Federal Farm Promotion ("Check-Off") Programs

This report discusses the so-called beef check-off program, one of a number of generic promotion programs for beef and other agricultural products that Congress has authorized in recent decades. Supporters view check-offs as economically beneficial self-help activities that need minimal government involvement or taxpayer funding. Producers, handlers, and/or importers are required to pay an assessment, usually deducted from revenue at time of sale — thus the name check-off. However, some farmers contend they are being “taxed” for advertising and related activities they would not underwrite voluntarily.

Order Code 95-353 ENR
Updated May 24, 2005
CRS Report for Congress
Received through the CRS Web
Federal Farm Promotion (“Check-Off”)
Programs
Geoffrey S. Becker
Specialist in Agricultural Policy
Resources, Science, and Industry Division
Summary
The U.S. Supreme Court recently affirmed the constitutionality of the so-called
beef check-off program, one of a number of generic promotion programs for beef and
other agricultural products that Congress has authorized in recent decades. Supporters
view check-offs as economically beneficial self-help activities that need minimal
government involvement or taxpayer funding. Producers, handlers, and/or importers are
required to pay an assessment, usually deducted from revenue at time of sale — thus the
name check-off. However, some farmers contend they are being “taxed” for advertising
and related activities they would not underwrite voluntarily. Various challenges in the
federal courts to end the programs had met with some success, and the Supreme Court’s
decision to uphold the beef check-off is considered significant for the future of the other
programs. This report will be updated if events warrant.
Although check-off programs, particularly at the state and regional levels, have
existed for many decades, interest appeared to increase during the 1980s and 1990s, as
commodity groups sought new ways to support their products. Such groups viewed the
programs as economically beneficial farmer self-help activities requiring minimal federal
involvement or funding. USDA’s Agricultural Marketing Service (AMS) has some
administrative and oversight responsibilities, but the producer boards who run the
programs must reimburse AMS for such costs.1
Federally sanctioned programs collect assessments for 16 commodities: avocados
(implemented in 2003; $16.3 million collected in the first nine months of FY2004), beef
($45.9 million collected in FY2004), blueberries ($1.3 million), cotton ($55 million),
dairy products ($87.1 million), eggs ($18 million), fluid milk ($103.2 million), honey
1 This report focuses on free-standing generic promotion programs; it generally does not cover
the similar promotion activities which are part of the regulations dictated by marketing orders
authorized by the Agricultural Marketing Agreement Act of 1937 as amended. For greater detail
on both generic promotion programs and their requirements, and on those associated with
marketing orders, see the USDA-AMS website at [http://www.ams.usda.gov/].
Congressional Research Service ˜ The Library of Congress

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($3.6 million), lamb ($2.5 million), mushrooms ($1.8 million), peanuts ($6.7 million),
popcorn ($600,000), pork ($59.1 million), potatoes ($8.6 million), soybeans ($44.2
million), and watermelons ($1.5 million).2 Other check-offs have been authorized by
Congress but either were not implemented or were terminated by producers in referenda
(e.g., for wheat, flowers, limes, sheep, and pecans).

Title V of the Federal Agricultural Improvement and Reform Act of 1996 (P.L. 104-
127) gave USDA broad-based authority to establish national generic promotion and
research programs for virtually any commodity, either at its own initiative or upon the
request of an industry group, without waiting for specific legislative authority. Prior to
the 1996 law, a check-off necessitated passage of specific authority for an individual
commodity — a route that some producer groups still follow. For example, the Hass
Avocado Promotion, Research, and Information Act of 2000, signed into law on October
23, 2000, explicitly authorized the program that took effect September 9, 2002.
Rationale
Many billions of dollars are spent annually on “branded” U.S. food advertising and
promotion, where one producer pits its name brand against the names of others offering
a similar or substitute product. Perdue chicken and Tropicana orange juice commercials
are examples of branded advertising. Generic ads, on the other hand, have no connection
to the name of a specific producer. Because producers of a basic agricultural product
cannot easily convince consumers to choose a particular egg or potato over another,
generic advertising can help to expand total demand for the product, it is argued. Generic
advertising also uses television, radio, and other media to reach consumers. The Beef: It’s
What’s for Dinner
, and Pork: The Other White Meat ads are examples. The programs
also seek to expand foreign markets and to fund research and education, such as
development of new or improved products or surveys of consumer behavior.
Producers can and do organize voluntary check-offs, but they account for only a
small share of all funding for generic efforts. Since the prototype Florida Citrus
Advertising Tax was instituted in 1935, hundreds of mandatory farm commodity
promotion programs have been legislated by states or the federal government. Nine out
of ten U.S. farmers were contributing to one or more of these efforts by the mid-1990s.3
Many commodity groups prefer mandatory check-offs as a way to address the so-
called “free rider” problem — nonpaying producers who benefit economically from
programs that others have funded. Requests to Congress or USDA to authorize
mandatory check-offs have been prompted by various factors, including the search for
new ways to stimulate product demand, particularly as farm markets have globalized.
Increasing foreign competition has caused U.S. producers to seek more money — from
both public and private sources — to promote food and agricultural sales in other
countries. Also, a belief that voluntary efforts have been ineffective, and the perceived
successes of existing mandatory check-offs, may contribute to interest in new programs.
2 Source: USDA Budget Explanatory Notes for FY2006. Reflects amounts that go to national
boards. Some programs collect additional sums but return them for state-level activities.
3 Armbruster, Walter J., and John P. Nichols. Commodity Promotion Policy. 1995 Farm Bill
Policy Options and Consequences, Texas A&M University, October 1994.

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Supreme Court Cases
Some producers have vigorously challenged mandatory check-off programs. Some
have asked USDA to change or abolish orders it has issued on behalf of the commodity
boards, or petitioned the department to hold a producer referendum on whether a check-
off should continue. Some producers also have filed lawsuits in federal courts. Their key
contention has been that the check-off is a “tax” to fund advertising and other activities
they would not pay for voluntarily. Three cases have reached the U.S. Supreme Court.
In the first, Glickman v. Wileman Brothers and Elliot, Inc., California peach and
nectarine handlers had challenged the USDA marketing order, which is not only a
promotion program but also sets quality standards and other marketing rules for those
fruits (see footnote 1). The 9th Circuit Court of Appeals had held that the order mandating
the assessments violated the affected parties’ First Amendment rights and therefore was
unconstitutional. The Circuit Court stated that such generic advertising had not been
proven necessary or more successful than individual advertising, and also, in effect,
violated the free speech of growers who would prefer to use their money to advertise in
other ways. The government appealed the case to the Supreme Court, which on June 25,
1997, reversed, by a 5-4 vote, the lower court’s ruling. It found that the program “should
enjoy the same strong presumption of validity that we accord to other policy judgments
made by Congress. The mere fact that one or more producers ‘do not wish to foster’
generic advertising of their product is not a sufficient reason for overriding the judgment
of the majority of market participants, bureaucrats, and legislators who have concluded
that such programs are beneficial.”4
However, the Supreme Court on June 25, 2001, ruled 6-3 that mandatory
assessments for the mushroom check-off were a violation of the First Amendment
because they force producers to pay for commercial speech. Upholding a decision by the
6th Circuit Court of Appeals, the Supreme Court reasoned, in United States v. United
Foods, Inc.
, that the program authorized by the Mushroom Promotion Act differs
fundamentally from that under Glickman. The court said that the mushroom check-off
is a stand-alone program that is not part of a broader regulatory scheme, as was the
marketing order for peaches and nectarines.
In Glickman the mandated assessments for speech were ancillary to a more
comprehensive program restricting marketing autonomy. Here, for all practical
purposes, the advertising itself, far from being ancillary, is the principal object of the
regulatory scheme.... Beyond the collection and disbursement of advertising funds
there are no marketing orders that regulate how mushrooms may be produced and
sold, no exemption from the antitrust laws, and nothing preventing individual
producers from making their own marketing decisions.5
4 Glickman v. Wileman Bros. & Elliot, Inc. 521 U.S. 457, 477 (1997).
5 United States v. United Foods, Inc. 533 U.S. 405, 412 (2001). Since the Court’s decision, the
Mushroom Council, the producer board that administers the program, in 2001 reduced the
mandatory assessments and diverted their revenue to non-promotional activities such as research
into mushrooms’ health and nutritional attributes.

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The Supreme Court issued its most recent decision on May 23, 2005. The case,
Johanns v. Livestock Marketing Association, stems from a ruling on June 21, 2002, by a
U.S. district court in South Dakota that the national beef check-off violates the First
Amendment by forcing producers “to pay, in part, for speech to which the plaintiffs
object.” The district court further ruled in the case that the generic advertising conducted
under the Beef Promotion and Research Act and the ensuing Beef Order is not
government speech. The 8th Circuit Court of Appeals announced that it would not
reconsider the district court’s ruling. The federal government appealed to the Supreme
Court, which heard oral arguments on December 8, 2004.
On beef, the federal government argued a point that the Justices had not considered
in the mushroom case: that check-off messages constitute government speech, and so are
not susceptible to a First Amendment challenge. The Supreme Court, in a 6-3 decision,
ruled in favor of the government, upholding the program. The Court stated, in part:
The message set out in the beef promotions is from beginning to end the message
established by the Federal Government. Congress had directed the implementation
of a “coordinated program” of promotion, “including paid advertising, to advance the
image and desirability of beef and beef products.” Congress and the Secretary have
also specified, in general terms, what the promotional campaigns shall contain. ...
Thus, Congress and the Secretary have set out the overarching message and some of
its elements, and they have left the development of the remaining details to an entity
whose members are answerable to the Secretary (and in some cases appointed by him
as well).6
The Supreme Court majority also rejected check-off opponents’ argument that the
program does not qualify as government speech because it is funded by a targeted
assessment rather than by general revenues (e.g., taxes). “Citizens may challenge
compelled support of private speech, but have no First Amendment right not to fund
government speech. And that is no less true when the funding is achieved through
targeted assessments devoted exclusively to the program to which the assessed citizens
object,” the Court concluded. It observed that “the beef advertisements are subjected to
political safeguards more than adequate to set them apart from private messages”:
The program is authorized and the basic message prescribed by federal statute, and
specific requirements for the promotions’ content are imposed by federal regulations
promulgated after notice and comment. The Secretary of Agriculture, a politically
accountable official, oversees the program, appoints and dismisses key personnel, and
retains absolute veto power over the advertisements’ content, right down to the
wording. And Congress, of course, retains oversight authority, not to mention the
ability to reform the program at any time. No more is required.7
In a May 23, 3005, press release, Secretary of Agriculture Johanns said that he was
pleased with the decision. He added that the beef check-off will continue without
interruption and that the department is studying the legal implications for other check-offs
6 Johanns v. Livestock Marketing Assn. and Nebraska Cattlemen v. Livestock Marketing Assn.
(Nos. 03-1164 and 03-1165).
7 Ibid.

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that are being challenged on constitutional grounds. The House Agriculture Committee
Chairman, the National Cattlemen’s Beef Association, the National Pork Producers
Council, the American Farm Bureau Federation, and the National Milk Producers
Federation were among the groups that also reacted favorably to the Supreme Court’s
decision. The National Farmers Union joined the Livestock Marketing Association in
expressing disappointment with the decision.
Outlook for the Programs
The Supreme Court beef ruling could be cited in defending other mandatory check-
off programs from First Amendment challenges. For example, on October 25, 2002, a
federal district court ruled, in Michigan Pork Producers v. Campaign for Family Farms
v. Ann Veneman
, that the pork check-off also is unconstitutional because it violates
complainants’ rights of free speech and association. On October 22, 2003, a three-judge
panel of the Sixth Circuit Court of Appeals agreed with the lower court’s ruling. Cases
also are at various stages in the federal courts on other commodity check-offs.8
Check-off supporters had been considering alternatives in case of an adverse Court
ruling. These included enacting more state-authorized check-off programs, possibly with
language permitting producers to request refunds; placing promotion within a broader
marketing order using the Agricultural Marketing Agreement Act of 1937; establishing
all-voluntary programs; requiring assessments only for research but not promotion
activities; or seeking alternative (e.g., general Treasury) funds for commodity promotion.
Each of these alternatives has perceived strengths and weaknesses; some could require
statutory changes.
It is possible that check-off opponents could continue to challenge other legal aspects
of the programs in the courts, and/or redouble efforts to change USDA rules or the
legislation itself. As the Supreme Court noted, Congress retains final oversight and
statutory authority. It remains to be seen whether check-off advocates also will continue
to examine the need for, and seek, any statutory changes, particularly those aimed at
withstanding any future legal and legislative challenges.9
8 See also “Ruling will likely impact other pending checkoff cases,” AgWeb.com, May 24, 2005.
9 For more information, see Clement E. Ward and Robert J. Hogan Jr., “Beef and Pork Checkoffs:
Challenges, Impacts, Alternatives,” a fact sheet available through the Oklahoma State University
Division of Agricultural Sciences and Natural Resources website, at [http://www.osuextra.com].
Also see the July-August 2001 and September-October 2003 issues of The Agricultural Law
Letter
published (at [http://www.agriculturelaw.com]) by the law office of McLeod, Watkinson,
& Miller, which has assisted groups to establish check-offs; and in Promotion Checkoffs, Why
So Controversial? The Evolution of Generic Advertising Battles
(September 2001) by John M.
Crespi, Cornell University National Institute for Commodity Promotion Research and Evaluation,
available at [http://aem.cornell.edu/special_programs/commodity/nicpre/bulletins/rb0104.pdf].