Letter to all Senators from Senators Grassley and Feingold
Dear Colleague:
As agricultural markets become more concentrated, the rights and bargaining power of farmers are often jeopardized. The traditional model of independent farmer selling to independent processor or cooperative is quickly shifting toward one of contract production, particularly in the livestock and poultry sectors. Under these contract arrangements, large, vertically integrated agribusiness firms have the power to dictate the terms of "take-it-or-leave-it" agricultural production contracts to farmers, who provide the capital, land, and labor to raise the animals to market weight for the company.
In recent years, one of the most abusive contract terms to arise in these non-negotiable agricultural production contracts is the mandatory arbitration clause. Essentially, mandatory arbitration clauses force the farmer or grower to waive their constitutional rights to take legal action against the agribusiness, even in the event of fraud, misrepresentation, discrimination or breach of contract. Instead, the farmer must present their case before a private panel of arbitrators. During this process, the farmer must typically pay exorbitant up-front fees for the right to have their arguments heard, and can be charged additional on-going fees during the hearing process. Basic legal protections, such as the right of discovery and a written record of the basis of the final decision, do not apply. Not surprisingly, even for those who can muster the huge expenses of the process, the farmer rarely prevails in this forum.
Fortunately, we has an opportunity to do something about this problem. During the last farm bill debate, we offered an amendment to stop the use of forced, mandatory arbitration clauses in livestock and poultry contracts. The amendment passed by a strong bipartisan vote, but was dropped in a Conference dispute with the House.
During this Congress, we have again introduced legislation, the Fair Contracts for Growers Act (S. 91), to stop this abusive practice. The bill would simply require both parties to a livestock or poultry contract to agree in writing to pursue arbitration, AFTER a dispute arises. In this way it assures that both parties agree to pursue arbitration voluntarily, instead of allowing one party to be forced to waive their legal protections under duress, leaving themselves open to future fraud and abuse. The bill is nearly identical to legislation enacted in 2002, which provided the same rights and protections for car dealers in their contract relationships with car manufacturers and distributors.
During a October 30, 2003 Judiciary Committee hearing entitled, "Monopsony Issues in Agriculture: Buying Power of Processors in our Nation's Agricultural Markets," mandatory arbitration clauses were referenced repeatedly in witness testimony and Senators' statements as one of the most common forms for abusive contract terms foisted on farmers by dominant agribusiness firms. If Congress turns a blind eye to these contract abuses in the livestock and poultry sector, it will only be a matter of time before such abuses spread to other sectors of agriculture. Now is the time to insist that basic standards of fairness apply in agricultural production contracts.
Please join us by cosponsoring the Fair Contracts for Growers Act (S.91)
Sincerely,
Senator Charles Grassley Senator Russ Feingold |