MEB & PACA
While there is some crossover between MEB and PACA’s areas of authority, as both license those involved in produce handling, the two are distinct agencies with their own approach.
Chiesa explains the difference: “PACA is a federal agency with jurisdiction over product handled interstate and in foreign commerce; MEB is a state agency with jurisdiction over product grown only in California. However, PACA and MEB may share basic information regarding entities required to be licensed with both agencies or that have had disciplinary action taken against them.”
Industry Scorecard
As with any governmental regulatory body, the proof of the pudding is in the eating, and the effectiveness of MEB can be measured by talking to attorneys and industry sources who have worked with the agency.
“In my opinion, MEB is not as influential as the USDA’s PACA, but they do help as much as possible,” says Shandler. “They’ve always been responsive even if they were not able to help solve the issue, they do provide relevant information, and have always followed up on our inquiries.”
Positives
Though legal considerations sometimes prevent the disclosure of full details of investigations, Shandler recalls a specific case where her company requested MEB investigate a produce wholesaler to determine if it was in violation of legal practices. When the investigation indeed found such violations, the business closed up shop and moved to a different area under another name, but MEB enforcement eventually prevented the company from doing further business in southern California.
Patricia J. Rynn, a partner with Los Angeles-based law firm Rynn & Janowsky LLP, has also worked with MEB on both sides of the fence.
“I have represented growers in claims filed with MEB via verified complaints, and have represented buyers and commission merchants in defending claims brought against them by growers,” she explains.
“I have also defended commission merchants and marketing agents when MEB sought to suspend or revoke their licenses.” In many cases, mediation worked to the benefit of all involved parties. “Through 2013,
MEB was very effective in resolving verified complaints against a licensee by conducting mediations,” says Rynn. “These mediations, more often than not, succeeded in obtaining a settlement satisfactory to both sides.”
Rynn also recalled a case in which the MEB’s quick action prevented violation of the Food & Agricultural Code: “A licensed produce dealer had sold a load to another licensee, but became concerned when the driver was directed by the buyer to divert the load from the original destination.” After calling MEB and filing a complaint on behalf of the shipper, Rynn says the load was quickly tracked down and “MEB was able to prevent the theft of highly perishable commodities by an unscrupulous and dishonest licensee.” She applauds the Branch’s “swift and decisive action, a rare trait indeed for a regulatory agency.”
If you buy or sell fresh produce in the Golden State or anywhere in the United States, you know about the Perishable Agricultural Commodities Act (PACA). But you may not be aware of the California Department of Agriculture’s Market Enforcement Branch (MEB). It is tempting to call it PACA’s little brother—but this would be inaccurate as the MEB actually predates PACA by two years.
“The Market Enforcement Branch was established in 1928 with the enactment of the Deciduous Fruit Dealers Act,” explains Laurene Chiesa, MEB surpervisor. “Since that time, its functions and responsibilities have evolved in response to industry needs, and it is responsible for enforcing the laws that the California legislature enacts in response to those needs and changes.”
Defining the MEB
As the produce industry has grown over the decades, the MEB has developed alongside it. Inconsistent and irregular market regulation spurred its creation in California, just before the Great Depression. In 1932 the Deciduous Fruit Dealers Act was repealed and replaced by the Produce Dealers Act, which regulated almost all farm products produced in California and significantly expanded the MEB’s purview.
The Processor’s Law was added in 1935 to regulate purchases from California farms for processing, and saw much government activity to regulate and stabilize the market. Parts of the law were altered repeatedly over the subsequent years, adding more to the MEB’s plate each time.
Most recently, 1998’s Senate Bill 1198 was a major turning point, making substantial shifts in the branch’s licensing, investigatory, and legal settlement powers, as well as changing how fees and revenue are collected.
With jurisdiction over the entire state of California, MEB maintains three main offices (in El Monte, San Francisco, and Sacramento) and nine field investigators, as well as a six-person staff to process licenses. Licensing and agent fees for purchasers, resellers, and processors of California-grown produce generate income for the agency, rather than tax revenues.
“The Market Enforcement Branch does not receive any California general fund money,” notes Chiesa. “The principal license fees are determined by the applicant’s annual dollar volume of business, based on the value of the farm products returned to the grower.”
In addition to handling licenses and generally interpreting and enforcing industry laws and standards, MEB acknowledges and mediates official complaints between growers, packers, and licensees, keeps industry members informed of their rights and responsibilities, and provides licensee data by area, commodity, and category. Its stated mission is to enforce the laws, ensure confidence in and stability to the market, and protect against unfair business practices. Areas of authority include all agriculture, horticulture, viticulture, vegetables, bee products, poultry, and livestock, excluding only timber, milk products, aquaculture, and bonded cattle.
Purpose & Operations
The Market Enforcement Branch serves the industry in a number of ways, and provides an increasing range of services.
Though the mission of the MEB is to enforce laws, this is accomplished through a fivefold program of licensing, investigations, disciplinary action, mediation, and outreach.
Licensing
Licensing includes any companies or organizations dealing with the processing or resale of California produce, including dealers, brokers, merchants, buyers, and processors. Investigations can be launched into any suspected violation of California code, and may be initiated by MEB itself or based on a complaint filed by a grower or license-holder.
If violations are found, MEB may take a wide variety of disciplinary actions from simply providing notice of a violation to placing a requirement for a bond, or even suspending or revoking a license.
When necessary, the Branch may even pass a case to local law enforcement for civil or criminal prosecution, though it has no law enforcement arm of its own.
The Complaint Process
Mediation services are provided for complaint resolution between growers and other licensees to avoid costly and rancorous lawsuits, and outreach is offered to licensees and other industry groups to inform them about existing laws, changes to the law, impending regulations, and anything that might impact their compliance or business operation.
Carole Shandler, president and chief executive officer of the Shapiro-Gilman-Shandler Company of Los Angeles, has consulted with MEB representatives on numerous occasions. “When we need information for collection purposes, become aware of an unauthorized person working for or owning an industry business, when we add or delete sales employees, or when we learn of illegal practices on the market, we go to the Market Enforcement Branch,” she says.
If a complaint about illegal practices is filed, MEB investigators will open a file, review documentation, and make a decision about whether or not to bring charges against the violator.
Licensees so charged will be notified in writing and given the opportunity to request a hearing before an independent judge, and both the complainant and the respondent have the opportunity to put forward a case and present witnesses.
Once a decision is made, the judge may authorize MEB to proceed with disciplinary or administrative action, which can range from coverage of fees not paid to loss or revocation of a license.
In some cases, a violator may not submit a license reapplication for up to two years. “Each case is unique based on the particular facts,” Chiesa says, and stressed many cases do not require the adjudication phase, but are settled through notification and mediation.
MEB & PACA
While there is some crossover between MEB and PACA’s areas of authority, as both license those involved in produce handling, the two are distinct agencies with their own approach.
Chiesa explains the difference: “PACA is a federal agency with jurisdiction over product handled interstate and in foreign commerce; MEB is a state agency with jurisdiction over product grown only in California. However, PACA and MEB may share basic information regarding entities required to be licensed with both agencies or that have had disciplinary action taken against them.”
Industry Scorecard
As with any governmental regulatory body, the proof of the pudding is in the eating, and the effectiveness of MEB can be measured by talking to attorneys and industry sources who have worked with the agency.
“In my opinion, MEB is not as influential as the USDA’s PACA, but they do help as much as possible,” says Shandler. “They’ve always been responsive even if they were not able to help solve the issue, they do provide relevant information, and have always followed up on our inquiries.”
Positives
Though legal considerations sometimes prevent the disclosure of full details of investigations, Shandler recalls a specific case where her company requested MEB investigate a produce wholesaler to determine if it was in violation of legal practices. When the investigation indeed found such violations, the business closed up shop and moved to a different area under another name, but MEB enforcement eventually prevented the company from doing further business in southern California.
Patricia J. Rynn, a partner with Los Angeles-based law firm Rynn & Janowsky LLP, has also worked with MEB on both sides of the fence.
“I have represented growers in claims filed with MEB via verified complaints, and have represented buyers and commission merchants in defending claims brought against them by growers,” she explains.
“I have also defended commission merchants and marketing agents when MEB sought to suspend or revoke their licenses.” In many cases, mediation worked to the benefit of all involved parties. “Through 2013,
MEB was very effective in resolving verified complaints against a licensee by conducting mediations,” says Rynn. “These mediations, more often than not, succeeded in obtaining a settlement satisfactory to both sides.”
Rynn also recalled a case in which the MEB’s quick action prevented violation of the Food & Agricultural Code: “A licensed produce dealer had sold a load to another licensee, but became concerned when the driver was directed by the buyer to divert the load from the original destination.” After calling MEB and filing a complaint on behalf of the shipper, Rynn says the load was quickly tracked down and “MEB was able to prevent the theft of highly perishable commodities by an unscrupulous and dishonest licensee.” She applauds the Branch’s “swift and decisive action, a rare trait indeed for a regulatory agency.”
Negatives
Just as the laws governing MEB’s functioning continue to change, so too does the agency itself and the environment under which it operates.
Both Rynn and Shandler report that PACA, though a federal agency, has begun taking more cases involving produce within the state of California in recent years, resulting in a slow decline in the number of complaints filed with MEB and a subsequent lessening of its perceived effectiveness.
Additionally, a 2013 departmental shakeup led to the retirement of the former MEB chief, who had over 30 years of experience. “This left a new chief and investigators,” comments Rynn, “with less experience in conducting mediations, resolving disputes, and overseeing audits.”
The Future
The future of MEB may depend on how the Branch and its personnel are able to handle trade organizations and federal agencies encroaching on the agency’s terrain.
Although industry sources were effusive in their praise regarding disputes and the mediation process, as well as saving time, money, and resources for both the state and the parties involved—the days ahead could present a number of challenges.
Based on the agency’s extensive history and reputation for workable solutions, the Market Enforcement Branch should be able to weather the storm and continue to provide buyers and sellers of fresh produce with satisfactory results.
Image: Shutterstock
