But Richardson didn’t complain. At age eighty, she collected social security. And she said she loved the Wayne Poultry employees like her own grandkids. The company had always treated her fairly, she said.
“I’ll survive,” she said. “That’s life.”
* * *
The public comment from Tyson Foods on the GIPSA rule didn’t look like a letter. It looked like a lawsuit. The document was far more detailed than the messages farmers sent into GIPSA. Tyson submitted a legal brief that was 335 pages long, including exhibits. The cover page was presented in the format of a court filing, with the prominently displayed names of seven attorneys from Washington, D.C., and Tyson’s headquarters in Springdale.
If GIPSA ever wondered what a legal challenge to the new rule would look like, they had their answer in Tyson’s comment. The document argued against virtually every aspect of the rule and challenged GIPSA’s very authority to enforce it.
The letter showed that Tyson was not ready to accept any of the rules. It wasn’t ready to adopt the kind of tournament system that Smithfield used for its profitable hog farms in Iowa. Tyson’s brief defended its tournament in different terms than were used in the letters that chicken farmers signed. Tyson’s defense of the tournament was a little more honest. The company acknowledged that the tournament was basically a way to punish farmers who didn’t upgrade their chicken houses. Without the tournament, Tyson wouldn’t have a lever to force farmers to upgrade or build new structures.
The company also suggested it could not tolerate a tournament with a guaranteed base payment, in part because that would disrupt the “settled expectations” of farmers who invested in new chicken houses expecting premium payments. The company didn’t mention the “settled expectations” of farmers with older housing, who didn’t know their pay would be docked when neighbors built new farms.
The message to GIPSA was clear: If you finalize this rule, we’ll see you in court.
* * *
The final hearing in the series of USDA/DOJ workshops was held in Washington, D.C., and it examined the growing gap between what consumers pay for food and what farmers earn for growing it. Between 1989 and 2009, the price that consumers paid for beef in the grocery store rose 60 percent. But the price of cattle rose only 12 percent. The price of pork in the grocery store rose 50 percent in that time, while the price of hogs on the farm actually fell 11.5 percent. The USDA couldn’t determine the gap for chicken because there wasn’t a good way to determine the price on the farm. In a vertically integrated system the company always owned the birds, and it kept the prices confidential.
David Murphy arrived at the hearing with some heavy boxes. Murphy was the liberal farm activist from Iowa who organized the presidential summit of 2007, where candidate Obama had laid down such a strong position on corporate agribusiness. Murphy had traveled the country during 2010 to attend the workshops that grew from this promise, and Murphy’s hopes were high. Activists like Murphy had grown jaded over the years, watching such hearings. He called them “show trials,” because they always seemed to end without any significant changes to public policy. But he thought this time might be different. The officials involved, from Tom Vilsack to Eric Holder to Christine Varney, seemed serious.
When he traveled to Washington for the final hearing, Murphy brought boxes full of petitions, signed by people who wanted the Obama administration to take tough antitrust actions against Tyson and its peers. Murphy was granted a private meeting with Christine Varney and John Ferrell, the head of GIPSA.
Murphy presented Varney with the petitions and told her the administration needed to act, now that it was finished with its nationwide listening tour.
Varney seemed sympathetic to his cause. But she also seemed hesitant.
— There are real problems out there. But we’re having difficulty getting people to agree on how to move forward, she said.
* * *
During the course of 2011, the meat industry’s intensified opposition to the GIPSA rule began to foster deep divisions within Secretary Vilsack’s Department of Agriculture.
The GIPSA rule became a convenient scapegoat for Tyson Foods and its lobbyists to attack as the industry sought to push back efforts at reform. The rule came to represent everything the meat industry saw as wrong with the administration. It was portrayed as a job killer and the misguided work of bureaucrats who didn’t understand how the real world worked. An information campaign spread through rural America, promoted by groups like the National Chicken Council and the National Cattlemen’s Beef Association, which portrayed the GIPSA rule as the first step toward the economic ruin of the meat business.
This pressure fractured Secretary Vilsack’s team into two camps: the pragmatists and the reformers.
To the pragmatists, the GIPSA rule was starting to look like a disaster. It was the worst of all worlds, in legislative terms. One single rule managed to infuriate all the major meat producers, from beef packers to chicken companies and industrial hog producers. By trying to regulate so many things at once, the rule managed to unite all the various meat companies against it. The pragmatists wanted to scale back the rule. They considered stripping some parts out, with the intention of pursuing them later. Some parts of the rule could be dropped altogether. The pragmatist camp had powerful advocates in Vilsack’s office, including Krysta Harden, who became Vilsack’s chief of staff in 2011. Harden had been Vilsack’s liaison to Congress since 2009, and she was well attuned to the political horse trading that was necessary to get anything substantive done in Washington. John Ferrell, the young head of GIPSA and other agencies, had also spent years on the Hill, and he tended to lean toward the pragmatist camp.
Another pragmatist was Anne Cannon MacMillan, a senior advisor to Vilsack. MacMillan had spent years as a staffer and policy advisor to the Democratic congressman Dennis Cardoza. Cardoza worked closely with agribusiness firms, which did big business in his home state of California. Over the last decade, agribusiness was the single biggest industry that supported Cardoza with campaign contributions.
In the reformer camp, there was Dudley Butler. The Mississippi attorney had come to Washington with one thing in mind: reforming the meat industry. He didn’t seem prepared to change course. During a series of meetings that year, staffers from Vilsack’s office (people from “across the street,” as they were referred to inside GIPSA, with just a note of derision) pressed Butler to compromise. Butler appeared to view this effort with growing contempt. It looked to him as if the political people around Vilsack were swapping provisions from the GIPSA rule as if they were just so many words on paper. But the impact the changes could have in rural America would be profound. Butler didn’t have time for smoothing egos in Congress in order to do what he considered the right thing. He had expected a fight from the meat industry, and he was ready to engage it.
It seemed as if Anne MacMillan’s job description became centered on one thing: babysitting Dudley Butler. Their exchanges sometimes grew contentious in meetings. MacMillan could point to the mountains of public comment against the GIPSA rule and the growing opposition in Congress.
— Nobody likes this rule! she said.
— There are hundreds of thousands of farmers that support this rule, Butler replied. At times he appeared to have difficulty disguising his disdain for MacMillan and other policy aides.
The two sides seemed at a stalemate. And as they argued, the meat industry enlisted more members of Congress to its side and told more ranchers and farmers how the rule could destroy their livelihoods.
Secretary Vilsack called a meeting in his office to discuss the GIPSA rule. He sat down at a conference table with Dudley Butler, Vilsack’s top attorney Ramona Romero, and others. Vilsack laid out the situation in stark terms. The GIPSA rule was becoming a lightning rod for opposition, and they needed to figure out a way to move forward.
Vilsack turned to Butler.
— What do you think we should do? Vilsack asked.
— We ca
n either be conciliatory, or we can do what we said we were going to do, Butler replied.
Ultimately, it would be up to Vilsack to decide which way to proceed.
* * *
On a chilly Thursday morning in October 2011, agriculture secretary Tom Vilsack walked into the NBC studios in Manhattan. He was set to appear on the popular cable news show Morning Joe, which was a rare bully pulpit for Vilsack to push his priorities. The show was a busy transit hub for presidential candidates, pundits, and politicians. It helped set the topic of discussion inside Washington, but it was also watched in households across America.
The U.S. Department of Agriculture was just months away from unveiling the final GIPSA rule, potentially the most sweeping antitrust measure since the Great Depression. But Vilsack never mentioned it during his appearance on the show that morning.
Barack Obama’s reelection campaign was just beginning to get under way, and Vilsack seemed to have his campaign talking points ready. During his appearance, Vilsack used American agriculture as a kind of political prop to bolster Obama’s campaign theme that things weren’t all bad in the U.S. economy. It was a tough message to sell in light of the 9.1 percent unemployment rate.
“We’re having a record year in agriculture,” Vilsack told the panelists. “It’s part of a story that’s not told very often in the economy. Trade surpluses, job growth, record income levels.”
Newspaper columnist Mike Barnicle, a frequent panelist on the show, asked Vilsack to elaborate.
“You know, we sit here in this urban cocoon,” Barnicle said. “We have no frame of reference for that. What does it mean to have a record year in agriculture for the rest of the country?”
“Well, one out of twelve jobs in this country is connected to agriculture,” Vilsack responded. “What it means is that farmers and ranchers are enjoying real success for the first time in a while.”
Barnicle looked quizzically at Vilsack while the secretary enumerated the value of crop exports and the promise of free-trade agreements. Barnicle didn’t seem to be buying it.
“Why is it that I still have this mental picture of the family farm disappearing, though, in spite of these record years?” Barnicle asked.
Vilsack had just been handed the ideal opportunity to mention the administration’s efforts to curb the corporate abuses that were driving smaller farmers out of business.
“There’s a lot of excitement and entrepreneurial activity going on in rural America,” Vilsack replied. “There are large, production-sized agricultural firms, no question about that. But we saw in the ag. census that there were 100,000 new farming operations started in this country, very small operations. And these are folks who are connecting locally and regionally, at farmers’ markets.”
As he sat at the round table with the show’s hosts and other guests, Vilsack painted a picture of the rural economy that was diametrically opposed to the one he had depicted a year and a half before in Ankeny, Iowa, when he launched the series of national hearings with Attorney General Eric Holder.
All the worries seemed to have vanished.
* * *
Inside GIPSA, it became clear that Dudley Butler had lost the fight. Butler himself realized this fact when he was no longer invited to critical meetings to finalize the GIPSA rule.
In the fall of 2011, officials from the Department of Agriculture met with their counterparts in the Office of Management and Budget, or OMB. The meetings with OMB were part of the final process for getting the rule approved. OMB’s job was to comb through the rule and evaluate its possible consequences and costs, advising the administration on what it found. It was the final hurdle to pass before the final GIPSA rule could be released.
Butler found out about the OMB meetings after they occurred. He heard secondhand about the concerns some OMB officials had about the rule, and he was frustrated that he couldn’t sit in on the meetings to defend the measure.
Butler was told, for example, that OMB officials were worried that setting a base price for chicken farmers in the tournament system might violate antitrust laws. They thought that setting a base price could be considered a form of price fixing. Butler thought that idea was ridiculous. Hog farmers in Iowa were already guaranteed a base price for the hogs they raised. The base price was more akin to setting a kind of minimum wage than it was to fixing the price of a product. But Butler wasn’t in the room to press his point. He suspected that that’s why he wasn’t invited.
The pragmatist camp was winning out. Parts of the rule were being abandoned, and other sections were going to be proposed again as temporary measures. In late 2011, Butler was presented with a final version of the GIPSA rule and given the choice to sign it or not.
Vilsack’s team gutted the GIPSA rule’s provision that would have reformed the poultry industry’s tournament system for paying farmers. The final rule dropped the all-important measure that would have fixed a base price in the tournament system, which would have given farmers a guaranteed minimum payment rather than risking their financial ruin with each flock.
But the rule did keep one key protection for farmers: It would force companies like Tyson to restrict the tournament to farmers who owned similar chicken houses. That meant that farmers with older houses wouldn’t compete against their neighbors with the newest, most expensive complexes. Such a rule seemed fair to Butler if the tournament was really meant to be an apples-to-apples contest that judged farming techniques rather than equipment.
The final rule over the tournament would be softened in another way. It was going to be presented as an “interim” measure, which would be enforced for just sixty days. That would give the meat industry more time to submit comment and ask for changes.
Vilsack’s team also 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. Vilsack himself had vehemently defended that provision when the rule was initially proposed, saying it was unreasonable to ask a single farmer to prove that a company’s actions against him would harm the meat industry as a whole.
But the so-called “competitive injury” provision had become a political liability over the course of 2011. Kansas Republican senator Pat Roberts attacked the provision, and Dudley Butler, during a congressional hearing that summer. Roberts hinted that Butler was trying to expand the farmers’ right to sue because, as a former trial attorney, Butler was looking forward to a big payday in court after leaving USDA.
As he sat behind the podium at the hearing, Roberts said he was disturbed by the USDA’s “attack” on agriculture.
“I do not want to call into question anyone’s motives. Let me make that clear,” Roberts explained during the hearing. “But I must say that the actions of the USDA on this rule, and the past activities of GIPSA administrator J. Dudley Butler as a lawyer in the private sector, call into question the department’s impartiality on the issue.
“It seems like the fox is guarding the hen house, and we’re missing a few hens,” Roberts said.
Roberts implied that Butler had misled Vilsack on Congress’s intent regarding the GIPSA rule. He also read a direct quote that Dudley Butler had made in an earlier public appearance, in which he called the GIPSA rule “a plaintiff’s lawyer’s dream.”
In fact, Butler had said during the appearance that it was the previous GIPSA regulations that were a trial lawyer’s dream because they were so vague. Butler had said he wanted to better define vague terms in the law like “unfair” and “undue preference,” while putting specific parameters around what was legal and what wasn’t.
Senator Roberts’s comments were inaccurate, but the damage had been done. The provision to help farmers sue under the Packers and Stockyards Act was increasingly seen as government overreach.
The USDA decided it would repropose the “competitive injury” rule rather than pass it as a final regulation, giving the industry more time to comment on it and request changes.
Bu
tler decided to sign the interim GIPSA rule over poultry tournaments and support the reproposal of the competitive injury rule. Even stripped down, the rules would be the strongest regulation passed in decades to curtail the market power of big meat companies.
But Butler’s decision to sign on to the plan would prove to be a moot point. Congress was about to make sure of that.
* * *
The meat industry had spent months, and millions of dollars, building opposition to the GIPSA rule in Congress. In late 2011, the investment paid 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 the 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. But the House couldn’t defund the rule by itself. The spending bill needed to be approved by the Democratic-controlled Senate as well.
Supporters of the GIPSA rule were encouraged when the Senate passed its own spending bill that kept funding for the rule. It appeared that the Democrats on the Hill were prepared to support President Obama’s farm reforms. But in November, members of the House and Senate met in a closed-door session to iron out their different spending bills into a compromise 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 and barring the 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 had helped them, including Pat Roberts from Kansas, who had publicly excoriated Dudley Butler in the Senate hearing. Missouri’s newly elected Republican senator Roy Blunt was also singled out for thanks.
The Meat Racket: The Secret Takeover of America's Food Business Page 32