How the Meat Industry Bested the Obama Administration. (Hint: It Involved Millions of Dollars.)

What to eat. What not to eat.
March 4 2014 7:52 AM

Meat Industry 1, Obama Administration 0

The president’s ambitious antitrust plan was no match for lobbyists with lots of cash.

(Continued from Page 1)

During an Agriculture Subcommittee hearing in July, the meat lobby’s allies in Congress attacked the proposed antitrust rule as toxic government overreach. Both Democrats and Republicans alike lit into USDA official Edward Avalos who had been propped up to defend the rule. Avalos stuttered and looked nervous, like a bank teller caught with his hand in the till.

David Scott, a Democrat from Georgia who chaired the subcommittee, was almost poetic in his anger as he stared down at Avalos.

“Mr. Undersecretary, I think what you have witnessed with this committee today is a very passionate outpouring of very serious concern that the Agriculture Department, in proposing this new rule, has very seriously—seriously—overstepped their boundaries ... It is what Shakespeare referred to when he said, ‘Et tu, Brutus, yours was the meanest cut of all,’ ” Scott intoned.

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To appease his critics, Vilsack extended the public comment period for the new rule, and said that the USDA would conduct an economic study assessing the rule’s impact on rural America. The study would take more than a year to complete. The extra time for comments and studies was a victory for the meat lobby. As the rule was delayed, it opened the door for a different narrative about the rules to emerge, and for opposition to grow.

To shape the debate, meat company lobbyists used an increasingly common tactic in the Washington influence industry. They stoked a “grassroots” movement of ordinary people who contacted lawmakers to voice complaints and make suggestions that perfectly mirror the wishes of big business. In the meat business, of course, there was no more effective group to enlist for such an effort than farmers themselves. If farmers opposed USDA’s efforts, it was hard to justify them.

On Aug. 4, 2010, the National Chicken Council sent out a confidential memo to poultry companies like Tyson Foods and Pilgrim’s Pride. The memo urged the companies to contact their farmers and ask them to oppose the GIPSA rule by sending comments to the agency.

The memo, which was later leaked to the Agri-Pulse industry news service, focused specifically on the provision that would ban the modern tournament system.

On Oct. 21, GIPSA got an angry letter from Eunice Richardson, an elderly chicken farmer. Richardson raised birds for a small company called Wayne Poultry in Danville, Ark. Richardson said she opposed the new rule, and her letter used language borrowed directly from the memo lobbyist Richard Lobb sent the poultry companies in August of that year.

Richardson said she sent the letter to GIPSA after “they” provided her a copy of the letter to sign. Richardson declined to say who “they” were. She said she didn’t want to do anything that might get Wayne Poultry in trouble. Even though she signed the letter at someone else’s urging, Richardson said she truly believed the GIPSA rule was a horrible idea. She thought it would remove the incentive for farmers to work hard.

Besides, a new rule wouldn’t help her anyway. Richardson declared bankruptcy and lost her farm about a year after she sent the letter. It had gotten harder over the years to pay the bills on her poultry farm. The utility costs kept rising, and her pay didn’t keep up. The final straw came in 2011 when one of her power generators broke down, and she couldn’t afford to pay for repairs. After more than a decade in the poultry business, she declared bankruptcy.

But Richardson didn’t complain. At age 80, she collected Social Security. And she said she loved the Wayne Poultry employees like her own grandkids. The company always treated her fairly, she said.

“I’ll survive,” she said. “That’s life.”

* * *

During the course of 2011, the meat industry’s intensified opposition to the new rule began to foster deep divisions inside Secretary Vilsack’s department of agriculture. This pressure fractured Vilsack’s team into two camps: the pragmatists and the reformers. To the pragmatists, the new rule was starting to look like a disaster. It was the worst of all worlds, in legislative terms. By tackling too many problems in the meat industry, it united the opposition of pork, chicken, and beef companies. The pragmatists wanted to scale back the rule, and ultimately they won out. Vilsack’s team decided to delay enacting the GIPSA rule’s most sweeping reform: the provision that would have made it easier to sue meat companies for unfair or deceptive practices. The USDA would re-propose the provision rather than pass it as a final regulation, giving the industry more time to comment on it and request changes. The agency also decided to delay enacting its reform of the tournament system for poultry payments, changing the measure to an “interim” rule that would be enforced for just 60 days.

In Congress, meanwhile, the meat industry’s big spending was paying off. The House of Representatives passed a spending bill that summer that banned GIPSA from using any money to finalize its new antitrust rule. In essence, the “defunding” provision meant that USDA couldn’t enforce the GIPSA rule even if it was finalized. It was a classic case of Congress using its power of the purse to influence policy in the executive branch. In November, members of the House and Senate met in a closed-door session to iron out their different spending bills into a comprise measure. Inside that conference committee, the GIPSA rule was killed. Congress stripped funding for the GIPSA rule on a remarkably detailed level. The spending bill went through the proposed rule, naming specific paragraphs and provisions, barring USDA from spending any money to enforce them.

After the bill was released, meat industry lobbyists gave a special public thanks to the senators who helped them. Between the Obama administration’s own back-pedaling and Congress’ opposition, the GIPSA rule was dead. A final version of the rule was released in December. It enacted one reform, one that allowed poultry farmers the right to sue meat companies in court if they had a contract dispute (most contracts had previously forced farmers into private arbitration hearings to settle disputes, keeping them away from unpredictable juries). The final rules also contained new guidelines suggesting when a poultry company could cut off of farmer or require a farmer to invest more money in their chicken houses. Those guidelines did not have the binding power of new rules, Vilsack admitted, but he hinted that the new guidelines would act as a deterrent for poultry companies.

A full year-and-a-half after Tom Vilsack promised “a new rural economy,” neither the Department of Agriculture nor the Department of Justice had issued any new policy recommendations. No major antitrust cases were filed. No joint report was issued.

The meat industry’s massive investment in lobbying was well worth the investment. Since Obama has taken office, the nation’s four biggest meat companies have steadily hiked prices and widened their profit margins. Last year alone, Tyson Foods reported a record profit of $778 million as the company raised prices for chicken, pork and beef. And in rural America, companies like Tyson are conducting business as they always have, using the tournament system to make chicken farmers compete against one another.

The only difference is that now, the big meat companies have proved that Washington is incapable of doing anything about it.

From The Meat Racket by Christopher Leonard. Copyright © 2014 by Christopher Leonard. Printed by permission of Simon & Schuster, Inc.

Christopher Leonard is the author of The Meat Racket. He is a Schmidt Family Foundation fellow at the New America Foundation. Follow him on Twitter at @CleonardNews.

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