Butler frustrated over way politics derailed competition rule

News
Feb 17, 2012
by DTN

—Ranchers hear ex-GIPSA chief

Talking to a room full of cattle producers, former USDA Grain Inspection Packers and Stockyards (GIPSA) Administration head Dudley Butler wanted to make it clear he was not “run off” or fired from his position in the Obama administration.

Butler, who left his post last month, noted he worked at GIPSA for 32 months but his daughter, who had been managing the farm in Benton, MS, got a job and moved.

That prompted Butler and his wife to want to return home. “That’s the reason I left the position,” he said.

Yet, Butler also described his frustration with the way a proposed livestock marketing rule, or “GIPSA rule” was beaten into submission by what Butler called cowardly moves in Congress, and “vicious lies” attacking him personally in the battle over a farm-bill rule on livestock.

“One of the things I didn’t expect was just the vicious, personal attacks on me, and most of them a lie,” Butler said. “That’s the problem.”

Looking at his concerns for the future of independent farmers and ranchers, Butler said cattle producers should continue to be worried about vertical integration in the livestock industry. The vertical integration that took over the poultry and pork businesses is continuing to expand into the feedlot industry, not just by buying feedlots, but through contracts, he said.

“I’ve had ranchers tell me, ‘Oh, we can’t be vertically integrated because they don’t want our land.’ They don’t want your land,” Butler said. “Let me tell you something about vertical integration. Vertical integration zeroes in on where the assets are concentrated. Where are the assets concentrated in the beef business? The feedlots. Well, if they control the feedlots, they control you.”

Bill Bullard, chief executive officer of R-CALF USA, said the lost fight over key provisions of the GIPSA rule reflected just how strong and influential other groups are in getting their way in Washington. Bullard noted that Butler was demonized in the politicking over the rule.

“He did exactly what he was appointed to do, but he wasn’t supported,” Bullard said.

With calf prices bringing over $1.75 a pound in some instances, cow/calf producers are seeing historic highs. Bullard acknowledged the strong markets make it harder to fire up producers for strong political activism and reforms.

Still, the O’Neill Community Center had a crowd of 250 producers come out on a 14-degree-Fahrenheit night for the event headlined by Butler.

The proposed rule from the 2008 farm bill had several major provisions, including language that livestock producers would not be required to show “harm to competition” in federal lawsuits against packers. Federal courts have repeatedly ruled against producers by citing that the producers have failed to show that a packer’s actions harmed overall livestock competition.

The rule also would have clarified language preventing packers and poultry integrators from retaliatory practices such as terminating contracts for joining a particular organization or filing a GIPSA claim.

But a House Agriculture Subcommittee in July 2010 strongly criticized the rule, as did major livestock groups such as the National Cattlemen’s Beef Association and National Pork Producers Council. The comment period for the rule was extended twice, leading to 61,000 comments that delayed USDA’s time frame for finalizing the rule. More hearings were held and after Republicans won control of the House last year; they limited US- DA’s ability to finalize the proposal.

The “injury to competition” provision, stricken from the final rule, was one that Butler felt would have offered producers legal recourse that has been limited over the past two decades by federal court rulings.

“In the farm bill, they told us to write these rules,” Butler said. “All we were saying is in the Packers and Stockyards Act, sometimes you don’t have to prove competitive injury to violate the Packers and Stockyards Act,” Butler said. He added later, “You can’t prove injury to market competition.”

Butler gave an analogy of the difficulties in proving competitive injury. Under such interpretations, if Butler came over and burned down your house, to successfully sue Butler, you would have to prove that by burning down your house, he affected the market for every homeowner in the marketplace.

“If you are an individual and you don’t get paid, you have to prove that affected everybody in the world selling cattle, he said.

He added, “Does that make sense to anybody here? I’m serious, and that’s what some of the courts have said” in cases against packers.

Butler noted the proposed rule also made it clear a packer could not retaliate against a producer, such as by stopping buying from them. In the case of a poultry or pork producer, that added clarity to prevent packers from cutting off the delivery of baby chicks or pigs, or intentionally delivering sick animals to a producer.

“We said it was unfair to retaliate against somebody,” Butler said. “Is that unfair?” He added, in a sarcastic tone, “Ooh, that’s too strong. That was what we said we couldn’t do.”

Further, packers argued there would be frivolous litigation if sales prices were public because producers would sue if their neighbor received more money. The rule actually would have prevented “undue and unreasonable preferences or advantages.”

Butler said it’s an issue of fairness that producers selling the same quality of cattle should get the same price.

“Now, if they said we were going to have all of these lawsuits if we had fairness, then there must have been a whole lot of unfairness going on,” he said.

Butler noted, the language on undue preferences was already in the law, but supporters of the GIPSA rule felt that clarity was needed.

The status of the rule was unclear last year until the House of Representatives passed a provision, or “rider,” in an appropriations bill that specifically blocked funding for implementing any rule changes or language changes to the specific provisions that the GIPSA rule would change in the Packers and Stockyards Act. That effectively ended the potential for some of the rule provisions on competitive injury or undue preferences.

Butler noted the final livestock and poultry marketing rule that stripped out all of the controversial language did go into effect.

In looking at what was accomplished despite the lost battle over the rule, Butler noted GIPSA worked on system upgrades, cleared off backlogs of cases and developed a better working relationship with the Department of Justice even though former anti-trust chief Christine Varney left last year.

“When I first got there, the employees at GIPSA were distraught because they hadn’t been able to do their job,” he said.

But Butler and Bullard also suggested those restricted provisions of the GIPSA rule could come back. Bullard said another GIPSA official had indicated the livestock provisions that did not make it into the final rule would be “re-proposed” to address issues of competitive injury and undue preferences.

Dudley said that was the plan, but then the rider was added to the appropriations bill. There is a legal question whether that rider prevents USDA from re-proposing the rule to address those issues. Another question is the political one “whether the powers that be want to try to stir this fight with Congress or wait until October when this rider is no longer in effect,” Butler said.

In an email, a spokesman for USDA stated that “Due to the appropriations rider, the Department is focused solely on the implementation of the provisions of the rule published on December 9, 2011.” — Chris Clayton, DTN

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