WASHINGTON – Senator Chuck Grassley yesterday introduced legislation that would limit mandatory arbitration arrangements made in contracts between farmers and large agribusiness firms.
Earlier this month, Grassley announced that he would be pushing an agriculture competitiveness agenda as Congress begins to write the 2007 farm bill. At the time, Grassley said that concentration was one of the most important issues in agriculture today. “Vertical integration leaves the independent producer with even fewer choices of who to buy from and sell to. And, it hurts the ability of farmers to get a fair price for their products,” he said.
In recent years agriculture has seen a shift toward contract production. Under many of these contract arrangements, large, vertically integrated agribusiness firms have the power to dictate the terms of "take-it-or-leave-it" production contracts to farmers.
“The mandatory arbitration process puts the farmer at a severe disadvantage. Even in a situation where discrimination or fraud is suspected, a farmer’s only recourse under such a contract is to submit to arbitration. The farmer cannot seek redress in court, even if the result is bankruptcy or financial ruin,” Grassley said. “Arbitration has its benefits in certain cases, so it should be an option, but it should not be the only option.”
When there is a dispute between the packer and the family farmer, and the contract between the two includes an arbitration clause, the family farmer has no alternative but to accept arbitration to resolve the dispute.
The legislation would amend the Packers and Stockyards Act to require that any contract arbitration be voluntarily agreed upon by both parties to settle disputes at the time a dispute arises, not when the contract is signed. This would allow farmers the opportunity to choose the best form of settlement and not have to submit to the packers.
Grassley said he plans to introduce additional pieces of legislation to jump-start the debate. This would include bills that he has introduced at other times during the last few years.
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