82 FR 48594 - Scope of Sections 202(a) and (b) of the Packers and Stockyards Act
DEPARTMENT OF AGRICULTURE
Grain Inspection, Packers and Stockyards Administration Federal Register Volume 82, Issue 200 (October 18, 2017)
Grain Inspection, Packers and Stockyards Administration
Federal Register Volume 82, Issue 200 (October 18, 2017)
| Page Range | 48594-48602 | |
| FR Document | 2017-22593 |
[Federal Register Volume 82, Number 200 (Wednesday, October 18, 2017)] [Rules and Regulations] [Pages 48594-48602] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-22593] [[Page 48593]] Vol. 82 Wednesday, No. 200 October 18, 2017 Part II Department of Agriculture ----------------------------------------------------------------------- Grain Inspection, Packers and Stockyards Administration ----------------------------------------------------------------------- 9 CFR Part 201 Scope of Sections 202(a) and (b) of the Packers and Stockyards Act; Rule; Unfair Practices and Undue Preferences in Violation of the Packers and Stockyards Act; Proposed Rule Federal Register / Vol. 82 , No. 200 / Wednesday, October 18, 2017 / Rules and Regulations [[Page 48594]] ----------------------------------------------------------------------- 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, [email protected]. 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 Sec. 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 Sec. 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 Sec. 201.3(c) as Sec. 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 [[Page 48595]] 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 Sec. 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 [[Page 48596]] 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\ --------------------------------------------------------------------------- \1\ E.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). \2\ E.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. --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \3\ 467 U.S. 837 (1984). \4\ Id. at 842-43 (endnotes omitted). --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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)). \6\ Nat'l Cable & Telecomm. Ass'n v. Brand X Internet Serv., 545 U.S. 967, 982 (2005) (emphasis added). --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \7\ 410 F.3d 1295 (11th Cir. 2005). \8\ Id. \9\ Id. at 304. \10\ Id. --------------------------------------------------------------------------- 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: --------------------------------------------------------------------------- \11\ 495 F.3d 1217 (10th Cir. 2007). \12\ Id. at 1223. 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 Sec. [192(a)] to show that the practice injures or is likely to injure competition.\13\ --------------------------------------------------------------------------- \13\ Id. at 1230. 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 [[Page 48597]] that a practice violates subsection (a) or (b) of Sec. 192 there must be proof of injury, or likelihood of injury, to competition.'' \16\ --------------------------------------------------------------------------- \14\ 591 F.3d 355 (5th Cir. 2009). \15\ Id. at 357. \16\ Id. at 363. --------------------------------------------------------------------------- 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 Sec. 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\ --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \23\ Wheeler 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). --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \27\ Chevron, U.S.A., Inc. v. Nat. Resources Def. Council, Inc., 467 U.S. 837, 842-43 (1984). --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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). --------------------------------------------------------------------------- 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: --------------------------------------------------------------------------- \32\ 618 F.2d 1329 (9th Cir. 1980). 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\ --------------------------------------------------------------------------- \33\ Id. at 1336-37. 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\ --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- In the Seventh Circuit case of Pacific Trading Co. v. Wilson & Co.,\38\ the plaintiffs claimed that the defendant packers had knowingly delivered ``off [[Page 48598]] 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\ --------------------------------------------------------------------------- \38\ 547 F.2d 367 (7th Cir. 1976). \39\ Id. at 369. \40\ Id. at 369-70. --------------------------------------------------------------------------- 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 Sec. 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: --------------------------------------------------------------------------- \41\ 53 F.3d 1452 (8th Cir. 1995). \42\ Id. at 1458. \43\ Id. 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\ --------------------------------------------------------------------------- \44\ Id. at 1458-59 (internal citations omitted). 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\ --------------------------------------------------------------------------- \45\ See 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.''). --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \46\ 5 U.S.C. 553(b)(B). \47\ Id. \48\ Woods Psychiatric Inst. v. United States, 20 Cl. Ct. 324, 332-33 (1990) (citing Alcaraz v. Block, 746 F.2d 593, 612 (9th Cir. 1984)). \49\ Tennessee 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)). --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \50\ Northern Mariana Islands v. United States, 686 F.Supp.2d 7, 14-15 (D.D.C. 2009) (internal citations omitted). 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\ --------------------------------------------------------------------------- \51\ Riverbend 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). \54\ Action on Smoking and Health v. Civ. Aeronautics Board, 713 F.2d 795, 801-02 (D.C. Cir. 1983). \55\ Util. 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)). --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \56\ Mobile Oil Corp. v. EPA, 35 F.3d 579, 584 (D.C. Cir. 1994). \57\ Action 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. --------------------------------------------------------------------------- We are unable to identify circumstances sufficient to dispense [[Page 48599]] with traditional notice and comment procedures. Although a large number of comments were received over a five-month 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. --------------------------------------------------------------------------- \60\ See id. --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \61\ Kollett v. Harris, 619 F.2d 134, 144-45 (1st Cir. 1980). --------------------------------------------------------------------------- GIPSA thus recognizes that no good cause existed. Neither Congress nor a court mandated that GIPSA issue Sec. 201.3(a), nor were there any deadlines for its issuance.\62\ Because Sec. 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. --------------------------------------------------------------------------- \62\ Id. at 15. \63\ Id. \64\ See 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''). --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \65\ See Util. Solid Waste Activities Group v. EPA, 236 F.3d 749, 755 (D.C. Cir. 2001). --------------------------------------------------------------------------- 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 Sec. 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 Sec. 201.3(a). The second alternative considered was to issue Sec. 201.3(a) as an IFR. The third alternative considered was to issue Sec. 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 Sec. 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 [[Page 48600]] 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\ --------------------------------------------------------------------------- \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 Ten-Year 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). --------------------------------------------------------------------------- GIPSA estimated the annualized costs of Sec. 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 Sec. 201.3(a), and the industries would only slightly adjust their use of AMA's and performance-based payment systems in the meantime. GIPSA estimated that the annualized cost of Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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 [[Page 48601]] 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. --------------------------------------------------------------------------- \67\ See: http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf. --------------------------------------------------------------------------- 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 Sec. 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 pre-empt 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 government-to-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 [[Page 48602]] 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. 0 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
![48594 Federal Register / Vol. 82, No. 200 / Wednesday, October 18, 2017 / Rules and Regulations
DEPARTMENT OF AGRICULTURE 192(a) and (b). Below is the basis for this date of the IFR to April 22, 2017. The
decision. The first section provides notice also extended the deadline for
Grain Inspection, Packers and background on the interim final rule submitting comments to March 24,
Stockyards Administration and on the proposed rule disposing of 2017. The delay and extension were
the interim final rule. The second and consistent with the memorandum of
9 CFR Part 201 third sections discuss the public January 20, 2017, to the heads of
RIN 0580–AB28
comments GIPSA received on the executive departments and agencies
interim final rule and the proposed rule, from the Assistant to the President and
Scope of Sections 202(a) and (b) of the respectively. The fourth section Chief of Staff entitled ‘‘Regulatory
Packers and Stockyards Act discusses GIPSA’s action, the Freeze Pending Review.’’
justification for that action, and On April 12, 2017, GIPSA published
AGENCY: Grain Inspection, Packers and responds to the comments received. The a notice in the Federal Register (82 FR
Stockyards Administration, USDA last section provides the required 17531) delaying the effective date for
ACTION: Final rule; withdrawal. impact analyses, including the the IFR for an additional 180 days, from
Regulatory Flexibility Act, the March 24, 2017, to October 19, 2017.
SUMMARY: The United States Department Paperwork Reduction Act, and the This extension allowed additional time
of Agriculture’s (USDA) Grain relevant Executive Orders. for USDA to consider adequately all
Inspection, Packers and Stockyards comments received and to make an
Administration (GIPSA), Packers and I. Background
informed policy decision.
Stockyards Program is withdrawing the The P&S Act at 7 U.S.C. 192(a) states
Concurrent with this notice, GIPSA
interim final rule (IFR) published in the that it is unlawful for any packer, swine
published in the Federal Register (82
Federal Register on December 20, 2016. contractor, or live poultry dealer to
FR 17594) a proposed rule presenting
Had the IFR become effective, it would ‘‘[e]ngage in or use any unfair, unjustly
four alternatives for disposing the IFR:
have added a paragraph to the discriminatory, or deceptive practice or
(1) Allow the interim final rule to
regulations issued under the Packers device.’’ Further, section 192(b)
become effective, (2) suspend the
and Stockyards Act (P&S Act) provides that it is unlawful for those
interim final rule indefinitely, (3) delay
addressing the scope of sections 202(a) same types of business entities to
‘‘[m]ake or give any undue or the effective date of the interim final
and (b) of the P&S Act, which
unreasonable preference or advantage to rule further, or (4) withdraw the interim
enumerate unlawful practices under the
any particular person or locality in any final rule. The proposed rule gave
Act. Specifically, the IFR would have
respect, or subject any particular person interested persons until June 12, 2017,
added a paragraph to the regulations
or locality to any undue or unreasonable to comment on the four alternatives.
further explaining the scope of sections
prejudice or disadvantage in any GIPSA has analyzed the comments
202(a) and (b) of the P&S Act such that
respect.’’ In the June 22, 2010 Federal received on the interim final rule
certain conduct or actions, depending
Register (75 FR 35338–35354), GIPSA published on December 20, 2016. It has
on their nature and the circumstances,
published a notice of proposed also evaluated the comments received in
could be found to violate the P&S Act
rulemaking (NPRM) that would make response to the proposed rule published
without a finding of harm or likely harm
several revisions to the regulations on April 12, 2017, regarding disposition
to competition.
implementing the P&S Act, including of that rule. Now, GIPSA is withdrawing
GIPSA accepted and analyzed
one revision that would add a paragraph the interim final rule.
comments on the IFR received on or
before March 24, 2017. In addition, in (c) to 9 CFR 201.3 to codify the agency’s II. Interim Final Rule—Discussion of
the April 12, 2017 Federal Register, longstanding interpretation that, in Comments
GIPSA solicited and analyzed comments some cases, a violation of 7 U.S.C.
192(a) or (b) can be established without GIPSA solicited comments concerning
received on or before June 12, 2017, on
proof of likelihood of competitive the IFR for a period of 90 days ending
four alternative actions regarding the
injury. 75 FR at 35340; see also id. at on March 24, 2017. GIPSA received 344
disposition of the IFR. After careful
35351 (proposed rule text for § 201.3(c)). timely comments. Commenters were
review and consideration of all
GIPSA originally set the comment from all sectors of the livestock and
comments received, GIPSA is
period for the NPRM to close on August poultry industries, including livestock
withdrawing the IFR.
23, 2010, and later extended it until producer groups; poultry grower interest
DATES: The interim final rule published groups; packers; poultry company
November 22, 2010 (75 FR 44163).
on December 20, 2016 (81 FR 92566), is associations; farmers and farmers’
The appropriations acts for fiscal
withdrawn as of October 18, 2017. organizations; consumer organizations
years 2012 through 2015 precluded
FOR FURTHER INFORMATION CONTACT: USDA from finalizing the NPRM, and consumers; and an animal rights
S. Brett Offutt, Director, Litigation and including the proposed § 201.3(c). The group.
Economic Analysis Division, Packers appropriations acts for fiscal years 2016 A common theme of those opposed to
and Stockyards Program, GIPSA, 1400 and 2017, however, did not include this the IFR was that it would lead to
Independence Ave. SW., Washington, preclusion. Accordingly, on December increased litigation. Commenters said
DC 20250–3601, (202) 720–7051, 20, 2016, GIPSA published in the that without the requirement to show
s.brett.offutt@usda.gov. Federal Register (81 FR 92566–92594) harm to competition, the IFR would
SUPPLEMENTARY INFORMATION: GIPSA is an interim final rule (IFR) adopting embolden producers and growers to sue
issuing this final rule to withdraw the essentially the same language in for any perceived slight by a packer or
integrator. Fear of litigation would cause
ethrower on DSK3G9T082PROD with RULES
interim final rule that would have proposed § 201.3(c) as § 201.3(a). GIPSA
revised the current regulations invited interested persons to submit packers and integrators to vertically
implementing the P&S Act to state that comments on the IFR on or before its integrate further, increase their volume
a finding of harm or likely harm to effective date of February 21, 2017. of captive supplies, and rely even more
competition was not needed to find a On February 7, 2017, GIPSA on those suppliers and growers they
violation of section 202(a) or (b) of that published in the Federal Register (82 currently use. Therefore, these
Act (7 U.S.C. 181–229c). See 7 U.S.C. FR 9489) a notice delaying the effective commenters suggested the IFR would
VerDate Sep<11>2014 19:47 Oct 17, 2017 Jkt 244001 PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 E:\FR\FM\18OCR2.SGM 18OCR2](https://thefederalregister.org/doc/82_FR_48794/page/1.svg)
![48596 Federal Register / Vol. 82, No. 200 / Wednesday, October 18, 2017 / Rules and Regulations
alternative 1 (i.e., to allow the IFR to P&S Act for decades.1 DOJ has filed authority.’’ 5 Moreover, even if a court
become effective as planned). One amicus briefs with several federal has spoken as to the interpretation of a
commenter preferred alternative 2 (i.e., appellate courts arguing against the statute, ‘‘[a] court’s prior judicial
to suspend the IFR indefinitely). This need to show the likelihood of construction of a statute trumps an
commenter, however, also said that competitive harm for all violations of 7 agency construction otherwise entitled
GIPSA should ‘‘allow the rule to die,’’ U.S.C. 192(a) and (b).2 to Chevron deference only if the prior
possibly indicating a real preference for However, as commenters have noted court decision holds that its
alternative 4, withdrawal, as opposed to construction follows from the
and GIPSA acknowledges, several
an indefinite suspension. No one voiced unambiguous terms of the statute and
federal appellate courts have declined to
a preference for alternative 3 (i.e., to thus leaves no room for agency
defer to USDA’s interpretation (see
further delay the IFR’s effective date). discretion.’’ 6
discussion of cases below). There is In the IFR, GIPSA acknowledged that
Fifteen individuals provided comments good reason to believe that several of
on the proposed rule but did not state multiple federal circuit courts had held
those courts would continue to do so that harm to competition is required to
a preference. even if USDA’s interpretation were prove violations of 7 U.S.C. 192(a) and
Many commenters who provided codified in a final rule. (b). For example, in the Eleventh Circuit
comments on the IFR also provided
When determining whether an case of London v. Fieldale Farms Corp.,7
comments on this proposed rule,
agency’s interpretation of a statute that the plaintiffs alleged that defendant
making largely the same arguments.
it administers is entitled to deference, impermissibly terminated plaintiffs’
Supporters of withdrawal were again contract.8 The court held that plaintiffs’
the Supreme Court explained in
concerned about increased litigation failure to allege harm to competition
Chevron, U.S.A., Inc. v. Natural
and vertical integration, reduction or was fatal to their 7 U.S.C. 192(a) claim.9
Resources Defense Council, Inc.,3 that
elimination of alternative marketing The court stated that ‘‘in order to prevail
courts look at whether Congress has
agreements, and decreased market under the [P&S Act], a plaintiff must
directly spoken to the precise question
access for producers and growers. Those show that the defendant’s deceptive or
favoring the IFR reiterated their concern at issue. If the intent of Congress is
clear, that is the end of the matter; the unfair practice adversely affects
that increased concentration led to competition or is likely to adversely
unfair practices and undue preferences court, as well as the agency, must give
effect to the unambiguously expressed affect competition.’’ 10
against farmers. They believed that the In the Tenth Circuit case of Been v.
IFR provided farmers the tools to intent of Congress. If, however, the court
determines that Congress has not O.K. Industries, Inc.,11 the plaintiffs,
address unfair practices and undue who were growers, alleged that a variety
preferences. directly addressed the precise question
at issue, the court does not simply of defendants’ actions with respect to
IV. Justification for Withdrawal of the impose its own construction on the the growers’ contracts were unfair.12
Interim Final Rule and Response to statute, as would be necessary in the The court concluded that plaintiffs must
Comments absence of an administrative show that defendants’ conduct harmed
interpretation. Rather, if the statute is or was likely to harm competition under
After reviewing the IFR and carefully silent or ambiguous with respect to the 7 U.S.C. 192(a) stating:
considering the public comments, specific issue, the question for the court We are concerned here only with whether
GIPSA is withdrawing the IFR because is whether the agency’s answer is based unfairness requires a showing of a likely
of serious legal and policy concerns on a permissible construction of the injury to competition, not whether deceptive
related to its promulgation and statute.4 practices require such a showing. We
implementation. First, the interpretation therefore join the [sic] those circuits
of 7 U.S.C. 192(a)–(b) embodied in the The courts have granted Chevron requiring a plaintiff who challenges a
IFR is inconsistent with court decisions deference ‘‘when it appears that practice under § [192(a)] to show that the
Congress delegated authority to the practice injures or is likely to injure
in several U.S. Courts of Appeals, and competition.13
those circuits are unlikely to give agency generally to make rules carrying
GIPSA’s proposed interpretation the force of law, and that the agency In the Fifth Circuit case of Wheeler v.
deference. Additionally, the IFR’s interpretation claiming deference was Pilgrim’s Pride Corp.,14 the plaintiffs
justification for dispensing with notice promulgated in the exercise of that alleged that one grower wrongfully
and comment for ‘‘good cause’’ was received superior contract terms and
inadequate to satisfy the APA’s 1 E.g., In re Ozark County Cattle Co., 49 Agric. that the disparity was unfair and
Dec. 336, 365 (1990); In re Rodman, 47 Agric. Dec. deceptive under 7 U.S.C. 192(a) and
requirements. 885, 912–13 (1988); In re Itt Cont’l Baking Co., 44
Agric. Dec. 748, 781 (1985) (citing Packers and
(b).15 The en banc court rejected this
A. Courts Are Unlikely To Give argument, finding ‘‘[t]o support a claim
Stockyards cases from 1957 through 1983); c.f.
Deference to the Interim Final Rule Sioux City Stock Yards Co. v. United States, 49 F.
Supp. 801, 806 (N.D. Iowa 1943) (‘‘[T]he statute, 5 Mayo Found. for Medical Educ. and Res. v.
The purpose of the IFR was to clarify neither expressly nor impliedly, makes any [finding United States, 562 U.S. 44, 45 (2011) (quoting
that conduct or actions may violate 7 that a market injury was being threatened] a United States v. Mead Corp., 533 U.S. 218, 226–27
U.S.C. 192(a) and (b) without adversely jurisdictional prerequisite to the Secretary’s power (2001)).
to act.’’); In re:Macy Live Poultry Co, 1 Agric. Dec. 6 Nat’l Cable & Telecomm. Ass’n v. Brand X
affecting, or having a likelihood of 479 (1942) (finding proof of weight fraud alone Internet Serv., 545 U.S. 967, 982 (2005) (emphasis
adversely affecting, competition. This sufficient to sanction a live poultry dealer). added).
reiterated USDA’s longstanding 2 E.g., Brief for Amicus Curiae the United States 7 410 F.3d 1295 (11th Cir. 2005).
interpretation that not all violations of of America in Support of Plaintiff-Appellant, Terry 8 Id.
ethrower on DSK3G9T082PROD with RULES
the P&S Act require a showing of harm v. Tyson Farms, Inc., 604 F.3d 272 (6th Cir. 2010) 9 Id. at 304.
(No. 08–5577), 2008 WL 5665508 at 11–26; En Banc
or likely harm to competition. Brief for Amicus Curiae the United States of
10 Id.
11 495 F.3d 1217 (10th Cir. 2007).
Contrary to comments that GIPSA America in Support of Plaintiffs-Appellees, Wheeler
12 Id. at 1223.
v. Pilgrim’s Pride Corp., 591 F.3d 355 (5th Cir. 2009)
failed to show that USDA’s (No. 07–40651), 2009 WL 7349991 at 9–29. 13 Id. at 1230.
interpretation was longstanding, USDA 3 467 U.S. 837 (1984). 14 591 F.3d 355 (5th Cir. 2009).
has adhered to this interpretation of the 4 Id. at 842–43 (endnotes omitted). 15 Id. at 357.
VerDate Sep<11>2014 19:47 Oct 17, 2017 Jkt 244001 PO 00000 Frm 00004 Fmt 4701 Sfmt 4700 E:\FR\FM\18OCR2.SGM 18OCR2](https://thefederalregister.org/doc/82_FR_48794/page/3.svg)
![Federal Register / Vol. 82, No. 200 / Wednesday, October 18, 2017 / Rules and Regulations 48597
that a practice violates subsection (a) or Commenters supporting the IFR cited the bidding for cattle.30 While the IBP
(b) of § 192 there must be proof of the current court precedent as court did not agree with the Judicial
injury, or likelihood of injury, to justification for its promulgation. They Officer’s factual findings, the court
competition.’’ 16 said showing harm to competition was agreed that the legal standard the
In the Sixth Circuit case of Terry v. a difficult standard to meet; and as long Judicial Officer applied was the correct
Tyson Farms, Inc.,17 the plaintiff as it remains a requirement, growers and one: ‘‘[w]e have said that ‘a practice
alleged, among other things, that the producers would continue to be which is likely to reduce competition
defendant poultry company cancelled subjected to unfair business practices, and prices paid to farmers for cattle can
his contract because plaintiff asserted and their businesses would be at risk. be found an unfair practice under the
his regulatory right to observe the GIPSA agreed with this view when it Act, and be a predicate for a cease and
weighing of his birds.18 He claimed this promulgated the IFR; however, current desist order.’ ’’ 31
violated 7 U.S.C. 192(a) and (b).19 The precedent poses a significant legal issue. Likewise, in the Ninth Circuit case of
court disagreed and held that ‘‘in order As discussed above, the courts only De Jong Packing Co. v. USDA,32 the
to succeed on a claim under § 192(a) grant Chevron deference to an agency’s appellate court agreed that collusion to
and (b) of the [P&S Act], a plaintiff must interpretation of a statute under its force conditional bidding on livestock
show an adverse effect on purview when the statute is ambiguous auctions was anti-competitive in nature
competition.’’ 20 The Terry court cited and the agency’s interpretation is holding:
cases from sister circuits, and claimed reasonable.27 The government contends that the purpose
that seven of the circuits agreed with its If the IFR becomes effective, it will of the Act is to halt unfair trade practices in
legal conclusion.21 The Terry court also conflict with Fifth, Sixth, Tenth, and their incipiency, before harm has been
claimed that this ‘‘tide’’ of opinions Eleventh Circuit precedent. This suffered; that unfair practices under [7 U.S.C.
from other circuits has ‘‘now become a 192] are not confined to those where
conflict creates serious concerns. GIPSA
tidal wave.’’ 22 competitive injury has already resulted, but
is cognizant of the commenters who includes those where there is a reasonable
Many commenters argued that the support this IFR becoming effective and likelihood that the purpose will be achieved
plain language of the P&S Act requires of their concerns regarding a perceived and that the result will be an undue restraint
competitive injury and that GIPSA imbalance of bargaining power. Also, of competition. We agree.33
therefore is not entitled to deference for GIPSA recognizes that the livestock and
a conflicting regulation. GIPSA Other courts have only required a
poultry industries have a vested interest showing of harm or likelihood of harm
recognizes that at least two federal in knowing what conduct or actions
circuits are unlikely to defer to USDA’s to competition for the conduct or action
violate 7 U.S.C. 192(a) and (b). However, at issue without generalizing their
interpretation. In the Fifth Circuit, the a regulation conflicting with relevant
Wheeler court said that ‘‘deference . . . holdings to all violations of 7 U.S.C.
Circuit precedent will inevitably lead to 192(a) and (b). In the Fourth Circuit case
is unwarranted where Congress has more litigation in the livestock and
delegated no authority to change the of Philson v. Goldsboro Mill Co.,34 the
poultry industries. Protracted litigation plaintiff turkey growers claimed their
meaning the courts have given to the to both interpret this regulation and
statutory terms . . . .’’ 23 The court held contract was terminated in retaliation
defend it serves neither the interests of for ‘‘vocalization of their grievances’’
USDA was not entitled to deference the livestock and poultry industries nor
‘‘because the PSA is unambiguous.’’ 24 and that defendant’s conduct was,
GIPSA. among other things, an unfair or
Likewise, the Eleventh Circuit refused
To be sure, some commenters deceptive practice in violation of the
to defer to USDA stating, ‘‘[t]his court
overstated the hostility in the case law P&S Act.35 The court held that, while ‘‘it
gives Chevron deference to agency
to USDA’s longstanding position. is unnecessary to prove actual injury to
interpretations of regulations
Contrary to some commenters’ claims, establish an unfair or deceptive practice
promulgated pursuant to congressional
GIPSA disagrees that the remaining U.S. [under 7 U.S.C. 192(a) and (b)], a
authority. The [P&S Act] does not
Circuit Courts of Appeals that have had plaintiff must nonetheless establish that
delegate authority to the Secretary to
occasion to address the issue (Fourth, the challenged act is likely to produce
adjudicate alleged violations of [7 U.S.C.
Seventh, Eighth, and Ninth Circuits) the type of injury that the Act was
192] by live poultry dealers. Congress
have gone as far as London, Been, designed to prevent.’’ 36 Thus, the court
left that task exclusively to the federal
Wheeler, and Terry, to declare that harm held that the district court did not err
courts.’’ 25 It went on to say that
or likelihood of harm to competition is in instructing the jury that plaintiff must
‘‘[b]ecause Congress plainly intended to
required in all cases brought under 7 prove that ‘‘the defendants’ conduct was
prohibit only those unfair,
U.S.C. 192(a) and (b). likely to affect competition adversely in
discriminatory or deceptive practices
adversely affecting competition a Some courts affirmed the position of order to prevail on their claims under
contrary interpretation of [7 U.S.C. the USDA that certain practices are the Packers and Stockyard Act.’’ 37
192(a)] deserves no deference.’’ 26 unfair because they are likely to harm In the Seventh Circuit case of Pacific
competition. In the Eighth Circuit case Trading Co. v. Wilson & Co.,38 the
16 Id. at 363. of IBP v. Glickman,28 the USDA brought plaintiffs claimed that the defendant
17 604 F.3d 272 (6th Cir. 2010). an action against a packer respondent packers had knowingly delivered ‘‘off
18 Id. at 274. for alleged unlawful use of the packer’s
19 Id. at 277. right of first refusal.29 Among other 30 Id. at 976.
31 Id. at 977 (quoting Farrow v. USDA, 760 F.2d
20 Id. at 279.
things, the USDA’s Judicial Officer
21 Id. at 277–79 (citing cases from the Fourth, 211, 214 (8th Cir. 1985)) (emphasis added in IBP).
ruled that there was potential harm to 32 618 F.2d 1329 (9th Cir. 1980).
ethrower on DSK3G9T082PROD with RULES
Fifth, Seventh, Eighth, Ninth, Tenth, and Eleventh
Circuits and electing to join those circuits).
competition based on the allegation that 33 Id. at 1336–37.
22 Id. at 277. the respondent was not participating in 34 164 F.3d 625, Nos. 96–2542, 96–2631, 1998 WL
23 Wheeler v. Pilgrim’s Pride Corp., 591 F.3d 355, 709324 (4th Cir. Oct. 5, 1998).
362 (5th Cir. 2009). 27 Chevron, U.S.A., Inc. v. Nat. Resources Def. 35 Id. at *2.
24 Id. at 373 n.3. Council, Inc., 467 U.S. 837, 842–43 (1984). 36 Id. at *4 (emphasis in original).
25 Id. at 1304 (internal citations omitted). 28 187 F.3d 974 (8th Cir. 1999). 37 Id.
26 Id. (internal quotations and citations omitted). 29 Id. at 975–76. 38 547 F.2d 367 (7th Cir. 1976).
VerDate Sep<11>2014 19:47 Oct 17, 2017 Jkt 244001 PO 00000 Frm 00005 Fmt 4701 Sfmt 4700 E:\FR\FM\18OCR2.SGM 18OCR2](https://thefederalregister.org/doc/82_FR_48794/page/4.svg)
![48598 Federal Register / Vol. 82, No. 200 / Wednesday, October 18, 2017 / Rules and Regulations
condition’’ hams in violation of 7 U.S.C. into effect would create an unworkable completion of the rulemaking process; and
192(a).39 The court concluded that ‘‘the legal patchwork. Based on the the harm that could befall members of the
plaintiffs have failed to state a claim comments received and the above legal public as a result of delays in promulgating
the rule in question.50
upon which relief can be granted under analysis, GIPSA is withdrawing the IFR.
the Packers and Stockyards Act. For the A situation is ‘‘impracticable’’ if ‘‘the
B. The Interim Final Rule Was agency cannot ‘both follow section 553
purpose of that statute is to halt unfair
Insufficiently Supported by a ‘‘Good and execute its statutory duties.’ ’’ 51
business practices which adversely
Cause’’ Exception to the Administrative ‘‘Unnecessary’’ refers to situations
affect competition, not shown
Procedure Act’s Notice and Comment where the rule at issue is ‘‘technical or
here . . . .’’ 40
Procedure minor’’ 52 or where it ‘‘is a routine
One of the cases from the Eighth
Circuit commonly cited by commenters GIPSA is also withdrawing the IFR determination, insignificant in nature
as requiring a showing of harm to because we believe it did not satisfy the and impact, and inconsequential to the
competition for all violations of 7 U.S.C. APA’s notice and comment industry and to the public.’’ 53 Finally,
192(a) and (b), does not convincingly requirements at 5 U.S.C. 553(b) and (c). ‘‘contrary to the public interest’’ arises
support the commenters’ position. In GIPSA justified promulgating the IFR when there is ‘‘real harm to the public,
Jackson v. Swift Eckrich, Inc.,41 the without notice and pre-promulgation not mere inconvenience to the
plaintiffs claimed that 7 U.S.C. 192 opportunity for comment because we Agency,’’ 54 and it ‘‘connotes a situation
entitled them the opportunity to obtain reasoned that its solicitation of in which the interest of the public
the same type of contract that defendant comments over a five month period on would be defeated by any requirement
offered other independent growers.42 the June 2010 NPRM satisfied those of advance notice,’’ such as a situation
The court disagreed stating that ‘‘[w]e requirements. 81 FR at 92570. GIPSA when announcing a rule would enable
are convinced that the purpose behind reached this conclusion because the harm the rule was designed to
§ 202 of the [P&S Act], 7 U.S.C. 192, was proposed 9 CFR 201.3(c) in the June prevent.55
not to so upset the traditional principles 2010 NPRM was largely the same as 9 The sole justification for invoking
of freedom of contract. The [P&S Act] CFR 201.3(a) in the IFR. Upon further ‘‘good cause’’ in the IFR was that its
was designed to promote efficiency, not examination, we recognize that this June 2010 NPRM soliciting public
frustrate it.’’ 43 But, the court also justification is not sufficient to meet the comment satisfied the APA’s notice and
appeared to acknowledge that other APA’s bar for establishing ‘‘good cause’’ comment requirements. Courts have
alleged violations of the P&S Act did not sufficient to dispense with normal acknowledged that an agency does not
notice and comment procedures. always have to ‘‘start from scratch’’ and
require a showing of harm to
To promulgate a rule as an interim initiate new notice and comment
competition. Specifically, the court
final rule and forego the normal notice proceedings to re-promulgate a rule.56
explained that:
and comment procedure, an agency On the other hand, the ‘‘mere presence
With regard to the claims of ‘other’ [P&S of a prior notice and comment record’’
must invoke a ‘‘good cause’’ exception
Act] violations, the breach of contract claim, does not automatically ‘‘render the
and the fraud claim, the district court found under the APA and explain its rationale
within the rule itself.46 To establish solicitation of new comments
that a jury question existed. We agree. The
Jacksons presented evidence that Swift ‘‘good cause,’’ the agency must unnecessary.’’ 57 ‘‘Although the [APA]
Eckrich had violated a number of PSA demonstrate that the normal procedure does not establish a ‘useful life’ for a
regulations, that it did not use the would be ‘‘impracticable, unnecessary, notice and comment record, clearly the
condemned carcass calculation formula or contrary to the public interest.’’ 47 life of such a record is not infinite.’’ 58
provided in the floor contracts, and that it ‘‘[T]he inquiry into whether good cause Accordingly, ‘‘[i]f the original record is
recorded bird weights without actually has been properly invoked must still fresh, a new round of notice and
performing any measurements.44 comment might be unnecessary. Such a
proceed on a case-by-case basis, with a
On the other hand, other Eighth sensitivity to the totality of the factors finding, however, must be made by the
Circuit cases have required a showing of at play.’’ 48 When agencies invoke ‘‘good agency and supported in the record; it
a likelihood of competitive injury when cause,’’ ‘‘the good cause exception is to is not self-evident.’’ 59
a plaintiff alleges that a practice is be ‘narrowly construed and only We are unable to identify
unfair because of its relationship to reluctantly countenanced.’ ’’ 49 circumstances sufficient to dispense
prices, bidding, or competition.45 Within the good cause inquiry, courts 50 Northern Mariana Islands v. United States, 686
Nevertheless, because at least two have identified situations that are F.Supp.2d 7, 14–15 (D.D.C. 2009) (internal citations
courts of appeals have held that the text ‘‘impracticable, unnecessary, or contrary omitted).
of the P&S Act unambiguously to the public interest,’’ based on a 51 Riverbend Farms, Inc. v. Madigan, 958 F.2d
forecloses USDA’s longstanding consideration of multiple factors. Those 1479, 1484 n.2 (9th Cir. 1992) (quoting Levesque v.
Block, 723 F.2d 175, 184 (1st Cir. 1983)).
interpretation, allowing the IFR to go factors include: 52 Id.
the scale and complexity of the regulatory 53 Mack Trucks, Inc. v. EPA, 682 F.3d 87, 94 (D.C.
39 Id. at 369. program the agency was required to Cir. 2012) (quoting Util. Solid Waste Activities
40 Id. at 369–70.
implement; any deadlines for rulemaking Group v. EPA, 236 F.3d 749, 755, (D.C. Cir. 2001).
41 53 F.3d 1452 (8th Cir. 1995). 54 Action on Smoking and Health v. Civ.
imposed by the enabling statute; the
42 Id. at 1458.
diligence with which the agency approached Aeronautics Board, 713 F.2d 795, 801–02 (D.C. Cir.
43 Id. 1983).
the rulemaking process; obstacles outside the 55 Util. Solid Waste Activities Group, 236 F.3d at
44 Id. at 1458–59 (internal citations omitted).
agency’s control that impeded efficient 755 (quoting United States Department of Justice,
45 See Farrow v. USDA, 760 F.2d 211, 214 (8th
Cir. 1985) (‘‘We agree with the JO that a practice Attorney General’s Manual on the Administrative
ethrower on DSK3G9T082PROD with RULES
which is likely to reduce competition and prices
46 5 U.S.C. 553(b)(B). Procedure Act 31 (1947)).
47 Id. 56 Mobile Oil Corp. v. EPA, 35 F.3d 579, 584 (D.C.
paid to farmers for cattle can be found an unfair
practice under the Act, and be a predicate for a 48 Woods Psychiatric Inst. v. United States, 20 Cl. Cir. 1994).
57 Action on Smoking and Health v. Civ.
cease and desist order. We conclude that this is so Ct. 324, 332–33 (1990) (citing Alcaraz v. Block, 746
even in the absence of evidence that the F.2d 593, 612 (9th Cir. 1984)). Aeronautics Board, 713 F.2d 795, 801 (D.C. Cir.
participants made their agreement for the purpose 49 Tennessee Gas Pipeline Co. v. FERC, 969 F.2d 1983).
58 Id. at 800.
of reducing prices to farmers or that it had that 1141, 1144 (D.C. Cir.1992) (quoting State of New
result.’’). Jersey v. EPA, 626 F.2d 1038, 1045 (D.C. Cir. 1980)). 59 Mobile Oil Corp., 35 F.3d at 584.
VerDate Sep<11>2014 19:47 Oct 17, 2017 Jkt 244001 PO 00000 Frm 00006 Fmt 4701 Sfmt 4700 E:\FR\FM\18OCR2.SGM 18OCR2](https://thefederalregister.org/doc/82_FR_48794/page/5.svg)
![48602 Federal Register / Vol. 82, No. 200 / Wednesday, October 18, 2017 / Rules and Regulations
13175, GIPSA offered opportunities to meaningful consultation is provided information technologies to provide
meet with representatives from Tribal where changes, additions, and increased opportunities for citizen
Governments during the comment modifications herein are not expressly access to Government information and
period for the June 2010 NPRM (June 22 mandated by Congress. services, and for other purposes.
to November 22, 2010) with specific
E. Paperwork Reduction Act List of Subjects in 9 CFR Part 201
opportunities in Rapid City, South
Dakota, on October 28, 2010, and This final rule does not contain new Contracts, Livestock, Poultry, Trade
Oklahoma City, Oklahoma, on or amended information collection practices.
November 3, 2010. GIPSA invited all requirements subject to the Paperwork ■ Accordingly, the interim final rule
tribal governments to participate in Reduction Act of 1995 (44 U.S.C. 3501 amending 9 CFR Part 201 that was
these venues for consultation. GIPSA et seq.). It does not involve collection of published at 81 FR 92566–92594 on
has received no specific indication that new or additional information by the December 20, 2016, is withdrawn.
the final rule will have tribal federal government.
Randall D. Jones,
implications and has received no further F. E-Government Act Compliance
requests for consultation as of the date Acting Administrator, Grain Inspection,
Packers and Stockyards Administration.
of this publication. If a Tribe requests GIPSA is committed to compliance
consultation, GIPSA will work with the with the E-Government Act, to promote [FR Doc. 2017–22593 Filed 10–17–17; 8:45 am]
Office of Tribal Relations to ensure the use of the internet and other BILLING CODE 3410–KD–P
ethrower on DSK3G9T082PROD with RULES
VerDate Sep<11>2014 19:47 Oct 17, 2017 Jkt 244001 PO 00000 Frm 00010 Fmt 4701 Sfmt 9990 E:\FR\FM\18OCR2.SGM 18OCR2](https://thefederalregister.org/doc/82_FR_48794/page/9.svg)
Document Created: 2017-10-18 01:38:03
Document Modified: 2017-10-18 01:38:03
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Rules and Regulations | |
| Action | Final rule; withdrawal. | |
| Dates | The interim final rule published on December 20, 2016 (81 FR 92566), is withdrawn as of October 18, 2017. | |
| 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, [email protected] | |
| FR Citation | 82 FR 48594 | |
| RIN Number | 0580-AB28 | |
| CFR Associated | Contracts; Livestock; Poultry and Trade Practices |
2025 Federal Register | Disclaimer | Privacy Policy
USC | CFR | eCFR