Source: https://www.dominalaw.com/legal-blog/2009/september/litigation-of-antitrust-claims-for-farmers-ranch/
Timestamp: 2019-04-26 00:20:00+00:00

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Figure 2 shows the inflation-adjusted retail cost of a fixed market basket of food purchased for at-home consumption from 1967-2009. A variety of factors explain some market behavior in the 1970s and 1980s. But since then, retail price has trended upward. In a competitive market, cost efficiencies would be reflected in a downward trend, which has not occurred. The basic data in this chart strongly suggest market power exertion and, moreover, any price increases due to market power exertion have been larger than cost efficiencies, resulting in food consumer harm.
At the same time, the retail sector has changed and is dangerously concentrated, too.
Empirical economic literature establishes that concentration in the processing of beef, pork, and dairy products, as well as retail sector concentration, adversely affects commodity prices and retail food prices. This produces dichotomous results: producers receive less of the retail dollar, while consumers pay more for food.
A generalized fear of reprisal if producers speak out about hostile market conditions makes evidence hard to gather, and market power easy to wield. 7 Things Americans were taught and still wish to believe about the American economy loosely called “free markets” and “capitalism”—do not readily fit into the present reality. Visible dysfunctions in policy, and political examination of the problem, are dismissed as temporary aberrations, or explained with cynicism, skepticism, or superficiality premises. Agriculture’s major crops, and biggest economic impact, are plagued by concentrated ownership of buyers for meat, major grain, and owners of seed genetics.
Small business drives the American economy,” said Dr. Chad Moutray, Chief Economist for the Office of Advocacy in a press release. Main Street provides the jobs and spurs our economic growth. American entrepreneurs are creative and productive, and these numbers prove it.
In 2004, there were an estimated 23,974,500 businesses in the U.S. Of the 5,683,700 firms with employees, 5,666,600 were small firms.
Concentration may increase because of mergers among independent firms, or because plants become larger. Over the last 25 years, large plants have become vastly more important in slaughter industries, as evidenced by two different measurement bases. GIPSA data sort cattle slaughter plants by size; the largest plants slaughter more than half a million cattle in a year, while large hog plants slaughter more than a million. The definition of “large” can change over time; the agency did not separately report cattle plants that slaughtered more than a million animals until 1987; by 1997, 14 plants were in that newly established category.
This is the tenor of the problem.
(d) Engage in any course of business or do any act for the purpose or with the effect of manipulating or controlling prices, or of creating a monopoly in the acquisition of, buying, selling, or dealing in, any article, or of restraining commerce; . . . .
The PSA “is remedial legislation.” It “should be liberally construed to further its life and fully effectuate its public purpose.” Bruhn’s Freezer Meats v. United States Dept. of Agr., 438 F.2d 1332, 1336 (8th Cir. 1971) (citations omitted). “[T]he purpose of the Act is to assure fair trade practices in the livestock marketing and meat-packing industry in order to safeguard farmers and ranchers against receiving less than the true market value of the livestock and to protect consumers against unfair business practices in the marketing of meats and the other products covered by the Act.” Id. at 1337-38 (emphasis added).
The Supreme Court has stated a statute “must take meaning from its historical setting” United States v. Henning, 344 U.S. 66, 72, 73 S.Ct. 114, 118, 97 L. Ed. 101. We may note that prior to the enactment of the Packers and Stockyards Act, Congress had enacted certain measures which, in some respects were designed to prohibit monopoly, restraint of trade, or unfair competition, viz., the Sherman Antitrust Act, 15 U.S.C.A. §§ 1-7, 15 note; section 2 of the Clayton Act, 15 U.S.C.A. § 13 prohibiting discriminatory practices; section 5 of the Federal Trade Commission Act, 15 U.S.C.A. § 45 prohibiting unfair methods of competition and commerce, and section 3 of the Interstate Commerce Act, 49 U.S.C.A. § 3.
The legislative history shows Congress understood the sections of the Packers and Stockyards Act under consideration were broader in scope than the antecedent legislation (61 Cong. Rec. 1805 (1921)). To illustrate, Representative (later Speaker) Rayburn, emphasized that although Congress gave the Federal Trade Commission wide powers to prohibit unfair methods of competition, such authority is not as wide ranging as that given to the Secretary of Agriculture under the language in section 202(a) and (b) of the Packers and Stockyards Act. (61 Cong. Rec. 1806 (1921)).
From the legislative history it is a fair inference that, in the opinion of Congress, section 2 of the Clayton Act, section 5 of the Federal Trade Commission Act and the prohibitions in the Sherman Antitrust Act were not broad enough to meet the public needs as to business practices of packers. Section 202(a) and (b) was enacted for the purpose of going further than prior legislation and the prohibiting of certain trade practices which Congress considered were not consonant with the public interest.
Unfair trade practices and monopolistic methods which in the end destroy competition, restrain trade, and create monopoly have never in all history resulted in benefit to the public interest . . . .
Antitrust laws, including the PSA Act, express a public policy distinguishing between fair, vigorous competition on the one hand, and predatory or controlled competition on the other.
Normally the twin solvents for determining when the boundaries of fair competition have been exceeded are the existence of predatory intent and the likelihood of injury to competition. The clearer the danger of the latter, as when competitors conspire to eliminate the uncertainties of price competition, the less important is proof of the former. Conversely, the likelihood of injury arising from conduct adopted with predatory purpose is so great as to require little or no showing that such injury has already taken place. Each statutory prohibition of specified acts or practices reflects the congressional conclusions as to the gravity of the injury to be feared and the relative difficulty of distinguishing honest competition and predation. The fact that a given provision does not expressly specify the degree of injury or the type of intent required, does not imply that these basic indicators of the line between free competition and predation are to be ignored. Surely words such as “unfair” and “unjustly” in Section 202(a) and “undue” and “unreasonable” in Section 202(b) requires some examination of the seller’s intent and the likely effects of its acts or practices under scrutiny, even though these tests under Section 202(a) and (b) be less stringent than under some of the antitrust laws. These adjectival qualifications expressed in the statutory language enjoin the department and courts to apply a rule of reason in determining the lawfulness of a particular practice under Section 202(a) and (b).
The law, as embodied in the PSA, was static from 1921 until the first decade of this century, but it was not enforced. The meats slaughter industry changed markedly. In beef, as noted above, 20 packers had 60% of the market in 1921, and now 4 packers have about 85% of the market, for slaughter weight beef animals.
In London v. Fieldale Farm Corp., 410 F.3d 1295 (11th Cir. 2005), a poultry grower sued the integrator, Fieldale Farms, for violations of § 202 of the P&S Act, asserting that the company retaliated against him for providing a deposition in a racial discrimination lawsuit against the company. The alleged retaliation involved terminating the poultry growing contract without economic justification, improperly adjusting weight of birds on which the grower’s pay was based, and providing settlement sheets calculating the grower’s payment that contained inaccurate weights. Despite a friend of the court brief filed by the USDA, arguing that the § 202 of the P&S Act does not require proof that the challenged action had an adverse affect on competition, the Court ruled that the grower was required to prove that such targeted practice or practices “adversely affects or is likely to adversely affect competition.” The Court refused to give deference to USDA’s interpretation of the P&S Act because, though the agency has the authority to adjudicate violations of the Act with regard to packers, it does not have the authority to adjudicate violations with regard to live poultry dealers.
In a class action lawsuit, Pickett v. Tyson Fresh Meats, Inc., 420 F.3d 1272 (11th Cir. 2005), cattle producers sued a packer claiming that the use of marketing agreements with formula prices used to purchase slaughter supplies was unlawful under § 202 of the P&SA, because it was a practice that was unfair and had the purpose or effect of manipulating or controlling prices. The jury found that the packer’s use of marketing agreements “damaged the cash market price” between 1994 and 2002, and awarded a total of $1.28 billion in damages to the class of cattle producers.
The Eleventh Circuit Court of Appeals, in affirming the district court’s decision to set aside the jury verdict, found that there was evidence to support the jury’s finding that the packer’s use of marketing agreements resulted in lower prices for cattle, both on the cash market and the market as a whole. However, the Court held that, in addition, the cattle producers were required to prove that the use of marketing agreements that resulted in reduced prices had an adverse effect on competition. The Court accepted the packer’s proffered business justifications for the use of marketing agreements.
supports a showing of adverse effect on competition?
3. Should the court defer to the interpretation of the USDA?
interpretation of the PSA? Id. at 458.
PPC raised a fifth issue, asserting that if the court provided that an adverse effect must be shown, then the case should be dismissed because the plaintiffs admitted that they had no evidence to prove an adverse effect on commerce. Id.
The Fifth Circuit Panel decision stated that the plain text of the PSA does not require a plaintiff to prove an adverse effect on commerce, and only addressed the first question presented on appeal. Id. The court discussed the legislative history of the PSA because the holding of the court was a departure from other circuits' view of the PSA. Id. The appellate panel noted that nowhere in the plain text of the PSA could a requirement of a showing of an adverse effect on commerce be found. Id. at 458-59 ( citing 7 U.S.C. § 192). PPC's argument relied primarily on the legislative history of the PSA rather than the actual text of the statute; however, the three judge panel concluded that it did not need to look to the legislative history of the PSA because the statute's text was plain, clear, and unambiguous. Id. at 459 ( citing Lamie v. U.S. Trustee, 540 U.S. 526, 534 (2004)). The court held that § 192(b) did prohibit any "unfair, unjustly discriminatory, or deceptive" practices, but nowhere in the language of the statute did it limit its application to those situations having an adverse effect on commerce. Id.
The panel noted that it must refrain from adding additional terms into the language of statutes, such as adding an additional requirement of an adverse effect on competition. Id. ( citing Lamie, 540 U.S. at 538)). The court held that "because PPC's construction of the PSA would require us to read absent terms into the statute, we reject it." Id. The Wheeler panel decision noted that Congress specifically added the "adverse effect to commerce" language in § 192(c)-(e) of the PSA, but left that phrase out of § 192(a)-(b). Id. The court concluded that this absence was a strong indication that Congress did not intend for § 192(a)-(b) to have the requirement of proving an adverse effect on commerce. Id. at 460. The court pointed to the legislative history to show that Congress not only intended for the PSA to protect against unfair competition, but also wanted to protect consumers from any unfair business practices. Id. ( citing H.R. 85-1048 at 1-2). 17 The Wheeler case awaits decision by the Fifth Circuit en banc.
The rewards of professional service are multifactoral. Giving service is rewarded first by the fulfillment that comes with serving those with needs. Winning can be lucrative; the amounts in controversy can be substantial. Treble damages and fees are recoverable under the Sherman and Clayton Acts, but not under the P&S Act. Tangible changes beneficial to the clients often arise upon filing. These are visible changes. They change markets, and things change for a lot of people as a result.
Courts awarding fees for successful plaintiffs are generous. The lodestar method is used. Fees are substantial. “Public interest firms” know this. Now, “private public interest firms” are learning how to sort through the risks and rewards to stay in business and handle these cases. “Private public interest firms”, like their successors, must choose the contingency cases they take on carefully. They must investigate the facts before entering into an engagement. After investigation, they must evaluate the likelihood of success, and estimate the investment required. After commitment, the attitude must be, “If it’s worth pursuing, it’s worth pursuing to the end.” It is unlikely as many as 15% of potential cases will be pursued. An entrepreneurial spirit must combine with a disciplined professional evaluation for the case selection process to work.
Lawyers are drawn to public interest firms, and the new private public interest groups, by a passion for the issues addressed and the clients served. New lawyers being to practice in a hurry. Responsibility is not in short supply in these cases!
1. Antitrust cases are expensive and time consuming.
2. Clients must arrange to pay litigation expenses.
3. Clients can virtually never afford to pay legal fees as the case unfolds.
3.1 The P&S Act does not contain a fee shifting provision.
3.2 Careful definition of litigation goals, the role of economists, and costs for their services must be negotiated.
3.3 Producers must be urged to negotiate arrangements with organizations to defray costs.
3.4 Lawyers must expect to handle these cases under risky contingent fee arrangements.
4. Producer witnesses are hard to find.
4.1 Producers appear to be victims of monopsony and will likely want to prove it in the litigation.
4.2 Victims of monopsony have no outlets for their products unless they can get along with the monopsonists.
4.3 Producers tend to be afraid of offending processors because they fear being run out of business.
4.4 In some industries producers are far flung and too independent, by virtue of their far-flung status, to be well organized.
4.5 Packers and processors tend to try to seduce producers to believe that each of them has a “special arrangement.” Each wants to claim the “special arrangement” is unique to that producer, not recognizing that all their neighbors may have the same deal, but have been told the arrangements are secret.
4.6 Producers have huge investments in their physical plants; they have huge pressures to turn profits and can ill afford a disruption in their marketing.
5. The law is not always favorable.
5.1 As the P&S cases above indicate, recent courts, looking at the statute, have construed it in a way not consistent with its literal language but make the burden of proving a case enormously high.
5.2 In addition, care must be exercised to avoid encountering problems with the United States Supreme Court decision in Illinois Brick Co. v. Illinois, 431 US 720 (1977). Illinois Brick prevents plaintiffs from establishing an antitrust injury when that injury has been passed on to them, and they are not the directly injured party. So, if a price-fixing conspiracy among food distributors results in a depressed price for farm products, farmers lack standing because they deal with the middle-man processor.
6. Illinois Brick has not been applied to a P&S Act case, but other antitrust-restricting judicial precedent, originally applied to the Sherman Act, has found its way into P&S litigation.
7. A distinction must be drawn between marketing agreements and production agreements. They must be analyzed differently.
7.1 Marketing agreements control the sale of the completed product and may restrict the cash market.
7.2 Production agreements involve contracting for the amount of goods, usually regulated by the number of acres, will be produced.
All this said, there is a genuine need for private antitrust enforcement. Market manipulation cases need to be filed. If they are not, the market will disappear, and its disappearance will cost all of us in untold ways.
“You don’t know what you’ve got ‘til it’s gone.
Joni Mitchell’s musical stanza tells the story. It is time for private lawyers to take on size and concentration, instead of just working with or for it.
1 David A Domina, DOMINA LAW Group pc llo, has tried over 300 jury cases, argued about 200 appeals and appeared in court across the country, in many cases involving agriculture. Lynn A. Hayes, Founder, Farmers Legal Action Group, Saint Paul MN contributed to this paper. Lynn has discharged major responsibilities in a variety of significant major ag markets cases with FLAG, and has directed its litigation programs. Ms. Hayes' separate materials concerning poultry and case development will reach AALA attendees separately.
2 AIB No. 763, March 2001.
3 See, Blair & Harrison, Monopsony: Antitrust Laws & Economics (Princeton Press 1993) for a major scientific work that is readable by economists and lay persons, for a thorough discussion of the concept of monopsony.
4 For a general review of farm numbers and farm size, see the USDA data published by the ERS at http://www.ers.usda.gov/publications/eib24/eib24b.pdf.
7 OCM Committee members have conducted interviews with potential witnesses harmed by beef and pork slaughterhouses and by poultry integrators. They have personal experience with the fears, phobias and unwillingness of prospective witnesses to “cross” the slaughterhouses that pay them too little for their livestock, but repress all alternative markets against them.
12 Engdahl, Seeds of Destruction, Global Research, (2007).
“the primary purpose of the [PSA] act was “to assure fair competition and fair trade practices in livestock marketing . . . .” H.R.Rep. No. 1048, 85th Cong., 2d Sess., reprinted in 1958 U.S. Code Cong. & Admin. News, 5212, 5213 (emphasis added). It was not intended merely to prevent monopolistic practices, but also to protect the livestock market from unfair and deceptive business tactics. Thus, under the Central Coast rule, we uphold the finding of a ? 213 violation where the evidence establishes a deceptive practice, whether or not it harmed consumers or competitors”.
17 The Wheeler case was decided on July 21, 2008 and reargued en banc in September 2009. It has not been decided by the Fifth Circuit en banc as of the date of this paper.
18 Joni Mitchell, Big Yellow Taxi from Ladies of The Canyon 1970).

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