USDA Seeks Public Information on Industry Consolidation and Anticompetitive Practices in Agricultural Supply Markets | Faegre Drinker Biddle & Reath LLP

Federal agencies continue to roll out new initiatives targeting anti-competitive behavior following President Biden’s July 2021 statement Executive Decree, “Promoting Competition in the American Economy.” The latest action comes from the United States Department of Agriculture (USDA), which released on March 11 three different information requests relating to agricultural markets for fertilizers, seeds and other inputs, and retail products. These applications – open for a 60-day public notice and comment period which will begin to run once the applications are posted on the Federal Register — seek information on harms and threats to competition in agricultural markets along the supply chain. The requests stem directly from the executive order’s directives to the USDA to evaluate its current regulations, enforcement priorities, and relief programs that involve competition concerns, and to propose changes or enhancements to those initiatives, as appropriate. applicable.

Below is a summary of key points to remember about USDA information requests following a brief reminder of the agriculture-specific guidance contained in the Executive Order (“Executive Order”) of the last summer.

Executive Order Overview: Key Takeaways for Food and Agriculture Businesses

The order directs federal agencies to review various types of business practices within their respective jurisdictions to identify anticompetitive behavior and trends. It further directs agencies, including the USDA, to take action where necessary – whether through new rules or programs, or both – to reverse what the Order describes as “ dangerous tendencies” which have “forced[ed] the growth and dynamism of [the American] the economy, harm[ed] the creation of quality jobs and threaten[ed] America’s economic position in the world.

In the agricultural sector in particular, the order posits that the aggressive consolidation and concentration of market power in recent decades has undermined competition in the supply chain of raw materials (e.g. feed, seed, fertilizer, equipment) and other agricultural product markets. These trends, the Order asserts, have caused detrimental effects on the livelihoods of farmers, ranchers and agricultural workers:

The consolidation of the agricultural industry makes the survival of small family farms too difficult. Farmers are caught between market power concentrated in the agricultural input industries – suppliers of seeds, fertilizers, animal feed and equipment – ​​and market power concentrated in the sales channels for agricultural products. As a result, farmers’ share in the value of their agricultural products has declined, and poultry farmers, pig farmers, cattle ranchers and other agricultural workers are struggling to maintain their self-reliance and generate sustainable income.

Based on these perceived market abuses and trends, the order directs the USDA to study market competition, players, and conduct throughout the U.S. agricultural industry and to consider ( but not to require) several different corrective actions, including:

  • Establish new rules under the Packers and Stockyards Act to assist farmers who challenge price exploitative practices and related abuses under the act;
  • Create retaliation protections for farmers who report illegal business practices undertaken by other companies in the supply chain;
  • Adopt new rules to regulate the use of labels for products made in the United States and increase transparency; and
  • Create new programs to support farmers’ access to retail markets, for example by establishing alternative food distribution systems that remunerate farmers fairly.

USDA Information Requests

On March 11, the USDA issued three requests for information (RFI) and public comments on the effects of concentration and market power on seeds and other agricultural inputs, fertilizers and retail. As part of these requests, the USDA also seeks information on the effects of competition and market access on farmers, ranchers, and on new and emerging competitors in the agricultural sector (particularly small and medium-sized companies).

Below is a brief summary of each of the three USDA information requests.

Fertilizer markets

The USDA highlights its Fertilizer RFI highlighting various consolidation trends in the fertilizer industry, largely due to merger activity over the past few decades, which is believed to have resulted in a small number of large food and agricultural companies being left in the market. These remaining companies would have disproportionate market power to wield over farmers, ranchers, farm workers and other participants in the agricultural and food supply chains. The USDA is therefore seeking information to help it “identify and address issues related to competition in the U.S. fertilizer market and other barriers preventing growers from accessing affordable, responsibly produced fertilizers.”

The Fertilizer RFI then sets out 15 questions for commenters to address in public comments. These questions touch on topics ranging from challenges and trends specific to fertilizer markets, to financing and new business growth strategies. The questions also seek guidance on supply chain issues that involve competition and national security concerns, including whether the merged companies exercise market power in price negotiations at all levels of the supply chain, as well as whether the United States’ reliance on foreign fertilizer supplies risks supply disruptions due to geopolitical conflicts, such as Russia’s invasion of Ukraine, or in due to trade wars and similar internal trade issues.

Seeds and other agricultural inputs

Similar to the Fertilizer RFI, the USDA RFI on seeds and agricultural inputs outlines high-level market concentration trends that the USDA says have emerged in recent years in the corn, soybean, grain trading and processing, machinery, and animal genetics markets. Without directly linking recent trends to price issues, the USDA discusses significant cost increases for some seeds and the role that a “healthy IP system plays.” . . to facilitate » research on seed technology.

To address these identified concerns, the USDA draws particular attention to “the effects of various forms of intellectual property, such as patents, on small and medium-sized seed companies and plant breeding programs” and its interest in ensuring fair and globally competitive seed and input markets. . In line with the Fertilizer RFI, the Seeds and Agricultural Inputs RFI solicits responses to 25 questions, which elicit comments on various market issues such as general supply-side barriers, intellectual property, sales practices, and enforcement and policy strategies, including any potential programs or initiatives the USDA may use to address seed affordability issues.

Retail and distribution markets

Finally, the USDA Food distribution and retail market RFI similarly describes current market conditions as suffering broadly the same types of harms caused by the alleged consolidation and abuses of market power identified by the USDA in the fertilizer, seed, and other input market segments agricultural. He notes that in addition to consolidation in the restaurant industry, “insufficient analytical attention has been paid to the links between retail, distribution and processing firms and the implications for competition in supply chains. ‘food and agricultural supply’.

For retail markets, the RFI notes in its preamble that it is particularly interested in whether current rules and regulations under the Packers and Stockyards Act of 1921 and the Robinson-Patman Act of 1936, both of which target discriminatory practices limiting market access in the agricultural industry — can be modified to improve market access and prevent predatory pricing by current market players. The USDA also wants to know if grants, loans, or other programs can help it achieve its policy goals.

RFI’s list of 20 questions on the food retail and distribution markets focuses on topics such as market share dynamics, food supply and distribution, exclusivity agreements, labeling, transportation systems, and enforcement and policy strategies the USDA might consider to improve access to food. and distribution markets by independent processors.

Final Thoughts

The USDA’s decision to issue the three RFIs (Fertilizer, Seed & Ag Inputs, Food Retail & Distribution Markets) stems directly from the Order agriculture-centric guidelines and provides food and agriculture businesses the opportunity to be heard on many competition issues raised by the College and the USDA.

Although the College does not require agencies to take action, its “whole-of-governmentThe USDA’s approach to addressing perceived competition concerns throughout the U.S. economy (and the global economy in certain circumstances) clearly informs the USDA’s RFIs, which in their scope and focus , suggest that the USDA is willing to consider multiple major agency actions to address competition issues within its jurisdiction. Indeed, the RFIs indicate that the USDA is willing to adopt several important rule and policy changes, adjust enforcement priorities, and create or improve programs to respond to the government’s view on competition issues. in the agricultural industry. In this context, food and agriculture companies should consider submitting comments to confirm, counter, or reframe the facts as presented by the USDA in their submissions. On this last point, note that the 60-day comment period for submitting responses will begin once the RFIs are officially published in the Federal Registerwhich has not yet taken place, but which should happen in the next few days.

While the full impact of the ordinance on the agriculture industry will not be fully apparent until the USDA receives a response and determines if and how to proceed, at least one thing is clear: the time is right. for agri-food companies to be heard on important competition issues. the problems are now.

Antitrust laws are nuanced and complex, and their application to particular business situations is a factual inquiry. Businesses concerned about the impact of recent developments on their antitrust risks and exposure are strongly advised to seek legal advice.

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