPD has 

all the information on its benefits, and 

the grower has none. Therefore, when 

the LPD requests that the grower spend 

money to advance the LPD’s business 

interests, the grower may incorrectly 

infer that an additional capital 

investment must also be in the grower’s 

interest. The regulation is remedial in 

purpose and effect, exactly as Congress 

intended the Secretary to regulate when 

the Act passed in 1921, and when 

Congress amended that statute in 

1987.53

Regarding the comment that asserted 

AMS has not proven that disclosures are 

always necessary to avoid an unfair or 

deceptive act or practice, Congress did 

not require that regulation be ‘‘always’’ 

necessary. AMS is not required to 

adduce individualized evidence that the 

disclosure was necessary to every 

grower—the regulation simply must be 

necessary to prevent deception or 

identify unfairness for some growers. As 

a factual matter, AMS concludes that 

the unequal bargaining terms between 

growers and LPDs requires LPDs to 

disclose key information regarding 

additional capital investment requests 

to mitigate asymmetric information gaps 

that result in unfair and deceptive 

practices. Furthermore, transparency in 

the market requires disclosure of this 

information when LPDs request an 

additional capital investment in order to 

prevent deceptive practices. 

Comment: One commenter 

commented on the rule explaining that 

AMS lacks the authority under ‘‘Section 

410’’ to ‘‘require dealers to make a 

variety of ‘‘disclosures’’ to growers.’’ 

AMS Response: Section 410 of the 

cited material, entitled ‘‘Final date for 

making payment to cash seller or 

poultry grower’’ deals with (a) ‘‘Delivery 

of full amount due,’’ (b) ‘‘Delay or 

attempt to delay collection of funds as 

‘unfair practice, ’ ’’ and (c) ‘‘Definition of 

cash sale.’’ Section 410 makes clear that 

Congress expected the Secretary to 

protect growers from receiving less than 

full payment. The mechanism for 

reducing or delaying that payment is 

immaterial. 

The Congressional purpose of the Act 

was to stop unfair practices in their 

incipiency.54 When an LPD fails to 

make available the required disclosures 

here, the unfair practice of reducing 

pay, banned by section 410, becomes 

undetectable because the terms 

surrounding payment are not clearly 

expressed. In other words, without 

having the necessary foundational 

terms, as per the required disclosure, 

there is no way for aggrieved party or for 

USDA to see a reduction of pay as there 

has been no set baseline. Congress 

expected USDA to take a proactive 

approach to prevent this sort of harm, 

which hurts both the grower and the 

market, because it destroys the ability of 

growers to continue in the business and 

reduces the supply of growers willing to 

contract. Thus, among the other 

authorities in the Act, USDA also 

believes this regulation implements 

provisions of section 410 of the Act. 

Comment: Several advocacy 

organizations suggested additional 

disclosure of cost and liability burden 

for environmental compliance. 

AMS response: AMS appreciates these 

comments and understands the 

importance of properly allocating cost 

and liability burden for environmental 

compliance in the poultry industry. 

However, AMS did not consider that in 

the proposed rule, and P&S Act 

regulations in general do not impact the 

environment.55 To the extent that the 

costs of environmental compliance are 

grower variable costs under particular 

poultry growing arrangements, they 

should be disclosed by the LPD under 

the requirement to disclose information 

relating to grower variable costs (9 CFR 

201.102(d)(3)). Therefore, AMS made no 

changes to the rule as proposed based 

on these comments. 

Comment: One commenter suggested 

that AMS make additional capital 

investment requests and disclosures 

public to other growers and track the 

frequency of additional capital 

investment requests and grower 

complaints of coercion, retaliation, or 

arbitrariness. 

AMS response: This rule is not 

designed to make private business 

arrangements and agreements public 

information. Furthermore, AMS is not 

contemplating such a shift as the 

dissemination of private business 

arrangements and agreements would 

require additional regulatory provisions, 

justifications, and safeguards that do not 

fall under the purview of this rule. 

Rather, this rule is designed to help 

poultry growers understand why they 

are being requested to make additional 

capital investments, how entering into 

those contracts will impact their pay, 

how long it will take to complete 

additional capital investments, potential 

conflicts of interest with LPD personnel 

or their family members, required 

vendors/manufacturers, and expected 

returns from the investment. This 

information will help growers make 


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effective business decisions, and, when 

shared with AMS, identify 

circumstances that may be unfair. 

With respect to AMS tracking the 

frequency of additional capital 

investment requests and grower 

complaints of coercion, retaliation, or 

arbitrariness, AMS agrees that market 

monitoring is important and invites 

growers to contact AMS at 

farmerfairness.gov or call 1–833–DIAL– 

PSD (1–833–342–5773) when they have 

concerns regarding additional capital 

investments they encounter and 

especially if they feel they are being 

subject to coercion, retaliation, or 

arbitrariness. 

Comment: An advocacy association 

suggested that all additional capital 

investments should be subject to the 

same disclosures and prohibitions. 

AMS response: The requirement to 

provide the disclosure will be triggered 

when the LPD requests the grower make 

an additional capital investment. There 

is no threshold below which this 

disclosure requirement does not apply. 

Nor are there any exclusions or 

exemptions for additional capital 

investment disclosures for other 

reasons. 

Additional capital investment 

prohibitions, however, will be 

considered on a facts-and-circumstances 

basis under the criteria set forth in 

§ 201.216 of AMS’s regulations and 

generally under section 202 of the Act. 

AMS does not in this rule identify 

specific prohibitions. To the extent that 

AMS identified an additional capital 

investment practice that was unfair, 

AMS would seek to stop the practice 

through an enforcement action and 

communicate its intent to stop such 

practices in similar circumstances. 

Comment: Several commenters 

suggested that LPDs should be required 

to make all additional capital 

investment contracts guaranteed for the 

duration of the loan required to pay for 

the additional capital investment. 

AMS response: AMS acknowledges 

the concerns of the commenters and 

advocacy groups. If an LPD requests 

additional capital investments without 

guaranteeing that the grower will have 

a contract that is sufficient to recoup the 

costs of the investment or loan, such 

conduct could violate section 202 of the 

P&S Act, including by being unfair 

under section 202(a). AMS will monitor 

these practices and enforce on a case-bycase basis. 

Comment: Several advocacy 

organizations supported the inclusion of 

LPDs’ motives for the additional capital 

investment request in the Disclosure 

Document. 

AMS response: AMS agrees that it is 

important for growers to know why an 

LPD requests an additional capital 

investment. As proposed, AMS 

included in § 201.112(b)(1) language 

requiring the LPD to disclose the 

purpose of the additional capital 

investment to both the LPD and the 

grower. Although AMS underscores that 

the inquiry should be focused on 

objective purposes and desired 

outcomes rather than a potentially 

vague concept of motives, the paragraph 

(b)(1) disclosures would mandate the 

full and complete presentation of any 

purposes of the additional capital 

investment. Partial disclosure of 

anything less than the LPD’s full range 

of purposes would not be considered 

compliance with the provision because 

growers need to understand the full 

range of risks they are taking on, 

including to be able to identify potential 

sources of unfairness. 

The provision also requires a 

summary of all research or other 

supporting material that the LPD has 

relied upon in justifying the additional 

capital investment. This requirement 

seeks to elicit the basis of the additional 

capital investment and permit the 

grower the ability to better understand, 

as well as evaluate, the reliability of that 

basis. 

Overall, AMS has included this 

provision around purpose, research, and 

supporting material because alleviating 

some of the information asymmetry 

between LPDs and growers through the 

disclosure of purposes and motivations 

for an additional capital investment will 

help poultry growers make better 

business decisions. Furthermore, the 

requirement for information regarding 

purposes and motivations will help 

poultry growers know if that particular 

additional capital investment request is 

for experimental or research purposes, 

and thus appreciate the degree of risk 

the grower is taking on in the additional 

capital investment. AMS did not make 

any changes to the regulation as 

proposed in response to this comment. 

Comment: Farmers’ coalitions 

indicated a clear disclosure of financial 

incentives is essential to a grower’s 

cashflow modeling. Advocacy 

associations requested further 

requirements for the analysis of 

projected returns. These suggested 

requirements include (1) a review of the 

projected returns by a disinterested 

third party and (2) the use of a 

standardized projected return form. 

AMS response: The Agency agrees 

with the comment that clear disclosure 

of financial incentives is essential. 

Under the final rule, LPDs must disclose 

all financial incentives and 

compensation for the grower associated 

with the additional capital investment 

(§ 201.112(b)(2)), along with any 

financial benefits that the LPD or any of 

its officers, directors, decision-making 

employees (as discussed above), or close 

family members receive from the use of 

an LPD-required manufacturer or 

vendor in connection with an additional 

capital investment (§ 201.112(b)(5)). 

AMS added the requirement regarding 

financial benefits accrued to an LPD or 

its affiliates as a result of an additional 

capital investment in the final rule to 

provide greater transparency regarding 

the financial components of an 

additional capital investment. For the 

time being, AMS is making no further 

changes to § 201.112. 

Comment: Several commenters 

suggested AMS should require the use 

of plain language in disclosure 

documents, especially the descriptions 

of financial terms. Advocacy 

organizations stressed the importance of 

standardizing disclosure documents 

(e.g., the format for reporting projected 

returns and delivery expectations). 

Industry commenters requested that 

AMS clarify certain aspects of the 

disclosure document, including the 

description of ‘‘relevant’’ information 

and of the summary justifying an 

additional capital investment. 

AMS response: Section 201.112(b) 

requires that the Disclosure Document 

present disclosures in a ‘‘clear, concise, 

and understandable manner.’’ The 

Agency acknowledges the potential 

benefits of standardizing Disclosure 

Documents but is not requiring a 

specific form for this required 

disclosure. 

AMS appreciates the commenters’ 

interest in additional clarity. However, 

AMS declines to adopt more specific 

terms in the regulatory text because 

specificity reduces the LPDs’ and 

growers’ contracting flexibility. The 

nature and circumstances of additional 

capital investment varies. Some 

additional capital investments may be 

oriented on technology designed to 

enhance the efficient use of inputs or to 

deliver more uniform growout of birds. 

Other additional capital investments 

may be oriented towards delivering 

particular production practices that 

consumers seek, such as no antibiotics 

use. In those examples, the purpose and 

construction of the additional capital 

investments are quite different. Rigid 

specificity in the disclosure 

requirements may create confusion or 

even limit the disclosures’ effectiveness. 

AMS’s purposes for the disclosure of 

this information in § 201.112 is to help 

poultry growers understand how the 

additional capital investment is 


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56Abby Budimen, ‘‘Hmong in the U.S. Fact 

Sheet,’’ Pew Research Center’s Social & 

Demographic Trends Project (May 24, 2022), 

available at https://www.pewresearch.org/socialtrends/fact-sheet/asian-americans-hmong-in-the-us/. 

intended to affect their operation and 

the risks and opportunities they may be 

taking on as a whole. AMS values 

comprehensive coverage rather than 

standardization. 

With respect to the term ‘‘relevant,’’ 

AMS agrees that its inclusion in 

paragraphs (b)(1) through (3) is 

superfluous to meaning of the sentences 

as drafted. Accordingly, AMS is 

removing it in this final rule and is 

revising paragraph (b)(1) slightly from 

‘‘any research or other supporting 

material’’ to ‘‘all research and other 

supporting material’’ to be consistent 

with the phrasing in paragraphs (b)(2) 

and (3). There is no change in the 

intended meaning. 

Comment: Some commenters 

requested that translations of the 

Disclosure Document be made available 

in languages other than English. 

AMS response: AMS appreciates this 

comment and acknowledges that 

disclosure has a basis in understanding; 

after all, the proposal included a 

requirement that the disclosure be 

‘‘clear, concise, and understandable.’’ 

Language can be a barrier to effective 

disclosure. To mitigate the barriers to 

this disclosure, we have added 

paragraph § 201.112(c), which requires 

the LPD to ‘‘make reasonable efforts to 

ensure that growers are aware of their 

right to request translation assistance 

and to assist the grower in translating 

the Capital Improvement Disclosure 

Document.’’ AMS takes note of the Civil 

Rights Impact Analysis located in 

section VI.G. of this rule that highlights 

the disproportionate impact of the rule 

on Asian-Pacific Island persons. Some 

commenters also indicated a need to 

ensure growers who are not native 

speakers of English can understand the 

disclosures. As noted by multiple 

commenters, non-native speakers of 

English are engaged in poultry growing. 

For example, in the early 2000s, large 

numbers of first-generation immigrant 

Hmong people, many of whom had been 

farmers in their native Laos, moved 

from urban areas in California, 

Minnesota, and North Carolina to the 

Ozark region in and around southwest 

Missouri and started growing poultry. 

Pew Research Center studies show that 

the English proficiency of the Hmong 

population in the U.S. in 2019 was only 

68 percent and, among foreign-born 

Hmong, English proficiency is just 43 

percent.56 Data supports the concerns 

expressed by commenters regarding 

providing poultry growers information 

in a manner growers are able to 

understand. AMS agrees that providing 

documents in the language growers best 

understand ensures fairness and reduces 

the risk of deception. Therefore, AMS 

added new language to the final rule to 

require that LPDs must make reasonable 

efforts to ensure that growers are aware 

of their right to request translation 

assistance and to assist the grower in 

translating the Disclosure Document. 

Historically, many growers have been 

immigrants who may not be fully 

proficient in English; hence, this rule’s 

goal of preventing deception would not 

be fully accomplished without LPDs 

providing reasonable assistance to help 

growers understand the disclosures in 

their most competent language upon its 

delivery. Notably, the translation 

requirements under § 201.102(g)(4) 

would apply to disclosures made under 

§ 201.112 if the latter is applicable to the 

LPD and incorporates what is otherwise 

required under § 201.102(d)(2)(i) and (ii) 

in a single disclosure that meets the 

requirements of both § 201.112 and 

§ 201.102(d)(2)(i) and (ii). 

ii. Additional Capital Investment 

Unfairness 

Comment: Growers stated the 

disclosure provisions should prioritize 

preventing harm to growers rather than 

focusing on enforcement after the fact. 

They further asserted that full 

transparency from poultry companies is 

crucial to ensure a level playing field. 

Several commenters were concerned 

that the proposed rule did not address 

the power imbalances that exist when 

negotiating additional capital 

investments. This imbalance creates an 

inherent pressure for producers to 

comply with LPD requests; even 

‘‘optional’’ or ‘‘voluntary’’ terms in a 

producer’s contract may amount to an 

unfair burden on producers given their 

fear of retaliation. Advocacy 

organizations and other commenters 

requested further provisions to protect 

growers from unfairness, excessive debt, 

and retaliation. 

AMS response: AMS appreciates and 

agrees with the comments that 

preventing harm to growers is preferable 

to enforcement after the fact. Indeed, the 

purpose of this disclosure rule is to help 

equalize the negotiating powers between 

poultry growers and LPDs. There is an 

asymmetric power imbalance between 

LPDs and poultry growers when 

deciding to undertake an additional 

capital investment and the goal of the 

new regulation is to equalize the footing 

of these parties prior to agreeing to an 

additional capital investment. To better 

enable AMS and growers to protect 

against unfairness and deception, the 

rule requires that LPDs disclose and 

record more information regarding the 

additional capital investments they 

request from broiler growers. The 

disclosures must occur before growers 

take on the financial burden and risks 

of the additional capital investment. 

The provision of such information is 

not, in and of itself, the cure for 

unfairness, but rather a key tool for 

AMS and growers to halt abusive 

practices by arming them with the 

ability to identify those challenges 

sooner. Indeed, disclosure has 

historically been one of the most 

powerful tools for preventing harms to 

growers by bringing practices to light 

early, and also subjecting those 

practices to the clarifying light of 

transparency. 

AMS further underscores that leveling 

the playing field for growers is one of 

the main purposes of this provision. 

This rule is designed to reduce 

deception, strengthen poultry growers’ 

negotiating position, and aid in their 

ability to identify and address unfair 

practices. The Agency believes that this 

disclosure requirement for requested 

additional capital investments will 

reduce information asymmetry between 

LPDs and poultry growers, thus helping 

poultry growers make more informed 

business decisions about additional 

capital investments. Reducing 

information asymmetry, by definition, 

helps mitigate power imbalances. 

However, AMS also acknowledges 

that this rule does not solve all 

challenges that growers may face arising 

from power imbalances between LPDs 

and growers, especially in concentrated 

local markets and in the context of holdup risks and dependency arising from 

vertical contracting arrangements. To 

that end, AMS underscores its 

commitment to vigorous enforcement of 

§ 201.216, which sets out criteria that 

AMS utilizes in identifying and 

enforcing against unfair additional 

capital investment practices. When the 

cost of the required additional capital 

investments cannot reasonably be 

expected to be recouped by the poultry 

grower, that failure is likely to be 

dispositive that the investment is unfair 

(§ 201.216(f)). AMS agrees with the 

commenter’s perspective on the 

importance of protecting growers from 

unfairness, excessive debt, and 

retaliation (discussed more fully below 

in the next comment response). Indeed, 

AMS is adopting this disclosure rule to 

enhance growers’ and AMS’s ability to 

identify and take swift action against 

unfair practices and the risk of unfair 

additional capital investment under 

existing § 201.216. That regulation sets 


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forth criteria for whether additional 

capital investments would be an unfair 

practice or other violation of the Act. 

These criteria include whether the 

grower can decide against the additional 

capital investments; whether the 

additional capital investments were a 

result of coercion, retaliation, or threats 

by the LPD; and whether the additional 

capital investments can result in 

reasonable recoupment, or adequate 

compensation for the additional capital 

investments, among other nonexhaustive criteria. However, AMS has 

found that the presence of the criteria 

alone is insufficient to effectively 

address problems stemming from 

additional capital investments. AMS 

and growers lack the data necessary to 

analyze whether an additional capital 

investment violates the criteria. 

Moreover, if an additional capital 

investment is unfair, the grower has 

both investment and debt, and the 

additional capital investment is 

impossible to unwind. Technical 

specifications can make switching 

costly (where even possible), and 

alternative uses at similar compensation 

rates are nearly nonexistent. 

Comment: Several commenters 

requested additional protection against 

retaliation for growers who refuse 

additional capital investment requests. 

Some commenters expressed concern 

regarding retaliation if additional capital 

investment requests are refused. One 

commenter requested AMS monitor 

complaints of coercion in relation to 

additional capital investment request 

refusals. 

AMS response: AMS agrees that 

retaliation is likely to harm competition 

and growers. AMS’s regulations at 

§ 201.304 recognize that retaliation for 

asserting any of the rights granted under 

the Act or part 201, or asserting contract 

rights (9 CFR 201.304(b)(2)(vii)), violates 

the Act. LPDs also violate the Act if they 

retaliate against poultry growers for 

speaking with government officials for 

the purposes of seeking redress for 

grievances brought under the Acts (9 

CFR 201.304(b)(2)(i)). AMS fully agrees 

that without those existing retaliation 

protections, poultry growers are in a 

weak position to refuse additional 

capital investment requests making the 

disclosure requirement ineffective. 

AMS regularly reviews LPDs for P&S 

Act compliance, and AMS expects to 

review Disclosure Documents for 

compliance. Growers who experience 

coercion should contact AMS regarding 

possible violations of the Act. AMS also 

notes that existing § 201.216 would help 

address these problems. The regulation 

sets forth criteria for whether additional 

capital investments would be an unfair 

practice or other violation of the Act. 

These criteria include whether the 

growers can choose to decline 

additional capital investments; whether 

the additional capital investments were 

a result of coercion, retaliation, or 

threats by the LPD; and whether the 

additional capital investments can 

result in reasonable recoupment, or 

adequate compensation for the 

additional capital investments, among 

other non-exhaustive criteria. AMS did 

not make any changes to the regulations 

as proposed in response to this 

comment. 

Comment: Many commenters 

emphasized the need for grower 

protection against debt and assurance of 

return on investments. Advocacy 

organizations and others also suggested 

adding a requirement that LPDs shall 

not mandate additional capital 

investments unless the cost can be 

reasonably recouped by the grower. 

Advocacy organizations indicated that 

projected recoupment should only be 

evaluated based on non-performance 

(base) pay. Many commenters also 

suggested contracts should be 

guaranteed to match the duration of 

loans or ensure a reasonable rate of 

return to recover additional capital 

investment costs. Advocacy 

organizations suggested growers should 

reserve the right to renew contracts until 

additional capital investment debt is 

fully serviced. 

AMS response: Under § 201.112(b)(2) 

and (3), LPDs would be required to 

disclose all relevant financial incentives 

and compensation associated with an 

additional capital investment and 

establish a schedule of expected grower 

construction for new additional capital 

investments. Financial incentives would 

include all incentives relating to the 

additional capital investment, including 

explicit incentive payment additions to 

base pay rates or performance 

compensation amounts, as well as what 

assumptions and risks undergird or may 

put at risk those incentives. Clearly 

disclosing financial incentives would 

assist the grower in assessing the 

relative risks of non-recoupment, as the 

reliability of those incentives may vary 

based on the duration of the contract 

and whether other growers are likely to 

incorporate the additional capital 

investment technology in a way that 

would make recoupment through 

performance pay less reliable. Clearly 

disclosing expected grower construction 

schedules and other repayment 

schedules also would assist the grower 

in assessing incentives and risks relating 

to borrowing, construction, and 

payment timing. Similarly, the 

requirement under § 201.112(b)(4) and 

(5) for LPDs to clearly disclose their 

expectations regarding housing 

specifications and required or approved 

manufacturers or vendors will position 

growers to better analyze the business 

risk in undertaking an additional capital 

investment. An important goal of this 

rule is to give the poultry grower 

adequate information so that they may 

make an informed decision, identify 

risks and opportunities based on their 

knowledge of their own costs and 

earning opportunities, including as 

disclosed in existing regulations such as 

§ 201.102. 

AMS remains committed to protecting 

growers to the maximum extent possible 

from practices that prevent growers 

from fully recouping their additional 

capital investment. An LPD’s failure to 

provide a reasonable opportunity for a 

grower to recoup the cost of a required 

(including ostensibly requested but in 

practice coerced) additional capital 

investments would be expected to 

violate § 201.216. AMS recognizes that 

growers cannot avoid the unfair exercise 

of market power and failing to 

sufficiently and fairly compensate 

growers is not a cognizable benefit to 

growers or to competition. Any 

reasonable recoupment analysis is factspecific, but it principally relies on the 

following criteria: (1) the information 

required to be disclosed under 

§ 201.112; (2) whether the contract term, 

including sufficient flock placements 

and density, extends at least as long as 

the projected timeline for returns set 

forth in that analysis; and (3) whether 

basic returns would cover the costs of 

the additional capital investment for the 

reasonable grower in the complex that 

performs under the contract. AMS is not 

adopting a requirement that projected 

recoupment only be evaluated based on 

non-performance (base) pay. The actual 

purpose of performance pay can vary 

greatly across different LPDs and even 

between complexes. 

AMS recognizes the grower concerns 

that give rise to those comments, but at 

this time intends to take a case-by-case 

approach to enforcement in part because 

the range of grower situations require 

any unfairness analysis to be tailored to 

the particular facts and circumstances. 

As noted in the paragraph above, 

contract term and renewals 

opportunities are relevant 

considerations in any recoupment or 

rate of return analysis owing to the 

heavy reliance interest that the grower 

has in the broiler growing arrangement, 

but AMS declines at this time to set 

forth a rule for all cases. AMS may 

revisit this determination following 

implementation of this rule and 

additional familiarity with the success 


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57 89 FR 49002, 49025, June 10, 2024. 

or limitations of its current case-by-case 

enforcement approach. 

Comment: Some commenters 

suggested growers should be ensured 

leniency for delays in construction 

schedules due to labor and supply 

shortages outside their control. 

AMS response: AMS acknowledges 

this comment regarding leniency for 

construction schedules, and the 

disclosure of the construction schedule 

under § 201.112(b)(3) is designed to 

help growers identify their risks in 

implementing an additional capital 

investment. However, as a disclosure 

requirement, it is intended to aid 

poultry growers by obligating that LPDs 

share relevant information regarding an 

additional capital investment request, so 

that the growers can make better 

decisions. It is also designed to help 

growers address potential unfairness 

relating to additional capital 

investment. To the extent that growers 

conclude that an LPD’s failure to 

provide leniency on construction 

schedules caused an unavoidable harm, 

the grower may consider reporting the 

matter to AMS for investigation into 

whether the LPD has committed an 

unfair practice. 

Comment: Some commenters 

indicated that LPDs should not be 

allowed to require growers to use 

certain equipment or vendors, 

especially when those LPDs hold any 

amount of financial interest in those 

equipment companies or specifically 

required vendors. 

AMS response: AMS appreciates the 

concerns that this comment raises 

around grower freedom to operate and 

especially regarding conflicts of interest 

around additional capital investment. 

The Agency recognizes that growers rely 

on construction schedules, housing 

specification requirements, and 

approved manufacturers or vendors 

when implementing an additional 

capital investment. In this final rule, 

AMS is enhancing the disclosure of 

required equipment and vendors in 

§ 201.112(b)(5) with an additional 

conflict of interest provision requiring 

the disclosure of ‘‘all financial benefits, 

if any, that the live poultry dealer or any 

officer, director, decision-making 

employee, or close family member of 

any such person, receives from the use 

of the required or approved 

manufacturer or vendor.’’ 

In the proposed rule, AMS asked, 

‘‘Should proposed § 201.112(b)(5), 

which requires LPDs to disclose 

required or approved manufacturers or 

vendors, also require the disclosure of 

any material financial benefits that the 

LPD, or any officer, director, employee 

or family member of any such person, 

receives from the use of the required or 

approved vendor? If so, please explain 

why for each party recommended to be 

covered, including examples and 

explanation where available.’’ 57 In 

adopting this provision, which is 

similar to a disclosure that the Federal 

Trade Commission requires under its 

Franchise Rule (16 CFR 436.5(h)), 

AMS’s goal is to help enable a grower 

to identify certain risks relating to the 

additional capital investment and 

potentially unfair or otherwise 

impermissible additional capital 

investment practices under § 201.116. 

For example, the disclosure should help 

growers identify conflicts of interest, 

favoritism, kickbacks, or financial 

benefits that may call into question the 

purposes of the additional capital 

investment. This should help combat 

the incentive problem inherent where 

one party has the decision-making 

power (LPDs) and another bears the 

costs (growers). LPDs are incentivized to 

seek out manufacturers and vendors that 

offer them the best incentives, not 

necessarily the manufacturers and 

vendors that offer the best deal for 

growers. This problem has been 

reported to AMS over the years to exist 

even at the level of complex managers 

who may have discretion over certain 

aspects of additional capital investment 

implementation. 

Disclosure of a relationship between 

an LPD and its equipment or vendors 

does not mean that the relationship is 

lawful. An LPD’s choice of vendor may 

be unfair or even anticompetitive in 

violation of the Act, such as contracting 

in bad faith or engaging in 

anticompetitive tying. But, at this time, 

AMS has designed this regulation to 

protect growers from unfairness and 

deception—for example by omissions or 

conflicts of interests—and not to 

specifically ban an LPD’s choice of 

vendor. 

iii. Benefit, Burden, and Cost 

Comment: A number of stakeholders 

commented on the rule stating that it is 

similar to the Transparency Rule and 

that much of the information being 

requested in this rule is already 

provided to the poultry growers and that 

this rule is therefore frivolous. An 

industry commenter suggested there is 

sufficient regulation regarding 

additional capital investment issues. 

AMS response: AMS recognizes the 

value of the Transparency Rule, 

including in helping growers 

understand financial opportunities 

relating to contract modifications and 

additional capital investment. However, 

the Transparency Rule does not require 

the disclosure of information specific to 

the additional capital investment 

request, nor does it prohibit certain 

practices relating to base pay and unfair 

comparisons which this final rule does. 

LPDs possess information about the 

expected purposes, processes, and 

outcomes relating to additional capital 

investments that growers do not have 

and cannot obtain independently. 

Therefore, LPDs exert substantial 

control over growers’ ability to evaluate 

the economic and financial feasibility of 

an additional capital investment while 

possessing the power to impose all 

additional capital investment costs on 

growers. Growers lack the bargaining 

power to demand the information they 

need to make decisions for their 

financial benefit. The inability to access 

this information frustrates growers’ and 

AMS’s ability to identify and therefore 

halt unfair practices in a timely manner. 

AMS has found transaction records 

around the financial incentives and the 

financial analysis insufficient to 

evaluate the compliance of additional 

capital investments under the Act 

generally. Therefore, even with the 

additional information that AMS and 

poultry dealers receive because of the 

Transparency Rule, this additional 

capital investment disclosure 

requirement is meant to ascertain 

different information than the 

information that results from 

compliance with the Transparency Rule. 

AMS also disagrees with the position 

that there is sufficient regulation on this 

issue overall. Although § 201.216 sets 

out criteria around unfair additional 

capital investment, AMS has found 

§ 201.216 challenging to implement in 

practice without sufficient real-time 

transparency into additional capital 

investment programs as they occur. As 

noted above, this is the first rule that 

addresses the information divide 

between poultry growers and LPDs 

regarding additional capital investment 

requests. Previous rules, namely the 

Transparency Rule, have required 

different kinds of information, such as 

settlement sheets, summaries of the 

LPD’s litigation history with broiler 

growers and its bankruptcy filings over 

the past 5 years, whereas this rule 

covers only additional capital 

investment requests and related 

materials. 

Comment: Some commenters were 

concerned about unnecessary additional 

capital investment requests. Farmers’ 

coalitions proffered that transparency 

requirements would result in fewer 

unnecessary additional capital 

investment requests. 


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58See, e.g., 9 CFR 201.216, ‘‘Additional capital 

investments criteria.’’ 

59Elam, Thomas, ‘‘Live Chicken Production 

Trends,’’ March 2022, Live-Chicken-ProductionFARMECON-LLC-2022-revision-FINAL.pdf 

(nationalchickencouncil.org). 

60 Giri, Anil and Subedi, Dipak, Farm Businesses 

Well-Positioned Financially Despite High Interest 

Rates, U.S. Department of Agriculture, Economic 

Research Service (2024), https://www.ers.usda.gov/ 

amber-waves/2024/july/farm-businesses-wellpositioned-financially-despite-high-interest-rates/ 

(In 2022, poultry farms carried the highest average 

debt-to-asset ratio in 2022: 26.7 (6 times that for all 

farm businesses), 28.7 (2.6x), and 17.4 (1.3x) 

percent for small, midsize, and large family farm 

businesses, respectively; while all farm businesses 

caried average debt-to-asset ratios of 4.2, 10.8, and 

13.1 percent, respectively). 

61Whitt, Christine, USDA Economic Research 

Service, Fees paid to growers for raising broiler 

chickens varied widely in 2020, (2022), https://

www.ers.usda.gov/data-products/chart-gallery/ 

gallery/chart-detail/?chartId=104642 (Median 

income does not tell the whole story. The range of 

household incomes earned by contract broiler 

growers is wider than other groups. The bottom 20 

percent of contract broiler growers earns $170,871 

less than those in the top 20 percent, compared to 

$123,094 for all farm households, and $114,084 for 

all U.S. households. The wider range reflects, in 

part, the financial risks associated with contract 

broiler production); MacDonald, James M. 2014, 

Technology, Organization, and Financial 

Performance in U.S. Broiler Production, EIB–126, 

USDA Economic Research Service, https://

www.ers.usda.gov/webdocs/publications/43869/ 

48159_eib126.pdf?v=1829.6. 

62See Been v. O.K. Indus., Inc., 495 F.3d 1217, 

1227 (10th Cir. 2007). 

63 Id. at 1230 citing Excel Corp. v. U.S. Dept. of 

Agriculture, 397 F.3d 1285, 1293 (10th Cir. 2005) 

Continued 

AMS response: The extent to which 

additional transparency may reduce the 

amount of additional capital investment 

requests that are either unnecessary or 

that do not add clear value to farms is 

not a determination that AMS can make. 

This final rule is a transparency rule to 

address deceptive conduct, but it is also 

designed to assist growers in identifying 

potential unfairness in additional 

capital investments. An additional 

capital investment with a speculative 

purpose or one not grounded in research 

and reasonable estimates—a concern 

that growers have reported to AMS 

regarding additional capital 

investments—would be more apparent 

if AMS and growers are able to review 

an LPD’s representations about the 

purpose of an additional capital 

investment, the research associated with 

it, and an LPD’s expectation of costs, 

construction schedules, and approved 

vendors for the additional capital 

investment. AMS emphasizes that 

disclosure under new § 201.112 is not, 

and is not intended to be, a remedy to 

unfairness in and of itself; rather, 

disclosure provides AMS and growers 

with information necessary to enforce 

their rights under existing § 201.216, 

‘‘Additional capital investments 

criteria,’’ and the P&S Act more broadly, 

when terms are unfair. Without 

sufficient, simple, and clear disclosures, 

growers cannot assess the benefits or 

risks of making the investment. Indeed, 

given the role of performance in 

determining compensation under the 

tournament, growers often cannot 

determine whether a program presented 

as voluntary is, for all practical 

purposes, mandatory without 

understanding the purposes, processes, 

and outcomes. Unfair practices, which 

can encompass additional capital 

investments, are illegal under section 

202(a) of the Act, even if fully 

disclosed.58 AMS did not make any 

changes to the rule as proposed in 

response to these comments. 

D. Other Comments About the Proposed 

Rule 

Comment: One processor pointed to a 

study prepared for the National Chicken 

Council that captured live chicken 

production statistics from 2021.59 The 

survey results indicated that ‘‘current 

poultry grower contracting relationships 

are mutually beneficial, successful, and 

profitable for both growers and 

integrators.’’ The survey found that 

among growers polled, despite options 

to work with different integrators, most 

growers have been with their current 

integrator for over five years and that 

the default rates on loans for poultry 

growers and integrators are low. Overall, 

the commenter argued that the current 

poultry grower compensation system 

works well, resulting in a highly 

efficient market and lower prices for 

consumers. 

AMS response: The comment 

indicates that current poultry grower 

contracting relationships are mutually 

beneficial to growers and integrators 

and utilizes survey results showing how 

long current farmers have been with 

their company and loan default rates to 

demonstrate this. This rule addresses 

specific components of the broiler 

growing compensation system that AMS 

has received multiple complaints and 

comments about and that the Agency 

has determined constitute unfair or 

deceptive acts or practices. The rule 

does not prohibit incentive payments, 

which some commenters would like to 

retain and suggest are a beneficial part 

of the tournament system. The 

comment, however, does not necessarily 

measure if growers support or oppose 

specific provisions of this rule. Other 

reasons may explain the duration 

farmers have been with their current 

dealer or experience low rates of 

default. AMS notes that growers may 

not switch because of barriers to 

switching: even when growers have 

other competitor LPDs, the competitor 

may not be recruiting or may require 

LPD-specific equipment changes, among 

other reasons. The commenter says that, 

according to a survey of farmers 

associated with member companies of 

the organization submitting the 

comment, a small percentage of farmers 

depart due to contract terminations. The 

described methodology does not say if 

the survey represents all growers, 

including dissatisfied growers or exgrowers. This methodological 

consideration aside, the survey results 

do not address specific provisions of the 

rule. 

The comment also cites data showing 

higher median incomes for broiler 

growers and lower loan deficiency and 

charge-off rates for chicken farmers 

compared to other types of farming 

operations to indicate the mutual 

benefits of the current poultry 

contracting system. While such 

comparisons provide some insight into 

the financial condition of poultry 

growers, they do not capture the full 

picture. For example, poultry growers 

carry the highest debt to asset ratios of 

all agricultural commodity operations.60

Additionally, the income variability for 

broiler growers is much higher than that 

for all agricultural producers or U.S. 

households.61

Comment: Industry associations 

commented on the rule, explaining that 

AMS only has the authority to prohibit 

conduct with an anticompetitive effect. 

AMS response: Section 202(a) of the 

Act prohibits any unfair practice or 

device. As noted earlier, in section 407 

of the Act Congress granted to the 

Secretary the authority to write 

regulations to effectuate the Act’s 

purposes. Under the Act, this authority 

includes issuing regulations to, among 

other things, define the obligations that 

the Agency is charged with enforcing. 

AMS believes this includes the power to 

prevent LPDs from engaging in unfair, 

unjustly discriminatory or deceptive 

practices or devices in their contracts. 

No court has held the Secretary does 

not have this rulemaking authority. 

Been v. O.K. Indus., Inc., 495 F.3d 1217, 

1227 (10th Cir. 2007), for example, 

recognized that the Secretary had the 

authority to promulgate rules relevant to 

that case, but that USDA had not done 

so.62 Been quoted, with approval, Excel 

Corp. v. United States Department of 

Agriculture, which held the 

Department’s implementing regulation 

on grading prohibited a practice that 

was harmful to competition but the 

court did not require evidence of harm 

to competition in case itself.63 Further, 


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(‘‘ ‘Congress and the USDA are the arbiters of what 

practices will impede competition.’ ’’). 

64See Spencer Livestock Comm’n Co. v. USDA, 

841 F.2d 1451, 1455 (9th Cir. 1988); Armour & Co. 

v. United States, 402 F.2d 712 (7th Cir. 1968). 

65See, e.g., Bruhn’s Freezer Meats of Chicago, Inc. 

v. U.S. Dep’t of Agric., 438 F.2d 1332, 1336 (8th Cir. 

1971) (citing cases); Swift & Co. v. United States, 

393 F.2d 247, 253 (7th Cir. 1968) (‘‘The Act is 

remedial legislation and is to be construed liberally 

in accord with its purpose to prevent economic 

harm to producers and consumers at the expense 

of middlemen.’’). 

66 61 Cong. Rec. 1801 (1921), statement of Rep. 

Haugen; see also Wilson & Co. v. Benson, 286 F.2d 

891, 895 (7th Cir. 1961): ‘‘The legislative history 

shows Congress understood the sections of the [Act] 

under consideration were broader in scope than the 

antecedent legislation.’’ (citing 61 Cong. Rec. 1805 

(1921)). If the antitrust laws were sufficient, then 

DOJ’s 1920 settlement with the major packers 

would have been sufficient; Congress understood 

the words ‘‘unfair practices’’ to have an obviously 

broader effect on regulating competition than 

antitrust injury. 

67Luke Herrine, ‘‘Cutthroat Business,’’ U. of 

Alabama Legal Studies Research Paper 

Forthcoming, Aug. 2024, available at https://papers.

ssrn.com/sol3/papers.cfm?abstract_id=4936628; 

Michael Kades, ‘‘Protecting livestock producers and 

chicken growers,’’ Washington Center for Equitable 

Growth (May 2022); Peter C. Carstensen, ‘‘The 

Packers and Stockyards Act: A History of Failure to 

Date,’’ The CPI Antitrust Journal (2) (2010), 

available at https://www.competitionpolicy

international.com/assets/Uploads/CarstensenAPR2.pdf; Herbert Hovenkamp, ‘‘Does the Packers and 

Stockyards Act Require Antitrust Harm?’’ 

(Philadelphia: Faculty Scholarship at Penn Law, 

2011), available at https://scholarship.

law.upenn.edu/faculty_scholarship/1862. 

68West Virginia v. Env’t Prot. Agency, 597 U.S. 

697, 723 (2022). 

69 Id. at 723 (citation and quotation marks 

omitted). 

70 Id. at 724. 71See 7 U.S.C. 193(a) (‘‘Whenever the Secretary 

has reason to believe that any packer or swine 

contractor has violated or is violating any provision 

of this subchapter’’ he may take appropriate 

enforcement actions as set out in the statute). 72See Massachusetts v. E.P.A., 549 U.S. 497, 532 

(2007) (‘‘ ‘[T]he fact that a statute can be applied in 

situations not expressly anticipated by Congress 

does not demonstrate ambiguity. It demonstrates 

breadth.’ ’’). 

the Supreme Court, in Mahon v. 

Stowers, 416 U.S. 100, 112 (1974), 

recognized that USDA has the authority 

to issue substantive regulations. 

Congress designed the P&S Act to 

provide broader protections than 

existing antitrust laws, such as the 

Clayton and Sherman Acts, in response 

to specific challenges in agricultural 

markets. More specifically, Congress 

intended to regulate practices that 

would violate those two antitrust laws 

and practices that would be unfair 

under the FTC Act, as well as the 

‘‘special mischiefs and injuries inherent 

in livestock and poultry traffic.’’ 64 AMS 

rejects the comments that the statute or 

case law limits violations of the Act to 

conduct that causes an anticompetitive 

effect, as that term is used in the 

antitrust laws. Such an approach would 

abrogate the scope of the plain meaning 

of section 202 of the Act. 

The existence of the P&S Act is proof 

that existing antitrust laws were not 

sufficient in protecting livestock 

producers and ensuring fair agricultural 

markets. It is well established that, to 

meet the needs of livestock producers 

more effectively, the Act provides 

broader protections than existing 

antitrust laws.65 The statutory text, case 

law, and legislative history make plain 

that the Act’s protections extend beyond 

antitrust laws.66 Accordingly, it has 

been the Agency’s longstanding position 

that because the Act addresses more and 

different types of harmful conduct than 

antitrust laws, the Agency has authority 

over a plethora of market behaviors, and 

is not limited to conduct with an 

anticompetitive effect.67 Additionally, 

as discussed elsewhere in this 

document, evidence of anticompetitive 

injury is not required under this rule to 

establish violations of section 202(a) 

and (b). 

Market abuses such as unfair or 

deceptive business practices by 

regulated entities are illegal under the 

Act. Addressing the harmful conduct 

this rule aims to prevent is squarely 

within the authority of the Secretary 

and accords with Congressional intent. 

Moreover, the Secretary, exercising 

authority to define the scope of section 

202(a) and (b), has determined that the 

prohibited practices are likely to 

prevent producers from earning the full 

value of their services and push some 

producers out of the market caused by 

coercive or deceptive practices by LPDs. 

Comment: One commenter said that 

AMS lacks the statutory authority to 

promulgate rules that have significant 

economic or political repercussions due 

to the major questions doctrine. The 

commenter expressed the idea that, in 

light of the U.S. Supreme Court decision 

in West Virginia v. EPA, 597 U.S. 697 

(2022), AMS may not expand its 

regulatory framework to change or 

undermine currently used poultry 

growing compensation systems because 

it lacks clear Congressional 

authorization. 

AMS response: AMS disagrees that 

the major questions doctrine applies to 

this rule. The Supreme Court has held 

that, ‘‘in certain extraordinary cases, 

both separation of powers principles 

and a practical understanding of 

legislative intent make us ‘reluctant to 

read into ambiguous statutory text’ the 

delegation claimed to be lurking 

there.’’ 68 Under such circumstances, 

courts may conclude that Congress does 

not ‘‘typically use oblique or elliptical 

language to empower an agency to make 

a radical or fundamental change to a 

statutory scheme.’’ 69 The major 

questions doctrine thus applies to some 

‘‘significant cases all addressing a 

particular and recurring problem: 

agencies asserting highly consequential 

power beyond what Congress could 

reasonably be understood to have 

granted.’’ 70 This final rule does not fall 

within this category for two 

independent reasons: USDA is not 

construing an ambiguous statute, but 

rather is applying a statute that 

explicitly confers upon it the power to 

make necessary regulations in the 

context of a scheme that 

comprehensively regulates unfair 

practices in certain industries; and, even 

if the relevant statutory authorities are 

ambiguous—and they are not—this final 

rule does not represent the type of 

‘‘transformative expansion’’ of the 

Agency’s regulatory authority that 

animates the major question doctrine. 

First, the major questions doctrine 

applies only when there is ambiguity 

over the power conferred. Here, there is 

none. Congress prohibited unfair, 

deceptive, discriminatory, and other 

practices in section 202 of the Act. 

Further, it explicitly gave power to the 

Secretary to comprehensively regulate 

unfair practices in meatpacking and 

broiler production. The Secretary has 

the power to enforce the provisions of 

the Act, including sections 202 and 

410.71 And separately, pursuant to 

section 407 of the Act, the Secretary was 

provided broad authority to ‘‘make such 

rules, regulations, and orders as may be 

necessary to carry out the provisions of 

this chapter.’’ The broad language here 

reflects Congress’ effort to grant the 

Secretary the flexibility necessary to 

prevent the P&S Act from becoming 

obsolete.72 Congress was clear in the 

authority it had granted, and that 

authority includes issuing regulations 

and orders relating to the Act and its 

remedial purposes—including, as here, 

the power of the Agency to construe the 

relevant provisions of the Act so as to 

provide clarity in enforcement. The 

Secretary has extensive power to 

regulate, and therefore has the authority 

to issue regulations such as this one. So, 

unlike cases where there has been some 

heretofore unforeseen ‘‘unheralded 

power,’’ there is no reason to believe 

that Congress understated the breadth of 

the authority it granted to the Agency to 

issue regulations construing the Act. 

Second, this final rule does not 

constitute the type of ‘‘transformative 

expansion’’ of Agency authorities that 

animates the major question doctrine. 

The rule codifies USDA’s interpretation 


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73See, e.g., Bruhn’s Freezer Meats of Chicago, Inc. 

v. U.S. Dep’t of Agric., 438 F.2d 1332, 1336 (8th Cir. 

1971) (citing cases); Swift & Co. v. United States, 

393 F.2d 247, 253 (7th Cir. 1968) (‘‘The Act is 

remedial legislation and is to be construed liberally 

in accord with its purpose to prevent economic 

harm to producers and consumers at the expense 

of middlemen.’’). 

74House Report No. 67–77, at 2 (1921). 

75House Report No. 67–324, at 3 (1921). 

76 Mahon v. Stowers, 416 U.S. 100, 107 (1974). 77West Virginia, 597 U.S. at 722. 

of section 202 consistent with much of 

the caselaw: the P&S Act is a remedial 

statute with a purpose that is broader 

than the antitrust acts.73 The Agency 

has used its section 228 authority for the 

issuance of a great variety of regulations 

to specify obligations for bonding, 

registration, accounting, recordkeeping, 

ownership, public communications, 

disclosures, limitations on 

commissions, credit sales, weighing, 

payment practices and other 

responsibilities under the statute—so 

this is not a newfound substantive 

power; and, in any event, this is not the 

type of consequential rule to which the 

major questions doctrine would 

otherwise apply. 

As discussed above, Congress enacted 

the P&S Act after many years of concern 

about farmers and ranchers being 

cheated and mistreated. Congress 

believed that existing antitrust and 

market regulatory laws, including the 

Sherman Act and Federal Trade 

Commission Act, did not sufficiently 

protect farmers and ranchers. 

Section 407 of the Act (7 U.S.C. 228) 

gives the Secretary authority to ‘‘make 

such rules, regulations, and orders as 

may be necessary to carry out the 

provisions of this Act.’’ The House of 

Representatives’ report on the Act stated 

that it was the ‘‘most comprehensive 

measure and extends farther than any 

previous law in the regulation of private 

business, in time of peace, except 

possibly the interstate commerce act.’’ 74

The Conference Report on the Act stated 

that, ‘‘Congress intends to exercise, in 

the bill, the fullest control of the packers 

and stockyards which the Constitution 

permits. . . .’’ 75 Congress considered 

this a power beyond the authority of the 

FTC and the Interstate Commerce 

Commission. The Supreme Court said of 

sections 407 and 202 of the P&S Act that 

Congress gave: ‘‘authority [to] the 

Secretary of Agriculture to promulgate 

appropriate rules and regulations to 

carry out the provisions of the Act.’’ 

And, ‘‘Enforcement of [section 202 of 

the Act] is the responsibility of the 

Secretary of Agriculture, who is given 

authority to hold hearings and enter 

binding orders.’’ 76 The major questions 

doctrine is an extraordinary application 

of statutory interpretation, because it 

has the potential to reverse an act of 

Congress, and, therefore, the Supreme 

Court has already noted that the 

doctrine does not apply generally. It has 

so far only applied in cases where the 

regulation would have been a 

questionable application of regulations 

with billions of dollars of effects, from 

regulating tobacco packaging, a nationwide moratorium on eviction, and 

setting limits on the carbon dioxide 

emissions from millions of small 

sources.77 Here, however, the rule does 

not meet these standards. The 

Department has consistently interpreted 

unfair practices—and thus applied the 

Act—to protect producer welfare and 

advance fair-trade practices in the 

livestock, meat, and poultry industries 

in accordance with Congressional intent 

upon passage of the Act. The 

Department’s policy on unfair practices 

has not changed throughout the course 

of its enforcement of the Act. 

The final rule continues this policy 

approach of protecting producer welfare 

and advancing fair trade practices in the 

poultry industry. This final rule 

advances these goals by prohibiting 

certain payment practices under poultry 

grower ranking systems, requires LPDs 

to adopt policies and procedures 

regarding their processes for operating a 

fair ranking system for broiler growers, 

and requires LPDs to provide certain 

information to broiler growers when the 

LPD requests or requires the grower to 

make additional capital investments. 

These regulations will increase 

transparency and address deception and 

unfairness in broiler grower payments, 

tournament operations, and capital 

improvement systems. The Act 

advances fair trade and competitive 

markets for the broiler industry. 

Notably, commentors generally 

appear to assert that the 2008 Farm Bill, 

and the decade of rulemaking that 

followed, either limits the Department’s 

general authority to issues rules, or 

shows that the Department did not have 

that authority. This is not an accurate 

version of events. Starting in 1997, a 

series of OIG and GAO reports were 

highly critical of USDA’s failure to 

pursue unfair practices and cases of 

antitrust injury in meatpacking under 

the P&S Act. At a Senate hearing in 

March of 2006, Senator Chambliss 

noted, ‘‘[t]his act is a critical law that 

assures farmers and ranchers that 

business transactions are conducted 

under the principles of fair competition, 

open and honest trade practices, and 

prompt payments to producers.’’ These 

criticisms culminated in an April 2007 

hearing in the House of Representatives 

where advocates requested, inter alia, 

that the Secretary be required to issue 

rules on undue preferences and 

advantages, because regulation was 

perceived ‘‘to ensure that small and 

midsized farmers and ranchers are not 

forced to accepted volume-based price 

discrimination.’’ The thrust of the 2008 

Farm Bill was not that the Secretary did 

not have the power to regulate, but that 

Congress demanded that power be used. 

Comment: Producers were both in 

opposition to and in support of the 

tournament system. Industry 

associations and processors generally 

supported the tournament system, 

claiming the tournament system 

incentivizes and rewards high 

performance, resulting in market 

efficiency, and also removes costs and 

economic risk from growers by 

providing inputs. Industry stakeholders 

asserted the rule undermines the 

tournament system, leading to 

inefficiencies and potentially higher 

prices. Commenters cited unintended 

consequences including increased 

production costs passed on to 

consumers; barriers to entry for small 

farmers, leading to further industry 

consolidation; and shift in production to 

countries with less stringent regulations. 

Additionally, industry commenters 

claimed that capping performance-based 

payments might create an undesirable 

redistribution of income from highperforming to lower-performing 

growers. Lastly, the industry anticipates 

substantial legal and administrative 

costs associated with compliance, 

including contract amendments and 

legal counsel. Some producers and an 

industry trade organization claimed the 

tournament system promotes animal 

welfare. 

Farmers’ coalitions, advocacy 

associations, and many individual 

commenters were largely opposed to the 

tournament system, expressing that the 

tournament system shifts economic 

risks to growers, locks them into 

inescapable cycles of debt, and enables 

retaliation. Some commenters were 

concerned that the tournament system 

appeared to pit farmers against each 

other, limiting knowledge sharing. 

Other commenters felt the tournament 

system is unfair due to the grower’s lack 

of control over production variables. 

AMS response: It is important to note 

that AMS is not banning the tournament 

system. Rather, AMS is prohibiting 

those parts of tournament systems that 

are unfair practices and ensuring that 

those agreements serve the competitive 

operation of the market in a fair and 

non-deceptive manner. Additionally, 

increased transparency through this 

final rule should improve confidence in 


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5188 Federal Register / Vol. 90, No. 10 / Thursday, January 16, 2025 / Rules and Regulations 

the tournament system rather than 

undermine it. 

In theory, the tournament system 

insulates growers from variation in the 

cost of feed and other inputs, 

encourages growers to perform to the 

best of their ability, and rewards betterperforming growers. In practice, 

however, the tournament system also 

raises a number of fairness concerns for 

growers. If an LPD treats individual 

growers in a tournament differently, for 

example providing a grower with 

inferior inputs, the grower’s skill does 

not determine their compensation. 

Information asymmetry in contracting 

arrangements is another cause for 

concern. LPDs have information related 

decision-making that impacts grower 

compensation, including the methods 

for calculating grower payment. These 

methods are often intended to limit total 

grower compensation while maximizing 

production efficiency. LPDs also have 

information relating to the factors that 

are under their control and the 

influence of performance elements on 

grower compensation. LPDs have 

internal knowledge about the types of 

additional capital investments that they 

typically require, which growers may 

not anticipate. Moreover, without a 

guaranteed base pay rate, the 

complexity of the tournament system 

makes it difficult for growers to clearly 

understand what the minimum amount 

is that they could actually receive in 

payment. If the comparison-factor (i.e., 

the bonus or deduction) is a large 

percentage of the total compensation, 

that variance in total could put the 

growers at significant financial risk. 

Tournament pay systems are also not an 

effective incentive system when factors 

outside of the grower’s control 

determine the grower’s performance. 

Finally, LPDs have substantial 

bargaining power, and as a result, LPDs 

can require growers to make additional 

capital investments that will increase 

the grower’s debt, and subsequently 

increase the grower’s reliance on the 

LPD’s contract. Such a dynamic can 

unfairly impose risk on the grower (for 

example by creating a difference in the 

term of the grower’s loan and the 

grower’s contract). Another concern is 

the variation in the quality of inputs 

(e.g., feed or chicks) supplied by the 

LPD, which can impact the performance 

of the grower’s flock. Similarly, LPDs 

determine the production practices on 

growers’ farms (e.g., density of bird 

placement, age at harvest, and weight at 

harvest), which greatly impact grower 

compensation. These factors can result 

in the grower’s becoming financially 

dependent on LPDs, therefore losing the 

power to negotiate, and to move to 

different LPDs if the terms of the 

growing contract are not ideal. 

AMS is not aware of any evidence 

that tournament systems promote 

animal welfare, nor did the commentors 

provide specific examples explaining 

the connection beyond the general 

assertion that performance payments 

through a tournament encourage grower 

effort. The tournament systems control 

how poultry growers are compensated 

for their output, but the quality of 

inputs or production practices on farms, 

and even the quality of the housing and 

equipment, is determined by the LPD. 

These requirements may have the effect 

of improving animal welfare, but they 

may well also have the opposite effect. 

Moreover, AMS in this rule does not 

prohibit performance payments nor ban 

the tournament. Rather, the rule sets 

standards around the reasonable design 

of payment systems and scope of the 

operation of tournaments. These 

standards provide ample opportunity 

for LPDs to incentivize grower effort, 

while minimizing the downsides of the 

current payment systems and 

tournament operations as they have 

been reported to AMS by growers. 

Comment: An industry representative 

stated that the proposed duty of fair 

comparison creates the untenable 

situation of extending P&S Act liability 

to a situation without determining 

whether the outcome was unfair, much 

less whether competition was harmed 

overall. The commenter cited an 

example in which a grower might 

receive a payment that aligns with the 

contract terms, meets the grower’s 

expectations, and is entirely fair when 

viewed objectively, but the LPD does 

not follow written policy; in this case, 

under the proposed rule, the commenter 

asserts that the LPD would potentially 

be liable for an unfair practice. 

AMS response: The comment appears 

to suggest that the regulation bans 

reasonable conduct. It does not. 

The duty of fair comparison provision 

(§ 201.110(a)) establishes a violation of 

the Act for either failure to design or 

failure to operate the comparison system 

in a fair manner. Failing in that 

responsibility is not contract 

compliance; it is bad faith and failure to 

make the full payment to the grower. 

In the first instance, AMS might bring 

an enforcement action for an LPD’s 

failure to design the ranking system in 

a manner that would deliver a fair 

comparison; such an action would be 

based upon the processes set forth in the 

documentation required under 

paragraph (b) of § 201.110. In the second 

instance, AMS might bring an 

enforcement action based upon an 

LPD’s failure to operate the ranking 

system in a manner consistent with the 

duty of fair comparison. Such a failure 

could be because the LPD was not 

following the documented processes or 

because in practice the documented 

processes did not deliver a fair 

comparison. 

The requirement to design the ranking 

system in a manner consistent with the 

duty of fair comparison is intended to 

prevent injury before it occurs, 

consistent with P&S precedent and the 

Act’s remedial purpose. USDA, through 

the P&S Act, has broad authority to 

ensure fair practices prevail in the 

poultry industry, and AMS concludes 

this includes preventing LPDs from 

designing a poultry grower ranking 

system that can be expected to produce 

an unfair comparison of growers. AMS 

did not make any revisions to the rule 

as proposed in response to this 

comment. 

Comment: Some commenters asserted 

that the proposed rule’s disclosure 

requirements violate the First 

Amendment because they restrict and 

prescribe what LPDs can say to their 

contract growers through their contracts. 

AMS response: The P&S Act prohibits 

unfairness and deception, and this final 

rule addresses harms caused by unfair 

and deceptive practices. While some 

commercial speech may be protected 

under the First Amendment, 

withholding material facts from a 

contracting party has never been 

protected speech. The rule does not 

restrict information that LPDs may 

provide to growers, rather it encourages 

full disclosure of material information 

to the grower. A disclosure requirement 

can be justified either because without 

the disclosure there is a risk of 

deception or there is another substantial 

government interest at issue. This rule’s 

disclosure requirements meet both 

justifications; absent the disclosures 

there is a risk of deception by regulated 

entities and the government is otherwise 

advancing its interest in a fair 

marketplace for poultry. To this end, 

AMS has narrowly tailored the required 

disclosures to protect the growers from 

the types of deception and unfair 

practices that many growers themselves 

have commented occurs in LPD contract 

performance and negotiation and which 

the Act seeks to prevent. 

With respect to compelled speech, 

AMS believes that the provision of 

additional factual information, related 

specifically to the growing arrangement, 

to growers is consistent with 

Congressional intent to benefit 

competition in the industry and 

provides growers with information 

needed to make informed business 

decisions. AMS concludes that 


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Federal Register / Vol. 90, No. 10 / Thursday, January 16, 2025 / Rules and Regulations 5189 

78Nigel Key, Christopher Burns, and Greg Lyons, 

‘‘Financial Conditions in the U.S. Agricultural 

Sector: Historical Comparisons,’’ EIB–211, U.S. 

Department of Agriculture, Economic Research 

Service (2019), https://www.ers.usda.gov/webdocs/ 

publications/95238/eib-211.pdf?v=4876.5. 

alleviating the asymmetric information 

problems in these contracts enables 

growers to identify the practices relating 

to additional capital investments that 

can lead to potential underpayment or 

other unfair and deceptive practices 

under the Act. Additionally, the Agency 

believes that the additional 

transparency and equalization of 

information asymmetry is critical for the 

longevity of the poultry business 

because it would allow poultry growers 

to accumulate a history of previous 

contracts, additional capital investment 

requests, and other information, which 

is good for long-term market conditions 

Congress designed the Act to promote. 

The First Amendment does not protect 

corporations from practices that 

deceive, and this final rule requires 

LPDs to share factual and 

uncontroversial information related to 

additional capital investments, 

contracts, and schedules with their 

growers to prevent deception and unfair 

practices. The information shared 

should achieve contracts that are both 

equitable and rely on facts, which is 

also consistent with the Act’s 

prohibition on unfair and deceptive 

practices. 

Comment: One commenter supported 

the proposal for the rule to be effective 

180 days after publication in the 

Federal Register, unless it disrupts 

contract renewals or seasonal 

production pauses. One industry 

representative suggested that the 180- 

day implementation period is the 

minimum timeframe necessary for 

compliance, and another expressed 

concern that short effective dates create 

challenges for managing grower 

relationships and suggested AMS 

develop outreach and educational 

programs. Two advocacy groups 

suggested shorter effective dates, one at 

60 days and one at 30 days. One trade 

association requested a 2-year 

implementation period. 

AMS response: AMS agrees with 

commenters that the final rule should 

provide sufficient time to implement 

any changes it requires, and broadly 

with the comment that 180 days is 

sufficient time for compliance with the 

rule. However, out of an abundance of 

caution, AMS is setting the effective 

date for this rule at July 1, 2026, which 

is approximately 18 months following 

publication in the Federal Register. 

LPDs will need to amend contracts in 

some instances, create records 

processes, format the incorporation of 

new information in existing documents, 

and create Disclosure Documents using 

the new format. Eighteen months 

provides more than the length of five 

flocks to prepare for implementation of 

the rule. AMS will have resources 

available to answer questions as 

appropriate. Additionally, based in part 

on the experience of recent settlements 

between DOJ and a large poultry 

company, AMS believes this period will 

provide sufficient time for LPDs to 

update their compliance systems and 

policies and procedures and comments 

complying with the rule. AMS’s 

approach has been to address the 

regulatory needs of the poultry industry 

systematically and as swiftly as 

possible. And while the 2-year period 

suggested by a commenter would 

unnecessarily delay implementation, 

thus denying growers the benefit of the 

rule and exposing them to continued 

uncertainty, AMS acknowledges 

additional time beyond 180 days will 

help facilitate an effective transition. 

Accordingly, AMS is extending the 

effective date to July 1, 2026, which is 

approximately 18 months post 

publication. 

AMS agrees that it should conduct 

outreach to growers and LPDs regarding 

these changes, implementation, and 

enforcement. Over the course of this 

rulemaking, AMS has published 

informational materials, including a fact 

sheet and a video webinar, to help the 

public understand the proposed rule. 

AMS intends to conduct further 

education and outreach following the 

finalization of the rule. 

VI. Regulatory Analysis 

A. Executive Orders 12866, 13563, and 

14094 

AMS is issuing this final rule in 

conformance with Executive Orders 

12866, 13563, and 14094. Executive 

Order 12866, as supplemented by 

Executive Order 13563, directs direct 

agencies to assess all costs and benefits 

of available regulatory alternatives and, 

if regulation is necessary, to select 

regulatory approaches that maximize 

net benefits (including potential 

economic, environmental, public health 

and safety effects, distributive impacts, 

and equity). Executive Order 13563 

further emphasizes the importance of 

quantifying both costs and benefits, 

reducing costs, harmonizing rules, and 

promoting flexibility. Executive Order 

14094 amended Executive Order 12866 

and directs agencies to solicit and 

consider input from a wide range of 

affected and interested parties through a 

variety of means. 

This rulemaking has been determined 

to be ‘‘significant’’ under Executive 

Order 12866, as supplemented by 

Executive Order 13563 and amended by 

Executive Order 14094, and, therefore, 

has been accordingly reviewed by the 

Office of Management and Budget 

(OMB). As a required part of the 

regulatory process, Agricultural 

Marketing Service (AMS) prepared an 

economic analysis of the costs and 

benefits of §§ 201.106, 110, 112, and 

390. 

B. Regulatory Impact Analysis 

AMS prepared an economic analysis 

of the costs and benefits of the final 

§§ 201.106, 110, and 112 as a required 

part of the regulatory process. 

As described previously elsewhere in 

this final rule, the organization and 

structure of broiler production is 

characterized by a high degree of 

vertical integration, market power in 

regional markets, substantial investment 

in production capital that is specific to 

a single production purpose, nearly 

universal use of production contracts, 

and use of complex grower 

compensation systems based on relative 

performance. Important factors that 

affect grower performance, including 

inputs (chicks, feed, medication, etc.) 

and some production practices 

(placement density, age and weight at 

harvest, etc.) are controlled by the LPD. 

In addition, the percentage of poultry 

producing farms considered to be in 

‘‘extreme financial stress’’ (defined as 

term debt coverage ratio less than one 

and a debt-to-asset ratio greater than 55 

percent) is among the highest of all 

types of commodity production 

operations.78 Market failures caused by 

asymmetric information, incomplete 

contracts, and hold-up in poultry 

contracting motivate specific 

interventions as discussed in this final 

rule. 

Comments From the Proposed Rule and 

Changes to the Final Rule 

After consideration of public 

comments, AMS decided to adopt the 

proposed rule as a final rule with 

several modifications. Live poultry 

dealers (LPDs) commented that the 

regulation would be particularly 

challenging if the period of time 

allowed for regulated entities to comply 

with the provisions is too short. In 

addition, they stated that a shortened 

period for implementing changes would 

require greater expenditures of 

resources to make required 

modifications and communicate with 

growers. To allow sufficient time for 

regulated entities to comply with the 

final rule and avoid excess 


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5190 Federal Register / Vol. 90, No. 10 / Thursday, January 16, 2025 / Rules and Regulations 

79See U.S. Bureau of Labor Statistics, May 2023 

National Occupational Employment and Wage 

Estimates, May 2023. https://www.bls.gov/oes/ 

special.requests/oesm23all.zip. 

80As described in the preamble section III., 

‘‘Summary of the Proposed Rule and Changes in the 

Final Rule,’’ these changes to proposed § 201.110(b) 

included simplifying 17 combined paragraphs and 

subparagraphs in proposed § 201.110(b)(1), 

‘‘Policies and procedures,’’ into six simple 

paragraphs in final § 201.110(b)(1) and removing 

proposed § 201.110(b)(2), ‘‘Compliance review,’’ 

and redesignating § 201.110(b)(3), ‘‘Record 

retention,’’ as paragraph (b)(2). 

implementation costs, AMS is setting 

July 1, 2026, as the effective date for this 

rule, which is approximately 18 months 

following publication in the Federal 

Register. This extended time frame will 

not impact the amount or timing for 

estimated costs of the final rule; 

regulated entities are expected to incur 

first year costs during the 12 months 

preceding the effective date. 

Industry trade organizations and LPDs 

commented that the full cost of 

implementing the proposed rule would 

be far greater than estimated by AMS. 

The commenters asserted that AMS 

greatly underestimated the costs that 

will be required for employing teams 

with highly specialized legal and 

technical expertise to implement the 

proposed rule by modifying or replacing 

grower contracts and communicating 

changes to growers. Commenters 

suggested that AMS did not adequately 

consider the total number of hours 

needed, but none provided quantified 

estimates. LPDs also commented that 

hourly rates paid to specialized industry 

professionals. Commenters also 

suggested that implementation of the 

rule would require LPDs to hire and 

train additional staff and pull resources 

away from other important activities. 

AMS consulted subject matter experts 

who are familiar with LPDs, integrators, 

and broiler complex operations. These 

experts were auditors and supervisors 

with many years of experience at AMS 

in auditing LPDs for compliance with 

the Act. The final rule provides an 

extended period of approximately 18 

months following publication in the 

Federal Register before the effective 

date, to permit sufficient time for 

implementation. Hourly rates used in 

cost analysis for the proposed rule were 

based on averages for legal, 

management, administrative, and 

information technology labor categories 

specifically within the agricultural 

sector as published and annually 

updated by the U.S. Bureau of Labor 

Statistics.79 Although the largest 

corporations likely employ lawyers and 

other specialists at hourly rates much 

higher than the National average, 

contract development and review efforts 

at those companies are spread across 

many complexes. AMS expects that 

average hourly rates provide an 

appropriate benchmark for estimating 

industry average costs. AMS revisited 

the estimated hours to implement all 

provisions of the final rule based on 

comments that costs were 

underestimated. After further discussion 

with subject matter experts, AMS added 

a modest amount of time to account for 

the cost of IT work in preparing 

§ 201.112 disclosures. AMS subject 

matter experts who are familiar with the 

operations of LPDs, integrators, and 

broiler complexes through their 

experience conducting regulatory 

reviews of LPDs confirmed that all other 

costs of the proposed rule are accurate 

estimates and accordingly, AMS made 

no other changes to hourly costs or 

estimated numbers of hours for 

implementation of the rule based on this 

comment. 

AMS received numerous comments 

from growers, grower groups, and 

advocate commenters in support of 

additional limitations on grower risk 

from excessive variability in 

compensation. Based on these 

comments, AMS has added provision 

§ 201.106(b), which establishes a 

presumption that a regulated entity is in 

violation of the Act when aggregate 

gross annual payments based upon a 

grouping, ranking, or comparison of 

growers (performance pay) exceed 25 

percent of total gross payments 

(including performance and all other 

types of grower pay). AMS again 

consulted its internal subject matter 

experts and added costs for LPDs to 

implement and monitor this new 

provision, which are discussed and 

quantified as direct costs. Other 

expected additional benefits and 

indirect costs resulting from this new 

provision cannot be quantified and are 

discussed separately. 

AMS also solicited comment in the 

proposed rule on whether there was a 

need to protect growers against the risk 

that LPDs might unfairly reduce broiler 

grower total compensation during a 

transition period after implementation 

of the final rule. Comments on the 

proposed rule reflected support for 

adding such protections. Based on 

comments received, AMS added 

§ 201.106(c), which will require LPDs to 

submit copies of the prior and modified 

contracts and disclosures to AMS if 

average gross grower payments at a 

complex show year-over-year decline 

following a contract modification in any 

of the three calendar years commencing 

with and including the effective date of 

the rule. AMS will review the 

information provided by LPDs to 

identify any potentially unfair practices 

related to broiler grower compensation. 

AMS consulted with its internal subject 

matter experts and added direct 

administrative costs for LPDs to provide 

information in compliance with this 

provision during the three-year period. 

AMS is not able to quantify the 

potential benefits and the potential 

indirect costs to LPDs of this 

provision—these will also be discussed 

separately. 

AMS received comments suggesting 

that some of the detailed documentation 

requirements under proposed 

§ 201.110(b) were similar to existing 

documentation requirements and might 

create unnecessarily burdensome and 

complex paperwork that could burden 

service technicians at broiler complexes 

and keep them from other important 

responsibilities such as assisting 

growers. In response to these comments, 

AMS made several changes to 

§ 201.110(b) in the final rule that 

included consolidating and streamlining 

the documentation requirements and 

removing some detailed requirements 

delineated under subparagraphs in the 

proposed rule.80 AMS expects that these 

adjustments to final § 201.110(b) will 

add clarity and minimize potential 

confusion about the documentation 

requirements, thereby making them 

more effective, and that these changes 

will reduce recordkeeping requirements 

by some amount. However, based on 

consultation with its internal subject 

matter experts, AMS chose to attempt to 

avoid underestimating costs and did not 

reduce the total recordkeeping 

requirements or the time cost of the 

information collection for LPDs. 

Accordingly, these changes did not 

affect the estimation of costs or benefits 

in the final rule. 

The proposed rule included 

§ 201.110(b)(2), ‘‘Compliance review,’’ 

which required LPDs to conduct a biannual review of the processes set out 

in § 201.110(b)(1). AMS removed this 

requirement in response to comments 

that self-audits would be burdensome 

for LPDs, and that elimination of this 

requirement would not substantially 

diminish effective compliance with 

§ 201.110. Compliance will be enforced 

through regular AMS review of the 

policies and procedures, as newly 

enhanced documentation, which LPDs 

are required to establish and maintain 

under § 201.110(b). Accordingly, 

removal of § 201.110(b)(2) eliminated 

the burden of compliance review on 

LPDs and reduced costs from the 

proposed to the final rule by the cost 

estimate in the proposed rule for that 

provision. 


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Federal Register / Vol. 90, No. 10 / Thursday, January 16, 2025 / Rules and Regulations 5191 

81 88 FR 83210, 83301 (Nov. 28, 2023). 

82USDA–NASS. Poultry—Production and Value 

2023 Summary (April 2024). 

83The Small Business Administration (SBA) 

defines small businesses by their North American 

Industry Classification System Codes (NAICS). Live 

poultry dealers, NAICS 311615, are considered 

small businesses by SBA if they have fewer than 

1,250 employees (13 CFR 121.201). 

Based on comments received, AMS 

added a provision at § 201.112(c) to 

require that the LPD make reasonable 

efforts to ensure that growers are aware 

of their right to request translation 

assistance and to assist the grower in 

translating the Capital Improvement 

Disclosure Document. Reasonable 

efforts include, but are not limited to, 

providing current contact information 

for professional translation service 

providers, trade associations with 

translator resources, relevant 

community groups, or any other person 

or organization that provides translation 

services in the poultry grower’s 

geographic area. Reasonable efforts, 

depending on the facts and 

circumstances (such as convenience, 

expense, and timeliness of the 

translation), may also include allowing 

the grower access to a computergenerated translation of the Disclosure 

Document and additional time to review 

any translated Disclosure Document. 

A similar requirement was established 

for LPDs in § 201.102(g)(4) of the 

‘‘Transparency in Poultry Grower 

Contracting and Tournaments’’ final 

rule.81 As LPDs already have all 

necessary information to make 

reasonable efforts to assist growers in 

translating disclosure documents and 

have made it available to growers who 

request the information, AMS did not 

add any time to its cost estimates for 

LPDs to comply with this new 

requirement. 

The following analysis describes the 

anticipated impacts of the final rule. 

The value of broiler production in the 

U.S. for 2023 was approximately $50.6 

billion.82 Our analysis finds that the 

total direct cost of final §§ 201.106, 110, 

and 112 will be greatest in the first year 

at $26.0 million or 0.051 percent of 

revenues. The broiler industry is a 

mature industry, and margins are likely 

relatively low. If profit margins are 1 to 

5 percent of revenues, then first-year 

direct costs would be 1.0 to 5.1 percent 

of margins. The total direct costs are low 

in relation to total industry size, but 

they do not include any potential costs 

from changes in supply or demand 

caused by final §§ 201.106, 110, and 

112. The final rule is also expected to 

provide many benefits of importance to 

broiler growers that could not be 

quantified. These include the value to 

broiler growers of improved fairness, 

reduced income variability, and reduced 

risk of fraud and deception. As a result 

of many factors that AMS is unable to 

measure due to insufficient data or 

which cannot be predicted with 

reasonable certainty, AMS is unable to 

quantify benefits or indirect costs and 

therefore cannot make a determination 

about the sign or magnitude of net 

benefits to the industry from final 

§§ 201.106, 110, and 112. 

Regulatory Alternatives Considered 

AMS expects final §§ 201.106, 110, 

and 112 to mitigate costs associated 

with asymmetric information and LPD 

unfairness and deception by 

establishing a duty of fair comparison 

for LPDs in poultry grower ranking 

system administration, requiring LPDs 

to establish and document processes, 

requiring LPDs to adopt transparent 

methods of presenting grower 

compensation in broiler grower 

contracts, limiting excess income 

variability, and requiring LPDs to 

provide important information to broiler 

growers. Final § 201.106 will prohibit 

the LPD from using a grower’s grouping, 

ranking, or comparison to other growers 

to reduce a rate of compensation 

disclosed in a broiler growing 

arrangement, establishes a presumption 

of violation when performance 

compensation for growers at a complex 

exceeds 25 percent of total 

compensation, and implements a threeyear transition pay period with 

additional grower protections. Final 

§ 201.110 will require LPDs to provide 

a fair comparison among growers when 

basing compensation upon a grouping 

or ranking of growers delivering during 

a specified period of time and to 

document how they comply with that 

duty. Final § 201.112 will require LPDs 

to produce and distribute disclosures 

when they request growers to make 

additional capital investments. 

AMS considered four alternatives to 

final §§ 201.106, 110, and 112, with the 

second and preferred alternative being 

the final rule. The first alternative is the 

‘‘do nothing’’ approach or maintaining 

the status quo. All regulations under the 

Packers and Stockyards Act would 

remain unchanged. This first alternative 

forms the baseline against which AMS 

will compare the second alternative, 

final §§ 201.106, 110, and 112. 

AMS considered a third alternative 

that would leave all requirements in 

final §§ 201.106, 110, and 112 the same, 

but entirely exempt LPDs that meet the 

criteria to be classified as small 

businesses by the Small Business 

Administration.83 This third alternative 

would exempt smaller LPDs. However, 

since larger LPDs do most of the 

contracting (as quantified later in this 

analysis), most poultry growers would 

still receive the benefits of new 

protections under final §§ 201.106, 110, 

and 112. AMS considered a fourth 

alternative, which would be to adopt 

proposed §§ 201.106, 110, and 112—this 

alternative also includes all small and 

large LPDs. Below, AMS provides 

estimates and comparisons of the costs 

and benefits of the alternatives and an 

explanation for why the Agency 

selected final §§ 201.106, 110, and 112 

as the preferred alternative. 

Benefits of Final §§ 201.106, 110, and 

112 

AMS expects that final §§ 201.106, 

110, and 112 will provide benefits to 

growers by reducing the risk of potential 

fraud, deception, and reduced payment 

for grower services by LPDs during the 

first three years of the final rule, 

improving clarity in grower payment 

systems, limiting excess variation in 

grower compensation, protecting 

growers against unfair reductions in 

compensation by LPDs during 

implementation of the rule, establishing 

a duty for fair comparison in the 

administration of broiler grower ranking 

systems, and making more information 

available to growers. These benefits are 

difficult to quantify. They depend on 

the extent to which the interventions 

will mitigate some existing unfairness 

and deception that results from 

incomplete contracts, inadequate and 

asymmetric information, and hold-up 

problems in an environment where 

LPDs are able to exert market power or 

bargaining power. Some of the benefits 

may vary based on the extent of 

competitive choice for growers in local 

markets. For example, in more 

competitive markets, increased 

transparency might benefit growers by 

empowering them to negotiate better 

terms with LPDs. In less competitive 

markets, increased transparency might 

assist growers in identifying potential 

unfairness from low compensation or 

abusive practices and allow them to 

seek assistance from AMS in more 

quickly remedying these problems. The 

size of benefits will be directly related 

to the extent to which the final rule will 

mitigate or reduce these practices. AMS 

is unable to quantify the benefits and 

will present a qualitative discussion of 

the potential types of benefits that 

growers would receive from final 

§§ 201.106, 110, and 112. The following 

discussion of unquantified benefits will 

proceed by final rule section. 


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84All contracts that AMS has previously 

reviewed include provisions for a minimum grower 

payment that is greater than zero. 

Benefits of Final § 201.106 

Section 201.106(a) prohibits LPDs 

from reducing a grower’s rate of 

compensation based upon a grouping, 

ranking, or comparison of growers. The 

practice of discounting or reducing 

disclosed contract ‘‘rates’’ creates 

problems for growers in assessing and 

comparing broiler production contracts. 

Growers commonly expect that based on 

ordinary efforts, they will be able to 

obtain at least the average rate of pay for 

growers in a settlement group, which is 

typically known as the ‘‘base’’ pay. If 

growers are evaluating the expected 

value of these contracts based upon 

‘‘base’’ or ‘‘average’’ pay rates, downside 

risk, which affects half of the settlement 

pool per flock, would be ignored. These 

are the types of problems that create 

income expectations that are unlikely to 

be met for a large segment of broiler 

growers. Growers thus cannot 

effectively evaluate their risks on a 

settlement payment by settlement 

payment basis, through presentation of 

base pay rate at the mid-point. Growers 

are harmed when they incur costs as a 

result of entering a contract with an LPD 

and the actual revenue and the range of 

payment outcomes realized are below 

those the grower was led to believe they 

would receive when reviewing the 

contract based on reasonably expected 

efforts within the control of the grower. 

In addition, competition in the market 

for broiler grower services is harmed 

when such deception and unfairness 

prevent growers from comparing 

competing offers from LPDs for the 

services of growers. 

Final § 201.106(a) applies to LPDs that 

calculate grower compensation based 

upon a grouping, ranking, or 

comparison of growers delivering 

poultry during a specified period. LPDs 

using such a system are prohibited from 

using that grouping, ranking, or 

comparison to reduce a rate of 

compensation disclosed in a broiler 

growing arrangement. Final § 201.106(a) 

requires that any performance or 

incentive payments made to broiler 

growers under a poultry ranking system 

must be in addition to a disclosed rate 

of compensation (i.e., any adjustments 

to rates of pay must be non-negative). 

Growers will benefit from increased 

certainty about the lowest possible 

revenue outcome under the growing 

arrangement. Greater certainty about 

minimum rate for their service can lead 

to improved financial planning and 

ability to manage financial risk. More 

transparent methods of presenting 

payments and compensation systems 

would also facilitate comparisons 

between alternative LPDs and benefit 

growers who may be evaluating offers or 

considering agreements from more than 

one LPD. 

In accordance with final § 201.106(a), 

LPDs will be expected to redefine 

grower payment calculation systems as 

appropriate to express all payments in 

the form of bonuses added to a stated 

pay rate. AMS expects that existing 

schedules of grower payments can be 

recreated such that they conform to this 

final rule change, assuming that no 

additional modifications are needed to 

comply with final § 201.106(b). Existing 

LPD methods of grower payment 

calculation can be expressed in an 

alternative format that includes only 

bonus adjustments added to an existing 

minimum rate.84 AMS is aware that 

several of the largest LPDs currently 

have existing payment systems that 

express all ranking bonuses as positive 

adjustments added to a stated pay rate 

and would conform to this requirement. 

Changes to presentation of grower 

compensation rates as required by final 

§ 201.106(a) are not expected to change 

the basic structure of grower 

compensation schedules for relative 

performance payments. The benefits 

that will accrue to growers from the 

changes will result from increased 

clarity as growers will be better 

informed of minimum compensation 

outcomes that can occur under the 

broiler growing arrangement. Growers in 

some circumstances may, therefore, be 

able to negotiate more appropriate 

compensation systems for themselves, 

in the form of higher base rates, for 

example. There is no expectation, 

however, that aggregate payments to 

growers will increase. Clearer 

presentation of grower compensation 

methods will benefit growers by 

improving grower understanding of 

potential revenue outcomes, thereby 

reducing problems of inadequate and 

asymmetric information and improving 

the clarity of defined terms to address 

incompleteness in contracting. 

Final § 201.106(b) will establish a 

presumption that an LPD is in violation 

of the Act if more than 25 percent of 

total compensation paid to all growers 

in a complex on an annual basis is 

based on performance. If a complex is 

in violation of this provision, in order 

to comply an LPD may either raise 

grower base pay, reduce grower 

performance pay, shift some 

performance pay to mechanisms not 

covered by the provision, or a 

combination of all of these. Although 

other alternatives would be possible, 

AMS expects that the most likely 

outcome will be for LPDs to restructure 

compensation systems while keeping 

total grower compensation at 

approximately the same level. In this 

case, a grower compensation structure 

that includes less comparison-based 

performance pay would limit the range 

of potential compensation outcomes 

that an individual grower might observe 

and reduce risk from income variability. 

Benefits of § 201.106(b) will accrue to 

broiler growers in the form of reduced 

income variability. For a given level of 

total income, growers would be likely to 

benefit if they receive a larger 

percentage of expected compensation 

based on fixed non-performance pay— 

which may include minimum base pay, 

fixed incentive payments for equipment 

standards and housing, fixed bonuses 

for adherence to clearly defined 

management practices, or other fixed 

targets—and a smaller percentage of 

compensation that is variable based on 

a grouping, ranking, or comparison to 

other growers, which makes up most 

forms of performance pay at present in 

the industry. 

When income is variable, growers will 

likely see trade-offs in the value to them 

of reducing income variability 

compared to mean incomes. Risk 

neutral growers will be made better off 

if they value any increase they receive 

in less variable pay not based on 

performance more than they value any 

decrease they experience in the 

expected value of performance-based 

pay. However, a risk averse grower 

would value a one dollar increase in 

less variable but more certain 

compensation more than they would 

value a one dollar decrease in the 

expected value of performance-based 

compensation that involves risk. 

Overall, individual growers are likely to 

benefit if the value to them of any 

increase they receive in less variable 

income—from compensation that is not 

based on performance—is greater than 

the value to them of any decrease they 

experience in the expected value of 

more variable performance-based 

compensation. 

The magnitude of benefits to growers 

that will result from § 201.106(b) 

depends on several factors that cannot 

be predicted with any reasonable degree 

of confidence. These factors include 

uncertainty about the number of 

complexes that will modify grower 

compensation structures in response to 

§ 201.106(b), the manner in which such 

modifications would be implemented, 

and the number of growers at affected 

complexes that would be impacted by 

any changes. AMS is unable to analyze 

comprehensive grower data for all 


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broiler complexes and cannot predict 

with certainty how regulated entities 

will respond to this provision. For this 

reason, potential benefits of § 201.106(b) 

are discussed qualitatively and not 

quantified. 

AMS does not have sufficient data to 

make an industry-wide inference on the 

number complexes that will need to 

reduce performance payments relative 

to total payments or the magnitude of 

any reductions that will be required. 

AMS reviewed one to five years of 

confidential grower compensation data 

for four individual broiler complexes 

that AMS gathered in prior 

investigations. This sample included 

small, medium, and large bird sizes and 

some of the largest broiler LPDs that 

operate several other complexes across 

the U.S. Aggregate performance 

payments at these four complexes were 

11.4, 17.4, 20.5, and 25.4 percent of total 

grower payments. AMS is not aware of 

any complex with performance 

payments that are as much as 26 percent 

of total payments, and it is possible that 

no complex will need to reduce 

performance payments relative to total 

payments by a substantial amount to 

comply with final § 201.106(b). 

To the extent that the complexes AMS 

reviewed are representative of the other 

complexes owned by the same firms, 

two or possibly three of the firms would 

likely already be in compliance with 

final § 201.106(b). In addition, the terms 

of a 2022 consent agreement between 

Wayne-Sanderson Farms, USDA, and 

the U.S. Department of Justice informed 

final § 201.106(b). In the WayneSanderson Farms consent, performance 

payments that Wayne-Sanderson Farms 

pays to broiler growers was limited to 

25 percent of total payments. Section 

201.106 establishes a presumption that 

poultry growing arrangements with 

variable pay greater than 25 percent is 

presumptively unfair. It is unlikely that 

the unfairness presumption will have 

any effect on these firms, which 

combined account for up to 35 percent 

of the complexes. It is possible that 

other firms already limit performance 

payments to less than 25 percent of total 

payments, but AMS does not have 

sufficient information to confirm this 

with a reasonable degree of confidence. 

Growers will benefit directly from 

changes in variability of compensation 

as a result of § 201.106(b) only at 

complexes where LPDs modify existing 

compensation structures to comply with 

the 25 percent presumption of 

unfairness. However, growers will also 

benefit from ongoing protection to the 

extent that this provision causes LPDs to 

forego future changes that would 

increase performance-based 

compensation beyond 25 percent of 

total compensation. 

For a given level of grower 

performance-based compensation at a 

complex, the presumption of unfairness 

also indirectly limits reductions to 

grower base pay rates. A reduction in 

the base pay rate will reduce the total 

amount of grower compensation not 

based on performance and must be 

accompanied by a proportional decrease 

in performance-based compensation to 

maintain an equivalent percentage. The 

presumptive limitation therefore 

provides an incentive for LPDs to 

maintain or increase existing levels of 

base grower compensation. This 

provides another benefit to growers: it 

serves as a backstop against the 

potential harm to growers that would 

occur if LPDs were to substantially and 

unfairly lower base pay rates when 

modifying pay structures to comply 

with § 201.106(a). 

The distributional effects of final 

§ 201.106(b) are likely to be unequal 

across individual growers: not all 

growers will benefit or benefit equally 

from this provision. Current contracting 

practices can vary widely between 

complexes even of the same LPD. As 

previously noted, AMS expects that the 

most likely outcome at complexes 

where grower compensation structure 

modifications occur will be for LPDs to 

keep total grower compensation at 

approximately the same level and 

reduce the percentage of compensation 

based on performance payments. This 

would change the distribution of total 

compensation among growers at the 

complex. Depending heavily upon the 

strategy for compliance chosen by the 

LPD, AMS would expect these changes 

to result in benefits to some growers, 

welfare transfers between some growers, 

and no change in welfare for some 

growers. At some complexes, AMS 

would expect that some amount of 

welfare transfer from higher performing 

growers to lower performing growers 

would result from payment structure 

modifications implemented to comply 

with the 25 percent presumption of 

unfairness. AMS expects some 

complexes to shift some performance 

pay to non-comparison methods, such 

as fixed metric performance, or to other 

innovative systems. Another possibility 

is that modifications could result in 

LPDs terminating or not renewing some 

marginally performing growers. This 

will be most likely to occur if LPDs seek 

to reduce the overall variation in grower 

performance at a complex as a means to 

comply or if payment structure 

modifications include increases in 

minimum grower payments that exceed 

the marginal value of services provided 

by some growers. Some LPDs may seek 

to utilize technology to more greatly 

standardize outcomes, thus reducing the 

need to utilize higher magnitudes of 

performance payment. AMS 

underscores that actual outcomes will 

depend upon how LPDs respond at 

different complexes owing to local 

factors on the ground. 

Performance-based compensation 

structures based on a grouping, ranking, 

or comparison of growers determine 

individual grower compensation using 

relative performance metrics that 

typically include feed efficiency and 

chick livability. Some aspects of 

performance can be controlled or 

influenced by the grower through effort 

and management, and to some extent 

investment (subject to the concerns 

highlighted by this rule), in the broiler 

operation. Other determinants of grower 

performance depend on actions of the 

LPD or other factors outside the control 

of the grower. Section 201.110 of this 

rulemaking addresses factors under 

control of the LPD by establishing a 

duty of fair comparison. As discussed 

elsewhere, this provision is expected to 

benefit producers by reducing unfair 

impacts on growers attributable to these 

factors. Nonetheless, the influence of 

factors controlled by LPDs on grower 

compensation will not and cannot be 

eliminated without eliminating 

performance-based methods of 

compensation. Natural variation and 

randomness will persist for certain 

production factors that influence 

relative performance, such as breed, sex, 

age of breeding flock, health at 

placement, and the performance of other 

growers, even if the LPD strictly adheres 

to the duty of fair comparison in the 

distribution of them. These factors 

therefore will continue to be important 

in determining compensation in a 

performance-based pay system. 

Provision § 201.106(b) benefits growers 

by establishing a presumption of 

unfairness based on the magnitude of 

performance-based compensation, 

thereby also limiting the share of 

income that will be affected by risk 

factors out of their control. 

Growers are vulnerable to hold-up in 

the broiler contracting relationship: 

once a grower makes a housing and 

equipment investment to grow broilers 

for an LPD, that capital cannot be 

repurposed and the grower’s choices 

become limited. In addition, many 

broiler operations operate in areas 

where they can potentially contract with 

only a very small number integrators, 

which severely limits the grower’s 

ability to switch integrators. Data cited 

in the preamble of this final rule 

(MacDonald 2014) shows that more than 


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half of broiler growers have only one or 

two LPDs (integrators) in their local 

areas. As a result, growers lack 

bargaining power to protect their 

existing level of compensation when 

LPDs change contract terms. In 

requiring LPDs to provide the prior and 

modified contracts and required 

disclosures when contract modification 

or renewal results in lower year over 

year gross annual average grower 

payments at a complex, § 201.106(c) 

facilitates AMS intervention in unfair 

treatment. During a three-year transition 

period, LPDs will report changes to 

existing grower payment systems that 

reduce average compensation for 

growers at a complex. 

Benefits of Final § 201.110 

Market power gives LPDs a 

considerable bargaining advantage 

relative to growers in poultry 

contracting arrangements. As a result, 

growers lack negotiating power to 

demand, among other things, 

transparency around, and completeness 

in, and reasonable performance under 

contracts that would likely reduce the 

potential for deception and unfairness. 

The interventions aim to reduce 

potential adverse impacts of market 

power by establishing a duty of fair 

comparison that would provide 

protections to growers that they do not 

have bargaining leverage to demand. 

Currently, most broiler production 

contracts are incomplete in that they fail 

to clearly state important terms and 

provisions related to input distribution 

and flock production practices, how 

grower compensation will be handled in 

certain variable circumstances, 

settlement grouping procedures, and 

other aspects of broiler grower ranking 

system administration. LPDs commonly 

seek to disclaim under these contracts 

what should be express or implied 

duties and warranties around the 

usability or appropriateness of inputs or 

production practices and other aspects 

of broiler grower ranking system 

administrations. LPDs frequently offer 

broiler contracts to growers on a take it 

or leave it basis, providing growers with 

little insight as to methods the LPD will 

use to compare growers for purposes of 

determining compensation, including 

whether growers will be compared to 

other growers provided with similar 

inputs and assigned similar production 

practices. Moreover, during 

performance, growers have little to no 

ability to demand LPDs actually perform 

as could be reasonably expected under 

the contracts, including promptly 

addressing problems that may emerge 

during ordinary operations. 

Even under a reasonable level of 

transparency around specific input 

differences, growers are often unable to 

make sufficient modifications to their 

individual efforts to manage risks to 

how payments are affected under a 

poultry grower ranking system. Nor can 

they avoid harms from disputes that 

may arise under the poultry growing 

arrangement. Growers reasonably 

assume that they will be fairly 

compared to other growers under a 

broiler grower ranking system. They are 

deceived if LPDs do not make a good 

faith effort to ensure fair comparison 

among participating growers when 

operating broiler grower ranking 

systems. Given the extent of LPD control 

over grower outcomes through the 

distribution of inputs such as feed and 

chicks or production practices such as 

placement density, target weight, etc., 

growers are forced to rely heavily on 

LPD good faith efforts in performing fair 

comparisons under broiler growing 

arrangements. 

Consistent delivery of fair comparison 

requires LPDs to incur monitoring costs 

and take corrective actions when 

operating poultry grower ranking 

systems. In fact, many LPDs implicitly 

acknowledge a responsibility to fairly 

compare growers when they use 

procedures to identify and correct 

imbalances and provide remedies when 

factors beyond the growers’ control 

affect grower payments. These include, 

for example, provisions to remove a 

grower from a broiler grower ranking 

system pool and to pay that grower 

according to another metric (such as a 

multi-flock average) if the LPD discovers 

that inputs provided to the grower were 

inferior—such as sick chicks. Another 

example would be a policy of the LPD 

to avoid providing a grower with 

inferior inputs on consecutive flocks— 

such as chicks from excessively young 

layer flocks that are considered to be 

lower performing, at least when using 

the broiler grower ranking system to 

determine performance pay in those 

circumstances. Although such policies 

are not uncommon, they are not 

currently required to be universally 

employed or uniformly applied by 

LPDs. LPDs may have legitimate 

business interests in providing certain 

growers, sometimes higher skilled 

growers in fact, with lower performing 

inputs. Yet care needs to be taken to 

ensure that any comparison-based 

method for determining performance 

pay be established under circumstances 

that do not permit or enable the LPD to 

intentionally disadvantage one or more 

growers in the ranking system. 

Growers also have no means by which 

to ensure that LPDs consistently carry 

out their responsibility under the 

contract or to enforce it. Further, the 

benefits of monitoring and correcting for 

unfair grower outcomes accrue to 

growers and not to the LPD. Therefore, 

LPDs have insufficient incentive to 

uphold their end of the bargain, 

especially in markets where growers 

have few options of alternative LPDs 

with whom they could contract. LPDs 

can therefore opportunistically 

minimize their costs of delivering a fair 

comparison at the expense of growers 

and, as a result, fail to deliver on their 

obligation for good faith and fair dealing 

under the contract. 

Final § 201.110 addresses these 

problems by establishing a duty for 

LPDs to provide a fair comparison 

among growers when basing 

compensation on a grouping or ranking 

of growers delivering poultry during a 

specified period and requiring LPDs to 

document how they comply with that 

duty. The fair comparison requirement 

in final § 201.110(a) ensures that LPDs 

will not compare growers to other 

growers who have been supplied with 

inputs or assigned production practices 

that result in material differences in 

performance metrics used in payment 

calculations. Duty of fair comparison 

also requires that LPDs compare growers 

over appropriate time periods and use 

appropriate non-comparison payment 

methods. Final § 201.110(b) establishes 

documentation requirements in the form 

of processes, commonly known as 

policies and procedures, to facilitate 

LPD effective broiler grower ranking 

system operation under that duty, 

effective recordkeeping of transactions, 

and facilitates AMS supervision and 

enforcement. These provisions will 

benefit growers by reducing deception 

and unfairness in the operation of 

poultry grower ranking systems. 

Expressly requiring LPDs to 

implement written processes that 

promote fair comparison of growers, 

whether through more consistent 

allocation of inputs and production 

practices or adjustments to methods and 

formulas, will foster more transparent, 

accurate, and reliable broiler grower 

ranking systems, and hold LPDs 

accountable for divergences from lawful 

action. Growers will benefit from this 

regulation because they will be less 

vulnerable to intentional harm due to 

deception, retaliation, or bad faith by 

LPDs. An LPD, AMS, or enforcement 

body can more easily evaluate grower 

complaints of intentional harm—for 

example, LPD employees targeting 

growers by providing inferior inputs— 

when they are able to consider whether 

the LPD has complied with its own 

stated policies and procedures for 


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85Section II of this final rule, ‘‘Background,’’ 

documents decades of grower comments to USDA 

that highlight concerns of persistent unfairness 

resulting from unfair comparisons in broiler grower 

tournaments. 

86AMS sought feedback on proposed rulemaking 

in a 2022 ANPR (87 FR 34814, June 8, 2022). Some 

commenters noted that LPDs often supply 

insufficient information with respect to requested 

or required upgrades and deceptively induce 

growers to make costly additional capital 

investments. One commenter, for example, asserted 

that LPDs demand costly upgrades that some 

growers have reported to be arbitrary and 

apparently untethered to any reasonable assurance 

of increased compensation. 

ensuring fair comparison. Ongoing 

monitoring of the broiler grower ranking 

system by LPDs to fulfill the duty of fair 

comparison required by final 

§ 201.110(a) will also provide safeguards 

to prevent growers from being 

substantially disadvantaged by 

unintentional or inadvertent outcomes. 

For example, an LPD will be compelled 

to take prescribed corrective action if it 

discovers that a particular grower has 

randomly received an unusual share of 

inferior inputs over multiple flocks. 

Procedures designed to ensure fair 

comparison will include monitoring to 

prevent natural variation in input 

quality and LPD-determined flock 

production practices among growers 

within a single settlement group from 

being allowed to persist as a pattern that 

disadvantages a particular grower over 

multiple settlement groups. By 

establishing a basic duty for LPDs to 

deliver fair comparison of growers, final 

§ 201.110 is structured to provide LPDs 

flexibility in fulfilling that duty within 

the context of individual circumstances 

and complex production processes. 

Benefits of § 201.110 deriving from 

the value to growers of fairness and 

equity are important. AMS is unable to 

quantify these benefits. However, as a 

result of this provision, compensation 

for individual growers will more closely 

match the level of individual grower 

effort, skill, and investment relative to 

other growers under a poultry grower 

compensation system that guarantees 

fair comparison. This provision will 

benefit growers by removing some of the 

unfairness in the distribution of grower 

compensation within poultry ranking 

payment systems. When LPDs fulfill a 

duty to ensure fair comparisons, no 

individual grower will receive 

consistently poor inputs while other 

growers with whom that grower is 

compared receive consistently good 

inputs. The expected benefits of 

ensuring fair comparisons among 

growers are highlighted by the 

consistent widespread reports of harm 

to individual growers resulting from 

existing unfair comparisons.85 A 

reduction in the occurrence of such 

harms could potentially lead to reduced 

grower turnover. 

Provisions included in final 

§ 201.110(b)(1)(vi) will also require 

LPDs to maintain written processes for 

communication and resolution of 

grower concerns with the design or 

operation of a system that is consistent 

with the duty of fair comparison. These 

processes should address timely 

resolution of such disputes. Providing 

an effective method of dispute 

resolution has the potential to help 

resolve disagreements involving 

personality conflicts which can lead to 

avoidable inefficiencies. 

Benefits of Final § 201.112 

LPDs encourage and often require 

broiler growers to make additional 

capital investments in assets that are 

specific to producing poultry for that 

LPD. Growers cannot exert bargaining 

power to demand essential information 

that would inform such investments. As 

a result, LPDs can induce growers to 

make additional investment decisions 

that do not benefit growers when they 

do not supply sufficient information for 

evaluation of requested upgrades. Such 

investments can cause financial harm to 

growers and increase the extent of their 

investments in capital that is specific to 

poultry production for nearby LPDs 

(thereby also increasing grower hold-up 

exposure) while still benefiting those 

LPDs. Moreover, broiler growers bear all 

the costs and risks of additional capital 

improvement investment. LPDs do not 

own the farm-based production capital 

and therefore do not share in these risks, 

although they frequently dictate grower 

investments. Because poultry 

production capital is largely owned by 

growers, LPDs have limited incentive to 

carefully consider how much required 

additional capital investments will 

improve individual grower production 

efficiency and whether they are likely to 

lead to financial success or failure. This 

misalignment of incentives is consistent 

with grower complaints that LPDs 

sometimes require costly investments 

that are unnecessary or in some cases 

merely cosmetic.86 When a broiler 

considers a new investment, the broiler 

grower considers gains in productivity 

relative to the cost of the investment. 

However, when LPDs do not bear 

investment cost, they have incentive to 

maximize only their benefits and 

encourage growers to over-invest in 

poultry-specific production capital to 

the point of negative returns for the 

grower. 

AMS has sought to address similar 

concerns through prior action. Finalized 

in 2011, § 201.216 sets out criteria for 

when the Secretary will find additional 

capital investment violated the Act (76 

FR 76874, December 9, 2011). However, 

AMS’s experience since has found that 

the rule is insufficient to help growers 

or the Agency to identify problematic 

additional capital investment in time to 

act. Accordingly, the Agency in this 

final rule has prioritized disclosure of 

critical information to growers in a 

timely manner, to enable growers and 

the Agency to have ready access to the 

necessary information to conduct 

analyses under § 201.216 and under the 

Act generally, including to stop 

additional capital investment that cause 

unavoidable harms. AMS also is 

adopting final § 201.112 to prevent 

deception of growers related to 

additional capital investment, as the 

information being required is critical to 

their decision-making around the 

additional capital investment, whether 

or not the additional capital investment 

gives rise to unavoidable harms separate 

and apart from the failure to disclose. 

LPDs prevent growers from making 

fully informed decisions and 

understanding the true extent of overinvestment when they withhold 

important information about additional 

capital improvement investments. An 

increase in grower investment leads to 

increased grower dependency on LPDs 

to generate returns on that investment 

through poultry contracting. The 

presence of few or no other poultry 

contracting options in a grower region 

further focuses dependence on a single 

LPD. The use of incentive payments by 

LPDs to compensate growers for 

additional capital investment can help 

to align investment incentives. For these 

arrangements to work properly, growers 

must clearly understand the parameters 

of the investment and the breakdown of 

payment components and financial 

incentives offered by the LPD. 

Final § 201.112 will require LPDs to 

provide a Capital Improvement 

Disclosure Document when requesting 

an additional capital investment over 

the identified threshold of $12,500 (as 

defined in § 201.2(n)). This disclosure 

will provide information to existing 

growers contemplating additional 

capital investments about the goal or 

purpose of the investment, grower 

financial incentives, construction 

schedules, description of changes to 

housing specifications, approved 

manufacturers or vendors, and analysis 

of projected returns including the 

assumptions, risks, and uncertainties 

upon which those projections are based 

(paragraphs (b)(1) through (6)). As such, 

the Capital Improvement Disclosure 

Document will clearly state the 


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5196 Federal Register / Vol. 90, No. 10 / Thursday, January 16, 2025 / Rules and Regulations 

87The Small Business Administration (SBA) 

defines small businesses by their North American 

Industry Classification System Codes (NAICS). Live 

poultry dealers, NAICS 311615, are considered 

small businesses by SBA if they have fewer than 

1,250 employees. 

88All live poultry dealers are required to annually 

file PSD form 3002 ‘‘Annual Report of Live Poultry 

Dealers,’’ OMB control number 0581–0308. The 

annual report form is available to public at https:// 

www.ams.usda.gov/sites/default/files/media/ 

PSP3002.pdf. 

89Unless otherwise noted, estimated cost or hours 

estimates for small and large live poultry dealers are 

the same. 

intended and expected outcome of LPD 

additional investment requirements. 

Requiring LPDs to provide this 

information to growers will reduce 

asymmetric information that contributes 

to inefficient investment and resource 

allocation decisions, where such choice 

exists by growers. LPDs providing this 

additional information related to grower 

requirements reduces the cost to 

growers of identifying and qualifying 

manufacturers and vendors when 

making capital improvements. To the 

extent that disclosures assist growers in 

understanding the purpose of additional 

capital investments, those growers will 

be more likely to realize any potential 

benefits from the additional capital 

investment. For example, growers will 

be able to tailor additional capital 

investments to their particular operation 

so as to be better positioned to 

implement the additional capital 

investment and produce intended 

production improvements. The clarity 

provided by additional capital 

investment disclosure will reduce the 

likelihood of costly errors caused by 

miscommunication and 

misunderstanding and increase the 

likelihood that growers will be able to 

correctly implement additional capital 

investments. Final § 201.112 will 

generate economic benefits by 

addressing certain limitations on market 

functioning arising in part from 

asymmetric information. Growers 

operating with better information are 

less likely to be deceived or unfairly 

misled by LPDs when additional capital 

improvement investments are required. 

Even where growers may not be able 

to avoid or negotiate around these 

terms, growers may be better able to 

effectuate their rights under the Act, and 

AMS would benefit from earlier 

identification of potentially unfair 

practices. To the extent this occurs, by 

addressing asymmetric information this 

section of the final rule will help 

alleviate additional hold-up of growers 

by LPDs. Even in cases where grower 

refusal may still result in other adverse 

consequences, growers may still be 

better off by preventing additional 

financial loss and increased specific 

investment and dependence on the LPD. 

Financial projections and other analyses 

of additional capital improvement 

investments developed by LPDs along 

with more complete information about 

investment purpose, expected benefit, 

and grower performance will be 

superior to analysis based on limited 

grower information. 

Final § 201.112(c) will benefit growers 

who require translation assistance by 

requiring LPDs to make reasonable 

efforts to ensure that growers are aware 

of their right to request translation 

assistance and to assist growers in 

translating the Capital Improvement 

Disclosure Document. 

Summary of Benefits of Final 

§§ 201.106, 110, and 112 

AMS expects that the final rule would 

provide substantial benefits to the 

industry and address issues of extreme 

importance to broiler growers. However, 

these benefits are unquantified. AMS 

cannot measure any impact or shift in 

total industry supply or any 

corresponding indirect effects on 

industry supply and demand, including 

price and quantity effects. 

Estimation of Costs of the Final 

Regulations 

AMS estimates cost for three 

alternatives. The first is the final 

§§ 201.106, 110, and 112, which is the 

preferred alternative. The second 

alternative is the same as final 

§§ 201.106, 110, and 112 with a 

complete exemption for LPDs that are 

considered small businesses by the 

Small Business Administration.87 All 

LPDs are also included in the third 

alternative, which is adoption of the 

proposed §§ 201.106, 110, and 112. All 

three alternatives are compared against 

a baseline of status quo, which has no 

costs or benefits. 

The direct costs of final §§ 201.106, 

110, and 112 primarily consist of the 

time required for LPDs to: (1) modify 

and monitor grower contracts to 

determine compensation in a manner 

consistent with final § 201.106; (2) 

develop, document, and comply with 

policies and procedures for ensuring 

that growers are fairly compared to 

other growers in poultry grower ranking 

systems; and (3) gather and document 

information pertaining to grower 

additional capital investments and 

distribute it among the growers. The 

costs of the final rules will fall on LPDs 

as they modify existing contracts and 

compensation systems, develop and 

comply with new policies, and collect 

and disseminate required information. 

Costs will also fall on poultry growers 

based on the value of the time they put 

into reviewing the disclosures. Though 

poultry growers are expected to incur 

costs in reviewing information, they 

will be the primary beneficiaries of the 

information, which may be reflected in 

their ability to make more informed 

decisions (where they may have more 

than one or two integrators as options in 

certain geographic areas). Further, 

growers will be able to better identify 

additional capital investment programs 

that are unfair, which either AMS or 

growers can challenge as a violation of 

the Packers and Stockyards Act. This 

may result in a more efficient allocation 

of capital within the poultry growing 

industry. 

There were 42 LPDs in the broiler 

chicken market that filed a fiscal year 

2023 Annual Report with AMS, and 

their reports indicate that they had 

20,014 contracts with poultry growers 

during fiscal year 2023.88 Of these, 21 

LPDs are considered small businesses 

according to SBA classification, and 

these have a total of 1,208 grower 

contracts. Small LPDs are expected to 

differ from large LPDs in structure and 

complexity, particularly with regard to 

the number of contract types used, 

management, use of legal services, and 

divisions of labor. Where noted below, 

some components of cost estimates are 

calculated separately for large and small 

LPDs to reflect these differences.89

AMS expects the direct costs of the 

final rule will be small in relation to 

overall production costs and will not 

measurably alter poultry supply. AMS 

also expects that neither LPDs nor 

poultry growers will measurably change 

any production practices that will 

impact the overall supply of poultry as 

a result of these direct costs. 

Expected direct costs are estimated as 

the value of the time required to 

develop and implement new broiler 

grower contracts and grower payment 

systems to comply with requirements of 

final § 201.106; develop, implement, 

and maintain compliance with 

processes reasonably designed by the 

LPD to deliver fair comparisons among 

broiler growers in the operation of 

broiler contract tournament systems as 

required by final § 201.110; and produce 

and distribute disclosures when LPDs 

request or require growers to make 

additional capital investments as 

required by final § 201.112, as well as 

the time required to create and maintain 

any necessary additional records. 

Grower payment systems required by 

final § 201.106(a) are substantively 

similar to many current payment 

systems already in use and will 

therefore not require large adjustments 


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Federal Register / Vol. 90, No. 10 / Thursday, January 16, 2025 / Rules and Regulations 5197 

90See U.S. Bureau of Labor Statistics, May 2023 

National Occupational Employment and Wage 

Estimates, May 2023. https://www.bls.gov/oes/ 

special.requests/oesm23all.zip. 

91Small live poultry dealers are estimated to 

require 50% as many legal hours as large live 

poultry dealers on a per company basis for one-time 

cost of developing § 201.106 one-time changes to 

grower contracts and payment systems. 

92 17,664 legal hours × $139.96 per hour + 57,750 

management hours × $96.40 per hour + 7.360 

administrative hours × $49.36 per hour + 7,360 

information technology hours × $95.58 per hour = 

$9,106,112. 

93Average hourly wage rates used to estimate 

dealer costs include a 41.79% markup for benefits 

and are as follows: Management—$96.40, Legal— 

$139.96, Administrative—$49.36, and Information 

Technology—$95.58. Hourly wage rates were 

established using the following BLS classifications 

for each labor category as follows (NAICS Code— 

OCC code—OCC Title): Management (3116—11– 

1020—General and Operations Managers) for live 

poultry dealers’ managers, Legal (3110—23–1011— 

Lawyers) for attorneys for live poultry dealers and 

for growers, Administrative (3116—43–6011— 

Executive Secretaries and Executive Administrative 

Assistants) for live poultry dealers’ administrative 

assistants, and Information Technology (3116—11– 

3020—Computer and Information Systems 

Managers) for information technology managers. 

94 7,360 legal hours × $139.96 per hour + 52,500 

management hours × $96.40 per hour + 7,360 

administrative hours × $49.36 per hour + 14,720 

information technology hours × $95.58 per hour = 

$7,861,333. 

95 736 legal hours × $139.96 per hour + 5,250 

management hours × $96.40 per hour + 736 

administrative hours × $49.36 per hour + 1,472 

information technology hours × $95.58 per hour = 

$786,133. 

for most LPDs. AMS does not have 

sufficient data to predict whether the 

presumption of unfairness based on 25 

percent performance-based grower pay 

will cause any LPDs to make substantial 

changes to grower compensation 

structures. The policies and procedures 

that LPDs would be required to develop 

in response to final § 201.110 are 

expected to result in formalization, in 

many cases, of existing practices LPDs 

are currently following, albeit 

sporadically or inconsistently. Nearly 

all of the information and records 

required for disclosure to growers under 

final § 201.112 are already kept by and/ 

or available to LPDs. 

Although LPDs will need to take 

several actions to comply with new 

requirements under final §§ 201.106, 

110, and 112, these provisions are not 

expected to require LPDs to 

substantially change their existing 

business practices. The exception to this 

would occur if some LPDs currently 

exceed the 25 percent presumption of 

unfairness on performance-based grower 

compensation set by § 201.106(b) and 

will be unable to comply without 

substantial changes. The changes to 

comply would result in indirect costs. 

Non-quantifiable potential indirect costs 

to LPDs who exceed the 25 percent 

presumption of unfairness on 

performance-based grower 

compensation will be discussed 

separately within this section. AMS 

expects total direct costs of adjustments, 

contract modifications, records creation, 

and compliance under the final rule to 

be small relative to the overall size of 

the industry. 

AMS also estimates the amount of 

time that growers would take to review 

the information provided to them by 

LPDs. Estimates of the amount of time 

required by LPDs to modify existing 

contracts, develop and comply with 

new policies, and collect and distribute 

required information, and for growers to 

review the information were provided 

by AMS subject matter experts. These 

experts were supervisors and auditors 

with many years of experience with 

AMS in auditing LPDs for compliance 

with the Packers and Stockyards Act. 

Estimates for the value of time are U.S. 

Bureau of Labor Statistics Occupational 

Employment and Wage Statistics 

estimates released May 2023 and costs 

are therefore expressed in 2023 

dollars.90 Throughout the discussion 

that follows, ‘‘first year’’ costs refers to 

costs that are estimated to be incurred 

during the 12 months immediately 

preceding the effective date of the rule. 

Direct Costs of Final § 201.106— 

Preferred Alternative 

Under final § 201.106(a), LPDs will be 

required to redefine grower payment 

calculation systems as appropriate to 

express all payments in the form of 

bonuses added to a stated pay rate. AMS 

expects that existing schedules of 

grower payments can be recreated such 

that they comply with this final rule 

change. Existing LPD methods of grower 

payment calculation can be expressed in 

an alternative format that includes only 

bonus adjustments added to from an 

existing minimum pay rate. AMS 

expects that most LPDs will be required 

to make one-time changes to existing 

grower contracts and develop new 

payment systems that are consistent 

with these provisions. This process will 

also include producing and filing 

grower documents and communicating 

information about the new contract and 

payment system to growers and staff at 

each complex. 

AMS estimates that the aggregate onetime costs to LPDs of updating grower 

contracts and developing new grower 

payment systems, including modifying 

information systems to include new 

calculations as well as filing, and 

reporting to comply with final 

§ 201.106(a), will require 17,664 legal 

hours,91 57,750 management hours, 

7,360 administrative hours, and 7,360 

information technology hours, costing a 

total of $9,106,000 92 in the first year.93

Once LPDs have incurred a one-time 

cost of developing, documenting, and 

communicating new contracts and a 

new system of grower payments, AMS 

does not expect additional ongoing costs 

of implementing final § 201.106(a). 

Once in place, new provisions and 

modifications resulting from this onetime update are not expected to lead to 

an increase in costs associated with the 

ongoing maintenance and updating of 

grower contracts that would occur in the 

normal course of business. 

Final § 201.106(b) establishes a 

presumption of unfairness when, for a 

given complex, aggregate payments 

based upon a grouping, ranking, or 

comparison of growers (performance 

pay) exceed 25 percent of gross payment 

to growers on an annual basis. LPDs will 

need to analyze grower compensation 

structures at the complex-level and 

calculate annual performance-based 

grower compensation as a percentage of 

total compensation to ensure 

compliance with the 25 percent 

presumption established by final 

§ 201.106(b). LPDs may choose to redesign and modify existing 

compensation structures where greater 

than 25 percent of the total grower 

compensation is based on performance 

pay These LPDs may choose to create 

processes for monitoring compliance on 

an ongoing basis. Modifications to 

grower compensation structures will 

need to be incorporated into broiler 

contracts and communicated to growers. 

AMS estimates that the aggregate onetime costs to LPDs of examining and 

evaluating existing grower 

compensation structures and making 

modifications as required to ensure 

ongoing compliance with final 

§ 201.106(b), will require 7,360 legal 

hours, 52,500 management hours, 7,306 

administrative hours, and 14,720 

information technology hours, costing a 

total of $7,861,000 in the first year.94

LPDs will implement and maintain 

processes for monitoring ongoing 

compliance with § 201.106(b). AMS 

expects these annual ongoing costs to 

require in aggregate 736 legal hours, 

5,250 management hours, 736 

administrative hours, and 1,472 

information technology hours for an 

aggregate annual cost of $786,000.95

Final § 201.106(c) requires that for 

each of the three calendar years 

commencing with and including the 

effective date for § 201.106, LPDs must 

submit to USDA a copy of the prior and 

modified contracts and associated 

disclosures if any contract modification 


ddrumheller on DSK120RN23PROD with RULES4
5198 Federal Register / Vol. 90, No. 10 / Thursday, January 16, 2025 / Rules and Regulations 

96 736 legal hours × $139.96 per hour + 5,250 

management hours × $96.40 per hour + 736 

administrative hours × $49.36 per hour + 1,472 

information technology hours × $95.58 per hour = 

$786,133. 

97The average hourly wage rate of $62.13 per 

hour used to estimate costs for a poultry grower 

includes a 41.79% markup for benefits. The wage 

rate was established using BLS classification 

(1152—11–0000—Management Occupations). 

98 4 hours to review each disclosure × $62.13 per 

hour × 20,014 contracts = $4,973,879. 

or renewal results in less than the prior 

annual-calendar year’s complex-wide 

average gross payment to the grower. 

LPDs will be required to monitor 

changes in average annual gross 

payments to growers at the complex 

and, if necessary, provide 

documentation. 

AMS does not expect any costs to 

LPDs in the first year in response to 

§ 201.106(c). For each of the three 

calendar years following the effective 

date, LPDs will monitor grower 

compensation and submit any necessary 

documentation on an annual basis. AMS 

expects these annual ongoing costs to 

require in aggregate 736 legal hours, 

5,250 management hours, 736 

administrative hours, and 1,472 

information technology hours for an 

aggregate annual cost of $786,000.96

Final § 201.106 concerns potential 

changes to the method of payment 

calculation and compensation structure 

used in grower tournament settlement 

systems. LPDs will provide new 

contracts that include these updated 

provisions for review by broiler growers. 

AMS expects that the first time a grower 

receives a new contract containing these 

modifications, he or she will require 

about 4 hours to review and consider all 

new terms and provisions. At $62.13 per 

hour,97 the total one-time cost for all 

broiler growers to review the new 

contract is $4,974,000.98 AMS expects 

that the updated contract provisions and 

payment systems developed by LPDs 

pursuant to § 201.106 will not 

contribute to additional ongoing 

contract review time by growers beyond 

an initial one-time review. Therefore, no 

ongoing future costs of grower contract 

review have been included for 

§ 201.106. The ten-year aggregate total 

costs of final § 201.106 to LPDs are 

estimated to be $26,401,000, the tenyear aggregated total costs of final 

§ 201.106 to poultry growers are 

estimated to be $4,974,000, and the 

combined ten-year aggregate total costs 

of final § 201.106 to LPDs and poultry 

growers are estimated to be $31,375,000. 

Unquantified Indirect Costs of 

§ 201.106—Preferred Alternative 

Many factors will affect the costs to 

LPDs of changing existing compensation 

structures to comply with a 25 percent 

presumption as defined in § 201.106(b). 

The scope of comprehensive data that 

would be required for AMS to 

accurately measure and quantify these 

costs makes collection of sufficient data 

infeasible if such exists. Further, the 

nature of these costs will depend on 

future choices made by industry 

participants that cannot be predicted 

with reasonable certainty. The potential 

indirect costs—other than those direct 

administrative costs which are 

quantified separately—will be discussed 

qualitatively in this section. 

If LPDs substantively modify existing 

structures of grower compensation to 

reduce performance-based 

compensation to less than 25 percent of 

total grower compensation, additional 

costs must be considered. The 

likelihood and magnitude of these 

additional indirect costs will depend on 

the number of complexes that will 

modify existing compensation 

structures as a result of § 201.106(b), the 

extent of those modifications, and 

resulting cost increases. 

As discussed in the benefits section, 

AMS does not have sufficient data to 

make an inference on the number 

complexes that will reduce performance 

payments relative to total payments or 

the magnitude of any reductions that 

will be required. As previously 

discussed, at four complexes, aggregate 

performance payments were 11.4, 17.4, 

20.5, and 25.4 percent of total grower 

payments. AMS is not aware of any 

complex with performance payments 

that are as much as 26 percent of total 

payments, and it is possible that no 

complex will reduce performance 

payments relative to total payments by 

a substantial amount to avoid the 

presumption of unfairness established 

in final § 201.106(b). 

To the extent that the complexes AMS 

reviewed are representative of the other 

complexes owned by the same firms, 

two or possibly three of the firms would 

likely already be in compliance with 

final § 201.106(b). And due to the 

Wayne-Sanderson Farms consent 

agreement with U.S. Department of 

Justice, it is unlikely that the regulation 

will have an effect on WayneSanderson’s existing contracts. 

Therefore, it is unlikely that the 

presumption of unfairness on 

performance payments will have any 

effect on these firms, which combined 

account for up to 35 percent of broiler 

complexes. It is possible that at other 

firms, performance payment makes up 

less than 25 percent of total payments 

as well, but AMS does not have 

sufficient information to confirm this 

with a reasonable degree of confidence. 

Conceptually, where firms modify 

existing grower compensation structures 

at a complex in response to this rule, if 

reductions in performance-based 

payments relative to total payments 

adversely affect grower performance 

incentives and cause growers to produce 

broilers less efficiently, that could result 

in increased production costs for the 

firms. In general, the ‘‘tournament’’ 

system of broiler grower compensation 

bases payments to individual growers 

on their performance relative to other 

growers. Performance payments provide 

an incentive for growers to optimize 

factors under their control, such as 

effort and management, and to some 

extent investment (subject to the 

concerns around investments 

highlighted by this rule), to improve 

their own relative performance 

efficiency and increase income. The 

strength of individual performance 

incentives is related to the size of 

expected (potential) grower performance 

payments, which will be limited by the 

total amount of performance-based pay 

distributed among all growers. The 

effectiveness of incentives is also 

limited by the extent to which the 

grower can control performance. 

Decreasing the relative size of 

performance payments available to all 

growers at a complex might, at or above 

a certain level, in theory, therefore 

weaken performance incentives of 

individual growers and could result in 

reduced overall grower efficiency in 

broiler production. 

AMS has no reason to believe that the 

25 percent presumption adopted in this 

final rule would significantly change 

incentives. As noted above, the third 

largest LPD is already in compliance 

with the provision and some LPDs do 

not use the tournament system. No 

evidence was produced by commenters 

regarding the level of tournament 

compensation needed to optimize 

grower performance. Other factors, 

including inputs and production 

practices, the level of prudence and 

professionalism of growers, their risks of 

termination, and non-comparison 

performance payments can, for example, 

provide incentives for growers. 

Additionally, LPDs already closely 

monitor grower performance with a 

range of information they already have. 

Finally, the concern arises only if both 

the 25 percent presumption would 

affect incentives and if an LPD could 

not otherwise overcome the 

presumption. 

AMS cannot rule out the possibility 

that incentives may be affected, and 

AMS is unable to predict specific effects 

with certainty. Were production 

efficiency in some manner to be 


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Federal Register / Vol. 90, No. 10 / Thursday, January 16, 2025 / Rules and Regulations 5199 

99 4,128 legal hours × $139.96 per hour + 28,500 

management hours × $96.40 per hour + 1,472 

administrative hours × $49.36 per hour + 1,472 

information technology hours × $95.58 per hour = 

$3,538,507. 100Small live poultry dealers are estimated to 

require 33% as many legal hours and 133% as 

many management hours as large live poultry 

dealers on a per-complex basis for one-time cost of 

developing § 201.110 tournament fairness policies 

and procedures. 101Small live poultry dealers are estimated to 

require 50% as many legal hours as large live 

poultry dealers on a per-complex basis in ongoing 

compliance and maintenance of § 201.110 

tournament fairness policies and procedures. 

reduced, economic principles suggest 

that cost of production would increase, 

causing an inward shift of a firm’s 

marginal cost curve and that those costs 

could be passed on to consumers. 

Increases in cost structures could, under 

that same hypothetical, affect demand 

for broiler growing services in certain 

areas, for example possibly resulting in 

LPDs terminating some marginal 

growers. As noted above, based on the 

regulatory record and the Agency’s 

expert judgment based on the 

information and data available to AMS 

during the rulemaking process, AMS 

does not view these outcomes as likely 

to any material degree. 

Furthermore, LPDs have tools to 

incentivize grower effort that would 

partially or entirely avoid the risks 

outlined above. LPDs may shift some 

performance pay to non-comparison 

methods, such as fixed metric 

performance or to other innovative 

systems, which could retain the 

incentives where necessary and 

appropriate. Other LPDs, however, may 

believe that the performance incentive 

delivered by the tournament is 

misplaced given the particularities of 

their business model or the type of bird 

being grown at a complex (e.g., growout 

of ‘‘no antibiotics ever’’ may require 

different incentives and management 

than commoditized product). 

Depending on the needs of the complex, 

LPDs may seek to utilize technology, 

training, or other approaches to improve 

outcomes, thus reducing the need to 

utilize higher magnitudes of 

performance payments. 

LPDs currently use many variations of 

relative performance compensation 

systems at broiler complexes and some 

LPDs do not use tournament 

performance compensation systems. 

This suggests that that setting 

comparison pay above 25 percent is not 

the only way to optimize incentives for 

all complexes, growers, or 

circumstances. AMS does not have data 

for every payment structure currently in 

use. Limited data analysis from the 

small sample of complexes described 

above shows that performance 

compensation at a number of complexes 

is less than 25 percent of total pay. This 

suggests that regulated entities can 

optimize incentives without setting 

comparison performance pay above 25 

percent. Ultimately, AMS does not 

expect that LPDs will choose to abandon 

the tournament compensation system 

entirely as a result of this regulation and 

does not expect materially adverse 

effects on production efficiency. 

Final § 201.106(c) requires that within 

a three-year transition period following 

the effective date, LPDs must provide 

the prior and modified contracts and 

grower disclosures if complex-wide 

average gross payment to growers falls 

below the level of the prior calendar 

year. AMS considered that LPDs could 

face additional costs if they were 

prevented from lowering grower 

compensation for a three-year period 

and were not able to adjust payment 

structures to meet challenging and 

unforeseen industry conditions in the 

broiler industry. For example, a sharp 

decline in broiler demand or other type 

of event disrupts the broiler industry 

could potentially create conditions in 

which aggregate average grower 

compensation at a complex temporarily 

falls below its level in the prior year. 

In analyzing information submitted by 

LPDs, AMS will consider all relevant 

factors, including industry conditions, 

when investigating unfairness. As a 

result, AMS expects that LPDs will be 

constrained only from unfair reductions 

in grower compensation and will not be 

prevented from adjustments to grower 

compensation that reflect legitimate 

business operations, such as responding 

to a decline in broiler demand or higher 

feed costs. In addition, the tendency for 

base levels of year over year inflation to 

naturally erode real grower 

compensation will also attenuate the 

need for nominal decreases. Given the 

restructuring of how payment 

calculation methods and compensation 

structures will be presented to growers 

as LPDs comply with § 201.106(a), 

review and analysis of documentation 

by AMS under this provision will focus 

on the unfair reductions in 

compensation resulting from contract 

modification which this provision is 

intended to prevent. Therefore, AMS 

does not expect additional costs for 

LPDs as a result of § 201.106(c) beyond 

the direct administrative costs of 

assessing and monitoring revised 

payment systems for potential 

reductions in grower compensation and 

providing documentation when 

required as explicitly described in the 

previous section. 

Direct Costs of Final § 201.110— 

Preferred Alternative 

Final § 201.110 will require LPDs to 

develop, maintain and comply with a 

set of policies and procedures that 

ensure the operation of a poultry grower 

ranking system that is consistent with 

the duty of fair comparison among 

growers, including describing processes 

for supplying or assigning inputs and 

production practices, communication 

and cooperation, and facilitating the 

conduct of ongoing compliance reviews 

with those processes. 

Final § 201.110(a) and (b)(1)(i) 

through (v) describe objectives and 

minimum requirements for written 

documentation of processes, including 

how LPDs will operate poultry grower 

ranking systems that are consistent with 

the duty of fair comparison. Information 

obtained during previous AMS 

investigations suggests that LPDs may 

already have some informal policies and 

practices or perhaps even some contract 

provisions in place to address and 

attempt to remedy situations in which 

growers have been inadvertently 

disadvantaged by such factors. For 

example, AMS is aware of situations 

where an LPD has removed a grower 

that received an unreasonable share of 

lower quality inputs from the grower 

pool and paid them by another method 

that would not penalize relative 

performance (e.g., a five-flock average). 

Under final § 201.110(a) and (b)(1)(i) 

through (v), all LPDs will be required to 

develop formal written processes that 

meet specific criteria outlined in the 

regulation. 

AMS estimates that the one-time 

aggregate cost of developing new 

policies and procedures in response to 

final § 201.110(a) and (b)(1)(i) through 

(v) for LPDs will require 4,128 legal 

hours, 28,500 management hours, 1,472 

administrative hours, and 1,472 

information technology hours, costing a 

total of $3,539,000 in the first year.99

Due to differences in their structure, 

estimates for small LPDs were 

calculated with the expectation that 

they would employ relatively fewer 

legal (attorney) hours that are offset by 

a larger share of management hours.100

LPDs will implement, monitor, and 

comply with new written processes for 

the design and operation of a poultry 

grower ranking system that is consistent 

with the duty of fair comparison; they 

will also maintain and update these 

written processes. AMS expects these 

annual ongoing costs to require in 

aggregate 1,400 legal hours,101 28,336 

management hours which include 

renewing and updating written 

processes at the corporate level as well 

as monitoring activities conducted by 


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102 1,400 legal hours × $139.96 per hour + 28,336 

management hours × $96.40 per hour + 736 

administrative hours × $49.36 per hour + 736 

information technology hours × $95.58 per hour = 

$3,034,210. 

103Small live poultry dealers are estimated to 

require 50% as many legal hours and 125% as 

many management hours, and 50% as many 

information technology hours as large live poultry 

dealers on a per company basis for one-time cost 

of developing § 201.110 communication, 

cooperation, and dispute resolution policies and 

procedures. 

104 840 legal hours × $139.96 per hour + 546 

management hours × $96.40 per hour + 168 

administrative hours × $49.36 per hour + 336 

information technology hours × $95.58 per hour = 

$210,608. 

105 336 legal hours × $139.96 per hour + 168 

management hours × $96.40 per hour + 84 

administrative hours × $49.36 per hour + 84 

information technology hours × $95.58 per hour = 

$75,397. 

106 74 legal hours × $139.96 per hour + 368 

management hours × $96.40 per hour + 74 

administrative hours × $49.36 per hour + 92 

information technology hours × $95.58 per hour = 

$58,203. 

107Live poultry dealers reported a combined total 

of 20,014 contracts for their fiscal year 2023. 

108 4 hours to review each disclosure × $62.13 per 

hour x 20,014 contracts × 5 percent of growers that 

require significant housing upgrades = $248,694. 

managers at each complex to ensure 

ongoing compliance, 736 administrative 

hours, and 736 information technology 

hours for an aggregate annual cost of 

$3,034,000.102

Final § 201.110(b)(1)(vi) requires that 

the written processes developed must 

include a description of how LPDs 

communicate and cooperate to resolve 

grower concerns in a timely fashion. 

AMS expects that the aggregate one-time 

cost to LPDs of setting up 

communications and cooperation 

protocol and implementing them in the 

first year will require 840 legal hours, 

546 management hours, 168 

administrative hours, and 336 

information technology hours 103 for an 

aggregate one-time cost of $211,000.104

Final § 201.110(b)(2) states the length 

of time for retaining the records relevant 

to an LPD’s compliance with final 

§ 201.110(b)(1) and (2). AMS considered 

record retention when estimating costs 

for final § 201.110(b)(1) and final 

§ 201.110(b)(2) does not impose any 

costs independently. 

AMS expects the ongoing annual 

costs after the first year of implementing 

written processes regarding 

communication, cooperation, and 

dispute resolution policies and 

procedures described in final 

§ 201.110(b)(1)(vi) to require, in 

aggregate, 336 legal hours, 168 

management hours, 84 administrative 

hours, and 84 information technology 

hours for an aggregate annual cost of 

$75,000.105

Written processes developed by LPDs 

are for internal use, to be complied with 

and maintained, to be provided to AMS, 

and as part of ongoing compliance 

monitoring. Under final § 201.110, LPDs 

are not required to provide additional 

disclosures to contract growers. 

Therefore, final § 201.110 will not 

impose any additional one-time or 

ongoing costs on growers to review 

additional disclosures, and total grower 

costs of final § 201.110 are zero. 

The ten-year total costs of final 

§ 201.110 to all 42 live broiler poultry 

dealers are estimated to be $31,736,000. 

Since expected grower costs for this 

section are zero, these also represent the 

total aggregate costs of § 201.110. 

Direct Costs of Final§ 201.112— 

Preferred Alternative 

The new provisions in final § 201.112 

will require LPDs to provide a Capital 

Improvement Disclosure Document any 

time the LPD requests existing broiler 

chicken growers to make an additional 

capital investment ($12,500 or more per 

structure excluding maintenance or 

repair). The Capital Improvement 

Disclosure Document must include 

information about the goal or purpose of 

the investment, financial incentives and 

compensation for the grower associated 

with the additional capital investment, 

all schedules and deadlines for the 

investment, a description of changes to 

housing specifications, and analysis of 

projected returns. 

Final § 201.112 will require LPDs to 

create a Capital Improvement Disclosure 

Document when new capital 

investments are required of growers. 

Based on information provided by 

subject matter experts, AMS estimates 

that capital upgrades will be required at 

5 percent of complexes each year, 

triggering creation of a new disclosure 

document for approximately 5 percent 

of growers annually. Therefore, AMS 

estimates the annual cost of creating 

disclosures for additional requested 

grower capital investment will require 

74 legal hours, 368 management hours, 

74 administrative hours, and 92 

information technology hours to create 

and provide a Capital Improvement 

Disclosure Document for all growers 

requiring additional capital 

improvement upgrades, for an aggregate 

annual cost of $58,000.106

With the exception of acknowledging 

receipt, the final rule will not impose 

any requirement on poultry growers to 

review the information provided by 

LPDs, but to benefit from the Capital 

Improvement Disclosure Document, 

growers will need to review the 

information provided. For final 

§ 201.112, AMS expects that growers 

will take about four hours to review 

these documents when they are 

disclosed as part of a capital 

improvement request or requirement by 

the LPD. LPDs will be required to 

provide disclosures to growers for any 

of 20,014 contracts for which additional 

capital investment requests are made.107

AMS expects that LPDs will make 

additional capital investment requests 

for an average of 5 percent of grower 

contracts annually. At an estimated 4 

hours of grower review time per 

disclosure at $62.13 per hour, growers’ 

aggregate annual costs will be 

$249,000 108 for reviewing documents 

required by § 201.112 in the first year 

and in each successive year. 

The ten-year aggregate total costs of 

final § 201.112 to LPDs are estimated to 

be $582,000, the ten-year aggregated 

total costs of final § 201.112 to poultry 

growers are estimated to be $2,487,000, 

and the combined ten-year aggregate 

total costs of final § 201.112 to LPDs and 

poultry growers are estimated to be 

$3,069,000. 

Unquantified Indirect Costs of 

§ 201.112—Preferred Alternative 

If AMS enforcement of final § 201.112 

has the effect of preventing broiler 

growers from making unprofitable 

additional capital investments (those for 

which individual grower returns do not 

exceed costs), then such decisions to 

forgo investment will likely result in 

fewer benefits for LPDs, and more for 

growers. Because LPDs benefit from any 

productivity gain created by grower 

investments, whether or not the 

investment is profitable for the grower 

in the long-run, LPDs will not receive 

these benefits if additional information 

provided under this provision causes 

growers to avoid additional capital 

investments that they deem to be 

unprofitable and inefficient for their 

operation. AMS is not able to quantify 

these lost benefits to LPDs. They 

represent costs to LPDs, but these costs 

are at least partly offset by gains (or 

avoided losses) for growers. In addition, 

to the degree that an additional capital 

investment requires over-investment, 

eliminating it benefits society. Overinvestment occurs when the cost of the 

investment exceeds the total value it 

generates (in terms of increased grower 

productivity, production cost efficiency, 

etc.) and the investment resources 

would be more productively employed 

in other ways. The benefits to growers 

and society of avoiding such 

investments would exceed the losses to 

LPDs. 


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109USDA–NASS. Poultry—Production and Value 

2023 Summary (April 2024). 

Combined Costs of Final §§ 201.106, 

110, and 112—Preferred Alternative 

Combined costs to LPDs for final 

§§ 201.106, 110, and 112 are expected to 

be $20,775,000 in the first year, 

$4,740,000 in years two through four, 

and $3,954,000 in subsequent years 

thereafter. Information collection costs 

are also reported in the Paperwork 

Reduction Act section as the combined 

costs to LPDs for compliance with the 

reporting and recordkeeping 

requirements of final §§ 201.106, 110, 

and 112. The combined costs for poultry 

growers are expected to be $5,223,000 in 

the first year and $249,000 in 

subsequent years. 

The ten-year aggregate combined costs 

of final §§ 201.106, 110, and 112 to 

LPDs are estimated to be $58,719,000 

and the present value of the ten-year 

total costs to be $54,230,000 discounted 

at a two percent rate. The annualized 

aggregate combined costs of the present 

value (PV) of ten-year costs to LPDs 

discounted at a two percent rate are 

expected to be $6,037,000. 

The ten-year aggregate combined costs 

of final §§ 201.106, 110, and 112 to 

poultry growers are estimated to be 

$7,461,000 and the present value of the 

ten-year total costs to be $7,110,000 

discounted at a three percent rate. The 

annualized aggregate combined costs of 

the PV of ten-year costs to poultry 

growers discounted at a three percent 

rate are expected to be $792,000. 

The ten-year aggregate combined costs 

of final §§ 201.106, 110, and 112 to 

LPDs and poultry growers are estimated 

to be $66,179,000 and the present value 

of the ten-year aggregate combined costs 

to be $61,341,000 discounted at a two 

percent rate. The annualized aggregate 

costs of the PV of ten-year costs to LPDs 

and poultry growers discounted at a two 

percent rate are expected to be 

$6,829,000. The cost estimates of final 

§§ 201.106, 110, and 112 presented 

above appear in the following table. 

TABLE 1—ESTIMATED COSTS OF FINAL §§ 201.106, 110, AND 112—PREFERRED ALTERNATIVE

Preferred alternative 

Expected costs * 

Live poultry 

dealers 

Poultry 

growers Industry total 

§ 201.106: 

First-Year .............................................................................................................................. $16,968,000 $4,974,000 $21,941,000 

Ten-Year Total ...................................................................................................................... 26,401,000 4,974,000 31,375,000 

PV of Ten-Year Discounted at 2% ....................................................................................... 25,148,000 4,876,000 30,025,000 

Ten-Year Annualized at 2% ................................................................................................. 2,800,000 543,000 3,343,000 

§ 201.110: 

First-Year .............................................................................................................................. 3,749,000 0 3,749,000 

Ten-Year Total ...................................................................................................................... 31,736,000 0 31,736,000 

PV of Ten-Year Discounted at 2% ....................................................................................... 28,559,000 0 28,559,000 

Ten-Year Annualized at 2% ................................................................................................. 3,179,000 0 3,179,000 

§ 201.112: 

First-Year .............................................................................................................................. 58,000 249,000 307,000 

Ten-Year Total ...................................................................................................................... 582,000 2,487,000 3,069,000 

PV of Ten-Year Discounted at 2% ....................................................................................... 523,000 2,234,000 2,757,000 

Ten-Year Annualized at 2% ................................................................................................. 58,000 249,000 307,000 

§§ 201.106, 110, and 112: 

First-Year .............................................................................................................................. 20,775,000 5,223,000 25,997,000 

Ten-Year Total ...................................................................................................................... 58,719,000 7,461,000 66,179,000 

PV of Ten-Year Discounted at 2% ....................................................................................... 54,230,000 7,110,000 61,341,000 

Ten-Year Annualized at 2% ................................................................................................. 6,037,000 792,000 6,829,000 

* Rows may not sum to Total Costs due to rounding. 

Estimated Costs-and Expected Benefits 

of Final §§ 201.106, 110, and 112— 

Preferred Alternative 

The value of broiler production in the 

U.S. for 2023 was approximately $50.6 

billion.109 Total direct costs of final 

§§ 201.106, 110, and 112 are estimated 

to be greatest in the first year at $26.0 

million, or 0.051 percent of revenues. A 

relatively small improvement in 

efficiency from improved allocation of 

capital and labor resources in the 

industry would more than outweigh the 

direct costs of this final rule. A 

reduction in information asymmetry 

(resulting in more useful information 

provided to growers), grower 

uncertainty and risk of potential adverse 

outcomes, and retaliatory and deceptive 

practices by LPDs will lead to benefits 

resulting from the final rule. The size of 

benefits will be directly related to the 

extent of these reductions. AMS expects 

that the final rule will provide 

substantial benefits the industry and 

address issues of extreme importance to 

broiler growers. However, these benefits 

are not quantifiable. Benefits and costs 

are summarized below for each 

provision of the rule. 

Final § 201.106(a) benefits broiler 

growers by requiring LPDs to implement 

payment structures that increase clarity 

and certainty about the lowest possible 

revenue outcomes under a growing 

arrangement. LPDs are expected to incur 

one-time direct costs of developing, 

documenting, and communicating new 

contracts and a new system of grower 

payments and no additional ongoing 

costs. Since most LPDs currently 

employ payment structures that allow 

for both bonuses and discounts, AMS 

expects these costs to be realized by 

LPDs at most complexes and the 

corresponding benefits to be realized by 

the vast majority of broiler growers. 

Final § 201.106(b) establishes a 

presumption of unfairness when the 

amount of total grower compensation 

based on relative performance exceeds 

25 percent and thereby protects growers 

from excess income variability. Some 

growers at complexes where LPDs 

modify compensation structures to 

reduce the percentage of grower pay 

based on relative performance may 

benefit from reductions in the 

variability of their income. The 

distribution of benefits is likely to be 

unequal, such that increases in 

compensation for some growers may 

correspond with decreases in 

performance-based compensation for 

other growers. 


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110 4 hours to review each disclosure × $62.13 per 

hour × 18,806 contracts = $4,673,667. 

In addition to direct costs to LPDs of 

implementing the rule, § 201.106(b) 

could result in additional indirect costs 

to broiler industry stakeholders 

(including LPDs, consumers, and 

growers) if LPDs modify existing 

compensation structures in ways that 

adversely affect grower incentives and 

lead to increased production costs. The 

magnitude of benefits and costs 

resulting from § 201.106(b) will depend 

on two important factors that cannot be 

measured or predicted with a reasonable 

degree of certainty: the number of 

broiler complexes that will modify 

existing compensation structures as a 

result of final § 201.106(b) and the 

manner in which those change will be 

implemented by LPDs. If few or no 

complexes make substantial 

modifications to existing compensation 

structures as a result of § 201.106(b), the 

resulting benefits to growers of reduced 

income variability and the indirect costs 

to the broiler industry will be small. All 

broiler growers will nonetheless benefit 

from ongoing protection against future 

increases in performance-based pay 

variability and reductions in base pay 

amounts. 

Growers will benefit from additional 

protections under § 201.106(c) that 

require LPDs to submit prior and 

modified contracts if contract 

modifications result in reduced average 

grower compensation during a threeyear transition period. This requirement 

will facilitate AMS monitoring and 

intervention, when necessary, to protect 

growers from unfair treatment. AMS 

does not expect indirect costs to broiler 

industry stakeholders. AMS expects the 

benefits of § 201.106(c) will accrue to all 

broiler growers and the direct costs of 

implementation over the three-year 

transition period will apply to all LPDs. 

By requiring that LPDs design and 

operate poultry grower ranking systems 

to provide a fair comparison among 

growers, final § 201.110 will benefit 

broiler growers through increased 

fairness and reduced deception. All 

broiler growers will benefit to the degree 

that this provision improves fairness 

and reduces deception within poultry 

grower ranking systems. The direct costs 

of implementing and maintaining 

compliance with § 201.110 will be 

incurred by all LPDs, and AMS does not 

expect any other indirect costs of this 

provision. 

Disclosures concerning additional 

capital investments required by final 

§ 201.112 will provide broiler growers 

with better information to make 

financial decisions and reduce the 

likelihood the LPDs can deceive or 

mislead growers. Growers will also 

benefit to the extent that this 

requirement provides information that 

facilitates improved identification and 

enforcement of violations under 

§ 201.116. LPDs will incur direct costs 

of preparing and distributing 

disclosures when additional capital 

investments are requested by the LPD. 

The provision could also cause some 

transfer of benefits from LPDs to 

growers if the provision causes growers 

to avoid making unprofitable 

investments that would have benefited 

the LPD more than the grower. 

Net total costs and benefits to the 

industry from final §§ 201.106, 110, and 

112 cannot be quantified. Thus, AMS 

cannot measure any impact or shift in 

total industry supply or any 

corresponding indirect effects on 

industry supply and demand, including 

price and quantity effects. 

Estimated Costs and Expected Benefits 

of the Small Business Exemption 

Alternative 

AMS estimated costs for an 

alternative to the preferred option for 

the final rule. It would be the same as 

final §§ 201.106, 110, and 112, with the 

exception that the alternative would 

exempt LPDs that fall under the SBA 

definition of small businesses from all 

provisions of the two final rules. In the 

preferred alternative, the requirements 

in final §§ 201.106, 110, and 112 would 

apply to all LPDs, including those 

classified as small businesses. 

The costs associated with this 

alternative are similar, but smaller than 

the preferred option. According to PSD 

records, small LPDs make up 50.0 

percent of all LPDs, but have only 6.0 

percent of poultry growing contracts. 

The estimation of the costs of the small 

business exemption alternative will 

follow the same format as the preferred 

alternative. 

Costs of Final § 201.106—Small 

Business Exemption Alternative 

AMS estimates that the aggregate onetime costs to LPDs of updating grower 

contracts and developing new grower 

payment systems, including modifying 

information systems to include new 

calculations as well as filing, and 

reporting to comply with final 

§ 201.106(a), will require 15,936 legal 

hours, 54,780 management hours, 6,640 

administrative hours, and 6,640 

information technology hours, costing a 

total of $8,474,000 in the first year 

under the small business exemption 

alternative. Once LPDs have incurred a 

one-time cost of developing, 

documenting, and communicating new 

contracts and a new system of grower 

payments, AMS does not expect 

additional ongoing costs of 

implementing final § 201.106(a) under 

the small business exemption 

alternative. 

AMS estimates that the aggregate onetime costs to LPDs of examining and 

evaluating existing grower 

compensation structures and making 

modifications as required to ensure 

ongoing compliance with final 

§ 201.106(b), will require 6,640 legal 

hours, 49,800 management hours, 6,640 

administrative hours, and 13,280 

information technology hours, costing a 

total of $7,327,000 in the first year 

under the small business exemption 

alternative. 

LPDs will monitor, maintain and 

comply with the processes for 

examining excessive variability. AMS 

expects these annual ongoing costs to 

require in aggregate 664 legal hours, 

4,980 management hours, 664 

administrative hours, and 1,328 

information technology hours for an 

aggregate annual cost of $733,000 under 

the small business exemption 

alternative. 

AMS does not expect any cost in the 

first year to set up and implement a plan 

in response to § 201.106(c). For each of 

the three calendar years following the 

effective date for § 201.106, AMS 

expects these annual ongoing costs to 

require in aggregate 664 legal hours, 

4,980 management hours, 664 

administrative hours, and 1,328 

information technology hours for an 

aggregate annual cost of $733,000 under 

the small business exemption 

alternative. 

For final § 201.106(a), AMS expects 

that growers will take about 4 hours to 

review new contract terms and 

provisions when they are provided in 

the first year. At $62.13 per hour, the 

total one-time cost for all broiler 

growers to review the new contract 

under the small business exemption 

alternative is $4,674,000.110 AMS 

expects that the updated contract 

provisions and payment systems 

developed by LPDs pursuant to final 

§ 201.106 (a) would not contribute to 

additional ongoing contract review time 

by growers beyond an initial one-time 

review. Therefore, no ongoing future 

costs of grower contract review are 

included. 

The ten-year aggregate total costs to 

LPDs of final § 201.106 under the small 

business exemption alternative are 

estimated to be $24,593,000, the tenyear aggregate total costs to broiler 

growers of final § 201.106 for the small 

business exemption alternative are 

estimated to be $4,674,000, and the firstVerDate Sep<11>2014 21:38 Jan 15, 2025 Jkt 265001 PO 00000 Frm 00058 Fmt 4701 Sfmt 4700 E:\FR\FM\16JAR4.SGM 16JAR4

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111 1,328 legal hours × $139.96 per hour + 25,564 

management hours × $96.40 per hour + 664 

administrative hours × $49.36 per hour + 664 

information technology hours × $95.58 per hour = 

$2,746,477. 112 504 legal hours × $139.96 per hour + 252 

management hours × $96.40 per hour + 84 

administrative hours × $49.36 per hour + 210 

information technology hours × $95.58 per hour = 

$119,051. 113 168 legal hours × $139.96 per hour + 84 

management hours × $96.40 per hour + 42 

administrative hours × $49.36 per hour + 42 

information technology hours × $95.58 per hour = 

$37,698. 

114 66 legal hours × $139.96 per hour + 332 

management hours × $96.40 per hour + 66 

administrative hours × $49.36 per hour + 83 

information technology hours × $95.58 per hour = 

$52,509. 

115Live poultry dealers that exceed SBA 

classification criteria for small businesses reported 

a combined 18,806 poultry contracts in their 

Annual Reports to AMS. 

116 4 hours to review each disclosure × $62.13 per 

hour × 18,806 contracts × 5 percent of growers that 

require significant housing upgrades = $233,683. 

year and ten-year aggregate total costs to 

LPDs and poultry growers of final 

§ 201.106 for the small business 

exemption alternative are estimated to 

be $29,267,000. 

Unquantified Indirect Costs of 

§ 201.106—Small Business Exemption 

Alternative 

AMS expects that indirect costs 

resulting from § 201.106(b) and (c) for 

the small business exemption 

alternative will be nearly identical to 

those discussed for the preferred 

alternative, with the only difference 

being the number of complexes 

potentially affected. In particular, small 

LPDs would be exempt from the 

presumption of unfairness under 

§ 201.106(b) and will not incur indirect 

costs from modifying grower 

compensation structures to reduce the 

percentage of performance-based 

compensation for a complex below the 

presumptively unfair 25 percent of total 

compensation. The 10 percent of 

complexes that would be exempted 

from the regulation under this 

alternative are small by definition. AMS 

does not have access to data that would 

suggest whether these small LPD 

complexes are any more or less likely to 

require modifications to existing grower 

compensation structures that result in 

indirect costs than other complexes. 

Indirect costs for the small business 

exemption alternative could only be 

equal to or less than the preferred 

alternative but cannot be quantified for 

the same reasons. 

Direct Costs of Final § 201.110—Small 

Business Exemption Alternative 

AMS estimates that the one-time 

aggregate cost of developing new 

policies and procedures in response to 

final § 201.110(a) and (b)(1)(i) through 

(v) for LPDs will require 3,984 legal 

hours, 24,900 management hours, 1,328 

administrative hours, and 1,328 

information technology hours, costing a 

total of $3,150,000 in the first year for 

the small business exemption 

alternative. 

After new written processes have 

been developed, LPDs would be 

required to implement, monitor, and 

comply and to maintain and update 

them. AMS expects these annual 

ongoing costs for the small business 

exemption alternative to require in 

aggregate 1,328 legal hours, 25,564 

management hours which include 

renewal and updating of written 

processes at the corporate level as well 

as monitoring activities conducted by 

managers at each complex to ensure 

ongoing compliance, 664 administrative 

hours, and 664 information technology 

hours for an aggregate annual cost of 

$2,746,000.111

Final § 201.110(b)(1)(vi) requires that 

the written processes developed must 

include a description for how the LPD 

would resolve a grower’s concerns with 

the LPD’s design or operation of a 

poultry grower ranking system that is 

consistent with the duty of fair 

comparison that is required by this 

section, including the timeliness of the 

resolution. AMS expects that the 

aggregate one-time cost to LPDs of 

setting up communications and 

complaint resolution processes as 

described in § 201.110(b)(1)(vi) for the 

small business exemption alternative 

will require 504 legal hours, 252 

management hours, 84 administrative 

hours, and 210 information technology 

hours for an aggregate one-time cost of 

$119,000.112

Costs associated with final 

§ 201.110(b)(2), ‘‘Record retention,’’ are 

included in cost estimates for final 

§ 201.110(b)(1). AMS expects that this 

section does not incur any additional 

costs. 

AMS expects the ongoing annual 

costs of implementing communications 

and complaint resolution processes as 

described in § 201.110(b)(1)(vi) to 

require, for the small business 

exemption alternative, in aggregate, 168 

legal hours, 84 management hours, 42 

administrative hours, and 42 

information technology hours for an 

aggregate annual cost of $38,000.113

Because final § 201.110 does not require 

LPDs to provide additional disclosures 

to contract growers, final § 201.110 

would not impose any additional onetime or ongoing costs on growers to 

review additional disclosures, and total 

grower costs of final § 201.110 are also 

zero under the small business 

exemption alternative. 

The ten-year total costs of final 

§ 201.110 to the 50.0 percent of live 

broiler poultry dealers impacted under 

the small business exemption 

alternative are estimated to be 

$28,327,000. Since expected grower 

costs for this section are zero, these also 

represent the total aggregate costs of 

final § 201.110. 

Direct Costs of Final § 201.112—Small 

Business Exemption Alternative 

Final § 201.112 would require LPDs to 

create a Capital Improvement Disclosure 

Document when new capital 

investments are requested of growers. 

Based on information provided by 

subject matter experts, AMS estimates a 

five percent annual average probability 

that capital improvement upgrades will 

be required for growers at a complex, 

which would trigger creation of a new 

Disclosure Document. Therefore, AMS 

estimates the annual ongoing cost of 

creating Capital Improvement 

Disclosure Documents for the small 

business exemption alternative will 

require 66 legal hours, 332 management 

hours, 66 administrative hours, and 83 

information technology hours to create 

and provide Capital Improvement 

Disclosure Documents for all growers 

requiring additional capital 

improvement upgrades, for an aggregate 

annual cost of $53,000 for the small 

business exemption alternative.114

For final § 201.112, AMS expects that 

growers would take about four hours to 

review these documents when they are 

disclosed as part of a capital 

improvement request or requirement by 

the LPD. For the small business 

exemption alternative, LPDs would be 

required to provide disclosures to 

growers for any of the 18,806 contracts 

for which additional capital investment 

requests are made.115 AMS expects that 

LPDs will make additional capital 

investment requests for an average of 

five percent of grower contracts 

annually. Given that growers require an 

estimated 4 hours at $62.13 per hour, 

growers’ aggregate annual costs would 

be $234,000 for reviewing documents 

required by final § 201.112 in the first 

year and in each successive year for the 

small business exemption alternative.116

The ten-year aggregate total costs of 

final § 201.112 under the small business 

exemption alternative for LPDs are 

estimated to be $525,000, and the tenyear aggregated total costs to poultry 

growers of final § 201.112 under the 

small business exemption alternative 

are estimated to be $2,337,000. The 

combined first-year aggregate total costs 

to LPDs and poultry growers of final 


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§ 201.112 under the small business 

exemption alternative are estimated to 

be $286,000, and the ten-year aggregate 

total costs are estimated to be 

$2,862,000. 

Combined Costs of Final §§ 201.106, 

110, and 112—Small Business 

Exemption Alternative 

Aggregate combined costs to LPDs for 

final §§ 201.106, 110, and 112 for the 

small business exemption alternative 

are expected to be $19,123,000 in the 

first year, and $4,302,000 in subsequent 

years. The combined costs for poultry 

growers are expected to be $4,907,000 in 

the first year, $234,000 in subsequent 

years. 

The aggregate ten-year combined 

quantified costs to LPDs of final 

§§ 201.106, 110, and 112 for the small 

business exemption alternative are 

estimated to be $53,445,000 and the 

present value of the ten-year combined 

costs $49,382,000 discounted at a two 

percent rate. The aggregate annualized 

costs of the PV of ten-year costs to LPDs 

discounted at a two percent rate are 

expected to be $5,498,000. 

The aggregate ten-year combined costs 

to poultry growers of final §§ 201.106, 

110, and 112 for the small business 

exemption alternative are estimated to 

be $7,011,000 and the present value of 

the ten-year combined costs are 

estimated to be $6,681,000 discounted 

at a two percent rate. The aggregate 

annualized costs of the PV of ten-year 

costs to poultry growers discounted at a 

two percent rate are expected to be 

$744,000. 

The aggregate combined costs of final 

§§ 201.106, 110, and 112 under the 

small business exemption alternative for 

LPDs and poultry growers are estimated 

to be $24,030,000 in the first year and 

$4,536,000 in subsequent years. The 

aggregate ten-year combined costs to 

LPDs and poultry growers of final 

§§ 201.106, 110, and 112 for the small 

business exemption alternative are 

estimated to be $60,456,000 and the 

present value of the ten-year combined 

costs are estimated to be $56,063,000 

discounted at a two percent rate. The 

aggregate annualized costs of the PV of 

ten-year costs to LPDs and poultry 

growers discounted at a two percent rate 

are expected to be $6,241,000. The 

aggregate cost estimates of final 

§§ 201.106, 110, and 112 under the 

small business exemption alternative 

presented above appear in the following 

table. The quantified costs to the 

industry in the first year under the small 

business exemption alternative are 

$24.030 million. 

TABLE 2—ESTIMATED COSTS OF FINAL §§ 201.106, 110, AND 112—SMALL BUSINESS EXEMPTION ALTERNATIVE

SBE alternative 

Expected cost * 

Live poultry 

dealers 

Poultry 

growers Industry total 

§ 201.106: 

First-Year .............................................................................................................................. $15,801,000 $4,674,000 $20,474,000 

Ten-Year Total ...................................................................................................................... 24,593,000 4,674,000 29,267,000 

PV of Ten-Year Discounted at 2% ....................................................................................... 23,426,000 4,582,000 28,008,000 

Ten-Year Annualized at 2% ................................................................................................. 2,608,000 510,000 3,118,000 

§ 201.110: 

First-Year .............................................................................................................................. 3,269,000 0 3,269,000 

Ten-Year Total ...................................................................................................................... 28,327,000 0 28,327,000 

PV of Ten-Year Discounted at 2% ....................................................................................... 25,485,000 0 25,485,000 

Ten-Year Annualized at 2% ................................................................................................. 2,837,000 0 2,837,000 

§ 201.112: 

First-Year .............................................................................................................................. 53,000 234,000 286,000 

Ten-Year Total ...................................................................................................................... 525,000 2,337,000 2,862,000 

PV of Ten-Year Discounted at 2% ....................................................................................... 472,000 2,099,000 2,571,000 

Ten-Year Annualized at 2% ................................................................................................. 53,000 234,000 286,000 

§§ 201.106, 110, and 112: 

First-Year .............................................................................................................................. 19,123,000 4,907,000 24,030,000 

Ten-Year Total ...................................................................................................................... 53,445,000 7,011,000 60,456,000 

PV of Ten-Year Discounted at 2% ....................................................................................... 49,382,000 6,681,000 56,063,000 

Ten-Year Annualized at 2% ................................................................................................. 5,498,000 744,000 6,241,000 

* Rows may not sum to Total Costs due to rounding. 

Estimated Costs and Expected-Benefits 

of Final §§ 201.106, 110, and 112— 

Small Business Exemption Alternative 

According to PSD records, only 6.0 

percent of poultry growing contracts are 

between small LPDs and poultry 

growers. Thus, 94 percent of all poultry 

growers will receive the benefits of final 

§§ 201.106, 110, and 112 under the 

small business exemption alternative. 

As with the preferred option, net total 

costs and benefits to the industry from 

§§ 201.106, 110, and 112 under the 

small business exemption alternative 

cannot be quantified. Thus, AMS cannot 

measure any impact or shift in total 

industry supply or any corresponding 

indirect effects on industry supply and 

demand, including price and quantity 

effects. 

The tables above indicate that the 

small business exemption alternative 

would cost the industry less than the 

preferred option. Although most 

growers contract with large poultry 

growers, AMS chose not to accept the 

alternative because exempting small 

business from complying with the 

regulations would also result in less 

benefits to growers. 

Estimated Costs and Expected Benefits 

of Proposed Rule Alternative 

AMS estimated costs for a third 

alternative to the ‘‘do nothing’’ option 

and the last of four total alternatives 

presented. This alternative considers 

adopting §§ 201.106, 110, and 112 for all 

small and large LPDs as originally 

proposed without including the changes 

in the final rule. These changes have 

already been described in extensively 

earlier in the document. The estimation 

of costs for the proposed rule alternative 

will proceed by describing differences 

in costs by major rule section and 

combined. 


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117 2,208 legal hours × $139.96 per hour + 14,720 

management hours × $96.40 per hour + 736 

administrative hours × $49.36 per hour + 2,392 

information technology hours × $95.58 per hour = 

$1,992,996. 118 736 legal hours × $139.96 per hour + 7,360 

management hours × $96.40 per hour + 368 

administrative hours × $49.36 per hour + 920 

information technology hours × $95.58 per hour = 

$918,613. 

Costs of § 201.106—Proposed Rule 

Alternative 

Final § 201.106(a) is unchanged from 

§ 201.106 as it was proposed and as it 

is analyzed in this alternative. Final 

§ 201.106(b), ‘‘Excessive variability,’’ 

and (c), ‘‘Transition,’’ were not included 

in proposed § 201.106. Neither estimates 

of direct time costs nor other potential 

indirect costs or associated benefits for 

these provisions are included for the 

proposed rule alternative. Estimated 

costs for § 201.106 under the proposed 

rule alternative are equal to one-time 

direct costs of final § 201.106(a). 

Costs of § 201.110—Proposed Rule 

Alternative 

Final § 201.110 requires LPDs to 

develop, maintain, and comply with a 

set of policies and procedures that are 

reasonably designed for the design and 

operation of a poultry grower ranking 

system that is consistent with the duty 

of fair comparison. As described in 

previous discussion of changes from the 

proposed to final rule, final § 201.110(a) 

is substantively unchanged from the 

proposed rule, text of final 

§ 201.110(b)(1) has been simplified from 

the proposed rule to improve clarity of 

documentation requirements, and 

proposed § 201.110(b)(2), ‘‘Compliance 

review,’’ has been removed. Two other 

provisions of proposed § 201.110 

relating to ‘‘Communication and 

cooperation’’ and ‘‘Record retention’’ 

have received paragraph number 

redesignations but are otherwise 

unchanged. Changes to § 201.110(b)(1) 

did not affect the estimation of hours or 

of costs and benefits to the rule. 

Estimated costs of § 201.110 under the 

proposed rule alternative are therefore 

equal to estimated direct costs for the 

final § 201.110 under the preferred 

alternative with costs for proposed 

§ 201.110(b)(2) added. 

Proposed § 201.110(b)(2), would 

require LPDs to conduct a compliance 

review of each complex no less than 

once every two years to ensure 

compliance with policies and 

procedures established under proposed 

§ 201.110(a) and (b)(1). LPDs would 

need to first design a compliance review 

system to be used for conducting 

written review of compliance by 

complex managers, production 

supervisors, and field agents. 

Compliance reviews would then need to 

be conducted every two years at each 

complex. 

AMS estimates that the aggregate onetime costs of designing and initiating 

the compliance review process would 

require 2,208 legal hours, 14,720 

management hours, 736 administrative 

hours, and 2,392 information 

technology hours costing $1,993,000 117

in the first year for LPDs to initially set 

up their review and compliance policies 

and procedures and initiate their 

ongoing compliance review processes. 

The ongoing cost for LPDs to conduct 

compliance reviews for each complex 

every two years has been converted to 

an annual cost by dividing the total cost 

of conducting reviews on all complexes 

in half. This could be consistent with, 

for example, a system where each LPD 

reviews half of their complexes each 

year on a rolling basis or, alternatively, 

where a sinking fund deposit is made 

each year and used every other year. 

AMS estimates that total ongoing annual 

costs on the part of LPDs will require 

736 legal hours, 7,360 management 

hours, 368 administrative hours, and 

920 information technology hours to 

conduct and document written reviews 

of compliance of each complex no less 

than once every two years, for an 

aggregate annual cost of $919,000.118

Costs of § 201.112—Proposed Rule 

Alternative 

Text of § 201.112(a) and (b) was 

changed from the proposed to final rule 

primarily for the purpose of clarification 

or to add paragraph titles; these changes 

did not affect the estimation of hours or 

of costs and benefits to the rule. The 

addition of final § 201.112(c), 

‘‘Translation,’’ from the proposed to 

final rule is also not expected to change 

hours or costs because LPDs already 

have all necessary information to make 

reasonable efforts to assist growers in 

translating disclosure documents and 

have made it available to growers who 

request the information. Accordingly, 

AMS did not add any time to its cost 

estimates for LPDs to comply with this 

new requirement. AMS cost estimates to 

LPDs and growers of § 201.112 under 

the proposed rule alternative are 

identical to those described under the 

preferred alternative. 

Combined Costs of §§ 201.106, 110, and 

112—Proposed Rule Alternative 

Aggregate combined costs to LPDs for 

§§ 201.106, 110, and 112 for the 

proposed rule alternative are expected 

to be $14,906,000 in the first year, and 

$4,086,000 in subsequent years. The 

combined costs for poultry growers are 

expected to be $5,223,000 in the first 

year, $249,000 in subsequent years. 

The aggregate ten-year combined 

quantified costs to LPDs of §§ 201.106, 

110, and 112 for the proposed rule 

alternative are estimated to be 

$51,684,000 and the present value of the 

ten-year combined costs is $47,314,000 

discounted at a two percent rate. The 

aggregate annualized costs of the PV of 

ten-year costs to LPDs discounted at a 

two percent rate are expected to be 

$5,267,000. 

The aggregate ten-year combined costs 

to poultry growers of §§ 201.106, 110, 

and 112 for the proposed rule 

alternative are estimated to be 

$7,461,000 and the present value of the 

ten-year combined costs are estimated to 

be $7,110,000 discounted at a two 

percent rate. The aggregate annualized 

costs of the PV of ten-year costs to 

poultry growers discounted at a two 

percent rate are expected to be 

$792,000. 

The aggregate combined costs of final 

§§ 201.106, 110, and 112 under the 

proposed rule alternative for LPDs and 

poultry growers are estimated to be 

$20,129,000 in the first year and 

$4,335,000 in subsequent years. The 

aggregate ten-year combined costs to 

LPDs and poultry growers of §§ 201.106, 

110, and 112 for the proposed rule 

alternative are estimated to be 

$59,145,000 and the present value of the 

ten-year combined costs are estimated to 

be $54,425,000 discounted at a two 

percent rate. The aggregate annualized 

costs of the PV of ten-year costs to LPDs 

and poultry growers discounted at a two 

percent rate are expected to be 

$6,059,000. The aggregate cost estimates 

of final §§ 201.106, 110, and 112 under 

the proposed rule alternative presented 

above appear in the following table. The 

quantified costs to the industry in the 

first year under the proposed rule 

alternative are $20.13 million. 


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5206 Federal Register / Vol. 90, No. 10 / Thursday, January 16, 2025 / Rules and Regulations 

TABLE 3—ESTIMATED COSTS OF §§ 201.106, 110, AND 112—PROPOSED RULE ALTERNATIVE

Preferred alternative 

Expected cost * 

Live poultry 

dealers 

Poultry 

growers Industry total 

§ 201.106: 

First-Year .............................................................................................................................. $9,106,000 $4,974,000 $14,080,000 

Ten-Year Total ...................................................................................................................... 9,106,000 4,974,000 14,080,000 

PV of Ten-Year Discounted at 2% ....................................................................................... 8,928,000 4,876,000 13,804,000 

Ten-Year Annualized at 2% ................................................................................................. 994,000 543,000 1,537,000 

§ 201.110: 

First-Year .............................................................................................................................. 5,742,000 0 5,742,000 

Ten-Year Total ...................................................................................................................... 41,996,000 0 41,996,000 

PV of Ten-Year Discounted at 2% ....................................................................................... 37,864,000 0 37,864,000 

Ten-Year Annualized at 2% ................................................................................................. 4,215,000 0 4,215,000 

§ 201.112: 

First-Year .............................................................................................................................. 58,000 249,000 307,000 

Ten-Year Total ...................................................................................................................... 582,000 2,487,000 3,069,000 

PV of Ten-Year Discounted at 2% ....................................................................................... 523,000 2,234,000 2,757,000 

Ten-Year Annualized at 2% ................................................................................................. 58,000 249,000 307,000 

§§ 201.106, 110, and 112: 

First-Year .............................................................................................................................. 14,906,000 5,223,000 20,129,000 

Ten-Year Total ...................................................................................................................... 51,684,000 7,461,000 59,145,000 

PV of Ten-Year Discounted at 2% ....................................................................................... 47,314,000 7,110,000 54,425,000 

Ten-Year Annualized at 2% ................................................................................................. 5,267,000 792,000 6,059,000 

* Rows may not sum to Total Costs due to rounding. 

Estimated Costs and Expected Benefits 

of §§ 201.106, 110, and 112—Proposed 

Rule Alternative 

The expected benefits of proposed 

§§ 201.106, 110, and 112 as analyzed in 

the proposed rule alternative have been 

described in the discussion of benefits 

for the preferred option, final 

§§ 201.106, 110, and 112, with the 

exception of § 201.110(b)(2), 

‘‘Compliance review,’’ which was 

removed from the proposed to final rule. 

Proposed § 201.110(b)(2) would require 

a written review of each broiler complex 

at least every other year to ensure 

compliance with the policies and 

procedures developed under this 

section. While the proposed rule would 

not require that LPD documentation be 

distributed to growers, it would be 

subject to USDA review to ensure 

ongoing maintenance and compliance. 

This compliance review requirement 

would not provide benefits separate 

from those generated by establishing the 

duty in § 201.110(a); however, 

documentation of regular review of LPD 

procedures could assist in ongoing 

enforcement of the proposed rule, 

thereby increasing the likelihood of 

compliance so that benefits of the 

proposed rule are realized by growers. 

All potential non-quantifiable benefits 

and indirect costs of final § 201.106(b) 

and (c) are excluded from the proposed 

rule alternative. Net total costs and 

benefits to the industry from §§ 201.106, 

110, and 112 in the proposed rule 

alternative cannot be quantified in 

relation to the total value of industry 

production. Thus, AMS cannot measure 

any impact or shift in total industry 

supply or any corresponding indirect 

effects on industry supply and demand, 

including price and quantity effects. 

Comments from the proposed rule 

have been discussed and changes to the 

final rule have been explained 

previously in this regulatory analysis. 

Expected benefits and costs of adopting 

the proposed rule are presented in this 

section as a third regulatory alternative 

to final §§ 201.106, 110, and 112. 

Estimated direct costs for the final rule 

preferred alternative are decreased by 

removal of proposed § 201.110(b)(2), 

‘‘Compliance review’’ and increased by 

the addition of § 201.106(b) and (c). As 

a net result of all changes, estimated 

direct costs are lower for the proposed 

rule alternative in comparison to the 

final §§ 201.106, 110, and 112. The 

proposed rule alternative also excludes 

expected benefits and indirect costs of 

§ 201.106(b) and (c). As discussed 

previously, commenters on the 

proposed rule expressed strong support 

for including these provisions. Under 

the proposed rule alternative, growers 

would be denied protection against 

excessive variation in compensation by 

establishing 25 percent as a 

presumptively unfair percentage of 

performance-based pay. Without 

protection during the transition period 

for implementation of these rule 

provisions, growers would be 

vulnerable to reductions in 

compensation by LPDs. 

After considering all four regulatory 

alternatives, AMS determined that the 

preferred alternative is the best 

alternative. 

C. Regulatory Flexibility Act 

As part of the regulatory process, a 

Regulatory Flexibility Analysis (RFA) is 

conducted in order to evaluate the 

effects of this final rule on small 

businesses. 

AMS is adding final §§ 201.106, 110, 

and 112 to the regulations under the 

Packers and Stockyards Act. The 

regulations will establish requirements 

for LPDs that produce broilers with 

grower ranking contracts. LPDs that 

only produce turkeys, ducks, geese, or 

other fowl will not be affected. Final 

§ 201.106 will require LPDs to develop 

and implement new broiler grower 

contracts and grower payment systems. 

Final § 201.110 will impose a duty on 

LPDs that produce broilers to establish 

and maintain compliance with written 

processes for the design and operation 

of poultry growing ranking systems 

consistent with a duty of fair 

comparison. Final § 201.112 would 

require LPDs to produce and distribute 

disclosures when they request growers 

to make additional capital investments. 

Summary of the Final Rule 

Final § 201.106 will prevent LPDs 

reducing compensation rates based on a 

grower’s grouping, ranking, or 

comparison to others. All payment 

adjustments related to grower 

performance will need to be positive 

adjustments. LPDs are prevented from 

taking deductions based on relative 

performance rankings. 


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119See U.S. Bureau of Labor Statistics, May 2023 

National Occupational Employment and Wage 

Estimates, May 2023. https://www.bls.gov/oes/ 

special.requests/oesm23all.zip. 

Final § 201.106 will also establish a 

presumptive unfairness limitation on 

the share of grower payments that an 

LPD may determine by a grower’s 

grouping, ranking, or comparison to 

others. The Secretary will presume that 

an LPD is in violation of the Act if a 

payment associated with a grower’s 

grouping, ranking, or comparison to 

others is more than 25 percent of the 

total payments to growers in a calendar 

year. 

Final § 201.106 also creates a 

transition period lasting three years after 

the regulation becomes effective. During 

the transition period, if an LPD reduces 

the price per pound, the LPD will be 

required to forward to the AMS 

Administrator a copy of the prior and 

the modified contract and any LPD 

Disclosure Document. 

Final § 201.110 will require LPDs to 

provide for fair comparison among 

growers when basing compensation on 

a upon a grouping or ranking of growers 

delivering during a specified period. 

Final § 201.110 also lists factors that the 

Secretary will consider in determining 

whether the system was designed to 

deliver a fair comparison, which 

include: whether growers will be 

compared to growers supplied with 

inputs or assigned production practices 

that result in material differences in 

performance metrics used in payment 

calculations, whether growers will be 

compared over appropriate time 

periods, whether any non-comparison 

payment methods applied are 

appropriate, whether the LPD has made 

reasonable efforts to timely resolve 

concerns a grower raises regarding the 

LPD’s design and operation of its 

poultry grower ranking system, and any 

other factor relevant to a fair 

comparison. 

Final § 201.110 will further require 

that when an LPD uses a poultry grower 

ranking system and cannot conduct a 

fair comparison for one or more 

growers, the LPD must compensate 

those growers through an appropriate 

non-comparison method specified in the 

contract that reflects reasonable 

compensation to the grower for its 

services. 

Final § 201.110 will also require LPDs 

to establish and maintain written 

documentation of poultry grower 

ranking system policies and procedures 

for the design and operation of a poultry 

grower ranking system that is consistent 

with the duty of fair comparison. The 

written documentation must include 

policies and procedures regarding the 

manner in which LPDs will work to 

ensure a fair comparison among contract 

growers taking into account the 

distribution of inputs and assignment of 

production variables that are controlled 

by the LPD, any flexibility the LPD has 

in performing these comparisons, and 

how the LPD resolves concerns 

regarding the design and operation of 

the poultry grower ranking system by 

the LPD. 

Final § 201.112 will require LPDs to 

provide a Capital Improvement 

Disclosure Document any time the LPD 

requests or requires existing broiler 

chicken growers to make an additional 

capital investment that is $12,500 or 

more per structure excluding 

maintenance or repair. The Capital 

Improvement Disclosure Document 

must include information about the goal 

or purpose of the investment, all 

schedules and deadlines for the 

investment, a description of changes to 

housing specifications, and analysis of 

projected returns. 

Comments on the Proposed Rule and 

Associated Changes to the Final Rule 

AMS did not receive comments from 

small LPDs. AMS received comments 

from trade associations that likely 

represent small LPDs, but none of their 

comments specifically addressed issues 

concerning small LPDs. After 

consideration of all the public 

comments, AMS chose to adopt the 

proposed rule as a final rule with 

several modifications. Large LPDs and 

trade associations commented that the 

regulation would be particularly 

challenging if the period of time 

allowed for regulated entities to comply 

with the provisions is too short. 

To allow sufficient time for regulated 

entities to comply with the final rule 

and avoid excess implementation costs, 

AMS is setting the effective date for this 

rule at July 1, 2026, which is 

approximately 18 months following 

publication in the Federal Register. 

This extended time frame will not 

impact the amount or timing for 

estimated costs of the final rule because 

regulated entities are expected to incur 

costs during the year preceding the 

effective date. 

Industry trade organizations and large 

LPDs commented that the full cost of 

implementing the proposed rule would 

be far greater than estimated by AMS. 

The commenters asserted that AMS 

greatly underestimated the costs that 

will be required for employing teams 

with highly specialized legal and 

technical expertise to implement the 

proposed rule by modifying or replacing 

grower contracts and communicating 

changes to growers. Commenters 

suggested that AMS did not adequately 

consider the total number of hours 

needed, but none provided quantified 

estimates. Large LPDs also commented 

that hourly rates paid to specialized 

industry professionals such as attorneys 

should be much higher. Commenters 

also suggested that implementation of 

the rule would require LPDs to hire and 

train additional staff and pull resources 

away from other important activities. 

For the time that small LPDs would 

require to comply with the rule, AMS 

consulted auditors and supervisors as 

subject matter experts who are familiar 

with LPDs and broiler complex 

operations from many years of 

experience employed with AMS in 

auditing LPDs for compliance with the 

Act. Small LPDs may need to hire new 

staff to implement the changes required 

by final §§ 201.106, 110, and 112, 

particularly in the first year. Hourly 

rates used in cost analysis for the 

proposed rule were based on averages 

within the agricultural sector as 

published and annually updated by the 

U.S. Bureau of Labor Statistics.119 AMS 

expects that average hourly rates 

provide an appropriate benchmark for 

estimating industry average costs. While 

some LPDs commented that AMS’s 

estimates were too low, none of them 

recommended a different method of 

estimating costs. 

In preparation for the final rule AMS 

reviewed direct costs with the subject 

matter experts. After doing so, AMS 

added modest amount of time to 

account for the cost of IT work in 

preparing disclosures in § 201.112. 

AMS received comments from 

growers, grower groups, government 

agencies, and advocates in support of 

additional limitations on grower risk 

from excessive variability in 

compensation. Based on these 

comments, AMS has added provision 

§ 201.106(b), which establishes a 

presumption that a regulated entity is in 

violation of the Act when aggregate 

gross annual payments based upon a 

grouping, ranking, or comparison of 

growers (performance pay) exceed of 25 

percent of total gross payments 

(including performance and all other 

types of grower pay). 

AMS added costs for LPDs to 

implement and monitor this new 

provision, which are discussed and 

quantified as direct administrative costs. 

Other expected additional benefits and 

indirect costs resulting from this new 

provision cannot be quantified and are 

discussed separately. 

AMS also solicited comment in the 

proposed rule on whether there was a 

need to protect growers against the risk 


ddrumheller on DSK120RN23PROD with RULES4
5208 Federal Register / Vol. 90, No. 10 / Thursday, January 16, 2025 / Rules and Regulations 

120 88 FR 83210, 83301 (Nov. 28, 2023). 

121 13 CFR 121.201. 

122All LPDs are required to annually file PSD 

form 3002 ‘‘Annual Report of Live Poultry Dealers,’’ 

OMB control number 0581–0308. The Annual 

Report form is available to the public at https://

www.ams.usda.gov/sites/default/files/media/ 

PSP3002.pdf. 

123USDA, NASS. 2023 Census of Agriculture: 

United States Summary and State Data. Volume 1, 

Part 51. Issued February 2024 Table 42. st99_1_042_

044.pdf (usda.gov). 

124Brothers, D. Goeringer, P. Thompson, J. ‘‘U.S. 

Broiler Growers Face Increasing Challenges on the 

Family Farm,’’ Choices Magazine, December 2023. 

Available online at <https://www.choices

magazine.org/choices-magazine/submitted-articles/ 

us-broiler-growers-face-increasing-challenges-onthe-family-farm> last accessed 11/6/2024. 

125Alabama A&M & Auburn University Extension 

ANR–2932, February 2024. Available online at 

<https://www.aces.edu/wp-content/uploads/2022/ 

10/ANR-2932_FarmTypesandEstimatedBusiness

Returns_021924L-G.pdf> last accessed 11/6/2024. 

that LPDs might unfairly reduce broiler 

grower total compensation during a 

transition period after implementation 

of the final rule. Based on comments, 

AMS added § 201.106(c), which will 

require LPDs to submit copies of the 

prior and modified contracts and 

disclosures to AMS if average gross 

grower payments at a complex show 

year-over-year decline following a 

contract modification during the three 

calendar years commencing with and 

including the effective date of the rule. 

AMS will review the information 

provided by LPDs to identify any 

potentially unfair practices related to 

broiler grower compensation. 

AMS expects that requirements in 

final § 201.106(c) will increase direct 

administrative costs for LPDs relative to 

the proposed rule. Final § 201.106(c) 

may increase indirect costs as well, but 

AMS does not have sufficient data to 

quantify the potential indirect costs or 

benefits associated with final 

§ 201.106(c). 

AMS received comments suggesting 

that some of the detailed documentation 

requirements under proposed 

§ 201.110(b) were similar to existing 

documentation requirements and might 

create unnecessarily burdensome and 

complex paperwork. In response to 

these comments, AMS made several 

changes to § 201.110(b) in the final rule 

that included consolidating and 

streamlining the documentation 

requirements and removing some 

detailed requirements that were 

included in the proposed rule. AMS 

expects these changes to modestly 

reduce the total recordkeeping 

requirements or time cost of the 

information collection for LPDs, but 

AMS is unable to estimate these effects 

with certainty. To limit the potential for 

underestimating costs, AMS did not 

reduce hours and accordingly these 

changes did not affect the estimation of 

costs or benefits in the final rule relative 

to the proposed rule. 

The proposed rule included 

§ 201.110(b)(2), ‘‘Compliance review,’’ 

which required LPDs to conduct a 

required bi-annual review process. AMS 

removed this requirement in response to 

comments that self-audits would be 

burdensome for LPDs, and that 

elimination of this requirement would 

not substantially diminish compliance 

with § 201.110. Compliance will be 

enforced through regular AMS review of 

the policies and procedures poultry 

dealers are required to establish and 

maintain under § 201.110(b). Removing 

the compliance reviews reduced costs in 

the final rule relative to the proposed 

rule. 

Based on comments received, AMS 

added a provision at § 201.112(c) to 

require that the LPD make reasonable 

efforts to ensure that growers are aware 

of their right to request translation 

assistance and to assist the grower in 

translating the Capital Improvement 

Disclosure Document. Reasonable 

efforts include, but are not limited to, 

providing current contact information 

for professional translation service 

providers, trade associations with 

translator resources, relevant 

community groups, or any other person 

or organization that provides translation 

services in the poultry grower’s 

geographic area. Reasonable efforts, 

depending on the facts and 

circumstances (such as convenience, 

expense, and timeliness of the 

translation), may also include allowing 

the grower access to a computergenerated translation of the Disclosure 

Document and additional time to review 

any translated Disclosure Document. 

A similar requirement was established 

for LPDs in § 201.102 of the 

‘‘Transparency in Poultry Grower 

Contracting and Tournaments’’ final 

rule.120 As LPDs already have all 

necessary information to make 

reasonable efforts to assist growers in 

translating disclosure documents and 

have made it available to growers who 

request the information. Similarly, AMS 

did not increase grower review time for 

the addition of § 201.112 as growers 

who require translation assistance 

already should be connected with the 

resources from § 201.102. 

Small Businesses Affected 

The Small Business Administration 

(SBA) defines small businesses by their 

North American Industry Classification 

System Codes (NAICS).121 SBA 

considers broiler producers small if 

sales are less than $3.5 million per year. 

LPDs, classified under NAICS 311615, 

are considered small businesses if they 

have fewer than 1,250 employees. 

AMS maintains data on LPDs from the 

Annual Reports these firms file with 

PSD.122 Currently, 42 LPDs would be 

subject to the regulation. Of these, 21 

LPDs would be small businesses 

according to the SBA standard. In their 

fiscal year 2023, LPDs reported that they 

had 18,806 production contracts with 

broiler growers. Small LPDs accounted 

for 1,208 contracts (6.0 percent). 

Annual Reports from LPDs indicate 

they had 20,014 contracts, but a poultry 

grower can have more than one contract. 

The 2022 Census of Agriculture 

indicated that there were 14,144 

contract broiler growers in the United 

States.123 AMS does not regulate poultry 

growers and has no record of the 

number of poultry growers that qualify 

as small businesses but expects that 

nearly all of them are small businesses. 

The typical size of broiler grow-out 

operations has trended larger from the 

early 2000s—when a typical broiler 

farm consisted of a 80,000–100,000 

square foot operation—to a typical new 

farm today which ‘‘may have eight or 

more barns of over 30,000 square feet 

each on one site.’’ 124 Projected gross 

revenue for a newer farm receiving 

relatively high performance-based pay 

rates is $224,000 for two 36,000 square 

foot barns.125 Extrapolating these 

projections on a per house basis, gross 

revenue for an eight barn 288,000 square 

foot operation would total just under 

$900,000 and an operation with 30 

barns could still remain within the $3.5 

million threshold for small business 

classification. However, this same study 

notes that, ‘‘still, 80,000 to 120,000 

square feet of housing for most family 

farms is all a single farmer can 

successfully operate while limiting 

hired labor.’’ 

Direct Costs of Final §§ 201.106, 110, 

and 112 

Direct costs of final §§ 201.106, 110, 

and 112 to LPDs would primarily 

consist of the time required to modify 

existing contracts, develop and comply 

with new policies, and collect and 

distribute it among the growers. Final 

§§ 201.106, 110, and 112 would also 

cost poultry growers the value of the 

time they put into reviewing and 

acknowledging receipt of new contracts 

and disclosures. 

Expected direct costs are estimated as 

the total value of the time required by 

LPDs to modify existing contracts, 

develop and comply with new policies, 


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Federal Register / Vol. 90, No. 10 / Thursday, January 16, 2025 / Rules and Regulations 5209 

126See U.S. Bureau of Labor Statistics, May 2023 

National Occupational Employment and Wage 

Estimates, May 2023 https://www.bls.gov/oes/ 

special.requests/oesm23all.zip. 

127 2,448 legal hours × $139.96 per hour + 5,670 

management hours × $96.40 per hour + 1,140 

administrative hours × $49.36 per hour + 2,160 

information technology hours × $95.58 per hour = 

$1,166,741. 

128Please note throughout the document that 

components may not sum exactly to aggregate 

amounts due to rounding. 

129 144 legal hours × $139.96 per hour + 540 

management hours × $96.40 per hour + 144 

administrative hours × $49.36 per hour + 288 

information technology hours × $95.58 per hour = 

$106,845. 

130 480 legal hours × $139.96 per hour + 3,894 

management hours × $96.40 per hour + 228 

administrative hours × $49.36 per hour + 270 

information technology hours × $95.58 per hour = 

$479,623. 

131 240 legal hours × $139.96 per hour + 2,856 

management hours × $96.40 per hour + 114 

administrative hours × $49.36 per hour + 114 

information technology hours × $95.58 per hour = 

$325,432. 

132Based on information provided by subject 

matter experts, AMS estimates that capital upgrades 

would be required at 5% of complexes each year, 

triggering creation of a new disclosure document for 

approximately 5% of growers annually. 

133 7 legal hours × $139.96 per hour + 36 

management hours × $96.40 per hour + 7 

administrative hours × $49.36 per hour + 9 

information technology hours × $95.58 per hour = 

$5,694. 

and collect and distribute required 

disclosures that would be required by 

final §§ 201.106, 110, and 112 as well as 

the time to create and maintain any 

necessary additional records. Estimates 

of the amount of time required to create 

and distribute the disclosure documents 

were provided by AMS subject matter 

experts. These experts were auditors 

and supervisors with many years of 

experience in auditing LPDs for 

compliance with the Packers and 

Stockyards Act. Estimates for the value 

of the time are U.S. Bureau of Labor 

Statistics Occupational Employment 

and Wage Statistics estimate released 

May 2023.126 AMS marked up the wages 

41.79 percent to account for benefits. 

AMS estimated one-time first-year 

investment to LPDs of updating grower 

contracts and developing new grower 

payment systems, including modifying 

information systems to include new 

calculations as well as filing, and 

reporting to comply with § 201.106 

would require 2,448 legal hours at 

$139.96 per hour costing $342,000, 

5,670 hours of management time at 

$96.40 per hour costing $547,000, 1,440 

hours of administrative time at $49.36 

per hour costing $71,000, and 2,160 

hours of information technology staff 

time at $95.58 per hour costing 

$206,000. Aggregate total first-year 

setup costs are expected to be 

$1,167,000 127 for final § 201.106.128

AMS expects that ongoing aggregate 

costs of implementation, maintenance, 

monitoring, and compliance with final 

§ 201.106 would annually require an 

additional 144 legal hours at $139.96 

per hour costing $20,000, 540 hours of 

management time at $96.40 per hour 

costing $52,000, 144 hours of 

administrative time at $49.36 per hour 

costing $7,000, and 288 hours of 

information technology staff time at 

$95.58 per hour costing $28,000. Total 

aggregate ongoing costs to small LPDs 

for final § 201.110 are expected to be 

$107,000 annually.129

AMS estimated the total costs of 

developing new policies and 

procedures, communications plans, and 

compliance review systems to comply 

with final § 201.110 would require a 

one-time first-year aggregate investment 

of 480 legal hours at $139.96 per hour 

costing $67,000, 3,894 hours of 

management time at $96.40 per hour 

costing $375,000, 228 hours of 

administrative time at $49.36 per hour 

costing $11,000, and 270 hours of 

information technology staff time at 

$95.58 per hour costing $26,000. Total 

aggregate first-year setup costs are 

expected to be $480,000 130 for final 

§ 201.110. 

AMS expects that ongoing aggregate 

costs of implementation, maintenance, 

monitoring, and compliance with final 

§ 201.110 would annually require an 

additional 240 legal hours at $139.96 

per hour costing $214,000, 2,856 hours 

of management time at $96.40 per hour 

costing $95,000, 114 hours of 

administrative time at $49.36 per hour 

costing $6,000, and 114 hours of 

information technology staff time at 

$95.58 per hour costing $11,000. Total 

aggregate ongoing costs to small LPDs 

for final § 201.110 are expected to be 

$325,000 annually.131

Proposed § 201.112 would require 

LPDs to provide a Capital Improvement 

Disclosure Document any time the LPD 

requests existing broiler chicken 

growers to make an additional capital 

investment.132 AMS estimated ongoing 

annual costs of final § 201.112 to small 

LPDs would require on average an 

additional 7 legal hours at $139.96 per 

hour costing $1,000, 36 hours of 

management time at $96.40 per hour 

costing $3,000, 7 hours of 

administrative time at $49.36 per hour 

costing $400, and 9 hours of information 

technology staff time at $95.58 per hour 

costing $900. Total aggregate ongoing 

costs to small LPDs for final § 201.110 

are expected to be $6,000 annually.133

Expected costs of final §§ 201.106, 

110, and 112 are associated with 

developing, maintaining, updating, and 

complying with policies and procedures 

that will be implemented at poultry 

growing complexes and communicating 

changes, and producing and distributing 

disclosure documents among contract 

growers. AMS expects that firms with 

fewer contract types and those that 

contract with few growers will have 

lower costs. Larger LPDs will tend to 

have larger numbers and types of 

contracts and will likely have more 

costs. Final §§ 201.106 and 201.110 only 

concern poultry grower ranking 

systems. Smaller LPDs that do not have 

grower ranking or tournament contracts 

will not have any of the costs associated 

with final §§ 201.106 and 201.110. Some 

LPDs have few contracts with poultry 

growers and raise poultry in their own 

facilities. Those dealers will have 

relatively lower costs. 

AMS does not regulate poultry 

growers, and, with the exception of 

reviewing and signing contracts that 

have been updated by LPDs to meet 

requirements of § 201.106 and 

acknowledging receipt of Capital 

Improvement Disclosure Documents at 

the time of capital investment requests, 

the final rule imposes no requirements 

on poultry growers. To benefit from the 

disclosures and to understand the 

updated contracts, growers would need 

to review the new contracts and 

disclosure information provided. 

Growers that do not expect a benefit 

from reviewing the disclosure 

information likely would not review it. 

AMS estimates aggregate growers’ 

costs for reviewing updated contracts 

and disclosures associated with final 

§§ 201.106 and 201.112 combined to be 

$315,000 in the initial year. After an 

updated contract has been reviewed and 

signed in the first year, AMS expects the 

annual aggregate cost for reviewing 

disclosures by growers making 

additional capital investments would be 

$15,000 each year. This amounts to 

$400 per grower in the first year. The 

table below summarizes costs of final 

§§ 201.106, 110, and 112 to small LPDs 

and small poultry growers. 

Indirect Costs Associated With Final 

§§ 201.106, 110, and 112 

Final § 201.106 will require all LPDs 

involved in broiler production with 

tournament or grower ranking contracts 

to redesign the way they pay broiler 

growers. It is likely that all LPDs will be 

required to change their contracts to 

make all performance base adjustments 

positive adjustments to the base prices. 

AMS does not have sufficient data to 

determine how many LPDs will need to 

change contracts to comply with the 

provision capping performance 

payments at 25 percent of total 

payments at a complex. AMS is aware 


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5210 Federal Register / Vol. 90, No. 10 / Thursday, January 16, 2025 / Rules and Regulations 

134AMS expects that recordkeeping costs will be 

correlated with the size of the firms. AMS ranked 

live poultry dealers by size and grouped them into 

quartiles. 

that some firms would currently be in 

compliance with a 25 percent cap, and 

at least some firms will not. 

Any firms that modify existing grower 

compensation structures at a complex in 

response to this rule could experience 

increased production costs if reductions 

in performance-based payments relative 

to total payments adversely affect 

grower performance incentives and 

cause growers to produce broilers less 

efficiently. In general, the ‘‘tournament’’ 

system of broiler grower compensation 

bases payments to individual growers 

on their performance relative to other 

growers. Performance payments provide 

an incentive for growers to optimize 

factors under their control, such as 

effort and management, and to some 

extent investment (subject to the 

concerns highlighted by this rule), to 

improve their own relative performance 

efficiency and increase income. 

Tournament systems have been 

described in economic literature as 

‘‘particularly economical means to 

provide incentive.’’ The strength of 

individual performance incentives is 

directly related to the size of expected 

grower performance payments, which 

will be limited by the total amount of 

performance-based pay distributed 

among all growers. Any firms that 

modify existing grower compensation 

structures at a complex in response to 

this rule by decreasing the relative size 

of performance payments available to 

growers at a complex might therefore 

weaken performance incentives and 

could result in reduced grower 

efficiency in broiler production. 

Given the range of possible outcomes, 

AMS is unable to predict effects with 

any degree of certainty. For example, if 

production efficiency is reduced, 

economic principles suggest that cost of 

production would increase at the 

impacted broiler complex, causing an 

inward shift of a firm’s marginal cost 

curve and an associated decrease in 

broiler production at the impacted 

complex. A decrease in production for 

a broiler complex would also be likely 

to reduce demand for broiler growing 

services in the area and could result in 

LPDs lowering overall rates of grower 

compensation and possibly terminating 

some marginal growers. 

AMS is not able quantify indirect 

costs related to capping performance 

payments. However, if the cap has any 

significant effect on grower 

productivity, it is likely that indirect 

costs of capping performance payments 

will be considerably larger than the 

direct costs that AMS has been able to 

estimate. 

TABLE 4—ESTIMATED DIRECT COSTS TO SMALL BUSINESSES OF FINAL §§ 201.106, 110, AND 112 

Type of cost 

Regulated 

live poultry 

dealers 

Unregulated 

growers Total * 

Final § 201.106: 

First-year Cost ...................................................................................................................... $1,167,000 $300,000 $1,467,000 

First-year Cost per Firm ....................................................................................................... 56,000 351 NA 

PV of Ten-year Cost Discounted at 2% ............................................................................... 1,722,000 294,000 2,017,000 

Ten-year Cost Annualized at 2% ......................................................................................... 192,000 33,000 225,000 

Average Ten-Year Cost per Firm Annualized at 2% ........................................................... 9,000 38 N/A 

Final § 201.110: 

First-year Cost ...................................................................................................................... 480,000 0 480,000 

First-year Cost per Firm ....................................................................................................... 23,000 0 NA 

PV of Ten-year Cost Discounted at 2% ............................................................................... 3,074,000 0 3,074,000 

Ten-year Cost Annualized at 2% ......................................................................................... 342,000 0 342,000 

Average Ten-Year Cost per Firm Annualized at 2% ........................................................... 16,000 0 NA 

Final § 201.112: 

First-year Cost ...................................................................................................................... 6,000 15,000 21,000 

First-year Cost per Firm ....................................................................................................... 271 18 NA 

PV of Ten-year Cost Discounted at 2% ............................................................................... 51,000 135,000 186,000 

Ten-year Cost Annualized at 2% ......................................................................................... 6,000 15,000 21,000 

Average Ten-Year Cost per Firm Annualized at 2% ........................................................... 286 18 NA 

Proposed §§ 201.106, 110, and 112: 

First-year Cost ...................................................................................................................... 1,652,000 315,000 1,967,000 

First-year Cost per Firm ....................................................................................................... 79,000 369 NA 

PV of Ten-year Cost Discounted at 2% ............................................................................... 4,848,000 429,000 5,277,000 

Ten-year Cost Annualized at 2% ......................................................................................... 540,000 48,000 587,000 

Average Ten-Year Cost per Firm Annualized at 2% ........................................................... 26,000 56 NA 

* Rows may not sum to Total Costs due to rounding. 

** Totals do not include indirect costs to associated with possible changes in supply or demand. AMS was not able to estimate indirect costs, 

but it is possible that they are larger than the direct costs in the table. 

LPDs report net sales in Annual 

Reports to AMS. Table 5 below groups 

small LPDs’ net sales into quartiles, 

reports the average net sales in each 

quartile, and compares average net sales 

to average expected first-year direct 

costs per firm for each of final 

§§ 201.106, 110, and 112 and total firstyear direct costs.134 Estimated first-year 

direct costs are higher than 10-year 

annualized costs, and for the threshold 

analysis, first-year costs will be higher 

than annualized costs as a percentage of 

net sales. Correspondingly, the ratio of 

ten-year annualized direct costs to net 

sales is lower than their corresponding 

first-year cost ratios listed in Table 5. If 

estimated costs meet the threshold in 

the first year, they will in the following 

years as well. AMS is able to perform a 

threshold analysis on based on direct 

costs. However, AMS was unable to 

estimate indirect costs associated with 

the final rule include indirect costs. 

Estimated first-year direct costs per 

firm are less than 1 percent of average 

net sales in the three largest quartiles. 

Total first-year direct costs as a percent 

of net sales are estimated to be about 0.8 

percent for the smallest quartile. 

However, average first-year cost per 

entity in Table 5 is the average cost of 


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Federal Register / Vol. 90, No. 10 / Thursday, January 16, 2025 / Rules and Regulations 5211 

all of the small businesses. Costs for the 

LPDs in smallest quartile will likely be 

less than the average for small 

businesses. 

LPDs do not report to AMS whether 

any of their contracts are tournamentstyle contracts but evaluating the 

number contracts that LPDs listed in 

their Annual Reports to AMS, few of the 

LPDs in smallest quartile contracted 

with a sufficient number of growers to 

implement tournament contracts. It is 

unlikely that any of the LPDs in the 

smallest quartiles had any tournament 

contracts. It is unlikely that several of 

the smaller LPDs in the second quartile 

had any tournament contracts either. 

Since final §§ 201.106 and 201.110 

only apply to tournament contracts, 

none of the LPDs in the smallest quartile 

are likely to incur any costs from final 

§§ 201.106 and 201.110. Their costs are 

likely only costs associated with final 

§ 201.112, which, as percentage of net 

sales would be 0.003 percent. Because 

the smallest LPDs have fewer contracts 

than the other small LPDs, their costs 

associated with final § 201.112 are also 

likely less than average. 

Costs in the threshold analysis do not 

include indirect costs, which AMS was 

not able to quantify. The size of the 

indirect costs is not known, and AMS 

cannot state with any confidence that 

the total costs associated with final 

§§ 201.106, 110, and 112 will be 

insignificant for any LPD. 

TABLE 5—COMPARISON OF SMALL LIVE POULTRY DEALERS’ NET SALES TO EXPECTED ANNUALIZED DIRECT COSTS OF

FINAL §§ 201.106, 110, AND 112 * 

Quartile 

(%) Average net sales 

First-year costs 

related to 

§ 201.106 as a 

percent of net sales 

(%) 

First-year costs 

related to 

§ 201.110 as a 

percent of net sales 

(%) 

First-year costs 

related to 

§ 201.112 as a 

percent of net sales 

(%) 

Total 

first-year costs 

as a percent of net 

sales 

(%) 

0 to 25% ................................................ $10,017,311 0.559 0.230 0.003 0.789 

25 to 50% .............................................. 34,567,539 0.162 0.067 0.001 0.229 

50 to 75% .............................................. 92,380,634 0.061 0.025 0.000 0.086 

75 to 100% ............................................ 226,958,521 0.025 0.010 0.000 0.035 

* Numbers in the table may not sum to one due to rounding. 

** Costs do not include indirect costs to associated with possible changes in supply or demand. AMS was not able to estimate indirect costs, but it is possible 

that they are larger than the direct costs in the table. 

Direct Cost Associated With an 

Alternative §§ 201.106, 110, and 112 

AMS also estimated costs of the 

original proposed rule as an alternative. 

Section 201.106(b) and (c) in the final 

rule were not include in the proposed 

rule. AMS estimated that alternative 

§ 201.106 would require a one-time firstyear investment of 1,728 legal hours at 

$139.96 per hour costing $242,000, 

2,970 hours of management time at 

$96.40 per hour costing $286,000, 720 

hours of administrative time at $49.36 

per hour costing $36,000, and 720 hours 

of information technology staff time at 

$95.58 per hour costing $69,000. 

Aggregate total first-year setup costs are 

expected to be $633,000. AMS does not 

expect additional ongoing costs of 

implementing final § 201.106 under the 

proposed rule alternative. 

Under the proposed rule alternative, 

§ 201.110(b) includes a section dealing 

with compliance reviews. AMS 

estimated that alternative § 201.110 

would require a one-time first-year 

aggregate investment of 696 legal hours 

at $139.96 per hour costing $97,000, 

5,334 hours of management time at 

$96.40 per hour costing $514,000, 300 

hours of administrative time at $49.36 

per hour costing $15,000, and 504 hours 

of information technology staff time at 

$95.58 per hour costing $48,000. Total 

aggregate first-year setup costs for small 

LPDs under the alternative are expected 

to be $675,000. 

AMS expects alternative § 201.110 

would annually require an additional 

312 legal hours at $139.96 per hour 

costing $44,000, 3,576 hours of 

management time at $96.40 per hour 

costing $345,000, 150 hours of 

administrative time at $49.36 per hour 

costing $7,000, and 204 hours of 

information technology staff time at 

$95.58 per hour costing $19,000. Total 

aggregate ongoing costs to small LPDs 

for final § 201.110 are expected to be 

$415,000 annually. 

All sections of § 201.112 were 

included under the proposed rule 

alternative. AMS estimated that firstyear and ongoing annual costs of final 

§ 201.112 to small LPDs would require 

on average an additional 7 legal hours 

at $139.96 per hour costing $1,000, 36 

hours of management time at $96.40 per 

hour costing $3,000, 7 hours of 

administrative time at $49.36 per hour 

costing $400, and 9 hours of information 

technology staff time at $95.58 per hour 

costing $900. Total aggregate ongoing 

costs to small LPDs for final § 201.110 

are expected to be $6,000 annually. 

The alternative would have a 

relatively small effect on costs to 

poultry growers on a per grower basis, 

and growers will only review the 

disclosures if they perceive that they are 

beneficial. AMS estimates growers’ 

aggregate costs for reviewing updated 

contracts and disclosures associated 

with final §§ 201.106 and 201.112 

combined to be $315,000 in the initial 

year. AMS expects the annual aggregate 

cost to growers making additional 

capital investments to be $15,000 each 

year. Table 6 below summarizes costs of 

alternative §§ 201.106, 110, and 112 to 

small LPDs and small poultry growers. 

TABLE 6—ESTIMATED COSTS TO SMALL BUSINESSES OF ALTERNATIVE §§ 201.106, 110, AND 112 

Type of cost 

Regulated 

live poultry 

dealers 

Unregulated 

growers Total * 

Final § 201.106: 

First-year Cost ...................................................................................................................... $633,000 $300,000 $933,000 

First-year Cost per Firm ....................................................................................................... 30,000 351 NA 

PV of Ten-year Cost Discounted at 2% ............................................................................... 620,000 294,000 914,000 

Ten-year Cost Annualized at 2% ......................................................................................... 69,000 33,000 102,000 

Average Ten-Year Cost per Firm Annualized at 2% ........................................................... 3,000 38 N/A 


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5212 Federal Register / Vol. 90, No. 10 / Thursday, January 16, 2025 / Rules and Regulations 

135The first-year cost per small live poultry 

dealer of $63,000 divided by the average net sales 

for all small live poultry dealers of $91 million is 

equal to 0.069 percent. 

TABLE 6—ESTIMATED COSTS TO SMALL BUSINESSES OF ALTERNATIVE §§ 201.106, 110, AND 112—Continued 

Type of cost 

Regulated 

live poultry 

dealers 

Unregulated 

growers Total * 

Final § 201.110: 

First-year Cost ...................................................................................................................... 675,000 0 675,000 

First-year Cost per Firm ....................................................................................................... 32,000 0 NA 

PV of Ten-year Cost Discounted at 2% ............................................................................... 3,266,000 0 3,266,000 

Ten-year Cost Annualized at 2% ......................................................................................... 364,000 0 364,000 

Average Ten-Year Cost per Firm Annualized at 2% ........................................................... 17,000 0 NA 

Final § 201.112: 

First-year Cost ...................................................................................................................... 6,000 15,000 21,000 

First-year Cost per Firm ....................................................................................................... 271 18 NA 

PV of Ten-year Cost Discounted at 2% ............................................................................... 51,000 135,000 186,000 

Ten-year Cost Annualized at 2% ......................................................................................... 6,000 15,000 21,000 

Average Ten-Year Cost per Firm Annualized at 2% ........................................................... 286 18 NA 

Final §§ 201.106, 110, and 112: 

First-year Cost ...................................................................................................................... 1,313,000 315,000 1,628,000 

First-year Cost per Firm ....................................................................................................... 63,000 369 NA 

PV of Ten-year Cost Discounted at 2% ............................................................................... 3,937,000 429,000 4,366,000 

Ten-year Cost Annualized at 2% ......................................................................................... 438,000 48,000 486,000 

Average Ten-Year Cost per Firm Annualized at 2% ........................................................... 21,000 56 NA 

* Rows may not sum to Total Costs due to rounding. 

Net sales for small LPDs that would 

be required to make disclosure under 

alternative §§ 201.106, 110, and 112 

averaged $91 million for their fiscal year 

2023. Expected first-year cost per LPD 

would be well below 0.1 percent.135

TABLE 7—COMPARISON OF SMALL LIVE POULTRY DEALERS’ NET SALES TO EXPECTED ANNUALIZED COSTS OF

ALTERNATIVE §§ 201.106, 110, AND 112 

Quartile Average net sales 

First-year costs 

related to 

§ 201.106 as a 

percent of net sales 

(%) 

First-year costs 

related to 

§ 201.110 as a 

percent of net sales 

(%) 

First-year costs 

related to 

§ 201.112 as a 

percent of net sales 

(%) 

Total 

first-year costs 

as a percent of net 

sales 

(%) 

0 to 25% ................................................ $10,017,311 0.299 0.319 0.003 0.629 

25 to 50% .............................................. 34,567,539 0.087 0.093 0.001 0.182 

50 to 75% .............................................. 92,380,634 0.032 0.035 0.000 0.068 

75 to 100% ............................................ 226,958,521 0.013 0.014 0.000 0.028 

Clearly, excluding § 201.110(b)(1)(vi) 

and (b)(2) would reduce cost to small 

LPDs. AMS prefers final §§ 201.106, 

110, and 112 because it reduces the 

amount of variation in payments that 

broiler growers might receive and 

provides protection against lower 

contract prices during the transition 

period of the first three years following 

implementation of the final rule. 

If direct costs were the only 

consideration, it is likely that final 

§§ 201.106, 110, and 112 would not 

have a significant economic impact on 

a substantial number of small business 

LPDs. AMS does not have sufficient 

information to make a quantified 

estimate of the indirect costs associated 

with §§ 201.106, 110, and 112, but the 

indirect costs have the potential to be 

much larger than the direct costs that 

AMS was able to quantify. If indirect 

costs are equal to direct costs, total costs 

would be about 1.26 percent for LPDs in 

the smallest quartile. It is possible that 

the indirect costs are considerably larger 

than direct costs, in which case larger 

LPDs would face significant costs. It is 

likely that costs will be significant for a 

substantial number of small business 

LPDs. 

Costs to growers will be limited to the 

time required to review and 

acknowledge receipt of updated grower 

contracts and disclosures. AMS expects 

that final §§ 201.106, 110, and 112 will 

have effects on a substantial number of 

growers. However, the costs will not be 

significant for any of them. Because 

AMS does not regulate poultry growers, 

AMS does not have information 

regarding the business sizes of poultry 

growers similar to the information it has 

concerning LPDs. 

Based on the above analyses, it is 

unlikely that final §§ 201.106, 110, and 

112 will create significant costs for a 

substantial number of small business 

broiler growers. AMS was not able to 

quantify indirect costs associated with 

final §§ 201.106, 110, and 112 but the 

rulemaking could cause significant costs 

for a substantial number of small LPDs. 

D. Paperwork Reduction Act 

In accordance with the Paperwork 

Reduction Act of 1995 (44 U.S.C. 

chapter 35), AMS requested OMB 

approval of the new information 

collection and recordkeeping 

requirements related to this final rule 

when it was proposed in the Federal 

Register on June 10, 2024 (89 FR 49002). 

The proposed information collection 

was for a total of 59,182 hours for the 

first year, and 42,682 hours per year 

thereafter. The comment period was 

open for 60 days and closed on August 

9, 2024. Below is a summary of the final 

rule’s information collection 

requirements, the comments AMS 

received relating to the information 


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Federal Register / Vol. 90, No. 10 / Thursday, January 16, 2025 / Rules and Regulations 5213 

136Responses and costs related to final 

§ 201.110(b)(1)(vi), ‘‘Communication and 

cooperation,’’ are discussed below separately from 

the other paragraphs of § 201.110. Costs associated 

with final § 201.110(b)(2), ‘‘Record retention,’’ are 

included in cost estimates for § 201.110(b)(1). 

collection requirements of the proposed 

rule, and any changes AMS made in 

response to the comments. Additional 

detail can be found in the Regulatory 

Impact Analysis (RIA). 

Title: Poultry Growing Tournament 

Systems: Fairness and Related 

Concerns. 

OMB Number: 0581–0346. 

Expiration Date of Approval: This is 

a NEW collection. 

Type of Request: Approval of a New 

Information Collection. 

Abstract: The information collection 

requirements in this request are 

essential to improve transparency and 

forestall deception and unfairness in the 

use of broiler growing arrangements, in 

accordance with the purposes of the 

Packers and Stockyards Act, 1921. The 

revisions to the Packers and Stockyards 

regulations would require that live 

poultry dealers (LPDs) establish, 

maintain, and review written 

documentation regarding their processes 

for the design and operation of a poultry 

grower ranking system that is consistent 

with the LPD duty of fair comparison, 

provide information through disclosures 

to growers when requesting that growers 

make additional capital investments, 

and submit contract and disclosure 

documentation to USDA when contract 

modifications result in reduced annual 

grower compensation during a 

transition period. 

Under this final rule, LPDs must 

develop and document policies and 

procedures for the design and operation 

of their tournament system consistent 

with the duty of fair grower comparison. 

All LPD documentation will be 

provided to USDA on request, 

maintained for no less than five years, 

and used for ongoing internal 

compliance activities. The final 

rulemaking requires that LPDs provide a 

Capital Improvement Disclosure 

Document to growers when LPDs 

request that growers make additional 

capital investments. In addition, for 

each of the three years following the 

effective date, LPDs will be required to 

provide the prior and modified 

contracts as well as all related LPD 

Disclosure Documents to USDA if any 

contract modification or renewal results 

in less than the prior annual-calendar 

year’s complex-wide average gross 

payment to the grower. The estimates 

provided below apply only to LPDs 

when they are required to provide the 

information to growers or create 

documentation for internal use and 

review. Poultry growers would not be 

required to provide information but 

would be able to use the information 

provided by LPDs to analyze additional 

capital investment decisions. 

Broiler Grower Compensation Design 

Under § 201.106(c) 

Estimate of Burden: Public burden for 

this collection of information is 

estimated to average 0.01 hours per 

response (years two through four), 0 

hours per year thereafter. 

Respondents: Live poultry dealers. 

Estimated Number of Respondents: 

42. 

Estimated Number of Responses: 

20,014. 

Estimated Number of Responses per 

Respondent: 477. 

Estimated Total Annual Burden on 

Respondents: 0 hours in the first year, 

and 194 hours per year thereafter for 

years two through four. 

Operation of Broiler Grower Ranking 

Systems Under § 201.110(a) and (b)(1)(i) 

Through (v) 

Estimate of Burden: Public burden for 

this collection of information is 

estimated to average 193.33 hours per 

response (first year), 169.61 hours per 

year thereafter. 

Respondents: Live poultry dealers. 

Estimated Number of Respondents: 

42. 

Estimated Number of Responses: 184. 

Estimated Number of Responses per 

Respondent: 4. 

Estimated Total Annual Burden on 

Respondents: 35,572 hours in the first 

year, and 31,208 hours per year 

thereafter. 

Communication and Cooperation Under 

§ 201.110(b)(1)(vi) 

Estimate of Burden: Public burden for 

this collection of information is 

estimated to average 45.00 hours per 

response (first year), 16.00 hours per 

year thereafter. 

Respondents: Live poultry dealers. 

Estimated Number of Respondents: 

42. 

Estimated Number of Responses: 42. 

Estimated Number of Responses per 

Respondent: 1. 

Estimated Total Annual Burden on 

Respondents: 1,890 hours in the first 

year, and 672 hours per year thereafter. 

Broiler Grower Capital Improvement 

Disclosure Document Under § 201.112 

Estimate of Burden: Public reporting 

burden for this collection of information 

is estimated to average 0.61 hours per 

response (first year), 0.61 hours per year 

thereafter. 

Respondents: Live poultry dealers. 

Estimated Number of Respondents: 

42. 

Estimated Number of Responses: 

1,001. 

Estimated Number of Responses per 

Respondent: 24. 

Estimated Total Annual Burden on 

Respondents: 607 hours in the first year, 

and 607 hours per year thereafter. 

AMS estimates that 42 LPDs would 

each submit the prior and modified 

contracts as well any LPD Disclosure 

Documents prepared with respect to 

those contracts to AMS as required 

under final § 201.106(c). AMS arrived at 

its estimate that 477 responses would be 

produced per LPD during each of years 

two, three, and four following the rule 

effective date in complying with the 

new requirements during a transition 

period following modification and 

renewal of broiler growing contracts by 

dividing the 20,014 grower contracts 

with broiler growers that were reported 

by 42 LPDs that filed fiscal year 2023 

Annual Reports with AMS. AMS does 

not have access to sufficient data and 

cannot predict the number of complexes 

for which the annual calendar year’s 

complex-wide average gross payment to 

the grower will be less than the prior 

year. Based on information provided by 

subject matter experts, AMS estimates 

that LPDs would be able to submit the 

required documentation for all contracts 

to USDA electronically once per year for 

a fixed annual time cost per complex. 

As a result, the estimate that all LPDs 

will provide 477 responses per year in 

years two through four therefore likely 

overestimates the burden by a 

substantial amount given that average 

grower payments may not be less than 

the prior year at most complexes. AMS 

estimates the annual cost of collecting 

and submitting required contract 

documents in years two through four, 

including management, legal, 

administrative, and information 

technology time, will require an average 

0.01 hours each. AMS arrived at the 

estimates of the number of hours on an 

annual basis to submit required contract 

documentation by dividing the number 

of hours to collect and submit the 

required documents (184 hours in each 

of years two through four) by the annual 

number of responses for all LPDs 

(20,014). 

AMS estimates that 42 LPDs would 

each establish, maintain, and review 

documentation of written processes for 

the design and operation of a poultry 

grower ranking system that is consistent 

with a duty of fair comparison as 

required under final § 201.110.136 AMS 

arrived at its estimate that four (4) 

responses would be produced per LPD 

in complying with new requirements for 


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5214 Federal Register / Vol. 90, No. 10 / Thursday, January 16, 2025 / Rules and Regulations 

137All live poultry dealers are required to 

annually file PSD form 3002 ‘‘Annual Report of 

Live Poultry Dealers,’’ OMB control number 0581– 

0308. The Annual Report form is available to the 

public at https://www.ams.usda.gov/sites/default/ 

files/media/PSP3002.pdf. 

138Estimates are available at U.S. Bureau of Labor 

Statistics. Occupational Employment and Wage 

Statistics, available at https://www.bls.gov/oes/ 

special-requests/oesm23all.zip (accessed 9/14/ 

2024). Featured OES Searchable Databases: U.S. 

Bureau of Labor Statistics (bls.gov) (accessed 

September 2024). 

poultry grower ranking system fairness 

policies and procedures by dividing the 

184 broiler plants (or complexes) 

indicated in the fiscal year 2023 Annual 

Report filed by 42 LPDs with broiler 

production.137 AMS estimates first-year 

development and production of 

§ 201.110 policies and procedures, 

including legal, management, 

administrative, and information 

technology time, would require an 

average of 193.33 hours for each 

response, while ongoing annual 

maintenance, compliance monitoring, 

production, and distribution would take 

169.61 hours. AMS estimates first-year 

development and production of 

§ 201.110 policies and procedures, 

including legal, management, 

administrative, and information 

technology time, would require an 

average of 193.33 hours for each 

response, while ongoing annual 

maintenance, compliance monitoring, 

production, and distribution would take 

169.61 hours. AMS arrived at the 

estimates of the number of hours per 

response on an annual basis to set up, 

produce, distribute, monitor, review, 

and maintain § 201.110 policies and 

procedures by dividing the total number 

of hours required (35,572 first-year 

hours and 31,208 ongoing hours) by the 

annual number of responses for all LPDs 

(184). 

AMS estimates that 42 LPDs would 

each develop and document one set of 

processes that address communication 

and cooperation when resolving grower 

concerns as required under final 

§ 201.110(b)(1)(vi). AMS estimates firstyear set-up and implementation of the 

plan, including management, legal, 

administrative, and information 

technology time, would require 

approximately 45.00 hours. AMS 

estimates ongoing annual 

implementation of communication, 

cooperation, and dispute resolution 

processes would require an average of 

16.00 hours. 

AMS estimates each of 42 LPDs 

would create and distribute an average 

of 24 Broiler Grower Capital 

Improvement Disclosure Documents 

each year for poultry growers relating to 

additional capital investments, as 

required under final § 201.112. AMS 

arrived at its estimate of 24 developed 

disclosure documents per LPD per year 

from AMS records which show 42 LPDs 

filed fiscal year 2023 Annual Reports 

with AMS, and their reports indicate 

that they had 20,014 growing contracts 

with broiler growers during fiscal year 

2023. Based on information provided by 

subject matter experts, AMS estimates 

that capital upgrades would be required 

at 5 percent of complexes each year, 

triggering creation of a new disclosure 

document for approximately 5 percent 

of growers annually. AMS multiplied 

the 20,014 growing contracts by 5 

percent and divided by the 42 LPDs to 

arrive at 24 disclosure documents per 

LPD. LPDs would only be required to 

provide the Broiler Grower Capital 

Improvement Disclosure Document to 

growers when requesting or requiring 

the grower to make an additional capital 

investment. AMS estimates first-year 

and ongoing development, production, 

and distribution of the disclosure 

documents, including management, 

legal, administrative, and information 

technology time, would require an 

average 0.61 hours each. AMS arrived at 

the estimates of the number of hours on 

an annual basis to set up, produce, and 

distribute the Broiler Grower Capital 

Improvement Disclosure Documents by 

dividing the number of hours to set up, 

produce, and distribute the disclosures 

(607 first-year and annual ongoing 

hours) by the annual number of 

responses for all LPDs (1,001). 

Under § 201.106(c) LPDs are required 

for a period for three years following the 

effective date to submit to USDA copies 

of the prior and modified contracts and 

any LPD Disclosure Documents 

prepared under § 201.102 if the annualcalendar year’s complex-wide average 

gross payments to growers at a complex 

of an LPD is less than the prior annualcalendar year’s complex-wide average 

gross payments to growers at the 

complex. 

Final § 201.110 would require LPDs to 

provide a fair comparison among 

growers when basing compensation on 

a grouping or ranking of growers 

delivering during a specified period of 

time and would also require LPDs to 

document how they comply with that 

duty of fair comparison. The policies 

and procedures documentation required 

under final § 201.110 must describe the 

LPD’s processes for the design and 

operation of a poultry grower ranking 

system for broiler growers that is 

consistent with the duty of fair 

comparison. The documentation of 

processes under final § 201.110, must 

also include a plan for communication 

and cooperation between the LPD and 

growers. LPDs are required to 

document, maintain, and comply with 

all policies and procedures required 

under final § 201.110 on an ongoing 

basis and provide them to USDA upon 

request. LPDs must retain all written 

records relevant to compliance with 

§ 201.110(b) for no less than 5 years 

from the date of record creation. 

Final § 201.112 would require LPDs to 

provide a Broiler Grower Capital 

Improvement Disclosure Document any 

time the LPD requests existing broiler 

chicken growers to make an additional 

capital investment ($12,500 or more per 

structure excluding maintenance or 

repair). The Broiler Grower Capital 

Improvement Disclosure Document 

must include information about the goal 

or purpose of the investment, financial 

incentives and compensation for the 

grower associated with the additional 

capital investment, all schedules and 

deadlines for the investment, a 

description of changes to housing 

specifications, and analysis of projected 

returns. 

Costs of Final §§ 201.106, 110, and 112 

The combined costs to LPDs for 

compliance with the recordkeeping and 

disclosure requirements of final 

§§ 201.106, 110, and 112 are expected to 

be $3,807,000 in the first year, 

$3,181,000 in years two through four, 

and $3,168,000 in subsequent years. The 

total hours estimated for the LPDs to 

create, produce, distribute, and 

maintain these documents are 38,069 in 

the first year, 32,671 in in years two 

through four, and 32,487 in subsequent 

years. As stated previously, the 

estimates provided apply only to LPDs 

who would be required to provide the 

information to growers. 

The amount of time required for 

recordkeeping and disclosure was 

estimated by AMS subject matter 

experts. These experts were auditors 

and supervisors with many years of 

experience in AMS’s Packers and 

Stockyards Division (PSD) conducting 

investigations and compliance reviews 

of regulated entities. 

AMS used the May 2023 U.S. Bureau 

of Labor Statistics (BLS) Occupational 

Employment and Wage Statistics for the 

time values in this analysis.138 BLS 

estimated an average hourly wage for 

general and operations managers in 

animal slaughtering and processing to 

be $67.99 per hour; $34.81 per hour for 

administrative assistants; $67.41 per 

hour for IT system managers; and $98.71 

per hour for lawyers in food 

manufacturing. In applying the cost 

estimates, AMS marked-up the wages by 

41.79 percent to account for fringe 


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Federal Register / Vol. 90, No. 10 / Thursday, January 16, 2025 / Rules and Regulations 5215 

benefits. The average hourly wage rates, 

adjusted to include the 41.79 percent 

markup for benefits, are as follows: 

$96.40 for managers, $49.36 for 

administrative assistants; $95.58 for IT 

system managers, and $139.96 for 

lawyers. 

Comments From the Proposed Rule and 

Changes to the Final Rule 

After consideration of public 

comments, AMS determined to adopt 

the proposed rule as a final rule with 

several modifications. This section 

provides an overview of the comments 

made specifically on the costs and 

benefits and how the final rule differs 

from the proposed rule in that analysis. 

Industry trade associations and LPDs 

commented that the full cost of 

implementing the proposed rule would 

be far greater than estimated by AMS. 

The commenters asserted that AMS 

greatly underestimated the costs that 

will be required for employing teams 

with highly specialized legal and 

technical expertise to implement the 

proposed rule by modifying or replacing 

grower contracts and communicating 

changes to growers. Commenters 

suggested that AMS did not adequately 

consider the total number of hours 

needed, but none provided quantified 

estimates. LPDs also commented that 

hourly rates paid to specialized industry 

professionals such as attorneys should 

be much higher. Commenters also 

suggested that implementation of the 

rule would require LPDs to hire and 

train additional staff and pull resources 

away from other important activities. 

AMS consulted auditors and 

supervisors as subject matter experts 

who are familiar with LPDs, integrators, 

and broiler complex operations from 

many years of experience with AMS in 

auditing LPDs for compliance with the 

Act. The final rule provides an extended 

period of approximately 18 months 

following publication in the Federal 

Register before the effective date, to 

permit sufficient time for 

implementation. Hourly rates used in 

cost analysis for the proposed rule were 

based on averages for legal, 

management, administrative, and 

information technology labor categories 

specifically within the agricultural 

sector as published and annually 

updated by the U.S. Bureau of Labor 

Statistics. Although the largest 

corporations likely employ lawyers and 

other specialists at hourly rates much 

higher than the national average, 

contract development and review efforts 

at those companies are spread across 

many complexes. AMS expects that 

average hourly rates provide an 

appropriate benchmark for estimating 

industry average costs. After further 

discussion with subject matter experts, 

AMS added a modest amount of time to 

account for the cost of information 

technology work in preparing § 201.112 

disclosures. AMS subject matter experts 

confirmed that all other costs from the 

proposed rule are accurate estimates 

and accordingly, AMS made no other 

changes to the information collection 

requirements of the rule based on this 

comment. 

AMS also received comments on the 

proposed rule in support of adding 

measures to protect growers against the 

risk that LPDs might unfairly reduce 

broiler grower total compensation 

during a transition period after 

implementation of the final rule. Based 

on comments received, AMS added 

§ 201.106(c), which will require LPDs to 

submit copies of the prior and modified 

contracts and disclosures to AMS if 

average gross grower payments at a 

complex show year-over-year decline 

following a contract modification during 

the three calendar years commencing 

with and including the effective date of 

the rule. AMS will review the 

information provided by LPDs to 

identify any potentially unfair practices 

related to broiler grower compensation. 

AMS consulted with its internal subject 

matter experts and added direct 

information collection costs for LPDs to 

comply with this provision during the 

three-year period. 

AMS also received comments 

suggesting that some of the detailed 

documentation requirements of 

proposed § 201.110(b) were similar to 

existing P&S documentation and 

disclosure requirements and might 

create unnecessarily burdensome and 

complex paperwork that could burden 

service technicians at broiler complexes 

and keep them from other important 

responsibilities such as assisting 

growers. In response to these comments, 

AMS made several changes to 

§ 201.110(b) in the final rule that 

included consolidating and streamlining 

the documentation requirements and 

removing some detailed requirements 

delineated under subparagraphs in the 

proposed rule. AMS expects that these 

changes in final § 201.110(b) will add 

clarity and minimize potential 

confusion about the documentation 

requirements, thereby making them 

more effective. AMS expects these 

changes will somewhat reduce total 

recordkeeping requirements for LPDs. 

Based on consultation with internal 

subject matter experts, AMS determined 

that the precise amount of time savings 

is difficult to estimate. AMS therefore 

chose a cautious approach to avoid 

underestimating costs and did not 

reduce the total recordkeeping 

requirements or the time cost of the 

information collection for LPDs. 

Accordingly, these changes did not 

affect the estimation of costs or benefits 

in the final rule. 

The proposed rule included 

§ 201.110(b)(2), ‘‘Compliance review,’’ 

which required LPDs to conduct a 

required bi-annual review of the 

processes set out in § 201.110(b)(1). 

AMS removed this requirement from the 

final rule in response to comments that 

self-audits would be burdensome for 

LPDs, and that elimination of this 

requirement would not substantially 

diminish effective compliance with 

§ 201.110. Compliance will be enforced 

through regular AMS review of the 

policies and procedures LPDs are 

required to establish and maintain 

under § 201.110(b). Accordingly, 

removal of § 201.110(b)(2) eliminated 

the burden of compliance review on 

LPDs and reduced costs from the 

proposed to the final rule by the cost 

estimate in the proposed rule for that 

provision. 

Based on comments received, AMS 

added a provision at § 201.112(c) to 

require that the LPD make reasonable 

efforts to ensure that growers are aware 

of their right to request translation 

assistance and to assist the grower in 

translating the Broiler Grower Capital 

Improvement Disclosure Document. 

Reasonable efforts include, but are not 

limited to, providing current contact 

information for professional translation 

service providers, trade associations 

with translator resources, relevant 

community groups, or any other person 

or organization that provides translation 

services in the poultry grower’s 

geographic area. Reasonable efforts, 

depending on the facts and 

circumstances (such as convenience, 

expense, and timeliness of the 

translation), may also include allowing 

the grower access to a computergenerated translation of the Disclosure 

Document and additional time to review 

any translated Disclosure Document. A 

similar requirement was established for 

LPDs in § 201.102(g)(4). As LPDs 

already have all necessary information 

to make reasonable efforts to assist 

growers in translating disclosure 

documents and have made it available 

to growers who request the information, 

AMS did not add any time to its 

information collection cost estimates for 

LPDs to comply with this new 

requirement. 

E. Executive Order 12988—Civil Justice 

Reform 

Executive Order 12988 instructs each 

executive agency to adhere to certain 


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5216 Federal Register / Vol. 90, No. 10 / Thursday, January 16, 2025 / Rules and Regulations 

139Among Asian and Native Hawaiian or Other 

Pacific Islander growers, a smaller percent 

participates in livestock or poultry agriculture 

(animal agriculture) than in other types of 

agriculture. A larger percent of American Indian or 

Alaskan Native growers participates in animal 

agriculture than in other types of agriculture. The 

other demographic groups’ participation in animal 

agriculture tended to fall within 10 percentage 

points of their participation in agriculture overall. 

requirements in the development of new 

and revised regulations to avoid unduly 

burdening the court system. This rule 

has been reviewed under Executive 

Order 12988 and complies with these 

requirements. This rule is not intended 

to have retroactive effect. This rule 

would not preempt state or local laws, 

regulations, or policies, unless they 

present an irreconcilable conflict with 

this rulemaking. There are no 

administrative procedures that must be 

exhausted prior to any judicial 

challenge to the provisions of this rule. 

Nothing in this rule is intended to 

interfere with a person’s right to enforce 

liability against any person subject to 

the Act under authority granted in 

section 308 of the Act. 

F. Executive Order 13175—Consultation 

and Coordination With Indian Tribal 

Governments 

Executive Order 13175 requires 

Federal agencies to consult with Indian 

Tribes on a government-to-government 

basis on policies that have Tribal 

implications. This includes regulations, 

legislative comments or proposed 

legislation, and other policy statements 

or actions. Consultation is required 

when such policies have substantial 

direct effects on one or more Indian 

Tribes, on the relationship between the 

Federal Government and Indian Tribes, 

or the distribution of power and 

responsibilities between the Federal 

Government and Indian Tribes. The 

following is a summary of activity to 

date. 

AMS engaged in a Tribal Consultation 

in conjunction with a previous 

rulemaking also under the Act 

(Inclusive Competition and Market 

Integrity Under the Packers and 

Stockyards Act (87 FR 60010, October 3, 

2022)) on January 19, 2023, in person in 

Tulsa, Oklahoma, and virtually. AMS 

received multiple Tribal comments from 

that Consultation, many of which were 

specific to and considered in that 

rulemaking. In that consultation, Tribes 

raised legal concerns with respect to the 

jurisdiction of the AMS enforcement of 

the P&S Act. Tribes commented that the 

P&S Act does not apply to Tribes and 

Tribal entities. Those comments raise a 

legal issue of statutory interpretation, 

but these concerns are not directly 

implicated by this final rule. This final 

rule provides additional standards for 

individual LPDs or growers, and AMS 

does not find that this rule carries 

substantial direct effects on one or more 

Indian Tribes beyond the purely legal 

issue raised during consultation. 

AMS recognizes and supports the 

Secretary’s desire to incorporate Tribal 

and Indigenous perspectives, remove 

barriers, and encourage Tribal selfdetermination principles in USDA 

programs, including hearing and 

understanding Tribal views on legal 

authorities and cost implications as 

facts and circumstances develop. If a 

Tribe requests additional consultation, 

AMS will work with USDA’s Office of 

Tribal Relations to ensure meaningful 

consultation is provided in accordance 

with Executive Order 13175. 

G. Civil Rights Impact Analysis 

Statement 

AMS has considered the potential 

civil rights implications of this final rule 

on members of protected groups to 

ensure that no person or group would be 

adversely or disproportionately at risk 

or discriminated against on the basis of 

race, color, national origin, religion, sex, 

gender identity (including gender 

expression), sexual orientation, 

disability, age, marital status, family/ 

parental status, income derived from a 

public assistance program, political 

beliefs, reprisal or retaliation for prior 

civil rights activity, in any program or 

activity conducted or funded by USDA. 

This final rule does not contain any 

requirements related to eligibility, 

benefits, or services that would have the 

purpose or effect of excluding, limiting, 

or otherwise disadvantaging any 

individual, group, or class of persons on 

one or more prohibited bases. 

In its review, AMS conducted a 

disparate impact analysis, using the 

required calculations, which resulted in 

a finding that Asians and Native 

Hawaiian or Other Pacific Islanders 

could be disproportionately impacted 

by the rule, insofar as fewer farmers in 

those groups participate in poultry 

production than would be expected by 

their representation among U.S. farmers 

in general and therefore are less likely 

to benefit, as a whole, from the 

protections provided by this rule.139

However, the regulations would provide 

benefits equally to all individual poultry 

growers across demographic 

characteristics, with some demographic 

groups being more or less represented 

among poultry growers. AMS will 

enhance efforts to notify the groups 

found to be more significantly impacted 

of the regulations and their 

implications. AMS will conduct 

mitigation and monitoring strategies and 

reach out to several organizations that 

represent the interests of the impacted 

groups. 

H. E-Government Act 

USDA is committed to complying 

with the E-Government Act by 

promoting the use of the internet and 

other information technologies to 

provide increased opportunities for 

citizen access to Government 

information and services, and for other 

purposes. 

I. Unfunded Mandates Reform Act 

Title II of the Unfunded Mandates 

Reform Act of 1995 (UMRA, Pub. L. 

104–4) requires Federal agencies to 

assess the effects of their regulatory 

actions of State, local, and Tribal 

governments, or the private sector. 

Agencies generally must prepare a 

written statement, including cost 

benefits analysis, for proposed and final 

rules with Federal mandates that may 

result in expenditures of $100 million or 

more (adjusted for inflation) in any 1 

year for State, local or Tribal 

governments, in the aggregate, or to the 

private sector. UMRA generally requires 

agencies to consider alternatives and 

adopt the more cost effective or least 

burdensome alternative that achieves 

the objectives of the rule. This rule will 

not compel the expenditure in any one 

year of $100 million or more (adjusted 

for inflation) by State, local, and Tribal 

governments, in the aggregate, or by the 

private sector. Therefore, a statement 

under 2 U.S.C. 1532 is not required. 

J. Congressional Review Act 

Pursuant to subtitle E of the Small 

Business Regulatory Enforcement 

Fairness Act of 1996 (also known as the 

Congressional Review Act, 5 U.S.C. 801 

et seq.), OMB’s Office of Information 

and Regulatory Affairs has determined 

that this rule does not meet the criteria 

set forth in 5 U.S.C. 804(2). 

List of Subjects in 9 CFR Part 201 

Confidential business information, 

Reporting and recordkeeping 

requirements, Stockyards, Surety bonds, 

Trade practices. 

For the reasons stated in the 

preamble, AMS amends 9 CFR part 201 

as follows: 

PART 201—ADMINISTERING THE 

PACKERS AND STOCKYARDS ACT 

■ 1. The authority citation for part 201 

continues to read as follows: 

Authority: 7 U.S.C. 181–229c. 

■ 2. Add § 201.106 to subpart N to read 

as follows: 


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Federal Register / Vol. 90, No. 10 / Thursday, January 16, 2025 / Rules and Regulations 5217 

§ 201.106 Broiler grower compensation 

design. 

(a) Rate transparency. When a broiler 

growing arrangement between the live 

poultry dealer and the broiler grower 

compensates the grower based upon a 

grouping, ranking, or comparison of 

growers delivering poultry during a 

specified period, the live poultry dealer 

may not use the grower’s grouping, 

ranking, or comparison to others to 

reduce any rate of compensation under 

the broiler growing arrangement. 

(b) Excessive variability. The 

Secretary presumes that a live poultry 

dealer violates the Act when aggregate 

gross annual payments based upon a 

grouping, ranking, or comparison of 

growers exceed 25 percent of total gross 

payments to growers in a complex on an 

annual-calendar year basis. 

(c) Transition. For modified or 

renewed broiler growing arrangements 

subject to paragraph (a) of this section, 

for each of the three calendar years 

commencing with and including the 

year this section becomes effective, if 

the annual-calendar year’s complexwide average gross payments to growers 

at a complex of a live poultry dealer is 

less than the prior annual-calendar 

year’s complex-wide average gross 

payments to growers at the complex, the 

live poultry dealer must submit to the 

Secretary the following: 

(1) A copy of the prior broiler growing 

arrangement and the modified or 

renewed growing arrangement; and 

(2) Any Live Poultry Dealer 

Disclosure Document prepared under 

§ 201.102 with respect to the prior 

broiler growing arrangement and the 

modified or renewed broiler growing 

arrangement for the growers at the 

complex. 

■ 3. Add § 201.110 to subpart N to read 

as follows: 

§ 201.110 Operation of broiler grower 

ranking systems. 

(a) Fair comparison.—(1) Duty of fair 

comparison. Live poultry dealers 

providing compensation to broiler 

growers based upon a grouping, ranking, 

or comparison of growers delivering 

poultry must design and operate their 

poultry grower ranking system to 

provide a fair comparison among 

growers. 

(2) Fair comparison factors. In 

determining whether the live poultry 

dealer reasonably designed or operated 

its poultry grower ranking system to 

deliver a fair comparison among 

growers or whether the live poultry 

dealer must utilize a non-comparison 

compensation method, the Secretary 

shall consider the following: 

(i) Whether the distribution of inputs 

by the live poultry dealer causes 

material differences in performance, and 

whether appropriate adjustments to 

grower compensation will be made. 

(ii) Whether the assignment of flock 

production practices by the live poultry 

dealer causes material differences in 

performance, and whether appropriate 

adjustments to grower compensation 

will be made. 

(iii) Whether the designated time 

period used in the live poultry dealer’s 

comparison is appropriate, including 

whether the live poultry dealer uses one 

or more groupings, rankings, or 

comparisons of growers to mitigate the 

effects of any differences in inputs over 

the designated time period. 

(iv) Whether conditions and 

circumstances outside the control of the 

live poultry dealer render comparison 

impractical or inappropriate. 

(v) Whether the live poultry dealer 

has made reasonable efforts to timely 

resolve concerns a grower raises 

regarding the live poultry dealer’s 

design and operation of its poultry 

grower ranking system to deliver a fair 

comparison among growers. 

(vi) Any other factor relevant to a fair 

comparison. 

(3) Non-comparison compensation 

method. When a live poultry dealer uses 

a poultry grower ranking system and 

cannot conduct a fair comparison for 

one or more growers, the live poultry 

dealer must compensate those growers 

through a non-comparison method 

specified in the contract that reflects 

reasonable compensation to the grower 

for its services. 

(b) Documentation.—(1) Policies and 

procedures. A live poultry dealer must 

establish and maintain written 

documentation of its processes for the 

design and operation of a poultry 

grower ranking system for broiler 

growers that is consistent with the duty 

of fair comparison. The written 

documentation must include the 

following: 

(i) Inputs under live poultry dealer 

control. How and when the live poultry 

dealer assigns, adjusts, or otherwise 

accounts for similarities and differences 

of quality and quantity in the delivery 

of inputs to growers. 

(ii) Flock production practices. How 

and when the live poultry dealer 

assigns, adjusts, or otherwise accounts 

for differences in production practices. 

(iii) League composition. How the 

dealer determines groupings of growers 

for settlement. 

(iv) Evaluation period. A reasonable 

time period over which the dealer 

evaluates the duty of fair comparison. 

(v) Non-comparison. When a live 

poultry dealer may remove growers 

from a ranking group, and how the live 

poultry dealer compensates the growers 

to satisfy the non-comparison 

compensation method under paragraph 

(a)(3) of this section. 

(vi) Communication and cooperation. 

How the live poultry dealer resolves a 

grower’s concerns with the design or 

operation of a poultry grower ranking 

system for broiler growers that is 

consistent with the duty of fair 

comparison, including the timeliness of 

the resolution. 

(2) Record retention. The live poultry 

dealer must retain all written records 

relevant to its compliance with this 

paragraph (b) for no less than 5 years 

from the date of record creation. 

■ 4. Add § 201.112 to subpart N to read 

as follows: 

§ 201.112 Broiler grower Capital 

Improvement Disclosure Document. 

(a) Disclosure requirement. When a 

live poultry dealer requests that a 

broiler grower make an additional 

capital investment, the live poultry 

dealer must provide the broiler grower 

with a Capital Improvement Disclosure 

Document, as described in paragraph (b) 

of this section. 

(b) Disclosure contents. The Capital 

Improvement Disclosure Document 

must disclose the following in a clear, 

concise, and understandable manner: 

(1) The purpose of the additional 

capital investment for both the live 

poultry dealer and the grower, and a 

summary of all research and other 

supporting material that the live poultry 

dealer has relied upon in justifying the 

additional capital investment. 

(2) All financial incentives and 

compensation for the grower associated 

with the additional capital investment. 

(3) All construction schedules related 

to the request for additional capital 

investment. 

(4) The housing specifications 

associated with the additional capital 

investment. 

(5) Any required or approved 

manufacturers or vendors, and all 

financial benefits, if any, that the live 

poultry dealer or any officer, director, 

decision-making employee, or close 

family member of any such person, 

receives from the use of the required or 

approved manufacturer or vendor. 

(6) An analysis of projected returns 

the grower can expect related to the 

additional capital investment, including 

any assumptions, risks, or uncertainties, 

sufficient to allow the grower to make 

their own projections. 

(7) This statement that ‘‘USDA has not 

verified the information contained in 


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5218 Federal Register / Vol. 90, No. 10 / Thursday, January 16, 2025 / Rules and Regulations 

this document. If this disclosure by the 

live poultry dealer contains any false or 

misleading statement or a material 

omission, a violation of Federal and/or 

State law may have occurred. Violations 

of Federal and State laws may be 

determined to be unfair, unjustly 

discriminatory, or deceptive and 

unlawful under the Packers and 

Stockyards Act, as amended. You may 

file a complaint at farmerfairness.gov or 

call 1–833–DIAL–PSD (1–833–342– 

5773) if you suspect a violation of the 

Packers and Stockyards Act or any other 

Federal law governing fair and 

competitive marketing, including 

contract growing, of livestock and 

poultry. Additional information on 

rights and responsibilities under the 

Packers and Stockyards Act may be 

found at www.ams.usda.gov.’’ 

(c) Translation. Upon delivery to the 

grower, the live poultry dealer must 

make reasonable efforts to ensure that 

growers are aware of their right to 

request translation assistance and to 

assist the grower in translating the 

Capital Improvement Disclosure 

Document. 

■ 5. Add § 201.290 to subpart N to read 

as follows: 

§ 201.290 Severability. 

If any provision of this subpart or any 

component of any provision is declared 

invalid, or the applicability thereof to 

any person or circumstances is held 

invalid, it is the Agricultural Marketing 

Service’s intention that the validity of 

the remainder of this subpart or the 

applicability thereof to other persons or 

circumstances shall not be affected 

thereby with the remaining provision, or 

component of any provision, to 

continue in effect. 

Erin Morris, 

Associate Administrator, Agricultural 

Marketing Service. 

[FR Doc. 2025–00508 Filed 1–15–25; 8:45 am] 

BILLING CODE P 


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