In 2012, a young researcher at what was then the New America Foundation’s Open Markets program published an exposé in the Washington Monthly about the plight of chicken farmers and ranchers who were being crushed by Big Ag monopolies. It described a reality in which the people responsible for the food most Americans eat are trapped in a web of exploitation that has not only battered their livelihoods but also has jacked up the prices for consumers and undermined the welfare of animals.
The story went on to explain how the Obama administration and its agriculture secretary at the time, Tom Vilsack, took aim against this exploitation by trying to update the rules of the Packers and Stockyards Act (PSA), a law passed in 1921 to protect farmers, consumers, and other stakeholders in the livestock, meat, and poultry industries from “unfair, deceptive, unjustly discriminatory and monopolistic practices.” The effort, however, was derailed once the large agribusinesses deployed their lobbying forces to Capitol Hill and stopped anything meaningful from getting done.
Now, it’s 2021, and the writer of that piece, Lina Khan, is no longer an unknown D.C. policy wonk, but chair of the Federal Trade Commission, one of the federal government’s two main antitrust enforcement agencies. And on July 9, President Joe Biden, who appointed Khan to her role, issued an executive order containing 72 separate initiatives to crack down on consolidation across the American economy. One of those guidelines instructs the Department of Agriculture, again headed by Vilsack, to update the rules of the PSA along almost precisely the same lines the Obama administration tried.
If the past is prologue, the Biden administration will face a similar battle getting the rule changes enacted. The difference this time, however, is that the effort will have more firepower on its side. Anti-monopolism was a fringe movement in Washington in 2009. There was little to no momentum to mount a battle over changing the rules to an obscure law from the 1920s to protect farmers. All that’s changed. Biden has clearly made antitrust a featured part of his domestic agenda, and there is growing awareness in both parties in Congress about the dangers of today’s Gilded Age–level corporate concentration, with sweeping antitrust bills gathering bipartisan support in both houses.
But as multiple sources deeply entrenched in the fight have told the Washington Monthly, it is far from a sure thing. Big Ag monopolists will not go gently into that good night—and they will pour the same money and resources and deploy the same playbook as last time to trip up the regulatory process in its tracks.
In August 2009, eight months into Obama’s first term, the administration began holding a series of hearings across the country to investigate consolidation in the poultry, dairy, cattle, and seed industries. The impetus was a provision in the 2008 farm bill, passed when George W. Bush was president, that instructed the USDA to update the Packers and Stockyards rules.
In state after state, government officials heard the same stories again and again from livestock producers—that the market was broken, and oppressive. The reason, they were told, was that the federal government had allowed the meatpacking industry to consolidate. The four biggest meatpacking companies controlled 82 percent of the beef market, up from 25 percent in 1976. And the top four poultry processing firms controlled 54 percent of the poultry market, up from 35 percent in 1986. At the hearings, chicken farmers complained that because there are so few buyers for their products, they had no choice but to sign sharecropper-like contracts with one of the few mammoth chicken processors. These contracts obliged them to purchase almost all the supplies they needed—like chicks or feed—from the processors themselves, and to accept whatever prices the processors offered for the grown birds. Whenever farmers would try to negotiate better terms, the companies would often retaliate by sending them back lousy feed or sickly chicks, thereby depressing their incomes even more. The system, in other words, meant the farmers had no choice but to accept the terms—even if those terms were driving them out of business—and to keep their mouths shut in the process.
Based on such testimony, the USDA proposed a new set of rules in June 2010. They included banning company retaliation against farmers who tried to renegotiate a contract; requiring any company that forced farmers to make capital investments to offer contracts long enough for those farmers to recover at least 80 percent of that investment; and, perhaps most importantly, getting rid of a provision that said farmers had to prove that breaches of PSA rules caused industry-wide harm—a standard that made it virtually impossible for farmers to successfully file a claim over a violation. These changes to an old law may not sound like a big deal, but for American livestock farmers, they would be life-changing.
A month later, however, Republicans on the House Agriculture Committee, joined by a few Democrats, assailed the administration for ignoring the concerns of meatpacking industry trade groups, such as the National Chicken Council and the National Cattlemen’s Beef Association. In response, the USDA, under Vilsack, extended the period for public comments on the proposed rules from 60 to 150 days.
That might sound reasonable enough. But the delay proved fatal, for two reasons. First, it pushed the public comment period beyond the midterms, which the Democrats lost. Second, it gave industry trade groups time to commission dubious research to counter the rules. “Anyone can pay economists to come up with studies to support their point of view,” Dudley Butler, then the top USDA official overseeing the livestock industry, told me. “And extending the time for comments allowed them to come back with their studies for why these new rules were going to destroy the industry and hurt consumers and all that.”
In November 2010, Informa Economics, a Memphis-based agricultural research firm that often works with the meatpacking industry, released a report purporting to show that the new rules would cost more than 22,000 jobs, $1.64 billion in meat industry revenue, and $360 million in tax revenue. The data Informa used to calculate these estimates, though, was supplied by the livestock industry trade groups that commissioned the report. Since the data was proprietary, and not available to regulators or outside reform groups, there was no way to check its validity—a classic deep lobbying trick.
Emboldened by the report, House Republicans and their Democratic allies in June 2011 added a rider in a government funding bill to strip the USDA of the funds it needed to implement the strongest of its proposed rule changes. Advocacy groups and farmers fought hard against the rider—6,000 people called the White House—but the industry lobbyists won. While the Senate supported the PSA provisions, the House members waged an all-out offensive over it—holding funding for crucial safety net programs, such as food stamps, hostage.
The maneuver worked. The Obama administration decided this was a war it could not win—and retreated from the fight. By November 2011, the rider passed the House, then made it through the Senate, and was later signed into law by Obama. The next month, the USDA published four watered-down versions of the rule changes, hardly making an impact. The defeat was intensely disappointing for Butler, who resigned from his post in January 2012.
For the next four years, the Obama administration let the issue fall by the wayside. But in its final days, it proposed three rule changes that stemmed from the 2009–11 hearings. Of course, Donald Trump was set to take office in less than a month, so the move was more symbolic than anything else. The Trump administration buried the proposed rule changes.
Today, however, it’s no longer Donald Trump’s Washington. Joe Biden is in the White House, Democrats control both the House and the Senate, and there’s a chance to finish what the Obama administration started.
This summer, Biden ordered the secretary of agriculture to propose new rules that would update the standards by which regulations and enforcement would be applied, almost entirely along Obama’s 2016 order, including getting rid of the current standard that any kind of alleged anticompetitive conduct, or PSA violation, must demonstrate industry-wide harm. Instead, anticompetitive conduct would be a violation simply by virtue of its being anticompetitive.
The new rules would also prohibit grower-ranking systems, which allow poultry companies and contractors to shortchange farmers, and enact anti-retaliation protections for farmers who file complaints.
But the proposals have already faced vociferous opposition from major trade associations that represent Big Ag, such as the North American Meat Institute, which promptly, upon Biden’s order being announced, said the changes would “open the floodgates for litigation” that would hurt livestock producers. They also sent out a flier to reporters that included an economic analysis from the Steiner Consulting Group—a consultancy that, in its mission statement, claims to work to “significantly improve the bottom line of food companies”—that says consolidation isn’t what has led to rising prices of meat. Rather, the report counters, meat has gotten more expensive because of issues of supply and demand.
Reports like this are part of the rhetorical weaponry that skilled Big Ag lobbyists—like Randy Russell of the Russell Group; Michael Torrey, a private attorney; and Kevin Bailey of the firm Finsbury Glover Herring (previously known as the Glover Park Group)—will likely use to try to kill or scale back the regulations.
Even if the USDA manages to issue strong regulations, the meatpacking behemoths will undoubtedly try to challenge them in federal court. In that effort, they will be able to deploy some of DC’s most powerful law firms. Kirkland and Ellis represents Tyson Foods; WilmerHale represents Monsanto; Mayer Brown represents Cargill. These firms will also have the advantage of arguing before a federal bench filled with GOP-appointed judges steeped in anti-regulatory, pro-monopoly thinking.The meatpacking industry released a report purporting to show that the new rules would cost more than 22,000 jobs, $1.64 billion in meat industry revenue, and $360 million in tax revenue. The study’s data, however, was supplied by the industry and there was no way to check its validity—a classic deep lobbying trick.
That’s why, if the Biden administration really wants to protect the plight of farmers from a concentrated food market, it needs not only to update the rules of the Packers and Stockyards Act but also to strengthen the law itself. That’s the only way to guard against the likelihood that conservative judges will toss out the regulations.
Luckily, there’s already a bill in Congress waiting for Biden to start pushing for aggressively: the Farm System Reform Act, sponsored by Senator Cory Booker. (Representative Ro Khanna has introduced a companion bill in the House.) The legislation would codify into law many of the reforms Biden is seeking in the executive order, such as eliminating tournament or ranking systems for contract growers. Thus far, the bill is only supported by Democrats, but congressional staffers who are working on it, as well as Joe Maxwell, the president of Family Farm Action and a former lieutenant governor of Missouri, see a reason to be optimistic that a few Republicans will jump on board.
At a Senate hearing on consolidation in the cattle market, for instance, Republican Senator Chuck Grassley grilled Justin Tupper, the vice president of the United States Cattlemen’s Association, on the need for price discovery mechanisms to ensure that small, independent producers have the same opportunity to market their cattle as the big producers that dominate the industry. It was a clear indication of his antipathy to the current arrangement, in which a small group of massive companies get to run the show. Grassley has also introduced separate legislation to promote more transparency in the cattle market, which has been cosponsored by Democrats as well as Republicans, such as Joni Ernst of Iowa and Steve Daines of Montana. It’s conceivable that enough of these Republicans could get behind a bill to rein in a concentrated food industry to overcome a filibuster.
The case for optimism is that when it comes to agriculture, and the economy generally, the winds have shifted in Washington, with growing bipartisan recognition of the deleterious effects of concentrated markets. The case for pessimism is that corporations generally, and Big Ag in particular, have a deep bench of veteran Washington experts who have proven they know how to block attempts to reform a broken system. Either way, if reformers are going to win this fight, they will have to know what and who they are up against.