HF 2734 (LSB 6664YH (5) 91)

HOUSE FILE 2734

BY  SCHOLTEN and TUREK

A BILL FOR

An Act providing for the processing and marketing of meat and poultry products, including by prohibiting vertical integration, providing for a health and safety program, and providing for the divestiture of interests in processors by certain retailers, and providing penalties.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  NEW SECTION.  202D.1  Title.
   This chapter be shall be known and may be cited as the “Retailer-Processor Fairness Act”.
    Sec. 2.  NEW SECTION.  202D.2  Findings and declaration.
   1.  The general assembly finds all of the following:
   a.  Concentration in the meat industry has materially impaired competition, eroding the bargaining power of Iowa farmers, independent processors, and workers, while foreclosing market access through captive supply arrangements, vertical integration, and dominant retailer ownership of meat processing facilities.
   b.  The entry of national retailers with substantial market share into the direct ownership of meat processing creates structural competitive disadvantages for independent Iowa farmers, independent processors, and grocers that existing market mechanisms have failed to remedy.
   c.  Federal law, as evidenced by the Sherman Antitrust Act of 1890, 15 U.S.C. §1 et seq., the Clayton Antitrust Act of 1914, 15 U.S.C. §12 et seq., and the Packers and Stockyards Act of 1921, 7 U.S.C. §181 et seq., reflect more than a century-long federal commitment to competitive agricultural markets.
   2.  The general assembly declares the necessity to extend state enforcement mechanisms to supplement provisions in chapters 202, 202A, 202B, 202C, and 553 in order to further deter the specific threat posed by dominant retailer ownership of meat processing facilities within this state.
    Sec. 3.  NEW SECTION.  202D.3  Definitions.
   As used in this chapter, unless the context otherwise requires:
   1.  a.  “Covered good” means a grocery item, including packaged food or unpackaged food.
   b.  “Covered good” does not include motor fuel, prescription drugs, tobacco products, or alcoholic beverages.
   2.  “Department” means the department of agriculture and land stewardship.
   3.  “Dominant retailer” means any of the following:
   a.  A person that has annual retail sales of covered goods in an aggregate amount exceeding eighteen billion dollars as adjusted each year by an amount equal to the percentage increase, if any, in the consumer price index for all urban consumers for the last available twelve-month period published in the federal register by the federal department of labor, bureau of labor statistics.
   b.  A person who owns or operates at least one storefront or distribution center located in more than twenty states, including this state. 
   4.  “Processor” means any establishment, plant, or operation engaged in the slaughter, fabrication, processing, or packing of livestock or poultry, including but not limited to the production of beef, pork, lamb, chicken, or turkey products.
   5.  “Producer” means a person who holds a legal interest in a land or facility where livestock or poultry are produced.
    Sec. 4.  NEW SECTION.  202D.11  Prohibition on vertical integration.
   1.  A dominant retailer shall not engage in vertical integration by doing any of the following:
   a.  Owning or controlling a processor including through direct ownership, partial ownership, an exclusive contract, or the ownership or control of a livestock operation. A dominant retailer, or a dominant retailer’s purchasing agent, shall not directly or indirectly acquire, hold, or maintain, in whole or in part, an ownership or controlling interest in a processor.
   b.  Entering into an exclusive contract with a producer that requires the sale of livestock or poultry only to that dominant retailer or a processor owned or controlled by the dominant retailer.
   2.  A dominant retailer is liable for a violation of this subchapter committed by a third party contracted by the dominant retailer. 
    Sec. 5.  NEW SECTION.  202D.12  Rulemaking.
   The attorney general, in consultation with the department, shall adopt rules pursuant to chapter 17A to administer and enforce this chapter.
    Sec. 6.  NEW SECTION.  202D.13  Administration and enforcement.
   1.  The attorney general, in consultation with the department of agriculture and land stewardship, shall determine which dominant retailers are engaging in vertical integration as prohibited in section 202D.11. In making this determination the attorney general shall do all of the following:
   2.  a.  Not later than September 1, 2027, and every two years thereafter, assess each person operating as a retailer of covered goods within the state and make a preliminary determination of whether the person is a dominant retailer acting in violation of section 202D.11.
   b.  Publish a preliminary list of the name and address of each person that the attorney general has initially determined to be acting in violation of section 202D.11.
   3.  Not later than October 1, 2027, and every two years thereafter, if necessary, the attorney general, in consultation with the department, shall conduct an inquiry regarding whether a person is a dominant retailer acting in violation of section 202D.11.
   a.  In conducting the inquiry, the attorney general shall do all of the following:
   (1)  Accept evidence, in affidavit form, signed by an individual authorized to represent the person named on the preliminary list stating that the named person is not a dominant retailer acting in violation of section 202D.11. The affidavit shall be sworn to by the affiant before an individual who has authority to administer the oath.
   (2)  Accept petitions or public comment submitted by interested persons, that includes evidence that a person is a dominant retailer acting or not acting in violation of section 202D.11. The evidence shall be admitted using the same standard as provided in section 17A.4. 
   b.  Within thirty days of accepting all evidence described in paragraph “a”, the attorney general, in consultation with the department, shall make a final decision as to whether a person is a dominant retailer acting in violation of section 202D.11. The attorney general’s final decision constitutes final agency action under chapter 17A, and the person may seek judicial review of such agency action pursuant to section 17A.19.
   4.  Notwithstanding subsection 3, a person included on the preliminary list as provided in subsection 2 may demand a contested case proceeding as provided in chapter 17A to determine the question of whether the person is a dominant retailer acting in violation of section 202D.11. The attorney general’s final decision constitutes final agency action under chapter 17A and the person may seek judicial review of such agency action pursuant to section 17A.19.
   5.  The attorney general shall publish a final list of the name and address of each person that the attorney general has determined to be a dominant retailer acting in violation of section 202D.11. A person shall not be included on the final list until after the time that the person’s right to seek judicial review has expired or after all judicial review of the person’s rights has been exhausted, and the attorney general’s final decision has been upheld. The final list shall be posted on the attorney general’s internet site. 
    Sec. 7.  NEW SECTION.  202D.14  Compliance.
   1.  Not later than thirty days after the attorney general publishes a final list that includes the name of a person who the attorney general has determined to be a dominant retailer acting in violation of section 202D.11, the person must submit a compliance plan to the attorney general for approval by the attorney general acting in cooperation with the department. The compliance plan shall specify how the dominant retailer will do all of the following:
   a.  Divest itself of any interest in a processor owned or controlled by the dominant retailer.
   b.  Relinquish any interest in a contract entered into with a producer.
   2.  a.  A person whom the attorney general has determined to be a dominant retailer acting in violation of section 202D.11 included on the final list described in subsection 1 of this section must comply with section 202D.11 within one year from the date the final list is published.
   b.  Notwithstanding paragraph “a”, the attorney general may, upon request of the person described in paragraph “a”, extend the date of compliance by one hundred eighty days if the attorney general determines that the person is acting in good faith to complete the compliance plan. The attorney general may base the decision to extend the period for compliance on criteria established by the attorney general.
    Sec. 8.  NEW SECTION.  202D.15  Injunctive relief.
   The attorney general or a county attorney may apply to the district court for injunctive relief in order to restrain a person from acting in violation of this chapter. 
    Sec. 9.  NEW SECTION.  202D.16  Civil penalty.
   A person who violates a provision of this chapter or rules adopted or orders issued under this chapter is subject to a civil penalty of fifty thousand dollars. Each day of a violation constitutes a separate offense. Moneys imposed, assessed, and collected by the attorney general will be credited to the general fund of the state. 
    Sec. 10.  NEW SECTION.  202D.17  Criminal offenses.
   1.  Except as provided in subsection 2, a person who knowingly violates a provision of this chapter or rules adopted or orders issued under this chapter commits a class “D” felony.
   2.  A person who falsely swears to a fact by an affidavit required in section 202D.13 commits perjury under section 720.2.
    Sec. 11.  NEW SECTION.  202D.21  Health and safety program.
   1.  a.  The department shall establish and administer a program for processors who comply with fair labor practices with financial incentives to support health and safety practices for their employees.
   b.  As used in paragraph “a”, “fair labor practices” includes a processor’s commitment to bargain with unions or associations representing the processor’s employees.
   2.  The department shall implement this program when the general assembly appropriates moneys required to support its administration of a health and safety program to be implemented by participating processors.
    Sec. 12.  CODE EDITOR DIRECTIVE.  The Code editor shall divide chapter 202D, as enacted in this Act, into subchapters and shall designate sections 202D.1 through 202D.10 as subchapter I, sections 202D.11 through 202D.20 as subchapter II, and section 202D.21 as subchapter III.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   GENERAL. This bill creates new Code chapter 202D, providing for the processing and marketing of meat and poultry products. The new Code chapter is divided into subchapter I, which includes general provisions including definitions, subchapter II, which prohibits certain retailers of food items from engaging in vertical integration, and subchapter III, which provides a health and safety program for participating processors.
   FINDINGS AND DECLARATION. The bill finds that concentration in the meat industry has materially impaired competition, eroding the bargaining power of Iowa farmers, independent processors, and workers, while foreclosing market access through captive supply arrangements, vertical integration, and dominant retailer ownership of meat processing facilities. The bill declares the necessity to extend state enforcement mechanisms to further deter the specific threat posed by dominant retailer ownership of meat processing facilities within this state.
   TERMS. Under the bill, a dominant retailer is a person that meets one of two criteria: (1) has annual retail sales of covered goods exceeding $18 billion or (2) operates at least one storefront or distribution center located in more than 20 states, including this state. A covered good includes grocery items, but excludes motor fuel, prescription drugs, tobacco products, or alcoholic beverages. A processor is an establishment engaging in the slaughter or preparation of meat or poultry products. A producer is a person that has a legal interest in land or a facility where livestock or poultry are produced.
   PROHIBITION ON VERTICAL INTEGRATION —— GENERAL. The bill prohibits a dominant retailer from engaging in vertical integration that includes (1) owning or controlling a processor or (2) entering into an exclusive contract with a producer that requires the sale of meat or poultry only to the dominant retailer or a processor controlled by the dominant retailer.
   PROHIBITION ON VERTICAL INTEGRATION —— ADMINISTRATION OR ENFORCEMENT. The bill is administered by the attorney general in consultation with the department of agriculture and land stewardship (DALS). The attorney general must investigate which dominant retailers are engaging in vertical integration. Every two years the attorney general must conduct an inquiry and make a preliminary determination regarding whether a person is a dominant retailer acting in violation of the bill’s provisions prohibiting vertical integration. The attorney general must make a determination based on evidence submitted by the person and interested persons. The evidence may include an affidavit form signed by an authorized individual stating that a retailer is not a dominant retailer acting in violation of the bill. However, a person subject to the inquiry may instead demand a contested case proceeding to decide the matter under the Iowa administrative procedure Act (Code chapter 17A).  In any case, the person has a right to seek judicial review of the attorney general’s final decision. If the attorney general’s final decision is not overruled, the attorney general must include the name of the dominant retailer on a list posted on the attorney general’s internet site. 
   PROHIBITION ON VERTICAL INTEGRATION —— COMPLIANCE. A dominant retailer determined to be engaged in vertical integration must submit a compliance plan to the attorney general specifying how the dominant retailer will comply with the law, including by divesting an interest in a processor or relinquishing an interest in a contract with a producer. The attorney general may apply to the district court for injunctive relief in order to restrain a person from acting in violation of the bill.
   PROHIBITION ON VERTICAL INTEGRATION —— CIVIL PENALTY.  A person who violates a provision of the bill prohibiting vertical integration is subject to a civil penalty of $50,000. Each day that a violation continues constitutes a separate offense.
   PROHIBITION ON VERTICAL INTEGRATION —— CRIMINAL PENALTIES. 

A person who knowingly violates a provision of the bill commits a class “D” felony. A person who falsely swears to a fact by an affidavit commits perjury and is also subject to a class “D” felony. A class “D” felony is punishable by confinement for no more than five years and a fine of at least $1,025 but not more than $10,245.
   HEALTH AND SAFETY PROGRAM. The bill requires DALS to establish and administer a program for a processor that complies with fair labor practices. A participating processor may be awarded financial incentives to support health and safety practices for the processor’s employees. The department must implement the program when the general assembly appropriates moneys required to support its administration.