By MATEUSZ PERKOWSKI
New rules proposed by USDA are aimed at leveling the playing field in the livestock industry, but they're also expected to test the agency's legal power to regulate meat packers.
The USDA says the rules clarify the agency's authority under the Packers and Stockyards Act, a law governing livestock transactions, as required by Congress in the 2008 Farm Bill.
Critics of the meat-packing industry say the proposed regulations will help protect livestock producers from exploitation.
"It's a long time coming. This is a huge step in the right direction," said Bill Bullard, CEO of the Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America.
Packers, alarmed by provisions they say will restrict common industry practices, claim the USDA wants to exceed its authority as delineated by federal appeals courts.
"All the agency is trying to do is engage in a regulatory end-run around what eight appellate courts have held," said Mark Dopp, senior vice president of regulatory affairs at the American Meat Institute, which represents packers.
In the proposed rules, the USDA states that it has the authority to bar "any unfair, unjustly discriminatory, or deceptive practice or device" and to prohibit preferential or prejudicial behavior by packers -- whether or not the actions are part of an anti-competitive conspiracy.
The agency acknowledged that appellate courts have construed the Packers and Stockyards Act as a pure antitrust law, thereby limiting USDA's ability to regulate actions that don't directly constrain competition.
The USDA nonetheless stands by its own analysis because the court opinions "are inconsistent with the plain language of the statute; they incorrectly assume that harm to competition was the only evil Congress sought to prevent," the proposed rule said.
Dopp claims the prevailing legal understanding of the Packers and Stockyards Act can only be altered by Congress. The USDA had plenty of opportunities to convince appellate courts of its view, but ultimately failed, he said.
"Every circuit has rejected their interpretation," Dopp said. "They have told the agency time and again, we don't agree with their interpretation."
Under an established legal principle, however, federal agencies are entitled to interpret the laws they administer without court interference -- barring certain ambiguities in the language.
Until now, the courts haven't had to defer to the USDA because its "interpretation hasn't been enshrined in a regulation," the proposed rule said.
The USDA's case is particularly strong because Congress specifically asked the agency to craft new regulations implementing the Packers and Stockyards Act, Bullard said.
Dopp alleges that USDA actually wants to go much farther than intended by Congressional language in the farm bill.
There's at least one point they can agree on, though: Opposing ideas about the scope of the Packers and Stockyards Act are likely to wind up in court.