Ontario Pork Producers' Marketing Board (Re), 2010 ONAFRAAT 15

Agriculture, Food and Rural Affairs Appeal Tribunal

Office of the Minister 77 Grenville Street, 11th Floor Toronto, (Ontario) M7A 1B3 Tel: (416) 326-3074, Fax: (416) 326-3083

Tribunal d’appel de l’agriculture, de l’alimentation et des affaires rurales Bureau de la ministre 7, rue Grenville, 11e étage Toronto (Ontario) M7A 1B3 Tél. : (416) 326-3074, Téléc. : (416) 326-3083

AGRICULTURE, FOOD AND RURAL AFFAIRS APPEAL TRIBUNAL

APPEAL: Minister’s decision on review in the matter of a decision of the Agriculture, Food and Rural Affairs Appeal Tribunal dated February 16, 2010 on appeals of a decision of the Ontario Farm Products Marketing Commission, dated October 6, 2008, regarding the Ontario Pork Producers’ Marketing Board

Minister’s Decision 2010 ONAFRAAT 15

STATUTE: Ministry of Agriculture, Food and Rural Affairs Act

HEARING: In writing

DATE OF DECISION: May 13, 2010

FILE NO.: 2010-15

NEUTRAL CITATION: 2010 ONAFRAAT 15

Minister’s decision on review in the matter of a decision of the Agriculture, Food and Rural Affairs Appeal Tribunal dated February 16, 2010 on appeals of a decision of the Ontario Farm Products Marketing Commission, dated October 6, 2008, regarding the Ontario Pork Producers’ Marketing Board

IN THE MATTER OF THE MINISTRY OF AGRICULTURE, FOOD AND RURAL AFFAIRS ACT, R.S.O. 1990, C. M. 16, AS AMENDED;

AND IN THE MATTER OF: Appeals to the Agriculture, Food and Rural Affairs Appeal Tribunal of a decision of the Ontario Farm Products Marketing Commission, dated October 6, 2008, regarding the Ontario Pork Producers’ Marketing Board

I. Background

On February 16, 2010, I received the decision of the Agriculture, Food and Rural Affairs Appeal Tribunal (Tribunal) dated February 16, 2010 on the above-noted proceeding. Pursuant to subsection 18(1) of the Ministry of Agriculture, Food and Rural Affairs Act, R.S.O. 1990, c. M. 16, as amended (MAFRAA), I have the following authority when reviewing a decision of the Tribunal:

• I can confirm, vary or rescind the whole or any part of the Tribunal’s decision;
• I can substitute any part of the Tribunal’s decision with my own decision as I consider to be appropriate; and
• I can require the Tribunal to hold a new hearing of the whole or any part of the matter appealed to the Tribunal and reconsider its decision.

Given the importance of this issue to the Ontario Hog Industry, I issued a Letter on March 17, 2010 to all of the Parties before the Tribunal indicating that I was going to extend my review period, as permitted under subsection 18(1) of the MAFRAA until, at the absolute latest, May 26, 2010. I also invited the Parties to provide submissions to me and indicated that I would consider those submissions during my review, provided my Office received those submissions by no later than 4 p.m. on April 14, 2010. Finally, my Letter provided some clarity on the policy intent behind section 2 of the Farm Products Marketing Act, R.S.O. 1990, c. F. 9, as amended (FPMA) and how the process of my review of a Tribunal decision operates under section 18 of the MAFRAA. I have included those clarifications in this decision as well for ease of reference.

For brevity purposes, I am not going to provide a detailed summary of each submission or letter I received. I think that it is suffice to say that I have reviewed and considered all submissions by the Parties that complied with the requirements set out in my Letter dated March 17, 2010 as well as all letters I received in making my decision. My decision below will (where appropriate) discuss and rely on the submissions and/or suggestions made in the letters in a more general aspect as well as respond to specific issues raised by the submissions and/or suggestions made in the letters (again, where appropriate).

II. Decision

My decision is based on a thorough review of the Tribunal’s decision (including submissions made to the Tribunal) as well as the decision of the Ontario Farm Products Marketing Commission (Commission) on this matter. I have also reviewed the submissions provided by the Parties and letters provided by other interested persons as well as consulted with OMAFRA staff during my review.

Before proceeding with my decision, however, I would first like to point out that my decision should not be taken to mean that I do not have confidence in the Tribunal. Indeed, I believe that the Tribunal serves an important function within Ontario’s regulated markets. However, and as the Tribunal readily pointed out in its decision, the adversarial process is not necessarily well-suited for resolving complex policy-laden questions. Often, the parties present their favored position(s) without examining or providing information to capture the larger policy issues in which their dispute(s) arise. This, in turn, leaves the decision-maker in a difficult position.

For the reasons that follow, I am of the opinion that it is appropriate in this case to exercise my authority pursuant to clauses 18(1)(a) and (b) of the MAFRAA to confirm, rescind and vary parts of the Tribunal’s decision. For ease of reference, I am going to address each and every aspect of the Tribunal’s decision under the headings “confirm”, “rescind” or “substitute” as well as provide my reasons to confirm, rescind or substitute the Tribunal’s decision. I am also going to, as noted above, repeat the clarification I provided in my Letter dated March 17, 2010 about my role in reviewing a Tribunal decision under section 18 of the MAFRAA.

1. Confirm Parts of Tribunal’s Decision

Pursuant to my authority under clause 18(1)(a) of the MAFRAA, I confirm the following parts of the Tribunal’s decision: (A) the Commission shall appoint a new chair to the Hog Industry Advisory Committee (HIAC) and require HIAC to operate in accordance with Revised Regulations of Ontario, Regulation 419 – Hogs – Marketing (Reg. 419); (B) the Ontario Pork Producer’s Marketing Board (Board) should have the power to collect and disseminate price information on marketing hog sales in an aggregate manner; and (C) the Board should have the authority to collect a fee on all classes of domestic swine produced in Ontario.

A. Commission Shall Appoint a New Chair to HIAC and Ensure HIAC Operates According to Reg. 419

I confirm the Tribunal’s decision that the Commission needs to appoint a new Chair to HIAC and require HIAC to operate in accordance with Reg. 419. Clause 13(2)(a) of Reg. 419 clearly requires the Commission to appoint a new Chair to HIAC in April of each year. Reg. 419 also clearly sets out the roles and responsibilities of HIAC.

Although the Commission enacted Reg. 419, this does not mean that the Commission can simply “ignore” its statutory obligations. The Commission is, just as every other government agency is, required to comply with all applicable legislative requirements. If the Commission believes that HIAC would be more effective if constituted differently, the answer is to amend Reg. 419.

B. Board Continue to Have Power to Collect and Disseminate Price Information in Aggregate

I confirm the Tribunal’s decision that the Board should continue to have the authority to collect and disseminate price information in the aggregate. I note that the Commission’s decision reached the same conclusion on this issue. It is important to have a body be able to collect and provide information to Ontario’s Hog Industry. Given the Board has expertise in the collection and dissemination of information as well as knowledge on the pricing of hogs it makes sense that the Board has the authority to undertake this activity.

C. Board Should Have Authority to Collect Fees on All Classes of Hogs

I confirm the Tribunal’s decision that the Board should have the authority to collect fees on all classes of hogs. I note that the Commission’s decision reached the same conclusion on this issue.

If the Board is going to retain some of its regulatory functions, it will (in light of my decision below) require a source of revenue to do so. Therefore, it makes sense that the Board be able to impose a reasonable fee to cover its operating expenses.

I will leave it to the Board to determine the appropriate method of collecting the fee to offset the Board’s regulatory costs as well as the quantum of such a fee. At the same time, however, I want to make it clear that I also expect that the Board will consult with all hog stakeholders, including the Commission, on its proposed method of collecting the fee as well as the quantum of the fee before implementation. As for the manner of consultation, I will leave that up to the Board to determine the most appropriate means of eliciting stakeholder input. I note in passing that a plebiscite on this issue is not specifically needed (i.e. I am not going to require one), unless, of course, the Board determines that this is the most appropriate means of determining stakeholder views.

In my letter to the Parties, I asked for thoughts on measures that would make the marketing system workable. The Board suggested that it should be able to license producers. I see merit in the idea of the Board issuing licences for two reasons. First, the Board could also use the licenses for traceability purposes, thereby providing an extra level of protection for Ontario’s Hog Industry. Second, the use of licences also appears to be a rather simple solution in terms of both enforcing the fee as well as collecting the fee (i.e. each hog producer would have to be licensed to market hogs in Ontario and that licence fee, which would have to be submitted to the Board, would be set at an amount to cover the Board’s regulatory functions). I note that the Commission has the authority to delegate this authority to the Board and refer the matter to the Commission for its consideration in consultation with the Board.

2. Rescind Part of Tribunal’s Decision

Pursuant to my authority under clause 18(1)(a) of the MAFRAA, I am going to rescind the Tribunal’s decision in relation to its interpretation of section 2 of the FPMA.

As indicated in my Letter dated March 17, 2010, I find that the Tribunal’s interpretation of section 2 of the FPMA is too narrow and unduly limits the available policy options open to the Commission in terms of how farm products can be regulated. In the Letter dated March 17, 2010, I wrote the following which I now incorporate into this decision:

Section 2 of the FPMA provides that the purpose of the FPMA is “to provide for the control and regulation in any or all aspects of the producing or marketing within Ontario…” (emphasis added). Section 2 of the FPMA does not require a single type of regulatory system for a regulated product in Ontario. Rather, it sets out that the FPMA was enacted to allow the Commission and/or a local board (where the Commission has delegated its regulatory power to the local board) to make decisions on what area(s) (if any) of the market should be regulated and how that regulation should be undertaken. For example, it is possible to regulate a regulated product through a licencing system without necessarily requiring a single desk marketing system for that regulated product. Conversely, it is also possible to regulate a regulated product by requiring a single desk marketing system for the regulated product without a licencing system. The decision about the type(s) of regulatory tools that will be used to regulate a regulated product (including whether a single desk or dual desk/open marketing system is used) is up to the Commission, in consultation with local boards.

The above point is further verified by section 7 of the FPMA. Subsection 7(1) of the FPMA gives the Commission the discretionary authority to enact regulations covering a vast variety of areas regarding the producing and marketing of a regulated farm product. Subsection 7(7) of the FPMA also gives the Commission the discretionary authority to delegate or revoke any delegation of its authority to enact regulations in relation to a regulated farm product to a local board. This, in turn, indicates that the FPMA does not require a single type of regulatory model to be used. Indeed, it indicates that a number of regulatory models exist and that it is up to the Commission, in consultation with local boards, to determine the appropriate regulatory model for a given farm product.

It is clear from the submissions in support of the Board retaining its marketing powers that some stakeholders would not necessarily support the above position. Notwithstanding this potential difference of opinion, I still believe that the Tribunal’s interpretation of section 2 of the FPMA is too narrow and does not respect the policy choices that are available (and indeed must be available) to regulate a regulated product. Simply put, section 2 of the FPMA does not set out that a single type of regulatory system must be in use for a regulated product in Ontario and to reach a contrary conclusion undermines the true policy objective of the FPMA, which is to allow for a flexible and fluid regulatory system for all regulated products in Ontario. Therefore, I hereby rescind that portion of the Tribunal’s decision interpreting the meaning of section 2 of the FPMA.

3. Substitute Part of Tribunal’s Decision

Pursuant to my authority under clause 18(1)(b) of the MAFRAA, I am substituting the following parts of the Tribunal’s decision with my own decision: (A) the manner in which Hogs are marketed in Ontario as well as the timing to implement the change; and (B) the time in which the Board is required to complete its governance review.

A. How Hogs Are To Be Marketed In Ontario

i. Marketing Hogs via an Open Market

The Tribunal’s decision on how hogs are to be marketed in Ontario can be broken down into several parts. First, the Tribunal held that sections 5(j) and 9 of Reg. 419 are to remain in place. Second, the Tribunal then provided a blanket exemption for all hog producers in Ontario pursuant to section 5(l) of Reg. 419 for a period of 18 months. Third, the Tribunal ordered the Board to provide a notice of election so that producers could choose whether they wanted to “opt into” the Board selling their hogs or directly market their hogs themselves. Further, those who “opted into” the Board selling their hogs are required to continue with that choice for the entire 18 month time period while those who decided to directly market their hogs could at any time “opt into” the Board selling their hogs and thereafter be required to continue with that choice for the balance of the 18 month time period. Finally, the Tribunal ordered the Board to continue to provide marketing services for all producers who chose to “opt into” the Board selling their hogs for at least 18 months.

The Commission’s decision on this issue, on the other hand, was more straightforward. It ordered the creation of an open market system within five months. Further, under the Commission’s decision, there was no need to review potential marketing options thereafter. Rather, the Commission’s decision was the permanent adoption of the open market system.

Although the Tribunal and Commission’s decisions appear to be at odds with one another, a closer examination reveals that they are, in fact, quite similar. In fact, both the Tribunal and Commission decisions allow for an open market system. The only real difference is the duration of the open market system and whether the issue should be revisited at a later date.

I support the Commission’s open market approach for the Ontario Hog Industry. The Commission’s decision provides for a clearer path forward. It will help to create stability in Ontario’s Hog Industry by resolving an outstanding issue that has been ongoing for more than 10 years now. Under the Tribunal’s decision, this issue would be allowed to go unresolved for a minimum of another 18 months. This time could, of course, be even longer if at the end of the 18 months the Hog Industry is still divided. This allows for more uncertainty within the Hog Industry, which, from a policy perspective, is not desirable.

As for the timing to implement the open market system, I believe that all necessary changes should be in place by no later December 4, 2010. I have chosen this date for the change for several reasons. First, hog producers will be on the land from April to June and it would not be appropriate to try and have them arrange their affairs for the transition while they are tending their fields. December 4, 2010 gives them nearly six months to plan for the transition without having to also worry about being on the land. Second, the Board’s fiscal year should be ending on or about December 4, 2010. Therefore, it makes sense to have the transition correspond to the Board’s new fiscal year as opposed to making a change partway through the Board’s fiscal year. Finally, December 4, 2010 should provide more than enough time for the Commission and the Board to work out the logistics of the transition. This should, in turn, allow for a smoother transition, thereby minimizing any disruption to Ontario’s Hog Industry.

I think that it is important to note that some of the submissions I received suggested that if I decided to implement an open market system that the Board should retain some type of residual power under sections 5(j) and 9 of Reg. 419 to deal with potential emergency situations. I do not, however, believe that this is necessary. If an emergency situation arises, I believe that the Board and the Commission can work together to address it in an efficient and effective manner. For example, nothing in this decision prevents the Commission from delegating authority back to the Board should the need arise. That decision would, however, be up to the Commission in consultation with the Board and the Hog Industry. To ensure certainty, however, I encourage the Commission and the Board, in consultation with the Hog Industry, to develop protocols as to how each will respond in an emergency situation.

I also think that it is important to note that my policy choice of adopting an open market system for Ontario’s Hog Industry does not prohibit the Board from offering marketing services to hog producers. It is clear from the submissions I received that some producers would prefer to continue to use the Board’s marketing services if an open market system were to be implemented. For example, either party to an agreement would still be able to rely on the Board’s expertise to review and provide comments on contracts if they wanted. Further, I note that the Board’s submissions contemplate the Board continuing to offer marketing services in the near term. And, I would encourage the Board to continue to offer its marketing expertise to Ontario’s Hog Industry.

The Board would, however, have to operate somewhat differently. For example, the Board would have to administratively separate its marketing side from its regulatory side to eliminate any potential conflict of interest and/or bias issues of being both the regulator and the regulated. Such a division would also have to include separating any fees the Board may receive for its regulatory functions from its marketing functions in order to ensure that the Board is not receiving an unfair competitive advantage over others who may want to offer marketing services. If the Board is to continue to market hogs, I expect that it will consult with the Commission on how best to separate its marketing function from its regulatory function.

Based on the above, I am going to substitute the Tribunal’s decision regarding the marketing of hogs in Ontario with my own. To implement my decision in this area, I am ordering the following:

• The Commission shall revoke sections 5(j) and 9 of Reg. 419 by no later than December 4, 2010.
• The Board will no longer have the authority to approve contracts. Rather, the Board will only have the authority to review contracts and provide comments when a party to the agreement requests its assistance.
• The Board shall address the logistical aspects of moving from the current system to an open market system. I strongly encourage the Board to work closely with the HIAC and the Commission in developing its implementation plan. More specifically, I expect the Board, in cooperation with industry stakeholders, to address the following (note that this list is not intended to be exhaustive):
  • The applicable fees (if any) for licences;
  • If the Board is going to offer marketing services after the implementation of the open market system, how the Board will separate its regulatory side from its marketing side;
  • What fees (if any) the Board should charge for providing its marketing functions and the quantum of those fees; and
  • The best method of consulting with hog stakeholders (as well as follow that method to effectively obtain their views);
• The existing marketing system will remain in place until the Commission revokes section 5(j) and 9 of Reg. 419.

ii. Merits of a Hog Financial Protection Plan

I note in passing that the Board’s submission asked that if an open market system were to be put in place then it would also like to have some type of swine financial protection program also put into place similar to what already exists for the livestock and grain sectors. I see merit in developing a detailed proposal for a financial protection program, modeled on what exists in the grain and livestock industries. OMAFRA staff is available to work with Ontario Pork to develop this proposal. Any proposal should be cost effective for government, be sensitive to an Open for Business environment and should be broadly supported by the Ontario Hog Industry.

B. Completion of Board’s Governance Review

The Tribunal gave the Board 18 months to complete its governance review. The Tribunal also ordered the Board to hold a plebiscite on any proposed changes.

I understand that the Board has already made significant progress in its governance review and has presented the outcome of that review at its Annual General Meeting. I would like to commend the Board for taking swift action in this area. As the Tribunal order has been overtaken by events, and the Board has gained support from producers for its governance proposal, further consultation is no longer necessary. The Board may now submit its proposed changes to its governance to the Commission for its consideration.

4. Clarifying Minister’s Role in Review of Tribunal’s Decision

As I noted in my Letter dated March 17, 2010, I believe that it is important to clarify a couple of issues regarding the Tribunal’s decision and my authority to review a Tribunal decision. There appears to be some confusion as to the process and what my role is. Therefore, in order to clarify this situation, I am going to reiterate what I provided in my Letter in relation to the process and my authority to review a Tribunal decision.

Pursuant to subsection 18(2) of the MAFRAA, a decision of the Tribunal is not final until after the expiration of my review period (including any extension) unless I vary, rescind or substitute a decision of the Tribunal with my own decision or I order the Tribunal to have a new hearing on the matter. Therefore, it is not appropriate to implement any part of the Tribunal’s decision until my review period (including any extension) expires or I render a decision on my review, whichever comes sooner.

Pursuant to subsection 18(1) of the MAFRAA, I have an independent statutory right to review a Tribunal decision. This means no one has to specifically ask that I review a Tribunal decision. However, I will, of course, consider any request that I do or do not review a Tribunal decision during my initial thirty-day review period or before I render my decision, whichever comes sooner.

Decision dated this 13th day of May, 2010

Carol Mitchell Minister of Agriculture, Food and Rural Affairs