House File 2734 - Introduced HOUSE FILE 2734 BY SCHOLTEN and TUREK A BILL FOR An Act providing for the processing and marketing of meat 1 and poultry products, including by prohibiting vertical 2 integration, providing for a health and safety program, and 3 providing for the divestiture of interests in processors by 4 certain retailers, and providing penalties. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 6664YH (5) 91 da/js

H.F. 2734 Section 1. NEW SECTION . 202D.1 Title. 1 This chapter be shall be known and may be cited as the 2 “Retailer-Processor Fairness Act” . 3 Sec. 2. NEW SECTION . 202D.2 Findings and declaration. 4 1. The general assembly finds all of the following: 5 a. Concentration in the meat industry has materially 6 impaired competition, eroding the bargaining power of Iowa 7 farmers, independent processors, and workers, while foreclosing 8 market access through captive supply arrangements, vertical 9 integration, and dominant retailer ownership of meat processing 10 facilities. 11 b. The entry of national retailers with substantial market 12 share into the direct ownership of meat processing creates 13 structural competitive disadvantages for independent Iowa 14 farmers, independent processors, and grocers that existing 15 market mechanisms have failed to remedy. 16 c. Federal law, as evidenced by the Sherman Antitrust Act of 17 1890, 15 U.S.C. §1 et seq., the Clayton Antitrust Act of 1914, 18 15 U.S.C. §12 et seq., and the Packers and Stockyards Act of 19 1921, 7 U.S.C. §181 et seq., reflect more than a century-long 20 federal commitment to competitive agricultural markets. 21 2. The general assembly declares the necessity to extend 22 state enforcement mechanisms to supplement provisions in 23 chapters 202, 202A, 202B, 202C, and 553 in order to further 24 deter the specific threat posed by dominant retailer ownership 25 of meat processing facilities within this state. 26 Sec. 3. NEW SECTION . 202D.3 Definitions. 27 As used in this chapter, unless the context otherwise 28 requires: 29 1. a. “Covered good” means a grocery item, including 30 packaged food or unpackaged food. 31 b. “Covered good” does not include motor fuel, prescription 32 drugs, tobacco products, or alcoholic beverages. 33 2. “Department” means the department of agriculture and land 34 stewardship. 35 -1- LSB 6664YH (5) 91 da/js 1/ 8

H.F. 2734 3. “Dominant retailer” means any of the following: 1 a. A person that has annual retail sales of covered goods 2 in an aggregate amount exceeding eighteen billion dollars 3 as adjusted each year by an amount equal to the percentage 4 increase, if any, in the consumer price index for all urban 5 consumers for the last available twelve-month period published 6 in the federal register by the federal department of labor, 7 bureau of labor statistics. 8 b. A person who owns or operates at least one storefront 9 or distribution center located in more than twenty states, 10 including this state. 11 4. “Processor” means any establishment, plant, or operation 12 engaged in the slaughter, fabrication, processing, or packing 13 of livestock or poultry, including but not limited to the 14 production of beef, pork, lamb, chicken, or turkey products. 15 5. “Producer” means a person who holds a legal interest in a 16 land or facility where livestock or poultry are produced. 17 Sec. 4. NEW SECTION . 202D.11 Prohibition on vertical 18 integration. 19 1. A dominant retailer shall not engage in vertical 20 integration by doing any of the following: 21 a. Owning or controlling a processor including through 22 direct ownership, partial ownership, an exclusive contract, or 23 the ownership or control of a livestock operation. A dominant 24 retailer, or a dominant retailer’s purchasing agent, shall not 25 directly or indirectly acquire, hold, or maintain, in whole or 26 in part, an ownership or controlling interest in a processor. 27 b. Entering into an exclusive contract with a producer that 28 requires the sale of livestock or poultry only to that dominant 29 retailer or a processor owned or controlled by the dominant 30 retailer. 31 2. A dominant retailer is liable for a violation of this 32 subchapter committed by a third party contracted by the 33 dominant retailer. 34 Sec. 5. NEW SECTION . 202D.12 Rulemaking. 35 -2- LSB 6664YH (5) 91 da/js 2/ 8

H.F. 2734 The attorney general, in consultation with the department, 1 shall adopt rules pursuant to chapter 17A to administer and 2 enforce this chapter. 3 Sec. 6. NEW SECTION . 202D.13 Administration and 4 enforcement. 5 1. The attorney general, in consultation with the 6 department of agriculture and land stewardship, shall determine 7 which dominant retailers are engaging in vertical integration 8 as prohibited in section 202D.11. In making this determination 9 the attorney general shall do all of the following: 10 2. a. Not later than September 1, 2027, and every two 11 years thereafter, assess each person operating as a retailer 12 of covered goods within the state and make a preliminary 13 determination of whether the person is a dominant retailer 14 acting in violation of section 202D.11. 15 b. Publish a preliminary list of the name and address of 16 each person that the attorney general has initially determined 17 to be acting in violation of section 202D.11. 18 3. Not later than October 1, 2027, and every two years 19 thereafter, if necessary, the attorney general, in consultation 20 with the department, shall conduct an inquiry regarding whether 21 a person is a dominant retailer acting in violation of section 22 202D.11. 23 a. In conducting the inquiry, the attorney general shall do 24 all of the following: 25 (1) Accept evidence, in affidavit form, signed by an 26 individual authorized to represent the person named on the 27 preliminary list stating that the named person is not a 28 dominant retailer acting in violation of section 202D.11. The 29 affidavit shall be sworn to by the affiant before an individual 30 who has authority to administer the oath. 31 (2) Accept petitions or public comment submitted by 32 interested persons, that includes evidence that a person is 33 a dominant retailer acting or not acting in violation of 34 section 202D.11. The evidence shall be admitted using the same 35 -3- LSB 6664YH (5) 91 da/js 3/ 8

H.F. 2734 standard as provided in section 17A.4. 1 b. Within thirty days of accepting all evidence described in 2 paragraph “a” , the attorney general, in consultation with the 3 department, shall make a final decision as to whether a person 4 is a dominant retailer acting in violation of section 202D.11. 5 The attorney general’s final decision constitutes final agency 6 action under chapter 17A, and the person may seek judicial 7 review of such agency action pursuant to section 17A.19. 8 4. Notwithstanding subsection 3, a person included on 9 the preliminary list as provided in subsection 2 may demand 10 a contested case proceeding as provided in chapter 17A to 11 determine the question of whether the person is a dominant 12 retailer acting in violation of section 202D.11. The attorney 13 general’s final decision constitutes final agency action under 14 chapter 17A and the person may seek judicial review of such 15 agency action pursuant to section 17A.19. 16 5. The attorney general shall publish a final list of the 17 name and address of each person that the attorney general has 18 determined to be a dominant retailer acting in violation of 19 section 202D.11. A person shall not be included on the final 20 list until after the time that the person’s right to seek 21 judicial review has expired or after all judicial review of the 22 person’s rights has been exhausted, and the attorney general’s 23 final decision has been upheld. The final list shall be posted 24 on the attorney general’s internet site. 25 Sec. 7. NEW SECTION . 202D.14 Compliance. 26 1. Not later than thirty days after the attorney general 27 publishes a final list that includes the name of a person who 28 the attorney general has determined to be a dominant retailer 29 acting in violation of section 202D.11, the person must submit 30 a compliance plan to the attorney general for approval by the 31 attorney general acting in cooperation with the department. 32 The compliance plan shall specify how the dominant retailer 33 will do all of the following: 34 a. Divest itself of any interest in a processor owned or 35 -4- LSB 6664YH (5) 91 da/js 4/ 8

H.F. 2734 controlled by the dominant retailer. 1 b. Relinquish any interest in a contract entered into with 2 a producer. 3 2. a. A person whom the attorney general has determined to 4 be a dominant retailer acting in violation of section 202D.11 5 included on the final list described in subsection 1 of this 6 section must comply with section 202D.11 within one year from 7 the date the final list is published. 8 b. Notwithstanding paragraph “a” , the attorney general 9 may, upon request of the person described in paragraph “a” , 10 extend the date of compliance by one hundred eighty days if the 11 attorney general determines that the person is acting in good 12 faith to complete the compliance plan. The attorney general 13 may base the decision to extend the period for compliance on 14 criteria established by the attorney general. 15 Sec. 8. NEW SECTION . 202D.15 Injunctive relief. 16 The attorney general or a county attorney may apply to the 17 district court for injunctive relief in order to restrain a 18 person from acting in violation of this chapter. 19 Sec. 9. NEW SECTION . 202D.16 Civil penalty. 20 A person who violates a provision of this chapter or rules 21 adopted or orders issued under this chapter is subject to 22 a civil penalty of fifty thousand dollars. Each day of a 23 violation constitutes a separate offense. Moneys imposed, 24 assessed, and collected by the attorney general will be 25 credited to the general fund of the state. 26 Sec. 10. NEW SECTION . 202D.17 Criminal offenses. 27 1. Except as provided in subsection 2, a person who 28 knowingly violates a provision of this chapter or rules adopted 29 or orders issued under this chapter commits a class “D” felony. 30 2. A person who falsely swears to a fact by an affidavit 31 required in section 202D.13 commits perjury under section 32 720.2. 33 Sec. 11. NEW SECTION . 202D.21 Health and safety program. 34 1. a. The department shall establish and administer a 35 -5- LSB 6664YH (5) 91 da/js 5/ 8

H.F. 2734 program for processors who comply with fair labor practices 1 with financial incentives to support health and safety 2 practices for their employees. 3 b. As used in paragraph “a” , “fair labor practices” includes 4 a processor’s commitment to bargain with unions or associations 5 representing the processor’s employees. 6 2. The department shall implement this program when the 7 general assembly appropriates moneys required to support its 8 administration of a health and safety program to be implemented 9 by participating processors. 10 Sec. 12. CODE EDITOR DIRECTIVE. The Code editor shall 11 divide chapter 202D, as enacted in this Act, into subchapters 12 and shall designate sections 202D.1 through 202D.10 as 13 subchapter I, sections 202D.11 through 202D.20 as subchapter 14 II, and section 202D.21 as subchapter III. 15 EXPLANATION 16 The inclusion of this explanation does not constitute agreement with 17 the explanation’s substance by the members of the general assembly. 18 GENERAL. This bill creates new Code chapter 202D, 19 providing for the processing and marketing of meat and poultry 20 products. The new Code chapter is divided into subchapter 21 I, which includes general provisions including definitions, 22 subchapter II, which prohibits certain retailers of food items 23 from engaging in vertical integration, and subchapter III, 24 which provides a health and safety program for participating 25 processors. 26 FINDINGS AND DECLARATION. The bill finds that concentration 27 in the meat industry has materially impaired competition, 28 eroding the bargaining power of Iowa farmers, independent 29 processors, and workers, while foreclosing market access 30 through captive supply arrangements, vertical integration, and 31 dominant retailer ownership of meat processing facilities. 32 The bill declares the necessity to extend state enforcement 33 mechanisms to further deter the specific threat posed by 34 dominant retailer ownership of meat processing facilities 35 -6- LSB 6664YH (5) 91 da/js 6/ 8

H.F. 2734 within this state. 1 TERMS. Under the bill, a dominant retailer is a person 2 that meets one of two criteria: (1) has annual retail sales 3 of covered goods exceeding $18 billion or (2) operates at 4 least one storefront or distribution center located in more 5 than 20 states, including this state. A covered good includes 6 grocery items, but excludes motor fuel, prescription drugs, 7 tobacco products, or alcoholic beverages. A processor is an 8 establishment engaging in the slaughter or preparation of meat 9 or poultry products. A producer is a person that has a legal 10 interest in land or a facility where livestock or poultry are 11 produced. 12 PROHIBITION ON VERTICAL INTEGRATION —— GENERAL. The 13 bill prohibits a dominant retailer from engaging in vertical 14 integration that includes (1) owning or controlling a processor 15 or (2) entering into an exclusive contract with a producer 16 that requires the sale of meat or poultry only to the dominant 17 retailer or a processor controlled by the dominant retailer. 18 PROHIBITION ON VERTICAL INTEGRATION —— ADMINISTRATION OR 19 ENFORCEMENT. The bill is administered by the attorney general 20 in consultation with the department of agriculture and land 21 stewardship (DALS). The attorney general must investigate 22 which dominant retailers are engaging in vertical integration. 23 Every two years the attorney general must conduct an inquiry 24 and make a preliminary determination regarding whether a person 25 is a dominant retailer acting in violation of the bill’s 26 provisions prohibiting vertical integration. The attorney 27 general must make a determination based on evidence submitted 28 by the person and interested persons. The evidence may include 29 an affidavit form signed by an authorized individual stating 30 that a retailer is not a dominant retailer acting in violation 31 of the bill. However, a person subject to the inquiry may 32 instead demand a contested case proceeding to decide the matter 33 under the Iowa administrative procedure Act (Code chapter 17A). 34 In any case, the person has a right to seek judicial review 35 -7- LSB 6664YH (5) 91 da/js 7/ 8

H.F. 2734 of the attorney general’s final decision. If the attorney 1 general’s final decision is not overruled, the attorney general 2 must include the name of the dominant retailer on a list posted 3 on the attorney general’s internet site. 4 PROHIBITION ON VERTICAL INTEGRATION —— COMPLIANCE. A 5 dominant retailer determined to be engaged in vertical 6 integration must submit a compliance plan to the attorney 7 general specifying how the dominant retailer will comply with 8 the law, including by divesting an interest in a processor or 9 relinquishing an interest in a contract with a producer. The 10 attorney general may apply to the district court for injunctive 11 relief in order to restrain a person from acting in violation 12 of the bill. 13 PROHIBITION ON VERTICAL INTEGRATION —— CIVIL PENALTY. 14 A person who violates a provision of the bill prohibiting 15 vertical integration is subject to a civil penalty of $50,000. 16 Each day that a violation continues constitutes a separate 17 offense. 18 PROHIBITION ON VERTICAL INTEGRATION —— CRIMINAL PENALTIES. 19 A person who knowingly violates a provision of the bill commits 20 a class “D” felony. A person who falsely swears to a fact by an 21 affidavit commits perjury and is also subject to a class “D” 22 felony. A class “D” felony is punishable by confinement for no 23 more than five years and a fine of at least $1,025 but not more 24 than $10,245. 25 HEALTH AND SAFETY PROGRAM. The bill requires DALS to 26 establish and administer a program for a processor that 27 complies with fair labor practices. A participating processor 28 may be awarded financial incentives to support health 29 and safety practices for the processor’s employees. The 30 department must implement the program when the general assembly 31 appropriates moneys required to support its administration. 32 -8- LSB 6664YH (5) 91 da/js 8/ 8