48594 Federal Register / Vol. 82, No. 200 / Wednesday, October 18, 2017 / Rules and Regulations 

DEPARTMENT OF AGRICULTURE 

Grain Inspection, Packers and 

Stockyards Administration 

9 CFR Part 201 

RIN 0580–AB28 

Scope of Sections 202(a) and (b) of the 

Packers and Stockyards Act 

AGENCY: Grain Inspection, Packers and 

Stockyards Administration, USDA 

ACTION: Final rule; withdrawal. 

SUMMARY: The United States Department 

of Agriculture’s (USDA) Grain 

Inspection, Packers and Stockyards 

Administration (GIPSA), Packers and 

Stockyards Program is withdrawing the 

interim final rule (IFR) published in the 

Federal Register on December 20, 2016. 

Had the IFR become effective, it would 

have added a paragraph to the 

regulations issued under the Packers 

and Stockyards Act (P&S Act) 

addressing the scope of sections 202(a) 

and (b) of the P&S Act, which 

enumerate unlawful practices under the 

Act. Specifically, the IFR would have 

added a paragraph to the regulations 

further explaining the scope of sections 

202(a) and (b) of the P&S Act such that 

certain conduct or actions, depending 

on their nature and the circumstances, 

could be found to violate the P&S Act 

without a finding of harm or likely harm 

to competition. 

GIPSA accepted and analyzed 

comments on the IFR received on or 

before March 24, 2017. In addition, in 

the April 12, 2017 Federal Register, 

GIPSA solicited and analyzed comments 

received on or before June 12, 2017, on 

four alternative actions regarding the 

disposition of the IFR. After careful 

review and consideration of all 

comments received, GIPSA is 

withdrawing the IFR. 

DATES: The interim final rule published 

on December 20, 2016 (81 FR 92566), is 

withdrawn as of October 18, 2017. 

FOR FURTHER INFORMATION CONTACT: 

S. Brett Offutt, Director, Litigation and 

Economic Analysis Division, Packers 

and Stockyards Program, GIPSA, 1400 

Independence Ave. SW., Washington, 

DC 20250–3601, (202) 720–7051, 

s.brett.offutt@usda.gov. 

SUPPLEMENTARY INFORMATION: GIPSA is 

issuing this final rule to withdraw the 

interim final rule that would have 

revised the current regulations 

implementing the P&S Act to state that 

a finding of harm or likely harm to 

competition was not needed to find a 

violation of section 202(a) or (b) of that 

Act (7 U.S.C. 181–229c). See 7 U.S.C. 

192(a) and (b). Below is the basis for this 

decision. The first section provides 

background on the interim final rule 

and on the proposed rule disposing of 

the interim final rule. The second and 

third sections discuss the public 

comments GIPSA received on the 

interim final rule and the proposed rule, 

respectively. The fourth section 

discusses GIPSA’s action, the 

justification for that action, and 

responds to the comments received. The 

last section provides the required 

impact analyses, including the 

Regulatory Flexibility Act, the 

Paperwork Reduction Act, and the 

relevant Executive Orders. 

I. Background 

The P&S Act at 7 U.S.C. 192(a) states 

that it is unlawful for any packer, swine 

contractor, or live poultry dealer to 

‘‘[e]ngage in or use any unfair, unjustly 

discriminatory, or deceptive practice or 

device.’’ Further, section 192(b) 

provides that it is unlawful for those 

same types of business entities to 

‘‘[m]ake or give any undue or 

unreasonable preference or advantage to 

any particular person or locality in any 

respect, or subject any particular person 

or locality to any undue or unreasonable 

prejudice or disadvantage in any 

respect.’’ In the June 22, 2010 Federal 

Register (75 FR 35338–35354), GIPSA 

published a notice of proposed 

rulemaking (NPRM) that would make 

several revisions to the regulations 

implementing the P&S Act, including 

one revision that would add a paragraph 

(c) to 9 CFR 201.3 to codify the agency’s 

longstanding interpretation that, in 

some cases, a violation of 7 U.S.C. 

192(a) or (b) can be established without 

proof of likelihood of competitive 

injury. 75 FR at 35340; see also id. at 

35351 (proposed rule text for § 201.3(c)). 

GIPSA originally set the comment 

period for the NPRM to close on August 

23, 2010, and later extended it until 

November 22, 2010 (75 FR 44163). 

The appropriations acts for fiscal 

years 2012 through 2015 precluded 

USDA from finalizing the NPRM, 

including the proposed § 201.3(c). The 

appropriations acts for fiscal years 2016 

and 2017, however, did not include this 

preclusion. Accordingly, on December 

20, 2016, GIPSA published in the 

Federal Register (81 FR 92566–92594) 

an interim final rule (IFR) adopting 

essentially the same language in 

proposed § 201.3(c) as § 201.3(a). GIPSA 

invited interested persons to submit 

comments on the IFR on or before its 

effective date of February 21, 2017. 

On February 7, 2017, GIPSA 

published in the Federal Register (82 

FR 9489) a notice delaying the effective 

date of the IFR to April 22, 2017. The 

notice also extended the deadline for 

submitting comments to March 24, 

2017. The delay and extension were 

consistent with the memorandum of 

January 20, 2017, to the heads of 

executive departments and agencies 

from the Assistant to the President and 

Chief of Staff entitled ‘‘Regulatory 

Freeze Pending Review.’’ 

On April 12, 2017, GIPSA published 

a notice in the Federal Register (82 FR 

17531) delaying the effective date for 

the IFR for an additional 180 days, from 

March 24, 2017, to October 19, 2017. 

This extension allowed additional time 

for USDA to consider adequately all 

comments received and to make an 

informed policy decision. 

Concurrent with this notice, GIPSA 

published in the Federal Register (82 

FR 17594) a proposed rule presenting 

four alternatives for disposing the IFR: 

(1) Allow the interim final rule to 

become effective, (2) suspend the 

interim final rule indefinitely, (3) delay 

the effective date of the interim final 

rule further, or (4) withdraw the interim 

final rule. The proposed rule gave 

interested persons until June 12, 2017, 

to comment on the four alternatives. 

GIPSA has analyzed the comments 

received on the interim final rule 

published on December 20, 2016. It has 

also evaluated the comments received in 

response to the proposed rule published 

on April 12, 2017, regarding disposition 

of that rule. Now, GIPSA is withdrawing 

the interim final rule. 

II. Interim Final Rule—Discussion of 

Comments 

GIPSA solicited comments concerning 

the IFR for a period of 90 days ending 

on March 24, 2017. GIPSA received 344 

timely comments. Commenters were 

from all sectors of the livestock and 

poultry industries, including livestock 

producer groups; poultry grower interest 

groups; packers; poultry company 

associations; farmers and farmers’ 

organizations; consumer organizations 

and consumers; and an animal rights 

group. 

A common theme of those opposed to 

the IFR was that it would lead to 

increased litigation. Commenters said 

that without the requirement to show 

harm to competition, the IFR would 

embolden producers and growers to sue 

for any perceived slight by a packer or 

integrator. Fear of litigation would cause 

packers and integrators to vertically 

integrate further, increase their volume 

of captive supplies, and rely even more 

on those suppliers and growers they 

currently use. Therefore, these 

commenters suggested the IFR would 


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result in new suppliers being shut out 

of markets. 

A major poultry trade association said 

that the IFR failed to describe what 

conduct or actions would constitute a 

violation of the P&S Act with sufficient 

clarity for people to understand 

prohibited or permitted conduct or 

actions and that this ambiguity would 

lead to arbitrary and discriminatory 

enforcement. It said that the IFR is not 

entitled to deference because, among 

other things, the plain language of 7 

U.S.C. 192(a) and (b) requires a showing 

of competitive injury. Finally, it noted 

that, although the Department of Justice 

(DOJ) filed amicus briefs with several 

appellate courts arguing against the 

need to show competitive harm, DOJ’s 

legal arguments failed to sway those 

courts’ decisions. 

A livestock packing industry 

association pointed out that the 

Administrative Procedure Act (APA) (5 

U.S.C. 551–559) requires the public to 

have an opportunity to comment timely 

on proposed rules. Because the 

substance of the IFR was part of the June 

2010 NPRM, this commenter believed 

the rulemaking record was ‘‘stale’’ and 

said that GIPSA should have re-opened 

the comment period to refresh the 

rulemaking record or have terminated 

the rulemaking proceeding. Further, 

having failed to do so, GIPSA should 

not be entitled to deference. 

Two trade associations representing 

the pork and beef industries also 

opposed the IFR. These commenters 

said that GIPSA failed to identify 

specific systemic problems needed to 

justify it. Although GIPSA provided 

examples of conduct or actions that 

could be challenged under the IFR, they 

said that GIPSA provided no evidence 

that the referenced conduct or actions 

occur in the pork or beef industries, 

and, therefore, it was not clear if these 

problems occur in those industries. If 

problems existed, they felt that GIPSA 

should have tailored the rule to address 

those problems instead of issuing one 

that was over-inclusive and impacted 

the entire meat industry. 

These commenters also said that 

GIPSA failed to address adequately the 

judicial decisions interpreting 7 U.S.C. 

192 that ran counter to the IFR. They 

said that court decisions held that the 

words used in 7 U.S.C. 192, such as 

‘‘unfair’’ and ‘‘unjust,’’ came from other 

antitrust statutes and reasoned their 

anti-competitive meaning transferred 

over to the P&S Act. They said that 

GIPSA also failed to argue against the 

conclusion drawn by multiple courts 

that the legislative history of the P&S 

Act shows that Congress intended § 192 

to require competitive injury. Finally, 

they noted that GIPSA failed to show 

that its interpretation was in fact a 

longstanding one. They argued that this 

failure undermined the argument that 

the courts should defer to GIPSA’s 

interpretation. 

Commenters opposed to the IFR also 

said that it would discourage incentives, 

premiums, and payment plans offering 

price differentials to producers or 

growers for supplying higher quality 

product or greater production efficiency. 

They claimed that the ambiguity of the 

terms used in the IFR would encourage 

limiting or abandoning alternative 

marketing arrangements that provide 

compensation that is both certain and 

necessary for producers to use in 

making financial investments. 

Self-identified contract growers for a 

major poultry company provided 

similar comments, saying that the IFR 

was not in the best interests of contract 

poultry growers, poultry companies, or 

consumers. They said that the pay 

system used in the poultry industry 

encouraged innovation and investment 

in the best practices and equipment. 

They predicted that the IFR might lead 

to changes to the pay system by 

removing incentives for innovation and 

investment, resulting in the U.S. poultry 

industry becoming less competitive in 

global markets and threatening jobs here 

in the U.S. 

A large poultry processing and 

livestock slaughtering corporation, 

along with many of its individual 

employees submitting form letters, said 

that GIPSA failed to prove the IFR was 

economically justified. The corporation 

argued that protection of competition 

must be the ‘‘underpinning’’ of a 

regulation issued under the P&S Act and 

that GIPSA’s competition-related 

justifications for the IFR were 

insufficient because the agency: (1) 

Failed to sufficiently cite economic 

studies to demonstrate that there is an 

imbalance of market power between 

livestock producers and poultry growers 

and (2) failed to show that regulated 

entities have an incentive to treat 

livestock producers and poultry growers 

in a manner that results in a lower 

supply of growers willing to contract. 

Moreover, this corporation claimed that 

the cost to the industry of the IFR would 

be $1 billion over the next decade, 

without specific quantifiable benefit. 

Supporters of the IFR included 

individual livestock producers, poultry 

growers, and farmers’ organizations. 

They pointed to the hundreds of 

thousands or millions of dollars farmers 

invest to grow or produce for a 

company. Many expressed their belief 

that farmers need the IFR’s protection to 

avoid losing their operations and their 

investments because of unfair, 

deceptive, and/or retaliatory practices. 

Support for the IFR was also rooted in 

the belief that requiring harm to 

competition was an impossibly high 

standard for individual farmers to meet. 

These commenters said increased 

concentration and imbalances of power 

in the marketplace facilitate abuse. They 

argued that small family farmers should 

not have to compete with one another 

because of the strong hold corporate and 

commercial farms and packers have on 

the agricultural sector. One commenter 

emphasized that it was unfair, unjustly 

discriminatory, or unduly preferential to 

require poultry growers to participate in 

a compensation system in which 

growers do not have full control over 

their production inputs. They said 

production inputs can be manipulated 

to the detriment of disfavored growers; 

and because there are limited 

contracting options, growers may not 

have the means to challenge abuses. 

Thus, family farmers face unfair 

practices because corporate 

concentration leads to power 

imbalances and this growing corporate 

concentration leaves consumers with 

fewer choices in the grocery stores. 

Supporters of the IFR also said it 

provided common-sense protections for 

farmers. They argued that the purpose of 

the P&S Act was to protect farmers from 

unfair treatment by companies and not 

just from anticompetitive practices. 

They said that the IFR simply ensured 

that farmers could challenge unfair 

treatment without having to bring a 

federal antitrust case. One commenter 

stated that as long as competitive injury 

is the law there is no deterrent 

preventing companies from treating an 

individual farmer as it wishes. 

III. Disposition of the Interim Final 

Rule—Discussion of Comments 

In the April 12, 2017 proposed rule, 

GIPSA stated that there were significant 

policy and legal issues addressed within 

the IFR that warranted further review by 

USDA. For these reasons, the proposed 

rule requested public comments on four 

alternative actions that USDA could 

take with regard to the disposition of the 

IFR. The four alternatives listed in the 

proposed rule were as follows: (1) Allow 

the IFR to become effective; (2) suspend 

the IFR indefinitely; (3) further delay 

the effective date of the IFR; or (4) 

withdraw the IFR. The proposed rule 

gave interested persons until June 12, 

2017, to comment on the four 

alternative actions. 

USDA received 1,951 timely 

comments. Of those comments, 1,466 

preferred alternative 4 (i.e., to withdraw 

the IFR). Another 469 preferred 


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1E.g., In re Ozark County Cattle Co., 49 Agric. 

Dec. 336, 365 (1990); In re Rodman, 47 Agric. Dec. 

885, 912–13 (1988); In re Itt Cont’l Baking Co., 44 

Agric. Dec. 748, 781 (1985) (citing Packers and 

Stockyards cases from 1957 through 1983); c.f. 

Sioux City Stock Yards Co. v. United States, 49 F. 

Supp. 801, 806 (N.D. Iowa 1943) (‘‘[T]he statute, 

neither expressly nor impliedly, makes any [finding 

that a market injury was being threatened] a 

jurisdictional prerequisite to the Secretary’s power 

to act.’’); In re:Macy Live Poultry Co, 1 Agric. Dec. 

479 (1942) (finding proof of weight fraud alone 

sufficient to sanction a live poultry dealer). 

2E.g., Brief for Amicus Curiae the United States 

of America in Support of Plaintiff-Appellant, Terry 

v. Tyson Farms, Inc., 604 F.3d 272 (6th Cir. 2010) 

(No. 08–5577), 2008 WL 5665508 at 11–26; En Banc 

Brief for Amicus Curiae the United States of 

America in Support of Plaintiffs-Appellees, Wheeler 

v. Pilgrim’s Pride Corp., 591 F.3d 355 (5th Cir. 2009) 

(No. 07–40651), 2009 WL 7349991 at 9–29. 

3 467 U.S. 837 (1984). 

4 Id. at 842–43 (endnotes omitted). 

5 Mayo Found. for Medical Educ. and Res. v. 

United States, 562 U.S. 44, 45 (2011) (quoting 

United States v. Mead Corp., 533 U.S. 218, 226–27 

(2001)). 

6Nat’l Cable & Telecomm. Ass’n v. Brand X 

Internet Serv., 545 U.S. 967, 982 (2005) (emphasis 

added). 

7 410 F.3d 1295 (11th Cir. 2005). 

8 Id. 

9 Id. at 304. 

10 Id. 

11 495 F.3d 1217 (10th Cir. 2007). 

12 Id. at 1223. 

13 Id. at 1230. 

14 591 F.3d 355 (5th Cir. 2009). 

15 Id. at 357. 

alternative 1 (i.e., to allow the IFR to 

become effective as planned). One 

commenter preferred alternative 2 (i.e., 

to suspend the IFR indefinitely). This 

commenter, however, also said that 

GIPSA should ‘‘allow the rule to die,’’ 

possibly indicating a real preference for 

alternative 4, withdrawal, as opposed to 

an indefinite suspension. No one voiced 

a preference for alternative 3 (i.e., to 

further delay the IFR’s effective date). 

Fifteen individuals provided comments 

on the proposed rule but did not state 

a preference. 

Many commenters who provided 

comments on the IFR also provided 

comments on this proposed rule, 

making largely the same arguments. 

Supporters of withdrawal were again 

concerned about increased litigation 

and vertical integration, reduction or 

elimination of alternative marketing 

agreements, and decreased market 

access for producers and growers. Those 

favoring the IFR reiterated their concern 

that increased concentration led to 

unfair practices and undue preferences 

against farmers. They believed that the 

IFR provided farmers the tools to 

address unfair practices and undue 

preferences. 

IV. Justification for Withdrawal of the 

Interim Final Rule and Response to 

Comments 

After reviewing the IFR and carefully 

considering the public comments, 

GIPSA is withdrawing the IFR because 

of serious legal and policy concerns 

related to its promulgation and 

implementation. First, the interpretation 

of 7 U.S.C. 192(a)–(b) embodied in the 

IFR is inconsistent with court decisions 

in several U.S. Courts of Appeals, and 

those circuits are unlikely to give 

GIPSA’s proposed interpretation 

deference. Additionally, the IFR’s 

justification for dispensing with notice 

and comment for ‘‘good cause’’ was 

inadequate to satisfy the APA’s 

requirements. 

A. Courts Are Unlikely To Give 

Deference to the Interim Final Rule 

The purpose of the IFR was to clarify 

that conduct or actions may violate 7 

U.S.C. 192(a) and (b) without adversely 

affecting, or having a likelihood of 

adversely affecting, competition. This 

reiterated USDA’s longstanding 

interpretation that not all violations of 

the P&S Act require a showing of harm 

or likely harm to competition. 

Contrary to comments that GIPSA 

failed to show that USDA’s 

interpretation was longstanding, USDA 

has adhered to this interpretation of the 

P&S Act for decades.1 DOJ has filed 

amicus briefs with several federal 

appellate courts arguing against the 

need to show the likelihood of 

competitive harm for all violations of 7 

U.S.C. 192(a) and (b).2

However, as commenters have noted 

and GIPSA acknowledges, several 

federal appellate courts have declined to 

defer to USDA’s interpretation (see 

discussion of cases below). There is 

good reason to believe that several of 

those courts would continue to do so 

even if USDA’s interpretation were 

codified in a final rule. 

When determining whether an 

agency’s interpretation of a statute that 

it administers is entitled to deference, 

the Supreme Court explained in 

Chevron, U.S.A., Inc. v. Natural 

Resources Defense Council, Inc.,3 that 

courts look at whether Congress has 

directly spoken to the precise question 

at issue. If the intent of Congress is 

clear, that is the end of the matter; the 

court, as well as the agency, must give 

effect to the unambiguously expressed 

intent of Congress. If, however, the court 

determines that Congress has not 

directly addressed the precise question 

at issue, the court does not simply 

impose its own construction on the 

statute, as would be necessary in the 

absence of an administrative 

interpretation. Rather, if the statute is 

silent or ambiguous with respect to the 

specific issue, the question for the court 

is whether the agency’s answer is based 

on a permissible construction of the 

statute.4

The courts have granted Chevron 

deference ‘‘when it appears that 

Congress delegated authority to the 

agency generally to make rules carrying 

the force of law, and that the agency 

interpretation claiming deference was 

promulgated in the exercise of that 

authority.’’ 5 Moreover, even if a court 

has spoken as to the interpretation of a 

statute, ‘‘[a] court’s prior judicial 

construction of a statute trumps an 

agency construction otherwise entitled 

to Chevron deference only if the prior 

court decision holds that its 

construction follows from the 

unambiguous terms of the statute and 

thus leaves no room for agency 

discretion.’’ 6

In the IFR, GIPSA acknowledged that 

multiple federal circuit courts had held 

that harm to competition is required to 

prove violations of 7 U.S.C. 192(a) and 

(b). For example, in the Eleventh Circuit 

case of London v. Fieldale Farms Corp.,7

the plaintiffs alleged that defendant 

impermissibly terminated plaintiffs’ 

contract.8 The court held that plaintiffs’ 

failure to allege harm to competition 

was fatal to their 7 U.S.C. 192(a) claim.9

The court stated that ‘‘in order to prevail 

under the [P&S Act], a plaintiff must 

show that the defendant’s deceptive or 

unfair practice adversely affects 

competition or is likely to adversely 

affect competition.’’ 10

In the Tenth Circuit case of Been v. 

O.K. Industries, Inc.,11 the plaintiffs, 

who were growers, alleged that a variety 

of defendants’ actions with respect to 

the growers’ contracts were unfair.12

The court concluded that plaintiffs must 

show that defendants’ conduct harmed 

or was likely to harm competition under 

7 U.S.C. 192(a) stating: 

We are concerned here only with whether 

unfairness requires a showing of a likely 

injury to competition, not whether deceptive 

practices require such a showing. We 

therefore join the [sic] those circuits 

requiring a plaintiff who challenges a 

practice under § [192(a)] to show that the 

practice injures or is likely to injure 

competition.13

In the Fifth Circuit case of Wheeler v. 

Pilgrim’s Pride Corp.,14 the plaintiffs 

alleged that one grower wrongfully 

received superior contract terms and 

that the disparity was unfair and 

deceptive under 7 U.S.C. 192(a) and 

(b).15 The en banc court rejected this 

argument, finding ‘‘[t]o support a claim 


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16 Id. at 363. 

17 604 F.3d 272 (6th Cir. 2010). 

18 Id. at 274. 

19 Id. at 277. 

20 Id. at 279. 

21 Id. at 277–79 (citing cases from the Fourth, 

Fifth, Seventh, Eighth, Ninth, Tenth, and Eleventh 

Circuits and electing to join those circuits). 

22 Id. at 277. 

23Wheeler v. Pilgrim’s Pride Corp., 591 F.3d 355, 

362 (5th Cir. 2009). 

24 Id. at 373 n.3. 

25 Id. at 1304 (internal citations omitted). 

26 Id. (internal quotations and citations omitted). 

27Chevron, U.S.A., Inc. v. Nat. Resources Def. 

Council, Inc., 467 U.S. 837, 842–43 (1984). 

28 187 F.3d 974 (8th Cir. 1999). 

29 Id. at 975–76. 

30 Id. at 976. 

31 Id. at 977 (quoting Farrow v. USDA, 760 F.2d 

211, 214 (8th Cir. 1985)) (emphasis added in IBP). 

32 618 F.2d 1329 (9th Cir. 1980). 

33 Id. at 1336–37. 

34 164 F.3d 625, Nos. 96–2542, 96–2631, 1998 WL 

709324 (4th Cir. Oct. 5, 1998). 

35 Id. at *2. 

36 Id. at *4 (emphasis in original). 

37 Id. 

38 547 F.2d 367 (7th Cir. 1976). 

that a practice violates subsection (a) or 

(b) of § 192 there must be proof of 

injury, or likelihood of injury, to 

competition.’’ 16

In the Sixth Circuit case of Terry v. 

Tyson Farms, Inc.,17 the plaintiff 

alleged, among other things, that the 

defendant poultry company cancelled 

his contract because plaintiff asserted 

his regulatory right to observe the 

weighing of his birds.18 He claimed this 

violated 7 U.S.C. 192(a) and (b).19 The 

court disagreed and held that ‘‘in order 

to succeed on a claim under § 192(a) 

and (b) of the [P&S Act], a plaintiff must 

show an adverse effect on 

competition.’’ 20 The Terry court cited 

cases from sister circuits, and claimed 

that seven of the circuits agreed with its 

legal conclusion.21 The Terry court also 

claimed that this ‘‘tide’’ of opinions 

from other circuits has ‘‘now become a 

tidal wave.’’ 22

Many commenters argued that the 

plain language of the P&S Act requires 

competitive injury and that GIPSA 

therefore is not entitled to deference for 

a conflicting regulation. GIPSA 

recognizes that at least two federal 

circuits are unlikely to defer to USDA’s 

interpretation. In the Fifth Circuit, the 

Wheeler court said that ‘‘deference . . . 

is unwarranted where Congress has 

delegated no authority to change the 

meaning the courts have given to the 

statutory terms . . . .’’ 23 The court held 

USDA was not entitled to deference 

‘‘because the PSA is unambiguous.’’ 24

Likewise, the Eleventh Circuit refused 

to defer to USDA stating, ‘‘[t]his court 

gives Chevron deference to agency 

interpretations of regulations 

promulgated pursuant to congressional 

authority. The [P&S Act] does not 

delegate authority to the Secretary to 

adjudicate alleged violations of [7 U.S.C. 

192] by live poultry dealers. Congress 

left that task exclusively to the federal 

courts.’’ 25 It went on to say that 

‘‘[b]ecause Congress plainly intended to 

prohibit only those unfair, 

discriminatory or deceptive practices 

adversely affecting competition a 

contrary interpretation of [7 U.S.C. 

192(a)] deserves no deference.’’ 26

Commenters supporting the IFR cited 

the current court precedent as 

justification for its promulgation. They 

said showing harm to competition was 

a difficult standard to meet; and as long 

as it remains a requirement, growers and 

producers would continue to be 

subjected to unfair business practices, 

and their businesses would be at risk. 

GIPSA agreed with this view when it 

promulgated the IFR; however, current 

precedent poses a significant legal issue. 

As discussed above, the courts only 

grant Chevron deference to an agency’s 

interpretation of a statute under its 

purview when the statute is ambiguous 

and the agency’s interpretation is 

reasonable.27

If the IFR becomes effective, it will 

conflict with Fifth, Sixth, Tenth, and 

Eleventh Circuit precedent. This 

conflict creates serious concerns. GIPSA 

is cognizant of the commenters who 

support this IFR becoming effective and 

of their concerns regarding a perceived 

imbalance of bargaining power. Also, 

GIPSA recognizes that the livestock and 

poultry industries have a vested interest 

in knowing what conduct or actions 

violate 7 U.S.C. 192(a) and (b). However, 

a regulation conflicting with relevant 

Circuit precedent will inevitably lead to 

more 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. 

To be sure, some commenters 

overstated the hostility in the case law 

to USDA’s longstanding position. 

Contrary to some commenters’ claims, 

GIPSA disagrees that the remaining U.S. 

Circuit Courts of Appeals that have had 

occasion to address the issue (Fourth, 

Seventh, Eighth, and Ninth Circuits) 

have gone as far as London, Been, 

Wheeler, and Terry, to declare that harm 

or likelihood of harm to competition is 

required in all cases brought under 7 

U.S.C. 192(a) and (b). 

Some courts affirmed the position of 

the USDA that certain practices are 

unfair because they are likely to harm 

competition. In the Eighth Circuit case 

of IBP v. Glickman,28 the USDA brought 

an action against a packer respondent 

for alleged unlawful use of the packer’s 

right of first refusal.29 Among other 

things, the USDA’s Judicial Officer 

ruled that there was potential harm to 

competition based on the allegation that 

the respondent was not participating in 

the bidding for cattle.30 While the IBP 

court did not agree with the Judicial 

Officer’s factual findings, the court 

agreed that the legal standard the 

Judicial Officer applied was the correct 

one: ‘‘[w]e have said that ‘a practice 

which is likely to reduce competition 

and prices paid to farmers for cattle can 

be found an unfair practice under the 

Act, and be a predicate for a cease and 

desist order.’ ’’ 31

Likewise, in the Ninth Circuit case of 

De Jong Packing Co. v. USDA,32 the 

appellate court agreed that collusion to 

force conditional bidding on livestock 

auctions was anti-competitive in nature 

holding: 

The government contends that the purpose 

of the Act is to halt unfair trade practices in 

their incipiency, before harm has been 

suffered; that unfair practices under [7 U.S.C. 

192] are not confined to those where 

competitive injury has already resulted, but 

includes those where there is a reasonable 

likelihood that the purpose will be achieved 

and that the result will be an undue restraint 

of competition. We agree.33

Other courts have only required a 

showing of harm or likelihood of harm 

to competition for the conduct or action 

at issue without generalizing their 

holdings to all violations of 7 U.S.C. 

192(a) and (b). In the Fourth Circuit case 

of Philson v. Goldsboro Mill Co.,34 the 

plaintiff turkey growers claimed their 

contract was terminated in retaliation 

for ‘‘vocalization of their grievances’’ 

and that defendant’s conduct was, 

among other things, an unfair or 

deceptive practice in violation of the 

P&S Act.35 The court held that, while ‘‘it 

is unnecessary to prove actual injury to 

establish an unfair or deceptive practice 

[under 7 U.S.C. 192(a) and (b)], a 

plaintiff must nonetheless establish that 

the challenged act is likely to produce 

the type of injury that the Act was 

designed to prevent.’’ 36 Thus, the court 

held that the district court did not err 

in instructing the jury that plaintiff must 

prove that ‘‘the defendants’ conduct was 

likely to affect competition adversely in 

order to prevail on their claims under 

the Packers and Stockyard Act.’’ 37

In the Seventh Circuit case of Pacific 

Trading Co. v. Wilson & Co.,38 the 

plaintiffs claimed that the defendant 

packers had knowingly delivered ‘‘off 


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39 Id. at 369. 

40 Id. at 369–70. 

41 53 F.3d 1452 (8th Cir. 1995). 

42 Id. at 1458. 

43 Id. 

44 Id. at 1458–59 (internal citations omitted). 

45See Farrow v. USDA, 760 F.2d 211, 214 (8th 

Cir. 1985) (‘‘We agree with the JO that a practice 

which is likely to reduce competition and prices 

paid to farmers for cattle can be found an unfair 

practice under the Act, and be a predicate for a 

cease and desist order. We conclude that this is so 

even in the absence of evidence that the 

participants made their agreement for the purpose 

of reducing prices to farmers or that it had that 

result.’’). 

46 5 U.S.C. 553(b)(B). 

47 Id. 

48Woods Psychiatric Inst. v. United States, 20 Cl. 

Ct. 324, 332–33 (1990) (citing Alcaraz v. Block, 746 

F.2d 593, 612 (9th Cir. 1984)). 

49Tennessee Gas Pipeline Co. v. FERC, 969 F.2d 

1141, 1144 (D.C. Cir.1992) (quoting State of New 

Jersey v. EPA, 626 F.2d 1038, 1045 (D.C. Cir. 1980)). 

50Northern Mariana Islands v. United States, 686 

F.Supp.2d 7, 14–15 (D.D.C. 2009) (internal citations 

omitted). 51Riverbend Farms, Inc. v. Madigan, 958 F.2d 

1479, 1484 n.2 (9th Cir. 1992) (quoting Levesque v. 

Block, 723 F.2d 175, 184 (1st Cir. 1983)). 52 Id. 53 Mack Trucks, Inc. v. EPA, 682 F.3d 87, 94 (D.C. 

Cir. 2012) (quoting Util. Solid Waste Activities 

Group v. EPA, 236 F.3d 749, 755, (D.C. Cir. 2001). 54Action on Smoking and Health v. Civ. 

Aeronautics Board, 713 F.2d 795, 801–02 (D.C. Cir. 

1983). 

55Util. Solid Waste Activities Group, 236 F.3d at 

755 (quoting United States Department of Justice, 

Attorney General’s Manual on the Administrative 

Procedure Act 31 (1947)). 

56 Mobile Oil Corp. v. EPA, 35 F.3d 579, 584 (D.C. 

Cir. 1994). 

57Action on Smoking and Health v. Civ. 

Aeronautics Board, 713 F.2d 795, 801 (D.C. Cir. 

1983). 

58 Id. at 800. 

59 Mobile Oil Corp., 35 F.3d at 584. 

condition’’ hams in violation of 7 U.S.C. 

192(a).39 The court concluded that ‘‘the 

plaintiffs have failed to state a claim 

upon which relief can be granted under 

the Packers and Stockyards Act. For the 

purpose of that statute is to halt unfair 

business practices which adversely 

affect competition, not shown 

here . . . .’’ 40

One of the cases from the Eighth 

Circuit commonly cited by commenters 

as requiring a showing of harm to 

competition for all violations of 7 U.S.C. 

192(a) and (b), does not convincingly 

support the commenters’ position. In 

Jackson v. Swift Eckrich, Inc.,41 the 

plaintiffs claimed that 7 U.S.C. 192 

entitled them the opportunity to obtain 

the same type of contract that defendant 

offered other independent growers.42

The court disagreed stating that ‘‘[w]e 

are convinced that the purpose behind 

§ 202 of the [P&S Act], 7 U.S.C. 192, was 

not to so upset the traditional principles 

of freedom of contract. The [P&S Act] 

was designed to promote efficiency, not 

frustrate it.’’ 43 But, the court also 

appeared to acknowledge that other 

alleged violations of the P&S Act did not 

require a showing of harm to 

competition. Specifically, the court 

explained that: 

With regard to the claims of ‘other’ [P&S 

Act] violations, the breach of contract claim, 

and the fraud claim, the district court found 

that a jury question existed. We agree. The 

Jacksons presented evidence that Swift 

Eckrich had violated a number of PSA 

regulations, that it did not use the 

condemned carcass calculation formula 

provided in the floor contracts, and that it 

recorded bird weights without actually 

performing any measurements.44

On the other hand, other Eighth 

Circuit cases have required a showing of 

a likelihood of competitive injury when 

a plaintiff alleges that a practice is 

unfair because of its relationship to 

prices, bidding, or competition.45

Nevertheless, because at least two 

courts of appeals have held that the text 

of the P&S Act unambiguously 

forecloses USDA’s longstanding 

interpretation, allowing the IFR to go 

into effect would create an unworkable 

legal patchwork. Based on the 

comments received and the above legal 

analysis, GIPSA is withdrawing the IFR. 

B. The Interim Final Rule Was 

Insufficiently Supported by a ‘‘Good 

Cause’’ Exception to the Administrative 

Procedure Act’s Notice and Comment 

Procedure 

GIPSA is also withdrawing the IFR 

because we believe it did not satisfy the 

APA’s notice and comment 

requirements at 5 U.S.C. 553(b) and (c). 

GIPSA justified promulgating the IFR 

without notice and pre-promulgation 

opportunity for comment because we 

reasoned that its solicitation of 

comments over a five month period on 

the June 2010 NPRM satisfied those 

requirements. 81 FR at 92570. GIPSA 

reached this conclusion because 

proposed 9 CFR 201.3(c) in the June 

2010 NPRM was largely the same as 9 

CFR 201.3(a) in the IFR. Upon further 

examination, we recognize that this 

justification is not sufficient to meet the 

APA’s bar for establishing ‘‘good cause’’ 

sufficient to dispense with normal 

notice and comment procedures. 

To promulgate a rule as an interim 

final rule and forego the normal notice 

and comment procedure, an agency 

must invoke a ‘‘good cause’’ exception 

under the APA and explain its rationale 

within the rule itself.46 To establish 

‘‘good cause,’’ the agency must 

demonstrate that the normal procedure 

would be ‘‘impracticable, unnecessary, 

or contrary to the public interest.’’ 47

‘‘[T]he inquiry into whether good cause 

has been properly invoked must 

proceed on a case-by-case basis, with a 

sensitivity to the totality of the factors 

at play.’’ 48 When agencies invoke ‘‘good 

cause,’’ ‘‘the good cause exception is to 

be ‘narrowly construed and only 

reluctantly countenanced.’ ’’ 49

Within the good cause inquiry, courts 

have identified situations that are 

‘‘impracticable, unnecessary, or contrary 

to the public interest,’’ based on a 

consideration of multiple factors. Those 

factors include: 

the scale and complexity of the regulatory 

program the agency was required to 

implement; any deadlines for rulemaking 

imposed by the enabling statute; the 

diligence with which the agency approached 

the rulemaking process; obstacles outside the 

agency’s control that impeded efficient 

completion of the rulemaking process; and 

the harm that could befall members of the 

public as a result of delays in promulgating 

the rule in question.50

A situation is ‘‘impracticable’’ if ‘‘the 

agency cannot ‘both follow section 553 

and execute its statutory duties.’ ’’ 51

‘‘Unnecessary’’ refers to situations 

where the rule at issue is ‘‘technical or 

minor’’ 52 or where it ‘‘is a routine 

determination, insignificant in nature 

and impact, and inconsequential to the 

industry and to the public.’’ 53 Finally, 

‘‘contrary to the public interest’’ arises 

when there is ‘‘real harm to the public, 

not mere inconvenience to the 

Agency,’’ 54 and it ‘‘connotes a situation 

in which the interest of the public 

would be defeated by any requirement 

of advance notice,’’ such as a situation 

when announcing a rule would enable 

the harm the rule was designed to 

prevent.55

The sole justification for invoking 

‘‘good cause’’ in the IFR was that its 

June 2010 NPRM soliciting public 

comment satisfied the APA’s notice and 

comment requirements. Courts have 

acknowledged that an agency does not 

always have to ‘‘start from scratch’’ and 

initiate new notice and comment 

proceedings to re-promulgate a rule.56

On the other hand, the ‘‘mere presence 

of a prior notice and comment record’’ 

does not automatically ‘‘render the 

solicitation of new comments 

unnecessary.’’ 57 ‘‘Although the [APA] 

does not establish a ‘useful life’ for a 

notice and comment record, clearly the 

life of such a record is not infinite.’’ 58

Accordingly, ‘‘[i]f the original record is 

still fresh, a new round of notice and 

comment might be unnecessary. Such a 

finding, however, must be made by the 

agency and supported in the record; it 

is not self-evident.’’ 59

We are unable to identify 

circumstances sufficient to dispense 


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60See id. 

61Kollett v. Harris, 619 F.2d 134, 144–45 (1st Cir. 

1980). 

62 Id. at 15. 

63 Id. 

64See U.S. Steel Corp. v. EPA, 595 F.2d 207, 214 

n.15 (5th Cir. 1979) (listing as examples of harm 

regulations ‘‘involving government price controls, 

because of the market distortions caused by the 

announcement of future controls’’ and regulations 

involving ‘‘gas stations, where temporary shortages 

and discriminatory practices were found to have 

deprived some users of any supply and led to 

violence’’). 

65See Util. Solid Waste Activities Group v. EPA, 

236 F.3d 749, 755 (D.C. Cir. 2001). 

with traditional notice and comment 

procedures. Although a large number of 

comments were received over a fivemonth period, USDA is unwilling to 

assert—and the record does not support 

the inference that—the June 2010 NPRM 

was still ‘‘fresh.’’ 60 Accordingly, the 

IFR’s good cause explanation is unlikely 

to withstand judicial scrutiny. As one 

commenter said, the record from the 

June 2010 rulemaking was ‘‘stale.’’ 

Thus, according to the commenter, 

GIPSA should have re-opened the 

comment period to refresh the 

rulemaking record or terminated the 

rulemaking record. GIPSA’s decision to 

seek post-promulgation comment in the 

IFR, noting the high stakeholder 

interest, the intervening six years since 

the NPRM, and an interest in open and 

transparent government, suggests that 

the agency recognized the need to 

refresh the rulemaking record. 

Failing ‘‘to incorporate an adequate 

statement of good cause for dispensing 

with prior notice and comment has not 

been held fatal if good cause indeed 

existed,’’ 61 but we can offer no further 

justifications as to why the normal 

notice and comment procedure was 

‘‘impracticable, unnecessary, or contrary 

to the public interest.’’ The 

‘‘impracticable’’ prong was not 

applicable because GIPSA could have 

executed its statutory duties by issuing 

a new proposed rule and soliciting 

comments in compliance with the APA. 

The ‘‘unnecessary’’ prong was also not 

applicable because GIPSA estimated the 

implementation costs of the rule for the 

livestock and poultry industries would 

be millions of dollars. For this reason 

alone, the IFR was not ‘‘technical or 

minor.’’ Finally, there was no evidence 

that prior notice and opportunity for 

comment would have been ‘‘contrary to 

the public interest,’’ as the IFR 

memorialized GIPSA’s well known and 

longstanding interpretation. 

GIPSA thus recognizes that no good 

cause existed. Neither Congress nor a 

court mandated that GIPSA issue 

§ 201.3(a), nor were there any deadlines 

for its issuance.62 Because § 201.3(a) 

only reiterated USDA’s longstanding 

interpretation of the P&S Act as 

confirmed in the 2010 NPRM, the 

impacted livestock and poultry 

industries should have been aware of 

the interpretation, thereby negating the 

necessity to issue the rule 

immediately.63 Also, there was no 

evidence that the public would suffer 

harm following the normal notice and 

comment procedure.64 Although 

appropriations acts prevented GIPSA 

from taking any action for three years, 

this congressionally mandated delay 

alone is insufficient to constitute good 

cause. 

For the reasons discussed above, 

GIPSA concludes that its possible 

justifications for issuing the rule as an 

interim final rule fail to meet any of the 

prongs of the ‘‘good cause’’ exception, 

individually or cumulatively. Therefore, 

the prior decision to forgo notice and 

comment was flawed and compels 

GIPSA to withdraw the IFR. 

V. Required Impact Analyses 

A. Effective Date 

The IFR addressing the scope of 7 

U.S.C. 192(a) and (b) will become 

effective on October 19, 2017, unless 

withdrawn or suspended. Pursuant to 

the APA at 5 U.S.C. 553(d)(3), GIPSA 

finds good cause for making this final 

rule effective less than 30 days after 

publication in the Federal Register 

because it would be contrary to the 

public interest to delay any further. 

Justifiable good cause includes 

situations where the interest of the 

public is defeated when following the 

normal procedure would create the 

harm the rule was designed to 

prevent.65 This situation is present here. 

A significant purpose in withdrawing 

the IFR is to avoid conflict with federal 

appellate courts. If the IFR goes into 

effect before this final rule to withdraw 

it can go into effect, the conflict with the 

federal appellate courts will occur. 

Accordingly, to eliminate this potential 

conflict, it is necessary to have this rule 

become effective immediately. 

Additionally, because GIPSA erred in 

promulgating the IFR without following 

the APA’s normal notice and comment 

procedure, it is in the public’s interest 

for GIPSA to respect the rule of law and 

withdraw the IFR. Immediately 

withdrawing the IFR prevents confusion 

in the livestock and poultry industries 

that may occur if the interim rule was 

only briefly effective. Thus, this final 

rule will be effective upon publication 

in the Federal Register. 

B. Executive Orders 12866 and 13771, 

and Regulatory Flexibility Act 

This final rule has been determined to 

be significant for the purposes of 

Executive Order 12866 and, therefore, 

has been reviewed by the Office of 

Management and Budget. This final rule 

is an Executive Order 13771 

deregulatory action. Assessment of the 

cost of allowing the interim final rule to 

take effect and the cost savings 

attributed to not allowing the interim 

final rule to take effect may be found in 

the economic analysis below. 

The first section of the analysis 

discusses the two regulatory alternatives 

considered and presents a summary 

cost-benefit analysis of each alternative. 

GIPSA then discusses the impact on 

small businesses. 

Cost-Benefit Analysis of § 201.3(a) 

Regulatory Alternatives Considered 

Executive Order 12866 requires an 

assessment of costs and benefits of 

potentially effective and reasonably 

feasible alternatives to the planned 

rulemaking and an explanation of why 

the planned regulatory action is 

preferable to the potential alternatives. 

In the IFR, GIPSA considered three 

alternatives. The first alternative 

considered was to maintain the status 

quo and not finalize § 201.3(a). The 

second alternative considered was to 

issue § 201.3(a) as an IFR. The third 

alternative considered was to issue 

§ 201.3(a) as an IFR but exempt small 

businesses, as defined by the Small 

Business Administration, from having to 

comply with the rule. GIPSA chose the 

second alternative, to issue § 201.3(a) as 

an IFR. The IFR announced GIPSA 

would add a paragraph to section 201.3 

of the regulations addressing the scope 

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

delays of the effective date, the IFR was 

scheduled to become effective on 

October 19, 2017. 

In preparing this final rule, GIPSA 

initially considered four alternatives, as 

described in Section III above. After 

soliciting comments on the four 

alternatives, GIPSA is only further 

analyzing two of the alternatives, 

allowing the IFR to become effective 

(alternative 1) and withdrawing the IFR 

(alternative 4). GIPSA is only further 

analyzing these two alternatives because 

all of the commenters who selected a 

preferred alternative selected 

alternatives 1 and 4, save one 

commenter. That commenter, as 

discussed in Section III, appears to have 

had a real preference for alternative 4. 

In analyzing these two alternatives, 

GIPSA used the same data and analysis 

as presented in the IFR. GIPSA used the 


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66 GIPSA specifically looked at the following 

range of expected costs if the interim final rule 

became effective: 

A. Lower Boundary of Cost Spectrum-Litigation 

Costs of Preferred Alternative (81 FR 92578–92580). 

B. Lower Boundary-Ten-Year Total Costs of the 

Preferred Alternative (81 FR 92580–92581). 

C. Lower Boundary-Net Present Value of TenYear Total Costs of the Preferred Alternative (81 FR 

92581). 

D. Lower Boundary-Annualized NPV of Ten-Year 

Total Costs of the Preferred Alternative (81 FR 

92581). 

E. Upper Boundary of Cost Spectrum-Preferred 

Alternative (81 FR 92581–92585). 

F. Upper Boundary-NPV of Ten-Year Total Costs 

of the Preferred Alternative (81 FR 92585). 

G. Upper Boundary-Annualized Costs of the 

Preferred Alternative (81 FR 92585). 

H. Sensitivity Analysis of the Upper Boundary 

(81 FR 92585). 

I. Range of Annualized Costs of the Preferred 

Alternative (81 FR 92585–92586). 

J. Point Estimate of Annualized Costs of the 

Preferred Alternative (81 FR 92586). 

K. Sensitivity Analysis of Point Estimates of 

Annualized Costs (81 FR 92586–92587). 

same data and analysis because only a 

relatively short period of time has 

elapsed since the economic analysis was 

conducted for the IFR. Therefore, the 

underlying facts and reasoning used in 

the estimates prepared for the IFR have 

not changed to any material extent. 

Also, because of the relatively short 

period of time since the publication of 

the IFR, the livestock and poultry 

industries have not had time to make 

significant changes in their structures, 

practices, or methodologies—if they 

have made any changes. Moreover, 

GIPSA anticipated that many firms 

would take a ‘‘wait and see’’ approach 

and would not make significant changes 

to their operations or procurement 

practices until they were sure that the 

IFR would become effective. 

Given the multiple delays of the 

effective date of the IFR and the 

proposed rule seeking comments on the 

disposition of the IFR, GIPSA believes 

that few, if any, livestock and poultry 

producers and stakeholders changed 

their operations or procurement 

practices in reliance on the assumption 

that the IFR would become effective. In 

fact, no commenters on this proposed 

rule said they changed their operations 

or procurement practices, nor has 

GIPSA otherwise been made aware of 

anyone or any business making changes 

to their operations or procurement 

practices in reliance on the IFR’s 

becoming effective. Therefore, the 

conditions in the livestock and poultry 

industries likely remain as they were 

when the IFR was published. 

Alternative One: Allow the Interim 

Final Rule To Become Effective 

The costs and benefits described for 

alternative number two in the IFR, to 

finalize the IFR, equate to current 

alternative 1, allowing the IFR to 

become effective. In the absence of any 

action by GIPSA, the IFR will become 

effective on October 19, 2017, and the 

costs and benefits associated with the 

rule will start to be incurred once the 

IFR becomes effective. Although none of 

these costs or benefits associated with 

the IFR result under current practice, 

they will result from allowing the IFR to 

become effective. As such, GIPSA 

analyzed the post-regulatory world in 

preparing the regulatory analysis 

associated with the IFR as the best 

estimate of the legal status quo. 

As described in the IFR, given the 

applicability of the regulation to the 

livestock and poultry industries in their 

entirety, it was difficult to predict how 

those industries would respond. 

Therefore, in the IFR, GIPSA assigned a 

range to the expected costs of the 

regulation. At the lower boundary of the 

cost spectrum, GIPSA considered the 

scenario where the only costs were 

increased litigation costs and where 

there were no adjustments by the 

livestock and poultry industries to 

reduce their use of Alternative 

Marketing Agreements (AMA) or 

incentive pay systems—such as poultry 

grower ranking systems—and there were 

no changes to existing marketing or 

production contracts. For the upper 

boundary of the cost spectrum, GIPSA 

considered the scenario in which the 

livestock and poultry industries 

adjusted their use of AMAs and 

incentive pay systems and made 

systematic changes in its marketing and 

production contracts to reduce the 

threat of litigation.66

GIPSA estimated the annualized costs 

of § 201.3(a) to range from $6.87 million 

to $96.01 million at the three percent 

discount rate and from $7.12 million to 

$98.60 million at the seven percent 

discount rate. The range of potential 

costs is broad. GIPSA relied on its 

expertise to arrive at a point estimate 

range of expected annualized costs. 

GIPSA expected that the cattle, hog, and 

poultry industries would primarily take 

a ‘‘wait and see’’ approach to how 

courts would interpret § 201.3(a), and 

the industries would only slightly adjust 

their use of AMA’s and performancebased payment systems in the 

meantime. GIPSA estimated that the 

annualized cost of § 201.3(a) would be 

$51.44 million at a three percent 

discount rate and $52.86 million at a 

seven percent discount rate based on an 

anticipated ‘‘wait and see’’ approach 

and limited industry adjustments. 

Although GIPSA was unable to 

quantify the benefits of § 201.3(a), 

GIPSA determined that this rule did 

provide a qualitative benefit. The 

primary qualitative benefit would be 

broader protection and fair treatment for 

livestock producers, swine production 

contract growers, and poultry growers, 

which could lead to more equitable 

contracts. GIPSA contended that the 

enactment of § 201.3(a) would allow for 

the increased ability to enforce the P&S 

Act for violations of 7 U.S.C. 192(a) and 

(b), which do not result in harm or 

likely harm to competition. GIPSA 

believed that increased enforcement 

actions would help in reducing the 

ability of packers, swine contractors, 

and live poultry dealers to monopolize 

or exercise market power. This, in turn, 

would help provide livestock producers, 

swine production contract growers, and 

poultry growers with some degree of 

negotiating power parity. GIPSA also 

believed that enforcement could serve 

as a deterrent to future violations of 7 

U.S.C. 192(a) and (b). 

Alternative Two: Withdraw the Interim 

Final Rule 

Withdrawing the IFR negates the 

$51.44 million with a range of $6.87 

million to $96.01 million at a three 

percent discount rate and $52.86 

million with a range of $7.12 million to 

$98.60 million at a seven percent 

discount rate in projected annualized 

costs described above that would be 

incurred should the IFR become 

effective. It also means that the 

qualitative benefit of § 201.3(a)—broader 

protection and fair treatment for 

livestock producers, swine production 

contract growers, and poultry growers, 

which may lead to more equitable 

contracts are not expected to occur as a 

result of this rule. Instead, GIPSA 

expects that packers and live poultry 

dealers would continue with their 

current practices and that current rates 

of enforcement of the 7 U.S.C. 192(a) 

and (b) would remain unchanged. 

Cost-Benefit Comparison of Regulatory 

Alternatives 

Alternative 1, allowing the IFR to 

become effective, results in annualized 

costs estimated at $51.44 million with a 

range of $6.87 million to $96.01 million 

at a three percent discount rate and 

$52.86 million with a range of $7.12 

million to $98.60 million at a seven 

percent discount rate. As stated above, 

GIPSA was unable to quantify the 

benefits of § 201.3(a), but it did identify 

qualitative benefits of allowing the IFR 

to become effective. The primary 

qualitative benefit of this alternative 

was broader protection and fair 

treatment for livestock producers, swine 

production contract growers, and 

poultry growers, which may lead to 


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67See: http://www.sba.gov/idc/groups/public/ 

documents/sba_homepage/serv_sstd_tablepdf.pdf. 

more equitable contracts. Benefits to the 

industries and the markets were 

projected to come from improvements to 

the parity of negotiating power and from 

increased enforcement serving as a 

deterrent to future violations. Upon 

further consideration of comments, the 

amount of increased enforcement may 

have been overestimated, because 

GIPSA was only enshrining in the 

rulemaking USDA’s longstanding view 

that proof of likelihood of harm to 

competition is not required in all 

instances. Additionally, GIPSA’s 

estimates were based on the assumption 

that all courts would enforce the IFR, 

ignoring the case law to the contrary. 

Notwithstanding an expected lack of 

deference by the Federal Circuits to the 

regulation, an increase in litigation is 

unavoidable in the livestock and poultry 

industries to not only interpret this 

regulation, but also to uphold it. This 

serves neither the interests of the 

livestock and poultry industries nor 

GIPSA. 

Alternative 2, withdrawing the IFR, 

would result in the benefit of 

eliminating the projected annualized 

costs of $51.44 million with a range of 

$6.87 million to $96.01 million at a 

three percent discount rate and $52.86 

million with a range of $7.12 million to 

$98.60 million at a seven percent 

discount rate that would be incurred if 

the IFR became effective. These figures 

represent the cost savings from 

withdrawing the IFR, however, these 

savings come at the arguable cost of the 

qualitative benefit GIPSA identified in 

the IFR. The projected broader 

protection and fair treatment for 

livestock producers, swine production 

contract growers, and poultry growers, 

which might possibly lead to more 

equitable contracts, will be lost. 

Having considered both alternatives, 

GIPSA believes that alternative 2, 

withdrawing the IFR, is the best option. 

Regulatory Flexibility Act Analysis of 

Withdrawing the Interim Final Rule 

The Small Business Administration 

(SBA) defines small businesses by their 

North American Industry Classification 

System Codes (NAICS).67 SBA considers 

broiler and turkey producers and swine 

contractors, NAICS codes 112320, 

112330, and 112210 respectively, to be 

small businesses if sales are less than 

$750,000 per year. Live poultry dealers, 

NAICS 311615, are considered small 

businesses if they have fewer than 1,250 

employees. Beef and pork packers, 

NAICS 311611, are defined as small 

businesses if they have fewer than 1,000 

employees. 

The Regulatory Flexibility Analysis in 

the IFR published on December 20, 

2016, analyzed the impact of enacting 

the IFR on small businesses (81 FR 

92591–92594). As part of the analysis, 

GIPSA identified the approximate 

number of entities subject to the IFR 

that were small businesses and analyzed 

the costs for those small businesses to 

implement § 201.3(a), both in the first 

full year of implementation (at that time 

2017), and annualized over a ten-year 

period. Because of the relatively short 

period of time since the publication of 

the IFR, the numbers of subject entities 

that are small businesses have not 

appreciably changed; therefore, the 

same number of entities that were small 

businesses that would have been 

impacted by implementing the IFR are 

the same entities that would be 

impacted by withdrawing the IFR. 

The Census of Agriculture (Census) 

indicates there were 558 farms that sold 

their own hogs and pigs in 2012 and 

that identified themselves as contractors 

or integrators. GIPSA estimated that 

about 65 percent of swine contractors 

had sales of less than $750,000 in 2012 

and would have been classified as small 

businesses. These small businesses 

accounted for only 2.8 percent of the 

hogs produced under production 

contracts. Additionally, there were 

8,031 swine producers in 2012 with 

swine contracts and about half of these 

producers would have been classified as 

small businesses. 

Based on U.S. Census data on county 

business patterns, in 2013, there were 

approximately 59 live poultry dealers 

employing fewer than 1,250 people 

each, which would have been classified 

as small businesses. GIPSA records for 

2014 indicated there were 21,925 

poultry production contracts in effect, of 

which 13,370, or 61 percent, were held 

by the largest six live poultry dealers, 

and 90 percent (19,673) were held by 

the largest 25 firms. These 25 firms are 

all in the large business SBA category, 

whereas the 21,925 poultry growers 

holding the other end of the contracts 

are almost all small businesses by SBA’s 

definitions. GIPSA determined that 

poultry dealers classified as large 

businesses are responsible for about 

89.7 percent of the costs on poultry 

contracts and therefore, by extension, 

small businesses would be responsible 

for 10.3 percent of the costs. GIPSA 

records, as of June 2016, included 227 

firms reporting the slaughter of hogs. Of 

these, 219 would be classified as small 

businesses. GIPSA estimated that small 

businesses accounted for approximately 

17.8 percent of the hogs slaughtered in 

2015. For that same year, GIPSA 

records, included 293 firms reporting 

the slaughter of cattle. Of these, 287 

would be classified as small businesses. 

As discussed earlier, because of the 

relatively short period of time since the 

publication of the IFR, the livestock and 

poultry industries have not changed 

their structures, practices, or 

methodologies. Also, GIPSA correctly 

predicted that many firms would take a 

‘‘wait and see’’ approach and would not 

want to make significant changes to 

their operations or procurement 

practices until they were sure that the 

IFR would become effective. 

Consequently, no small businesses 

should incur any costs from the IFR’s 

withdrawal. 

Based on this analysis, GIPSA 

certifies that withdrawal of the IFR is 

not expected to have a significant 

economic impact on a substantial 

number of small business entities as 

defined in the Regulatory Flexibility Act 

(5 U.S.C. 601, et seq.). 

C. Executive Order 12988 

GIPSA reviewed this final rule under 

Executive Order 12988, Civil Justice 

Reform. This action is not intended to 

have retroactive effect nor will it preempt state or local laws, regulations, or 

policies, unless they present an 

irreconcilable conflict with this rule. 

There are no administrative procedures 

that must be exhausted before any 

judicial challenge to this final rule. 

Nothing in this final rule is intended to 

interfere with a person’s right to enforce 

liability against any person subject to 

the P&S Act under authority granted in 

section 308 of the P&S Act. 

D. Executive Order 13175 

GIPSA reviewed this final rule in 

accordance with the requirements of 

Executive Order 13175, ‘‘Consultation 

and Coordination with Indian Tribal 

Governments.’’ Executive Order 13175 

requires Federal agencies to consult and 

coordinate with tribes on a governmentto-government basis on policies that 

have tribal implications, including 

regulations, legislative comments or 

proposed legislation, and other policy 

statements or actions that have 

substantial direct effects on one or more 

Indian tribes, on the relationship 

between the Federal Government and 

Indian tribes, or on the distribution of 

power and responsibilities between the 

Federal Government and Indian tribes. 

Although GIPSA has assessed the 

impact of this final rule on Indian tribes 

and determined that this final rule does 

not, to its knowledge, have tribal 

implications that require tribal 

consultation under Executive Order 


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48602 Federal Register / Vol. 82, No. 200 / Wednesday, October 18, 2017 / Rules and Regulations 

13175, GIPSA offered opportunities to 

meet with representatives from Tribal 

Governments during the comment 

period for the June 2010 NPRM (June 22 

to November 22, 2010) with specific 

opportunities in Rapid City, South 

Dakota, on October 28, 2010, and 

Oklahoma City, Oklahoma, on 

November 3, 2010. GIPSA invited all 

tribal governments to participate in 

these venues for consultation. GIPSA 

has received no specific indication that 

the final rule will have tribal 

implications and has received no further 

requests for consultation as of the date 

of this publication. If a Tribe requests 

consultation, GIPSA will work with the 

Office of Tribal Relations to ensure 

meaningful consultation is provided 

where changes, additions, and 

modifications herein are not expressly 

mandated by Congress. 

E. Paperwork Reduction Act 

This final rule does not contain new 

or amended information collection 

requirements subject to the Paperwork 

Reduction Act of 1995 (44 U.S.C. 3501 

et seq.). It does not involve collection of 

new or additional information by the 

federal government. 

F. E-Government Act Compliance 

GIPSA is committed to compliance 

with the E-Government Act, to promote 

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. 

List of Subjects in 9 CFR Part 201 

Contracts, Livestock, Poultry, Trade 

practices. 

■ Accordingly, the interim final rule 

amending 9 CFR Part 201 that was 

published at 81 FR 92566–92594 on 

December 20, 2016, is withdrawn. 

Randall D. Jones, 

Acting Administrator, Grain Inspection, 

Packers and Stockyards Administration. 

[FR Doc. 2017–22593 Filed 10–17–17; 8:45 am] 

BILLING CODE 3410–KD–P 


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