Federal Register / Vol. 82, No. 200 / Wednesday, October 18, 2017 / Proposed Rules 48603 

DEPARTMENT OF AGRICULTURE 

Grain Inspection, Packers and 

Stockyards Administration 

9 CFR Part 201 

RIN 0580–AB27 

Unfair Practices and Undue 

Preferences in Violation of the Packers 

and Stockyards Act 

AGENCY: Grain Inspection, Packers and 

Stockyards Administration, USDA. 

ACTION: Proposed rule; notification of no 

further action. 

SUMMARY: The Department of 

Agriculture’s (USDA) Grain Inspection, 

Packers and Stockyards Administration 

(GIPSA), Packers and Stockyards 

Program (P&SP) is notifying the public 

that after review and careful 

consideration of the public comments 

received, GIPSA will take no further 

action on the proposed rule published 

on December 20, 2016. 

DATES: As of October 18, 2017, GIPSA 

will take no further action on the 

proposed rule published on December 

20, 2016, at 81 FR 92703. 

FOR FURTHER INFORMATION CONTACT: 

S. Brett Offutt, Director, Litigation and 

Economic Analysis Division, P&SP, 

GIPSA, 1400 Independence Ave. SW., 

Washington, DC 20250–3601, (202) 720– 

7051, s.brett.offutt@usda.gov. 

SUPPLEMENTARY INFORMATION: On 

December 20, 2016, GIPSA published in 

the Federal Register (81 FR 92703) and 

invited comments on a proposed rule to 

amend the regulations issued under the 

Packers and Stockyards Act (P&S Act) 

(7 U.S.C. 181–229c). GIPSA intended 

that the proposed rule would clarify the 

conduct or action that GIPSA considers 

unfair, unjustly discriminatory, or 

deceptive in violation of 7 U.S.C. 192(a). 

The proposed rule also identified 

criteria that the Secretary would use to 

determine if conduct or action by 

packers, swine contractors, or live 

poultry dealers constitutes an undue or 

unreasonable preference or advantage in 

violation of 7 U.S.C. 192(b). GIPSA 

published a document in the February 

7, 2017, Federal Register (82 FR 9533) 

to extend the comment period for the 

proposed rule from February 21, 2017, 

to March 24, 2017. GIPSA received 866 

comments on the proposed rule. 

Commenters opposing the proposed 

rule stated that the purpose of the P&S 

Act is to protect competition, not 

individual competitors or market 

participants. The commenters 

commonly claimed that the proposed 

rule would increase litigation industrywide. Commenters stated that if the 

requirement to show harm to 

competition was no longer applicable, 

the proposed rule would embolden 

producers and growers to sue for any 

perceived slight by a packer, swine 

contractor, or live poultry dealer. 

Commenters also pointed out that the 

proposed rule contains vague terms and 

phrases including: ‘‘legitimate business 

justification,’’ ‘‘retaliatory action,’’ 

‘‘similarly situated,’’ ‘‘reasonable time to 

remedy,’’ ‘‘arbitrary reason,’’ and ‘‘but is 

not limited to.’’ They argued that those 

terms and phrases are overbroad and 

create ambiguity regarding the conduct 

or action that would be permitted or 

prohibited. They speculated that this 

ambiguity would lead to broad 

interpretations that would make 

compliance difficult, and that this 

uncertainty would generate litigation. 

Also, commenters noted that the 

proposed rule conflicts with case law in 

multiple U.S. Courts of Appeals that 

have ruled that 7 U.S.C. 192(a) and (b) 

only authorize a cause of action if the 

conduct at issue harms, or is likely to 

harm, competition. The Department of 

Justice (DOJ) filed amicus briefs with 

several of these courts, but DOJ’s legal 

arguments failed to persuade the courts. 

Commenters further wrote that at least 

two of these U.S. Courts of Appeals are 

unlikely to grant deference to the 

proposed rule if finalized. Also, 

commenters argued that Congress 

considered and ultimately declined to 

enact legislation in 2007 that would 

have overturned the judicial decisions 

interpreting 7 U.S.C. 192(a) that require 

a showing of harm or likely harm to 

competition. 

Producers, growers, and farm trade 

groups generally supported the 

proposed rule, with some exceptions. 

Commenters who expressed support 

often noted that many farmers invest 

millions of dollars of their own money 

on new—or upgrades to existing— 

production facilities in order to meet the 

contractual demands of packers, swine 

contractors, or live poultry dealers. 

Many wrote that farmers need the 

proposed rule to protect them from 

unfair, deceptive, or retaliatory practices 

that can cause farmers to lose their 

operations and investments. These 

commenters stated that this proposed 

rule provided long overdue protection 

to farmers and clarified to the industry 

the conduct or action that is a violation 

of the P&S Act. 

The proposed rule closely relates to 

the interim final rule (IFR) published in 

the Federal Register (81 FR 92566) on 

December 20, 2016, which stated that 

conduct or actions can violate 7 U.S.C. 

192(a) or (b) of the P&S Act without a 

finding of harm or likely harm to 

competition. In the IFR, GIPSA 

formalized its longstanding 

interpretation of 7 U.S.C. 192(a) and (b). 

In the preamble to the proposed rule, 

GIPSA explained that the rule was 

consistent with the IFR because 

proposed 9 CFR 201.210(b) and 201.211 

give examples of conduct that does not 

require likelihood of harm to 

competition to violate 7 U.S.C. 192(a) 

and (b). GIPSA withdrew the IFR 

because, among other reasons, it is 

inconsistent with court decisions in 

several Courts of Appeals and those 

courts are unlikely to give GIPSA’s 

interpretation deference. 

As the comments noted, this proposed 

rule, like the IFR, conflicts with legal 

precedent in several Circuits. These 

conflicts pose serious concerns. GIPSA 

is cognizant of the commenters who 

support allowing the proposed rule and 

their concerns regarding the imbalance 

of bargaining power Also, we recognize 

that the livestock and poultry industries 

have a vested interest in understanding 

what conduct or actions violate 7 U.S.C. 

92(a) and (b). This proposed rule, 

however, would inevitably generate 

litigation in the livestock and poultry 

industries. Protracted litigation to both 

interpret this regulation and defend it 

serves neither the interests of the 

livestock and poultry industries nor 

GIPSA. 

Also, as the preamble to the proposed 

rule noted: ‘‘For several decades, GIPSA 

has brought administrative enforcement 

actions against packers for violations of 

the regulations under the P&S Act 

without demonstrating harm or likely 

harm to competition.’’ In the proposed 

rule itself, GIPSA linked the proposed 

rule to practices that are already 

violations of the regulations and statute, 

such as 9 CFR 201.82, and 7 U.S.C. 

228b. GIPSA also predicted that the 

proposed rule would not increase 

administrative enforcement actions 

against packers because GIPSA designed 

the regulations to follow its current 

interpretation of 7 U.S.C. 192(a) and (b). 

On the other hand, some commenters 

wrote that the breadth of the proposed 

regulation would suppress innovative 

contracting because regulated entities 

would fear the increased risk of 

litigation presented by ambiguous terms 

in the proposed rule. As stated 

previously, commenters noted 

producers and growers might be 

emboldened to sue for any perceived 

slight. 

Executive Order 13563 directs, as a 

matter of regulatory policy, that USDA 

identify and use the best, most 

innovative, and least burdensome tools 

for achieving regulatory ends; to 


ethrower on DSK3G9T082PROD with PROPOSALS
48604 Federal Register / Vol. 82, No. 200 / Wednesday, October 18, 2017 / Proposed Rules 

account for benefits and costs, both 

quantitative and qualitative; and to 

tailor its regulations to impose the least 

burden on society, consistent with 

obtaining regulatory objectives. To the 

extent the proposed rule codified 

longstanding practice, the prescriptions 

of the proposed rule could have the 

unintended consequence of preventing 

future market innovations that might 

better accommodate rapidly evolving 

social and industry norms. In the past, 

GIPSA has approached the elimination 

of specific unfair and deceptive 

practices on a case-by-case basis. 

Continuing this approach will better 

foster market-driven innovation and 

evolution, and is consistent with the 

obligation to promote regulatory 

predictability, reduce regulatory 

uncertainty, and identify and use the 

most innovative and least burdensome 

tools for achieving regulatory ends. 

Therefore, after review and careful 

consideration of the public comments 

received, GIPSA will take no further 

action on the December 20, 2016, 

proposed rule referenced above. 

Randall D. Jones, 

Acting Administrator, Grain Inspection, 

Packers and Stockyards Administration. 

[FR Doc. 2017–22588 Filed 10–17–17; 8:45 am] 

BILLING CODE 3410–KD–P 


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