House File 59HOUSE FILE BY WHITAKER, SWAIM, FREVERT, WESSEL=KROESCHELL, SMITH, WENDT, SCHUELLER, BAILEY, GASKILL, and LUKAN Passed House, Date Passed Senate, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act providing for the regulation of packers and the purchase 2 of swine from producers, and providing for penalties. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 1291HH 82 5 da/je/5 PAG LIN 1 1 Section 1. NEW SECTION. 202D.1 PURPOSE. 1 2 The purpose of this chapter is to increase competition and 1 3 transparency among packers that purchase swine from producers. 1 4 Sec. 2. NEW SECTION. 202D.2 DEFINITIONS. 1 5 1. "Base price" means the price paid for swine, delivered 1 6 to a packer, before application of any premiums or discounts, 1 7 and expressed in dollars per hundred pounds of hot carcass 1 8 weight as calculated in the same manner as provided in 7 1 9 C.F.R. } 59.30. 1 10 2. "Business association" means the same as defined in 1 11 section 202B.102. 1 12 3. "Controlling interest" means actual control of a 1 13 business or the exercise of material participation, directly 1 14 or indirectly, in the management and policies of a business, 1 15 whether through the ownership of voting securities, by 1 16 contract, or otherwise. 1 17 4. "Covered packer" means a packer that is required to 1 18 report to the United States department of agriculture each 1 19 reporting day purchase data and slaughter data regarding swine 1 20 as provided in section 202D.3. However, a covered packer does 1 21 not include a packer which has a controlling interest in only 1 22 one packing plant. 1 23 5. "Department" means the department of agriculture and 1 24 land stewardship. 1 25 6. "Federal Meat Inspection Act" means the same as defined 1 26 in section 189A.2. 1 27 7. "Nonaffiliated producer" means a producer who sells 1 28 swine to a packer. In addition, all of the following must 1 29 apply: 1 30 a. The producer has less than a one percent equity 1 31 interest in the packer, including but not limited to as a 1 32 shareholder, partner, member, or beneficiary. 1 33 b. If the producer is a business association, the packer 1 34 has less than a one percent equity interest in the producer, 1 35 including but not limited to as a shareholder, partner, 2 1 member, or beneficiary. 2 2 c. The producer is not an officer, director, employee, or 2 3 owner of the producer who is also an officer, director, 2 4 employee, or owner of the packer. If the producer is a 2 5 business association, an officer, director, employee, or owner 2 6 of the producer cannot also be an officer, director, employee, 2 7 or owner of the packer. 2 8 d. The producer does not owe a fiduciary responsibility to 2 9 the packer. 2 10 e. If the producer is a business association, the packer 2 11 does not have an equity interest in the producer. 2 12 8. "Packer" means a business association engaged in buying 2 13 swine in commerce for purposes of slaughter, of manufacturing 2 14 or preparing meats or meat food products from swine for sale 2 15 or shipment in commerce, or of marketing meats or meat food 2 16 products from swine in an unmanufactured form acting as a 2 17 wholesale broker, dealer, or distributor in commerce. 2 18 9. "Processing plant" means the geographic location of an 2 19 establishment as defined in section 189A.2 which is both of 2 20 the following: 2 21 a. Subject to inspection by the department pursuant to 2 22 chapter 189A or the United States department of agriculture 2 23 pursuant to the federal Meat Inspection Act. 2 24 b. Slaughters an average of at least one hundred thousand 2 25 swine per year during the immediately preceding five calendar 2 26 years or has the capacity to slaughter that number of swine in 2 27 any one of those years. 2 28 10. "Producer" means a person who holds an ownership 2 29 interest or controlling interest in a business association 2 30 that operates a location where livestock are fed or otherwise 2 31 maintained, including a building, lot, yard, or corral; or 2 32 holds an ownership interest or controlling interest in 2 33 livestock which are fed or otherwise maintained at the 2 34 location. 2 35 11. "Reasonable competitive bidding opportunity" means 3 1 circumstances in which all of the following apply: 3 2 a. A written or oral agreement does not preclude a 3 3 producer from soliciting or receiving bids from other packers. 3 4 b. No circumstances, customs, or practices exist that do 3 5 any of the following: 3 6 (1) Establish the existence of an implied contract. 3 7 (2) Preclude the producer from soliciting or receiving 3 8 bids from other packers. 3 9 12. "Spot market sale" means a purchase and sale of swine 3 10 by a packer from a producer that specifies a firm base price 3 11 that may be equated with a fixed dollar amount on the date the 3 12 agreement is entered into under which the swine are 3 13 slaughtered not more than seven days after the date on which 3 14 the agreement is entered into, and under circumstances in 3 15 which a reasonable competitive bidding opportunity exists on 3 16 the date on which the agreement is entered into. 3 17 13. "Swine" means a porcine animal raised to be a feeder 3 18 pig, raised for seedstock, or raised for slaughter. 3 19 Sec. 3. NEW SECTION. 202D.3 ELECTRONIC PACKER REPORTING 3 20 == PURCHASE DATA FOR SWINE. 3 21 1. The department of agriculture and land stewardship 3 22 shall establish an electronic packer reporting system which 3 23 automatically receives data for all swine purchased and 3 24 slaughtered as reported daily by packers to the United States 3 25 department of agriculture pursuant to 7 U.S.C. ch. 38, subch. 3 26 II, pt. C. The department of agriculture and land stewardship 3 27 shall cooperate with the United States department of 3 28 agriculture as necessary in order to establish and administer 3 29 the electronic system. 3 30 2. The department of agriculture and land stewardship 3 31 shall establish and administer the electronic packer reporting 3 32 system in order to do all of the following: 3 33 a. Provide timely, accurate, and reliable market 3 34 information. 3 35 b. Facilitate more informed marketing decisions. 4 1 c. Promote competition in the swine slaughtering industry. 4 2 d. Enforce the provisions of section 202D.4. 4 3 Sec. 4. NEW SECTION. 202D.4 SPOT MARKET SALE 4 4 REQUIREMENTS. 4 5 For each reporting day, at least twenty=five percent of all 4 6 swine slaughtered by a covered packer must be purchased from 4 7 nonaffiliated producers by spot market sale. 4 8 Sec. 5. NEW SECTION. 202D.5 CITIZEN ACTION. 4 9 If a nonaffiliated producer cannot make a spot market sale 4 10 to a covered packer on a reporting day because a covered 4 11 packer violates section 202D.4, the nonaffiliated producer may 4 12 bring a civil action against the covered packer. The 4 13 nonaffiliated producer may bring the civil action in district 4 14 court for Polk county, the district court of the covered 4 15 packer's principal place of business in this state, or in the 4 16 county where the nonaffiliated producer resides in this state 4 17 or if the nonaffiliated producer is a business association, in 4 18 the county of its principal place of business in this state. 4 19 A covered packer who is guilty of violating section 202D.4 4 20 shall be liable to the nonaffiliated producer for three times 4 21 the amount of the spot market sales price for the swine that 4 22 the nonaffiliated producer would have received if the 4 23 violation had not occurred. The court shall award the 4 24 nonaffiliated producer who prevails in the civil action 4 25 reasonable attorney fees and expert witness fees incurred by 4 26 the nonaffiliated producer, to be paid by the covered packer 4 27 and taxed as part of the costs of the civil action. 4 28 Sec. 6. NEW SECTION. 202D.6 PENALTIES. 4 29 A covered packer who violates a provision of section 202D.4 4 30 is subject to a civil penalty of not more than twenty=five 4 31 thousand dollars. The civil penalties collected under this 4 32 chapter shall be deposited into the general fund of the state. 4 33 Sec. 7. NEW SECTION. 202D.7 ENFORCEMENT ACTION. 4 34 1. a. The attorney general's office is the primary agency 4 35 responsible for enforcing this chapter. 5 1 b. The department shall notify the attorney general's 5 2 office if the department has reason to believe that a 5 3 violation of section 202D.4 has occurred. 5 4 2. The attorney general's office may bring an enforcement 5 5 action in district court in Polk county, in the county where 5 6 the violation occurs, or in the county where the covered 5 7 packer has its principal place of business. The attorney 5 8 general's office may do all of the following: 5 9 a. Apply to the district court for an injunction to do any 5 10 of the following: 5 11 (1) Restrain a covered packer from engaging in conduct or 5 12 practices in violation of this chapter. 5 13 (2) Require a covered packer to comply with a provision of 5 14 this chapter. 5 15 b. Apply to district court for the issuance of a subpoena 5 16 to obtain contracts, documents, or other records of a covered 5 17 packer for purposes of enforcing this chapter. 5 18 c. Bring an action in district court to enforce civil 5 19 penalties as provided in section 202D.6, including the 5 20 imposition, assessment, and collection of the civil penalties. 5 21 EXPLANATION 5 22 This bill regulates packers engaged in the business of 5 23 purchasing swine for slaughter and processing. It is based on 5 24 the federal Agricultural Marketing Act of 1946 and specific 5 25 provisions which require packers to report purchase data 5 26 relating to swine for slaughter to the United States 5 27 department of agriculture (7 U.S.C. ch. 38, subch. II, pt. C). 5 28 The bill is also based on provisions included in S. 325 5 29 introduced in the Senate of the United States on February 6, 5 30 2003, which states an intent to increase competition and 5 31 transparency among packers that purchase livestock, including 5 32 swine from producers. That intention is rephrased in the 5 33 first section of the bill. 5 34 The bill requires the department of agriculture and land 5 35 stewardship to establish an electronic packer reporting system 6 1 which is to automatically receive purchase data and slaughter 6 2 data reported for swine by the United States department of 6 3 agriculture and provided by packers on a daily basis. 6 4 The bill generally defines the term "packer" as a person 6 5 who engages in buying swine for purposes of slaughter, or 6 6 manufacturing or preparing meats or meat food products from 6 7 swine. The bill uses the term "covered packer" to describe a 6 8 packer required to report purchase data or slaughter data for 6 9 swine to the United States department of agriculture. 6 10 Generally, under the federal livestock reporting law, a packer 6 11 is a person who owns a federally inspected processing plant 6 12 which slaughters an average of at least 100,000 swine per year 6 13 during the immediately preceding five calendar years. 6 14 The bill requires that when a covered packer purchases 6 15 swine, it must reserve a percentage of its daily reported kill 6 16 for the purchase of swine from nonaffiliated producers on the 6 17 spot market. The bill defines a "spot market sale", in the 6 18 same manner as federal law, to mean a purchase and sale of 6 19 swine by a packer from a producer that specifies a firm base 6 20 price on the date the agreement is executed, if the swine are 6 21 slaughtered not more than seven days after the date on which 6 22 the agreement is executed. It defines a "nonaffiliated 6 23 producer" to mean a producer who holds no more than a de 6 24 minimus equity interest (shares) in or fiduciary duty to the 6 25 packer. 6 26 The bill provides enforcement mechanisms. A nonaffiliated 6 27 producer may bring a legal action against a covered packer who 6 28 violates the bill's provisions and may be awarded treble 6 29 damages together with reasonable attorney fees and fees for 6 30 expert witnesses. The bill imposes civil penalties upon a 6 31 covered packer who violates the provisions of the bill. 6 32 The attorney general's office is the primary agency 6 33 responsible for enforcing the bill's provisions. The attorney 6 34 general's office may apply to district court for an injunction 6 35 to restrain a covered packer from engaging in conduct or 7 1 practices in violation of the bill's provisions; require a 7 2 covered packer to comply with a provision of the bill; obtain 7 3 a subpoena to obtain contracts, documents, or other records 7 4 for purposes of enforcing the bill's provisions; or bring an 7 5 action in district court to impose and collect the civil 7 6 penalties. The amount of the civil penalties and the 7 7 authority granted to the office of the attorney general are 7 8 similar to provisions included in Code chapter 202B which 7 9 prohibits the ownership of swine operations by processors and 7 10 restricts contract feeding contracts executed by processors 7 11 and producers. 7 12 LSB 1291HH 82 7 13 da:rj/je/5