[Code of Federal Regulations]
[Title 9, Volume 2, Parts 200 to end]
[Revised as of January 1, 2001]
From the U.S. Government Printing Office via GPO Access
[CITE: 9CFR203.18]

[Page 58-59]
 
                  TITLE 9--ANIMALS AND ANIMAL PRODUCTS
 
  CHAPTER II--GRAIN INSPECTION, PACKERS AND STOCKYARDS ADMINISTRATION 
       (PACKERS AND STOCKYARDS PROGRAMS),DEPARTMENT OF AGRICULTURE
 
PART 203--STATEMENTS OF GENERAL POLICY UNDER THE PACKERS AND STOCKYARDS ACT--Table of Contents
 
Sec. 203.18  Statement with respect to packers engaging in the business of custom feeding livestock.

    (a) In its administration of the Packers and Stockyards Act, the 
Grain Inspection, Packers and Stockyards Administration (Packers and 
Stockyards Programs) has sought to promote and maintain open and fair 
competition in the livestock and packing industries, and to prevent 
unfair or anticompetitive practices when they are found to exist. It is 
the opinion of the Administration that the ownership or operation of 
custom feedlots by packers presents problems which may, under some 
circumstances, result in violations of the Packers and Stockyards Act.
    (b) Packers contemplating entering into such arrangements with 
custom feedlots are encouraged to consult with the Administration prior 
to the commencement of such activities. Custom feedlots are not only 
places of production, but are also important marketing centers, and in 
connection with the operation of a custom feedlot, it is customary for 
the feedlot operator to assume responsibility for marketing fed 
livestock for the accounts of feedlot customers. When a custom feedlot 
is owned or operated by a packer, and when such packer purchases fed 
livestock from the feedlot, this method of operation potentially gives 
rise to a conflict of interest. In such situations, the packer's 
interest in the fed livestock as a buyer is in conflict with its 
obligations to feedlot customers to market their livestock to the 
customer's best advantage. Under these circumstances, the packer should 
take appropriate measures to eliminate any conflict of interest. At a 
minimum, such measures should insure:
    (1) That feedlot customers are fully advised of the common ties 
between

[[Page 59]]

the feedlot and the packer, and of their rights and options with respect 
to the marketing of their livestock;
    (2) That all feedlot customers are treated equally by the packer/
custom feedlot in connection with the marketing of fed livestock; and
    (3) That marketing decisions rest solely with the feedlot customer 
unless otherwise expressly agreed.
    (c) Packer ownership or operation of custom feedlots may also give 
rise to competitive problems in some situations. Packers contemplating 
or engaging in the business of operating a custom feedlot should 
carefully review their operations to assure that no restriction of 
competition exists or is likely to occur.
    (d) The Grain Inspection, Packers and Stockyards Administration 
(Packers and Stockyards Programs) does not consider the existence of 
packer/custom feedlot relationships, by itself, to constitute a 
violation of the Act. In the event it appears that a packer/custom 
feedlot arrangement gives rise to a violation of the Act, an 
investigation will be made on a case-by-case basis, and, where 
warranted, appropriate action will be taken.

(Approved by the Office of Management and Budget under control number 
0590-0001)

(7 U.S.C. 203, 204, 207, 217a, 222 and 228)

[49 FR 33004, Aug. 20, 1984]