Antitrust Law Down on the Farm: Farmers, Food Inflation, and a Fair Deal

Chayila Kleist: Hello and welcome to this FedSoc Forum webinar call. Today, July 9th, 2024, we're delighted to host a discussion on antitrust law down on the farm, farmers, food inflation, and a fair deal. My name is Chayila Kleist and I'm an Associate Director of Practice Groups here at the Federalist Society. As always, please note that all expressions of opinion are those of the experts on today's program as the Federalist Society takes no position on particular legal or public policy issues. 

Now in the interest of time, we will keep an introduction of our guests today brief, but if you'd like to know more about any of our speakers, you can access their impressive full bios at fedsoc.org. Today we are fortunate to have with us as our moderator for today's conversation, the Hon. Stephen Alexander Vaden, who currently serves as a judge on the United States Court of International Trade, where he regularly deals with issues of administrative law and regulation as a part of the court's heavily administrative docket.

Before joining the court, Judge Vaden served as general counsel at the United States Department of Agriculture where he served for nearly four years, Judge Vaden also, Lee formerly worked for two law firms, Jones Day and Patton Boggs. At both, he served as an appellate litigator as part of the firm's political law practices, and I'll leave it to him to introduce our panel. 

A last note and then I'll get off your screens. If you have any questions, please do submit those via the question and answer feature likely found at the bottom of your zoom screen so it'll be accessible when we get to that portion of today's webinar. With that, thank you all for joining us today, judge Vaden, the floor is yours.

Hon. Stephen Alexander Vaden: Thank you so much Chayila, and thank you all for joining us here today and thanks especially to the Federalist Society for hosting today's forum. As many of you know, antitrust law is in flux. Are we solely interested in whether the consumer can pay the cheapest price possible or are there other values in play that courts and policymakers should consider? That was the focus - if you attended the 2023 National Lawyers Convention - of a keynote address by Federal Trade Commission chair Lena Kahn. We're going to look at some of those same issues in the context of food prices today. Food prices are on everyone's mind and they've even played a prominent role in the current election cycle. The question for policymakers as well as eventually perhaps for courts are, are companies taking advantage of the current inflationary environment to raise their prices or are what we're seeing in the grocery store the result of normal commodity business cycles and how do farmers who produce the food that we eat fit in the picture?

The United States Department of Agriculture has provided something of a response. It has issued over the past several years four regulations that are in various states of finality that it says will create a fair food system. I will quickly go over those four regulations, introduce our panelists, and then turn it over to them. The first regulation which has been finalized would allow producers to sue for civil rights violations under a 1921 antitrust statute known as the Packers and Stockyards Act. 

The USDA regulation would permit farmers who believe that in their dealings with food companies, companies like Tyson, for example, that they have been discriminated against on the basis of race, national origin, sex, including gender identity and disability to sue. It would require the companies who are subject to the Packers and Stockyards Act to keep certain records allowing USDA to monitor their compliance and it would prohibit those companies from taking certain retaliatory actions against farmers who complain of discrimination.

The second regulation, which is currently at the proposed rule stage, would seek to redefine the Packers and Stockyards Act requirement that one must show harm to the market in order to state a cause of action as instead harm to individual market participants. If adopted, this would obviously make it much easier for farmers who raise livestock to sue the companies to whom they sell because they would no longer have to demonstrate that the harm that was done to them harmed the market overall. And third and fourth, we have two regulations that affect primarily poultry growers that would prohibit certain contractual terms that have heretofore been standard in many farmers' contracts with the companies to which they sell their chickens. According to the US Department of Agriculture. The goal of these two regulations is to increase contracting transparency and to equalize bargaining position among two entities, a farmer and a corporation that according to the department, do not have equal bargaining power.

One of these rules has been finalized, the other is currently in the comment stage as a proposed rule. Will any of these proposed regulations benefit farmers by increasing their income and will these regulations benefit consumers by lowering food prices? Are those two goals - raising farmer income while lowering food prices - mutually exclusive? We've got three wonderful panelists who will be chatting with us today about this and I'll introduce them in the order in which they will speak. First, we are honored to have with us Congressman Brad Finstad of Minnesota's first Congressional district. The congressman was first elected in a special election held on August 9th, 2022. He is a fourth generation farmer and a graduate of the University of Minnesota with a degree in agricultural education and emphasis in rural leadership development. During the Trump administration, Mr. Finstad served as USDA's state director for Minnesota for rural development.

Next up we have Joe Maxwell, who is a co-founder of the organization Farm Action, which is devoted to promoting an inclusive US economy, particularly for rural Americans. Mr. Maxwell has held multiple positions throughout his career. I'll highlight a couple. He's been a Missouri State legislator, has served as Missouri's Lieutenant Governor and is retired from the Army National Guard. Mr. Maxwell is also a farmer. And last but certainly not least, we are joined by Mark Dopp. Mr. Dopp is the chief operating officer and general counsel for the North American Meat Institute. In this role, Mr. Dopp oversees policy and legal matters. He joined the North American Meat Institute in 1999. Prior to that, he worked as an attorney in private practice at Hogan & Hartson, now known as Hogan Lovells, and as former general counsel of the Department of Agriculture. I would be remiss if I did not point out that Mr. Dopp began his career at USDA's office of the General Counsel. Mr. Dopp holds both Bachelor's and Master's degree in Agricultural Science from the University of Wisconsin and the Master's from Michigan State University. His law degree is from the University of Missouri. With no further ado, I will turn it over to the congressman. Congressman, the floor is yours.

Representative Brad Finstad: Alright, thank you Judge and thank you all for hopping on this today. I just want to start out by saying I'm just very honored to be here and to be with all of you. I'm excited to have this conversation today. So I also, again Judge, just want to say hi to you. It's an honor to see you, a fellow alum of the US Department of Ag. It was an honor to serve with you in the Trump administration there and great to be with you today. When I get asked to do these things, my introduction is always the same. I'm a proud fourth-generation farmer of Southern Minnesota. I'm raising the fifth and I like to say I raised corn, soybeans, and kids. My wife and I have been blessed with seven amazing children that we are farming with and having them really become a part of that next generation to run our family farm.

My wife and I, Jackie, met in second grade on the school bus, both farm kids, farm families, and so agriculture has been in my family and it's part of our history. I'm also very honored to represent a very strong agricultural producing district in Congress. The first congressional district represents 21 counties in southern Minnesota, stretches from Wisconsin to South Dakota, and we have a lot of things to be proud of. One of those things, in a few of our counties, we have more pigs than people. 

We have a strong pork producing congressional district. We have the second highest agriculture producing district - in a lot of the commodities - in Congress. And so just very honored to represent my neighbors in Congress. And so as we look at some of the challenges that we face and I hear from my neighbors in southern Minnesota, it's relevant that we're having this conversation today and I'm honored to be speaking with the Federalist Society.

And as I was preparing for this, one of the things that really struck me is that the organization that you all are a part of whose founding principles include that the separation of powers is central to our constitution. I think this is pretty relevant with the recent Supreme Court's action, Supreme court action here in the last couple of weeks with the Chevron decision. And really from a legislator's perspective, I will tell you that I think one of the things that we struggle with is really the work that it takes to be a member of Congress, the rolling up your sleeves and that farmer attitude that I think we need more of in Congress because as a country we have slipped more and more into this process where there is confusion in the separation and roles of the three branches of government. And I think the Supreme Court's decision really is going to have - force us to have that conversation again.

And to give you an example of that, when I was at the USDA - I mean this is probably the most easy way to understand this - when I was at the USDA early in my career there or my service there, I had a USDA career employee tell me very plainly that "I was here long before you and I plan on being here long after you're gone." And that was a politically appointed position. So obviously they knew that my shelf life was limited based on the next election and it was really one of those eye-opening moments for me that we do have a challenge here in our country right now in regards to everything from the power of the purse to where the administrative state lies and where that gray area becomes and how that affects real people in real ways. So as we look at the topic at hand, the history of the Packers and Stockyards - the 2018 Farm Bill as many of you most likely know Congress directed USDA to issue regulations that will establish criteria for the secretary to consider determining whether there's an undue or unreasonable preference or advantage that has occurred in violation of the section 202 of the Packers and Stockyards Act.

And again, this was essentially in 2008 and we've seen different administrations and different secretaries interpret this a little bit differently and how this is essentially going to be implemented. And at the end of the day as a member of Congress, I mean I am looking out for my farmers and how do the folks that I represent get affected by this gray area of is it an administrative decision, is it going to be decided by a faceless, nameless unelected bureaucrat or is it going to be something that will affect their daily life that I have to put my name on the line and every two years they can decide if I get to continue to represent them or not? And so when you look at some of the competition concerns, I will just be very simple about this. As a fourth-generation farmer, I'm a small business owner. I'm not just a farmer. I'm a small business owner and I am looking out and marketing my product day in, day out and I'm trying to find the best deal that I can for my farm to succeed not only for me but for the next generation, and how my neighbor right next to me does it - they're a small business that's going to be different than me. If I get a better deal than them because I've been a better marketer, then that's just what it is.

But from a competition standpoint, for an unelected, nameless, faceless bureaucrat to decide where that competition should be or where it should lie under the premise that we're going to solve the inflation issue and the high price of food, I think it's being insincere and maybe un-honest in certain ways. I think we have to have a holistic conversation about the inflation and the food price issue that we have right now. As a farmer, again, when Russia invaded Ukraine, I saw direct input costs increase by a couple hundred percent instantly. That will have an effect on the price of food. 

We also saw the COVID and post-COVID recovery with the supply chain and the disruption that we all faced. I mean we definitely saw pricing issues that were affected and we're still dealing with that. And then on top of that, you have the current climate of political science right now when a state like California introduces Prop 12 and tries to tell farmers in southern Minnesota that they know best on how to raise our pigs and what the gestation pen should look like and how many square feet that should be, we should not be surprised that bacon costs 27% more in California now than it does in other parts of this country.

And so we have big issues to talk about and I think that it's a holistic conversation that when it comes to food security, which is our national security, it is something that we as lawmakers need to take more seriously and to really roll up our sleeves and have a good healthy conversation on. So I'm looking forward to hearing the other presenters today and their thoughts. This is a wild time that we live in right now, whether it's politics, whether it's foreign affairs, whether it's post-COVID recovery, you name it. There's a lot of big issues that we have to deal with. And so my hope and plea to the members that I serve with is we need more adults in the room right now having adult conversations and really trying to fix and solve things that will definitely positively affect the next generation of folks that we are working hard every day to turn this great country over to. So with that, again, Judge, very, very happy to be here with you and Joe and Mark, looking forward to your comments and looking forward to the questions and conversations. Thank you.

Hon. Stephen Alexander Vaden: Mr. Maxwell. The floor is yours.

Joe Maxwell: Thank you, Judge. 512,000. It's a number I will always remember. It's the number of us who are raising hogs for America when I began farming. Today, there are less than 61,000 of us. I have lived the negative impact that government policies have had on concentration. It is an honor to be here today and thank you Congressmen, Judge. Thank you Congressman for your comments. And I do want to thank the judge and the Federalist Society for inviting me. Today I'm going to try to provide the state of the food and agriculture market and why Farm Action does support the recent USDA issued rules. I am co-founder and Chief Strategy Officer of Farm Action. It's an organization that works to hold the government accountable to principles of fair competitive markets and correct imbalances of power in the food and agriculture sector. We believe competition in the marketplace is a cornerstone of economic opportunity, liberty, and the foundation of the birth of our country.

We look at the broader impact of market concentration within the food and agriculture system and develop policy recommendations to bring about economic vitality in rural America. I spent the majority of my career working to build a just, inclusive food system. I have degrees in agriculture, economics, and law, and over 30 years experience in policy development and advocacy. My brother and I are farmers from Missouri. He does the farming, most of the farming, while I focus on issues that I'll be presenting today. As I stated in my opening as a farmer, I have firsthand knowledge of the growth of concentration in food and agriculture and its consequences. 

The food system today is embroiled in a historic period of consolidation and concentration both globally and nationally. All of you all are aware of the protest against our government operating in concert with monopolies to grant them privileges to sell their products in the US while blocking independent businesses the opportunity to sell their goods while consumers were gouged on price. At the time, our government was England, and the protesters were the Sons of Liberty who stormed an East India Company ship and threw the tea overboard.

The Boston Tea Party was 250 years ago last December. Today, we're at an unprecedented point in United States history, not seen since the British Grants of Commerce to monopolies like the East India Company. Today we see a level of concentration of power in the market that drives farmers off the land, small businesses out of business, and is gouging the consumer at the grocery store. The level of concentration has reached such highs that today a handful of corporations have such a level of power and control of the food system that they dictate who farms, what they farm, and who gets to eat. Economists suggest that market abuses are likely to occur when concentration ratios of the top four firms exceed 40%, and the US CR4 ratios surge far beyond this percentage in such diverse sectors as the processing of soybeans, corn, beef, pork and poultry, as well as cold cereal, soft drinks, beer, salty snacks, bread, ice cream, fresh cut salad, wine, retail, grocery, and convenience stores.

For example, today, beef processing concentration is at 85%. Pork processing is at 67% and the chicken processing is at 54%. In other words, the entire food system is controlled by a handful of corporations. Today's heavily concentrated and vertically integrated food and agriculture supply chains provide dominant firms with the power and control to disregard the need to compete with each other. Competition is one of the most important dynamics within the market. 

Without the fear of competition, the market does not work. Further, heavy market concentration coupled with dominant firms' vertically integrated supply chains provides a platform for opportunistic market behavior, which allows corporations to defy expected market responses to respond to supply disruptions, giving the industry the excuse to price gouge the consumer and short-pay the farmer. Farm Action has completed three case studies. We've looked at the egg market, the fertilizer market - the congressman mentioned input costs going up - and the cattle market.

I want to highlight the cattle market, considering we're looking at USDA and the rules impacting the meat and poultry processing. The first thing that we looked at was the Holcomb Fire, which occurred in 2019. It highlights how the consolidation in the meatpacking industry allows for such unethical price manipulation schemes as I mentioned previously. On Friday, August 9th of 2019, a fire in Holcomb, Kansas shuttered a Tyson plant that handled five to 6% of beef processed in the US By Monday morning. The packers' dire warnings of shortages caused retail grocers to make a run on beef in order to secure expected Labor Day sales. Beef packers simultaneously cut the price paid to cattle producers with the excuse about lost processing capacity By August 24th, the result was a 67% spread in what beef packers paid the cattle producer and how much they were charging retail grocers. This was a record level for the spread.

To put this in perspective, this spread reflected a 143% increase over the average from 2016 to 2018. What is most telling about the market power of the dominant beef packers is that in the three weeks that followed the fire, the beef industry slaughtered 5,000 more cattle than the three weeks prior to the fire. In reality, the packers had the processing capacity to replace Holcomb's plant's capacity all along. The current administration is pushing to end the government's role in the development of monopoly power. USDA has issued the four rules that the judge referenced earlier. I think it's important to note that when adopted in 1921, the Packers and Stockyards Act was referred to as the Farmer's Bill of Rights. USDA's new rules are targeted to ensure these farmers have these rights. Today, the marketplace for poultry growers and livestock producers is very different. Today we do not have chicken farmers.

We have Tyson, Pilgrim's Pride and other extremely large global meat processors who own the vast majority of the chickens. The farmer in the supply chain is called the contract poultry grower. They borrow millions of dollars to build a poultry barn to raise a poultry processing company like Pilgrim's Pride companies' birds hoping the company will keep sending them flocks so they can make enough money to pay their mortgage. SBA determined that contract poultry growers are not independent business people and they're under so many mandates of the processor that they actually are working for the processor. One wrong move, one wrong statement, and they lose their homes and their farms. However, there are still independent hog and cattle farmers and ranchers who are selling into the market because of the state of the chicken growing and processing two of the rules issued by USDA focus on the contract Poultry growers - the judge has already highlighted those four rules.

I want to indicate why Farm Action supports these rules, and I think it's also important the judge mentioned redefining this idea of harm to competition. Judge, we would respectfully recharacterize that statement. For almost 80 years, a farmer or rancher did not have to show harm to competition in order to bring an action under Packers and Stockyards Act section 202, it has only been in the last 20 years due to the judicial decisions in four of the circuits has the farmer now been mandated to bring that the showing of a harm to the whole market or market harm and competition. We support the four rules because of these principles. Our country's foundational principles of liberty include economic liberty, and require the government to take action to ensure individuals have a fair opportunity to compete in the marketplace and that our government should not work in concert nor support the world's largest meat packing monopolies like Brazil's JBS and China's Smithfield.

Second, our democracy and economic system will not preserve liberty and opportunity for prosperity for all of us without government actions to establish competition safeguards. And three, the Packers and Stockyards Act was enacted as the Farmer's Bill of Rights designed by Congress to be individual farmer protections against the power of the meat packers. The P and S act was to be additive to the monopoly laws that already existed by 1921, the Sherman Act and the Clayton Act, and not to just regurgitate the marketplace protections of those two prior acts. I look forward to answering the questions.

Hon. Stephen Alexander Vaden: Thank you, Mr. Maxwell. And if I could just clarify one point, I know you mentioned earlier on in your presentation the CR4 percentages. Would I be correct in my assumption that what you mean by that is, is what market share the top four market participants have and whatever market you are looking at is the CR?

Joe Maxwell: Yes, Judge, I appreciate you clarifying and thank you for that clarification. That is correct. That would be the power or the control, the percentage control of the four dominant firms within any market sector.

Hon. Stephen Alexander Vaden: Okay, I just wanted to make certain our audience can follow along. Mr. Dopp, you're up next.

Mark Dopp: Well, thank you, Your Honor. I will echo Mr. Maxwell and Congressman Finstad's comments by thanking the Federalist Society and you for the invitation to be here today. Judge Vaden in his introductory remarks commented or highlighted the four rules. Joe referenced the four rules as well. I'm going to focus my comments today on two of those rulemakings. I'll respectfully set aside the two rules regarding poultry because I don't think it's necessarily appropriate for me to be advancing or making comments representing the poultry industry when the Meat Institute does not represent them. Having said that, I'll focus on the inclusive competition rule and what I'll call the unfair practices rule. Let me just state right up front, I think both rules are fundamentally legally flawed, but just as importantly, I think both rules are bad public policy and I'll get into the details as to why I say that more specifically.

I think in particular if you look at the unfair practices rule and for that matter the inclusive competition rule, if the unfair practices rule is finalized, I think it's going to adversely affect - contrary to what the agency said - it's going to adversely affect producers, packers, and perhaps most importantly consumers. And I'll get into some details about why I think that. First, however, I'm going to give credit where credit is due. Having failed at this exercise in both 2010 and 2016 in the Obama administration, this administration has taken a slightly different approach. Rather than trying to hit the home run that they did back in 2010, they've broken up the different topics and the issues into four separate regulations. It makes it look like the economic impact of all of them is less than what was proposed back in 2010. But if you look at them in their totality, the sum of the adverse economic impact is equal - if not worse.

So I said that I think that the inclusive competition rule and the unfair practice rules are legally flawed. I think if you go back, they still talk about hornbook law in law school. It's been 40 years for me, so I don't remember, but I mean the phrase was hornbook law. Under hornbook Law, a vague law is no law at all if I remember correctly, right? Well before I joined the Meat Institute in 1999 as Judge, as you mentioned, I was a partner at Hogan and Hartson and I represented a number of the companies who are my members here at the Meat Institute. If I was to give them advice as to how to comply with the inclusive competition law, it's practically impossible. It is so vague and so broad as to be almost unintelligible. If you look at the categories or classes of individuals that they've identified as deserving of special protection - because that's what they're talking about - it covers the following, race, color, religion, national origin, sex - including sexual orientation, and gender identity - disability, marital status and age. I'm not sure what that leaves out. I wouldn't begin to know how to advise a client or in this case, a member company, what they have to do to avoid being sued under the inclusive competition rule, which is as you pointed out, final, likewise, and by the way, I've only found one case that deals with this issue. It's Sanders v. Koch Foods in 2020 where the court looked at that and said, that's not the purpose of the Packers and Stockyards Act and dismissed those particular claims - a granted district court decision. Similarly, the unfair practices rule is equally vague. And granted, the unfair practices rule was just unveiled two weeks ago at a Center for American Progress event with Secretary Vilsack and Assistant Attorney General Kanter present.

But if you look at the proposed standards there, I wouldn't begin to know how to tell a client or a member what they are supposed to do to ensure that a producer gets the full and fair value for his or her products or livestock because I don't know what that means, and I don't think anybody else does either, which then leads me - that vagueness and that how broad those are - leads me to touch on what I think is the singularly most important issue of these regulations, and that is the USDA'S steadfast refusal to accept the fact that a showing of injury or likelihood of injury to competition is necessary to prevail in a Packers and Stockyards Act 202 A or B case.

If you look at the preamble, and again I'm going to give credit where credit is due, USDA figured something out. They did not incorporate it as they did in 2010 - the specific language that you don't have to show that - as they did in 2010, they incorporated that into the proposed rule. It never made it through. This time. If you look at the preamble to both of those rules, both the final and the proposed rule recently, the preamble is littered with assertions by USDA like that, but proving injury or likelihood of competition or likelihood of injury to competition is not necessary. Nothing in the regulation says that. However, and I'll disagree with Joe ever so slightly, he referenced four appellate courts - by my count and by the six six circuits count - it's now eight. Specifically - and I kind of hesitate to do this, Your Honor - but I'm going to quote from a case that I think sort of settles this issue once and for all frankly. In 2009 in Wheeler v. Pilgrim's Pride, Judge Reavley said - and I quote - "Once more, a federal court is called to say that the purpose of the Packers and Stockyards Act of 1921 is to protect competition and therefore only those practices that will affect competition adversely violate the act that is this holding."

Only a year later, the Sixth Circuit said the tide has now become a tidal wave. But the recent issuance of the Fifth Circuit Court of Appeals' en banc decision in Wheeler v. Pilgrims Pride - I won't bore you with the rest of the quote - but the judge, in that case, went on to identify the other seven circuits that have so held. So, why does this matter? USDA claims in the recently published proposed rule on unfair practices that its rule will increase competition in the meat and poultry industry. I suggest the much more likely outcome is not more competition, but more lawsuits. Two weeks ago at the Center for American Progress event that I mentioned, assistant Attorney General Kanter ended his remarks by saying - about the rule - he hopes that it will spur the plaintiffs to "bring a PSA case or two - or twenty." Again, this is an enforcement mechanism intended to generate more litigation.

I said at the beginning of my remarks that the rules will hurt producers, packers, and consumers. Why do I say that? Well, alternative marketing arrangements or agreements are now very, very popular. Let's remember that AMAs were the brainchild of not the packers but producers, specifically, cattle producers. It's the cattle producers who came to some of the companies and said, we would like to have an arrangement with you or an agreement with you that will warrant or pay us more for our innovation and the skill that we have to deliver cattle that have specific attributes that are desirable by consumers. And in 2007, the Research Triangle Institute did the definitive study on the value of AMAs, and they found - that is a study that was commissioned by USDA - what did RTI find? RTI found that AMAs benefit producers, packers, and consumers. Likewise, RTI concluded that if AMAs were to go away, they would adversely affect producers and consumers much more so than packers.

Why is this relevant? It's relevant because if the harm to competition standard goes away, if the policy that USDA has been clamoring for more than 20 years, and by the way, many of the cases that the Sixth Circuit cited, USDA was either a party to that case or participated as amicus. So this is 20 to 30 years of USDA saying X, and the courts saying, Y - we disagree. Why does it matter? Because if I was outside counsel or in-house counsel to a number of companies and that standard changes, many of those AMAs are simply going to go away. I'm not going to sit here and tell you that they are all going to go away, but they will be severely limited or restricted because if I look at, for example, the jury verdict of 1.28 billion in the Pickett v. Tyson case and I am risk averse, I'm going to tell my client we're not doing this anymore. We're going to treat everybody exactly the same. And that is not in the best interest of producers, or consumers, or packers. So in conclusion, like I said, I think that the rules will spur more litigation. In fact, I guarantee you that they're intended to do that.

I won't reference the now infamous "plaintiff's lawyer's dream" comment that was made a number of years ago, but I think that's where - if these rules become final and survive legal challenges - that's where we may find ourselves. And with that, happy to answer any questions.

Hon. Stephen Alexander Vaden: Well thank you, Mark. And thank you to each of our panelists. You've given us a lot to chew on. I want to remind our audience, a few of you have already submitted questions. I've taken a look at them, they look pretty good to me, but I'm certain many of you have more questions. If you have a question, please iterate in our Q&A function and we'll get to that shortly. But all of you talked about themes that melded quite well with one another, and so a couple of questions came to my mind while listening to your remarks. Congressman, you noted in your remarks that Congress is supposed to play the dominant role in lawmaking. And one of the things that we are talking about with these rules is a rule that as Mark and Mr. Maxwell noted, takes a 1921 antitrust statute and seeks to create a cause of action that most people would think would come under the auspices of a civil rights law.

That raises the question - no one's in favor of discrimination, at least no one anyone would want to associate with - and no one wants discrimination to be tolerated. And there are a number of laws outside of the antitrust realm in which one can file a cause of action if one believes one has been discriminated against, most notably in the economic realm, Section 1981, which allows for any individual who is involved in any type of contract who believes that he or she has been discriminated against on the basis of race to file a federal cause of action against the alleged discriminator. That raises the question, is it fair to say that antitrust law has anything to say about civil rights? Is that a fair interpretation? And point two, also playing off something the congressman pointed out, even if it might be defensible in a world where Chevron existed, with the Supreme Court's recent overturning of Chevron in the Loper Bright and Relentless cases, will that make the rule regarding civil rights matters under the Packers and Stockyards Act, or any of the other rules we've talked about, more difficult to sustain? Congressman, I'll turn to you first since you raised the themes and then we'll go down to Mr. Maxwell. And Mr. Dopp.

Representative Brad Finstad: Thank you, Judge, I am very forward with this - I am a farmer, not a lawyer. That's why I have good friends like you Judge, to help me with the legalities of how we do these things. But I will tell you that maybe to try to answer this, the question that arises with lawmakers is what are we trying to fix with the rulemaking process that we're talking about? What is broken? I mean, I will tell you as a member of Congress, a new member of Congress that represents 21 counties, a very large egg-producing district, I have not had one constituent reach out to my office and say, “You know what? There are some contracts that are adversely affecting me based on racial discrimination.” I have not heard that.

Again, the very simple question that we ask is what problem are we trying to fix? Are there other tools currently in law that are at our disposal to use if there is injustice with contracts, if we do see discrimination, if we do see something that isn't working, what specifically are we trying to answer and fix with this? And then moreover, you have to ask yourself from a lawmaker's perspective, I mean I can't help but see that, and I know this is risky to say in front of a group of lawyers, but this is a lawyer's "get rich plan" right now. I mean, if you look at the litigation that will or that does spur from the confusion that this creates, we again from a legislative perspective are not doing our job. 

If there is a problem to fix, we need to take this back. I personally look at, again, the appellate courts, the eight decisions that have been made that have said that there's some overreach going on. This isn't working. If you look at the three branches of government, we have now two branches saying this isn't the right way to go about it. So I think again, the answer is if we want to talk a little bit more about competition, if we want to talk more about money at the farm, opportunities at the farm, then I think we have to have that conversation in Congress.

Hon. Stephen Alexander Vaden: Mr. Maxwell?

Joe Maxwell: Thank you, Judge. First I'd like to point out that Mark also raised the issue around I think what USDA was using was the one case by the black farmer, the last black farmer of Koch foods and his litigation in a district court saying that the Packers and Stockyards Act did not provide a means for bringing a discrimination case. 202 says "It shall be unlawful for any packer or swine contractor with respect to livestock meats, meat food products or livestock products in unmanufactured form or any live poultry dealer with respect to live poultry, to engage in certain prohibited conduct, which includes any unfair, unjustly discriminatory or deceptive practice or device." By its very words, section 202 of the Packers and Stockyards Act of 1921 raises the issue that it does protect - or this particular statute that Congress set in place and decided that under the Packers and Stockyards Act - discriminatory practices was unlawful. As it relates to Chevron, the decision by the Supreme Court, we would suggest that case is not on point as it relates to the particular packers and stockyards rules.

You can go to FarmAction.US and read our legal assessment as to why it is not applicable as to these particular rules. The most important thing to note is that Congress did act here - in 1921. It may not be the Congress of today, but it was the Congress. It acted, it also provided specific authority to the USDA - which was different and differentiated itself from the case that the Supreme Court reviewed in Chevron - it designated authority by USDA to issue rules. So we believe these rules will meet the test - that the recent decision on Chevron does not impact them. And we would also ask to simply look at the specific language of section 202. This is where all this comes about - 202 A and B, as to whether or not an individual farmer who has been discriminated against based upon the color of his skin by a company and has been forced into bankruptcy.

That's what that case is about. If they should have a right to bring that claim under the Packers and Stockyards Act, and not just under civil rights, we would suggest that yes, they should have a right to bring that case. Any discriminatory act - I'm a small farmer, I don't have a truckload of pigs, but I should not be discriminated against, I should be offered the same price. Mark mentioned these AMAs - the sweetheart deals, making exclusive contracts and those not being transparent or reported, which USDA now says in September there's going to be a rule due. You ought to have a right to know what the real market is.

That is a foundation to our free and fair markets, competitive markets and capitalist system - is to be able to have transparency, and the Packers and Stockyards Act provides authority for USDA to act. It was a congressional act that implemented it and it says that there should not be any unfair, unjustly discriminatory receptive practices or any undue or unreasonable preferences or advantages. And that's what Mark was getting to as it related to AMAs. But you can't have unreasonable preferences or advantages. The meat packers, JBS, and Smithfield may want those opportunities and their sweetheart deal feedlots may want those, but independent cattle producers and haul producers deserve to have transparency in the market as provided by the Packers and Stockyards Act of 921.

Hon. Stephen Alexander Vaden: Mark, and as part of your answer, if you could help tell the non-farm part of our audience just briefly what an alternative marketing arrangement is?

Mark Dopp: So an alternative marketing arrangement is basically an agreement or a contract between, as I said, they're the brainchild of in particular cattle producers, and they're the brainchild of cattle producers who were looking to get more money, get a premium if you will, for delivering livestock that had attributes that the packer and more importantly, that the consumer desire. And that would trigger a premium to be paid for that. And it can be everything. It could be anything from I'm going to deliver never, ever antibiotics, livestock. I'm going to deliver organic. There's an array of different characteristics or attributes that these agreements, and like I said, they started say 20 to 25 years ago, roughly, maybe a little more than that, but that's the producers coming to the packers saying, "If I deliver livestock with these attributes, will you give me a premium and will you provide some assurance that I'm going to get those funds - that I'm going to receive that premium?" They're working relationships, and frankly, they have taken over in some respects, whereas the cash, and I think Joe would agree with this, the cash-fed cattle market went from what, 50% to say about 20%. But that is a function of what the producers are interested in doing.

I want to address a comment that Joe made about discrimination, et cetera. And by the way, I wholeheartedly agree, Judge Vaden with your comments about how you initiated your statement about discrimination, et cetera. But I would respond with respect to the Cook case to say the judge looked at that very issue and concluded that it is still necessary to show injury to competition as have all of the cases. I mean, this is the sticking point on this is the USDA and with all due respect, others, apparently, are unwilling to accept the decision from eight different appellate circuit courts that have decided that this is a necessary element. I might also point out that when you get to the inclusive competition rule, Joe was reading from the statute and he's right, he read it properly. There is a word in there that is not, you will not find in the regulation, that's the word "undue". If you go back and look at the statute, it says "undue, et cetera, et cetera." You look at the regulation, USDA omitted the word "undue" from its final rule, I guess in some, nobody's in favor of discrimination, but I think frankly, I think the inclusive competition rule is probably ultras vires and subject to challenge for that reason among others. And as strongly as some people may wish it to be the case, it is still necessary to show harm to competition in A 202 A or B case. It's that simple.

Hon. Stephen Alexander Vaden: So Mr. Dopp and Mr. Maxwell, you've been having an interesting discussion and I'd like to kind of, since both of you are lawyers, get your take on the more somewhat theoretical issue that is coming to the fore with these regulations with regard to the inclusive competition regulation, which is the regulation that seeks to give a civil rights tinge to the Packers and Stockyards Act. Mr. Dopp, you've pointed to a district court decision - out of Mississippi, I believe - that found that the Packers and Stockyards Act did not apply to racially discriminatory actions. It was an antitrust statute. You have also pointed in regards to the pending regulation for comment that seeks to say "harm to the market means harm to individual market participants" to eight federal circuit court of appeals decisions which find otherwise. And if my memory from being general counsel of USDA is correct, many of those circuit court decisions did so as a matter of statutory interpretation, that is to say what powers Congress gave to USDA, not necessarily a regulatory interpretation.

So in the old Chevron framework, Chevron step one, we didn't get to step two, the court said that this is what the statute means and that's the end of it. That raises the question, of what power - if any - USDA has through the notice and comment rulemaking process to seek to change these judicial interpretations of statute by rulemaking, and whether particularly with regard to the effort to say harm to the market is harm to the individual market. The only way to do that through rulemaking given the multiple Circuit Court of Appeals opinions otherwise would be to generate a case that eventually made its way to the Supreme Court to overrule those decisions perhaps through one of the four circuits that hasn't opined, generating a circuit split. But I'm just curious, I'll turn to you first, Mr. Maxwell, how do you see the legal mechanics of what these rules are trying to do, interacting with the court decisions that Mr. Dopp continues to cite?

Joe Maxwell: Well, first I want to - I raise differentiated animals and get a premium for those animals in the market. These rules do not prevent me from receiving differentiated premium pricing. For, Congressman mentioned, Prop 12, the group my brother manages, Hulk Producers, are Prop-12-compliant and they're receiving a premium. The rules would allow for those premiums, but within those premiums, you couldn't discriminate. The rule would not allow you to pay one farmer who is like-situated a different price. I think that the Chevron case, the recent decision by the Supreme Court to vacate the prior decision of the Supreme Court on Chevron, will open up a host of - if you want to talk about litigation - every rule I think will be challenged by the meat industry, Mark, and the meat packers, It's in their best interest to throw everything they can at the federal government in its effort to rein in and provide competition in the market.

I do expect there to be a surge of litigation using the basis of the Supreme Court backing up on Chevron to bring those cases. In reading the case, and I don't hold myself out as any type of legal expert ,constitutional expert.,I do have a law degree, but in reading the case, I would suggest there will be other lawyers that will come and defend the rules. And of course, that's what judges are for, Judge. 

But I do think there's room within the decision to clearly say that the Packers and Stockyards Act rules as issued by USDA and you can go to our website and see our analysis, FarmAction.US, that the recent decision by the Supreme Court is not applicable to the rules that USDA has issued. I think that there are courts, there has not been a split decision. It would be our objective that someday the Supreme Court would take up this decision and put it to bed.

We believe that the courts failed to recognize in the 11th circuit, the Fifth Circuit, the Fourth and the Sixth, failed to recognize that the Packers and Stockyards Act was to be additive to the law. They reverted back to anti-monopoly law, the Clayton and Sherman Act, stating that there has to be a show of harm to competition. The Congress would not have had to adopt a 1921 law and specifically draft 202 A and B if the Sherman and Clayton Act had been supportive of the individual farmers and their individual harm to their farm, the packer can squeeze one farmer out of business. That farmer should be able to bring a case under Packers and Stockyards Act 202 A and B if how they were squeezed was based upon the provisions provided for in 202 A and 202 B that I referenced earlier. So we do hope that would be where we are.

You can go to FarmAction.US, you can see further analysis on Chevron, how that impacts it. I understand and respect Mark's position. I will understand when his lawyers show up in court. He does represent the world's largest meat packers, it was the North American Meat Institute. It's now the Meat Institute. As I represent individual independent farmers and ranchers, we believe we have the legal basis for the claims we're making here today. But I respect that Mark''s group will feel like they have the legal basis for their claims and the judges will make their decision.

Mark Dopp: Your Honor, let me, Joe, I appreciate your comments. Joe has referenced on multiple occasions the fact that the Packers and Stockyards Act was enacted in 1921 and we are talking about the injury to competition or harm to competition standards. And like I said, I think that's the crux of the matter. But let me just suggest - I suspect, Joe, the same thing - I've been working on this matter for this type of stuff for a lot of years, including on the 2008 Farm Bill. And in 2007, Senator Harkin - Tom Harkin from Iowa - introduced an amendment to what ultimately became the 2008 Farm Bill, that would have changed the standard, much as USDA would like it to have been changed, and that amendment failed. So, whether harm to competition or likelihood of harm to competition is the appropriate standard, I would argue has been considered by the Congress and decided, and by denying or not enacting Senator Harkin's Amendment, Congress said this is the appropriate standard for the Packers and Stockyards Act.

Hon. Stephen Alexander Vaden: We have actually made our way through several of our viewer questions, but I want to end with a question that we haven't touched on and that is a question that is directed to both the Congressman and Mr. Dopp. One of our viewers would like to know, do you believe that the problems that Mr. Maxwell have highlighted exist and are harming farmers' ability to make a fair amount of money for their livestock? And if you do believe that there is a problem, if the rules as promulgated by USDA or not a solution, what do you believe a solution would be? Mr. Dopp, I'll go to you first and then we'll let the congressman have the last word.

Mark Dopp: Well, I will provide, in response, I'll provide what I think are a couple of facts. One, when it comes to the unfair practices rule, in particular, if producers are being harmed, then somebody should explain to me why the National Academies Beef Association and National Pork Producers Council both adamantly oppose the unfair practices proposed rule. Second, I read Drovers, I get Drovers via email virtually every morning and I read Cassie Fish's "The Beef'' blog basically every day to sort of keep a finger on the pulse of what's going on in the markets. And Darryl Peele had a piece, he's an economist from Oklahoma State, and I hate to do this, but Dr. Peele said this morning in his piece at midyear, cattle prices are at all-time record levels. Fed steers averaged $195.81. Four years ago, they were $95, a hundred, maybe. 

He concluded his piece by saying, "Barring outside shocks, cattle prices will remain at record levels and push even higher if herd rebuilding begins in the coming months''. So I'd like to think that those facts speak for themselves. We are at record high cattle levels and just as one other aside, I know there's been a lot of talk about profits, et cetera, et cetera, but if you look at, for example, in the beef world, and the retail beef value world, in May of 2024, the packers are receiving approximately 8% of that retail value. The retailer is receiving about 42% and the producer is receiving 50%. I hope that answers the question,

Hon. Stephen Alexander Vaden: Congressman?

Representative Brad Finstad; Yeah, thank you. It’s how I opened up my comments. I mean, I think it's a holistic conversation well beyond just the harm to competition piece that we're talking about today. If you look at all of the pressures that we feel in ag country, it's well beyond the bureaucracy deciding on the harm to competition clause and some of the things that the USDA is pushing. I mean, if it's everything from the pressures that we're seeing from the supply chain, the global pressures on top of that, the regulatory climate, and then we talked about prop 12. Now, Joe mentioned that Prop 12 has potentially been lucrative to his group. And I think that's an example of there are markets out there and there are opportunities for farmers to do well in this economy, if we look at farming as a small business practice and treat it as such. There's not a one-size-fits-all, “Everyone is going to get this kind of dollar amount and we'll all live happily ever after.” That answer does not exist. And so I think for us to say we're going to solve the problems just with this piece, we would not be honest with each other and it's a bigger, much bigger conversation that we need to have.

Hon. Stephen Alexander Vaden: Thank you, Congressman. Chayila, I'm going to turn it back over to you. I think we've reached our time, but I also think we've succeeded in having a very Federalist Society discussion about weighing the role of Congress versus the role of the executive branch and its agencies versus the role of the courts and how all that comes together and helps to determine the price we pay at the grocery store.

Chayila Kleist: Absolutely. I'll echo those thanks to our panel. Really appreciate you all joining us today and taking this section of your days to share your expertise and insight. Thanks also to our audience for joining and participating. We welcome listener feedback by email at [email protected], and as always, keep an eye on our website and your emails for announcements about other upcoming virtual events. With that, thank you all for joining us today. We are adjourned.