A History of Agricultural Marketing Legislation in Ontario
This history was written by John C. McMurchy, Q.C. in April 1990. Mr. McMurchy served in the Legal Branch of the Ministry of Agriculture and Food as solicitor for the Ontario Farm Products Marketing Board and the Milk Commission of Ontario (predecessors to the Ontario Farm Products Marketing Commission) and then as their Chairman in the early eighties.
The roots of the marketing board system may be traced to the development of the co-operative movement in the early part of this century. Co-operatives were promoted as a means of enabling producers to band together to improve their strength in the market place. There has been a recognition, for a very long time, that producers of agricultural products, by reason of their relatively small individual size and large numbers, are at a distinct disadvantage in dealing both with buyers of their products and sellers of their supplies. Co-operatives were aimed at correcting this perceived inequity. Through this mechanism, producers could gain the advantage of volume purchasing in buying their inputs and, hopefully, reduce the number of sellers of agricultural raw products, thereby, reducing the ability of dealers, wholesalers and others to play one farmer off against another to drive down farmers' prices.
The 1920's were prosperous years for many segments of society, but were not very good years for farmers. During this period, it became quite clear that a co-operative could have little or no effect on the price paid to producers for their product. Any attempt by a co-operative to hold to a given price on a product simply created an umbrella for producers outside of the co-operative. Outside producers could and did sell for slightly less than the co-operative price. This in turn would create pressure on the co-operative, which resulted in it lowering its price. In any normal situation, the co-operative was forced, however unwillingly, to spiral its prices downward. It became apparent, therefore, that regardless of any benefits, a co-operative might confer on the supply side by buying fertilizer, seed and material for producers, it offered little, if any, advantage when it came to selling the end product.
In the 1920's, therefore, the concept was developed of a compulsory co-operative, which would prevent outside producers from levering price downward. The first marketing board was formed in Queensland, Australia, under the Queensland Primary Products Act in 1922.
The concept was imported into Canada by the province of British Columbia, which enacted a Produce Marketing Act in 1927 and a Dairy Product Sales Adjustment Act in 1929. For various reasons, both of these Acts were struck down by the courts.
If the 1920's were not very good, the 1930's were far worse for farmers. The problem was sufficiently severe that the Canadian parliament enacted The Natural Products Marketing Act in 1934. This legislation provided for the establishment of 'local boards' with considerable powers of regulation. There were 'schemes' established in Ontario for flue-cured and burley tobacco, cheddar cheese and dry beans. When the government was changed after the 1935 election, the new government referred the Act to the courts to obtain a ruling on its validity. In 1937, the Privy Council in the United Kingdom (at that time, the court of last resort for Canada) ruled the Act unconstitutional on the grounds that in various areas it infringed on provincial jurisdiction.
British Columbia had already, in 1934, enacted its own legislation, the Natural Products Marketing Act, possibly anticipating that the federal legislation would be in trouble.
After the federal legislation was struck down, the Ontario government moved quickly to enact the Farm Products Control Act in 1937. Several votes were held among producers that year and in 1938 the first Ontario marketing plans were established. The oldest plans still in existence date back to that era. The Ontario Tender Fruit Producers' Marketing Plan is an amalgamation of two earlier plans (one for fresh fruit and the other for processed fruit) which were in turn outgrowths of a plan for fresh peaches established in 1938 and a plan for processed pears, plums and cherries, also established in 1938. Honours for the oldest plan still administered by the same board go to the Ontario Asparagus Growers' Marketing Plan, which was established in 1938, but, originally, only for processed asparagus. Also in 1938, there was a plan for cheddar cheese established, elements of which are now incorporated into the Ontario Milk Marketing Plan.
It is worth noting a rather fundamental difference between the approach followed in Ontario and that followed in other jurisdictions. In other jurisdictions, the approach was basically that of the 'compulsory co-operative' in which the marketing board handled the sale of the product in much the same way as a co-operative would, with the vital difference that all producers were compelled to belong. The marketing board thus became a full-fledged sales monopoly. While this kind of approach was allowed under the Ontario legislation, a different plan rapidly became the dominant type. The negotiating style marketing plan provided for a 'negotiating agency' composed of members of the marketing board and the buyers. The negotiating agency was empowered to negotiate prices with provision for binding arbitration. This concept more akin in spirit to labour negotiations, was entirely different from the 'compulsory co-operative' approach. So popular did this system become, that by 1960, of 14 plans then in existence, all but two plans were of the negotiating type. The two exceptions were peaches (one of the earliest) and hogs.
The Farm Products Control Act was repealed in 1946 and replaced by the Farm Products Marketing Act with the existing schemes continued in force. That latter Act, with numerous amendments, has been carried forward to today.
The 'compulsory co-operative' (which is my phrase) became known as a 'marketing agency'. The marketing agency provisions in the Act were enlarged and better defined in 1955. Under this concept, there were Actually two bodies paralleling the local board and negotiating agency in the other type of plan. The local board was the producer-operated regulatory body, while the marketing agency was a separate, but closely related producer body, which concerned itself solely with selling the product. The marketing agency was basically a co-operative and was, in effect, controlled by the directors of the local board. The present section 8* of the Act was originally the section that gave the marketing agency power to deal in the product.
Of the two marketing agency plans in existence in 1960, the plan for hogs generated by far the most excitement. The controversy that swirled about this plan lasted for many years and was not resolved until the early 1960's. The Ontario Pork Producers' Marketing Board has produced a history of the plan, which contains an account of the battle that is interesting, though not free from bias.
In the meantime, marketing agencies, as separate entities, had been eliminated from the Act and the marketing agency powers were made available directly to marketing boards in 1960.
While all this Activity had been going on, the negotiating agency plans continued on their way with, for the most part, no basic changes. One negotiating agency plan, however, did introduce a concept at that time new to Ontario marketing plans.
The Ontario Flue-Cured Tobacco Growers' Marketing Board was established in 1957 after a vote of producers. It succeeded an association which, in turn, arose from the ashes of the tobacco plan established under the illfated Canadian Natural Products Marketing Act of 1934. The original plan and the later association had developed a system of quotas related to acreage. This system was basically carried forward into the new plan and was implemented in 1958. Thus began supply management. The Act was amended to ensure the system's workability and some of those provisions are still to be found in section 20, although no longer in use.
The year 1965 was a banner year for marketing boards because of three major events, all of which had farreaching implications.
First, the marketing system for milk operated under the Milk Industry Act had been in disarray. There was widespread dissatisfaction among producers because of disparities in returns between different areas and between fluid and industrial shippers. The government had appointed a 'Royal Commission Inquiry into the Milk Industry' (the Hennessey Commission). Based on the findings in the Commission's Report, the government introduced the Milk Act, 1965, which established the Milk Commission of Ontario and the Ontario Milk Marketing Board. The Milk Plan, as it developed, became the most comprehensive marketing plan in Ontario with power to set price, establish quotas, establish pools and buy and sell all raw milk in the province.
Secondly, longstanding problems in the broiler chicken industry resulted in a vote of producers, which led to the establishment of the Ontario Broiler Chicken Producers' Marketing Plan, which was the first plan under the Farm Products Marketing Act to apply quotas to a food product.
Thirdly, the Ontario Bean Producers' Marketing Board had, over a period of several years, consistently refused to divest itself of control of the Ontario Bean Producers' Co-operative. This co-operative was originally intended to develop into a marketing agency, but with the change in the Act, was no longer needed for that purpose. The local board kept the co-operative operating as a wholly owned subsidiary of the local board. Regular dealers were incensed at having to compete against the Co-operative because it was funded by the local board's compulsory licence fees. The Ontario Farm Products Marketing Board was concerned because the Co-operative operated outside of the Act and, in effect, allowed the local board to do things that a local board could not ordinarily do. The Board placed the local board in trusteeship using three trustees appointed by government. The trustees forcibly separated the local board and the co-operative and established the co-operative as an entirely separate, genuine producer-owned co-operative. Subsequently, the government allowed elections to take place and the trustees then stepped down in favour of the newly elected local board.
After these three major events, it can truly be said that the marketing system assumed a radically different aspect. Supply management was here to stay and accountability of local boards had been tested and enforced.
The next major change was the development of national marketing legislation.
The Canadian Dairy Commission was established in 1966 under The Canadian Dairy Commission Act. This Act showed the potential for national Action to deal with certain problems. The legislation led to the development of a national supply management system for industrial milk and was the first such program to be initiated and carried on. This legislation was specific and could not, therefore, be readily extended to other products. Moreover, the Canadian Dairy Commission was operated by a small board composed entirely of federal government appointees, an approach at which some producers of other commodities looked askance.
In other commodities, the approach taken was to en-Act The National Farm Products Marketing Agencies Act. This Act arose from the socalled 'Chicken and Egg War' of 1971, in which various provinces, especially Ontario and Quebec, used their marketing legislation to retaliate against each other's products. This made it clear that provincial marketing plans were necessarily limited in coping with problems of inter-provincial and international trade. The Act provided for an essentially parallel structure at the federal level intended to dovetail with existing provincial plans.
There is not time in this presentation to deal with the many struggles in the three major national plans for eggs, chicken and turkey, but it should be noted that these plans, if nothing else, have served as the justification for imposition of import quotas. Since none of these products can be produced here at prices competitive with U.S. product, it is arguable that without these three national plans, imports would have severely damaged or destroyed the local industries.
The signing of the Canada-U.S. Free Trade Agreement has, to some degree, loosed the restrictions on imports that are so important to the national marketing agencies. Current GATT negotiations could have an even greater impact. The system of import restriction used in connection with the national marketing agencies depends entirely on Article 11 of the GATT Agreement. That Article is under attack by various nations involved and will, no doubt, continue to be the subject of intense discussion throughout the GATT negotiations.
Marketing plans had, through all of these processes, developed considerable powers. There was a recognition that the effect of these powers on individuals could be drastic. Therefore, in 1965 (that memorable year) the Farm Products Marketing Act was amended to make the Ontario Farm Products Marketing Board a formal appeal body, with right to hear appeals from any decision of a local board. A similar provision was inserted into the new Milk Act while it was being drafted. For a number of years, therefore, both the Ontario Farm Products Marketing Board and the Milk Commission of Ontario heard many appeals of this nature. As time went on, however, it became obvious that this approach had a serious inherent flaw. Both bodies were expected to work with the marketing boards under their jurisdiction in resolving problems. This could result in an appeal coming before either body on a matter in which it had earlier been involved. In such a situation, the Commission or the Board would be open to allegations of bias. To ensure that the appeal system would be impartial, it was decided to pass legislation establishing the Farm Products Appeal Tribunal, under the Ministry of Agriculture and Food Act, to hear such appeals. This amendment came into force in February of 1979, and at that time, the appeal provisions were removed from the Milk Act and the Farm Products Marketing Act. At the same time, the Milk Commission of Ontario and the Ontario Farm Products Marketing Board, although retaining separate legal identities, were administratively merged under the Farm Products Marketing Branch. Also, at the same time, all noncivil servant members of both bodies were transferred to the Tribunal and both bodies became composed entirely of civil servants.
As a result of a study of the operations of the Ontario Farm Products Marketing Board and the Milk Commission of Ontario carried out in 1985, by Ken Knox, it was decided to revert to the earlier concept of having a majority of the members of both bodies drawn from the private sector, with some civil servants remaining as members.
In 1988, by means of an Omnibus Bill, the Legislature enacted a variety of amendments that affected the Farm Products Marketing Act and the Milk Act.
The Ontario Farm Products Marketing Board and the Milk Commission of Ontario, which had been administratively merged in 1979, were now legally merged into a new body under the Ministry of Agriculture and Food Act, known as the 'Ontario Farm Products Marketing Commission'.
In addition, the new legislation revised the licensing provisions in various respects, including providing for licensing to be administered by an appointed Director rather than by the Commission and also clarified and revised certain of the provisions affecting the Farm Products Appeal Tribunal. By and large, however, the revision did not alter the powers of the marketing boards or their relationship to the new Commission.
As you will note, therefore, the Farm Products Marketing Act has not had a major rewriting since 1946 and the Milk Act has remained essentially unchanged since its introduction in 1965. It is obvious, however, that the nature and extent of the marketing board system has changed dramatically over the past few decades. These changes have triggered numerous patchwork amendments. The result of such amendments is to create legislation that, if it ever was easy to understand, is not now.
From the mid 1950's onward, marketing legislation has often been challenged in the courts with several cases going all the way to the Supreme Court of Canada. Generally, by and large, the courts have upheld the legislation. In the few cases where the courts have not upheld the legislation, the Legislature has moved quickly to correct deficiencies, (e.g. the introduction of production quotas in response to the Campbell Soup Case decision).
It would be tedious to review those cases here, but two major decisions should be mentioned.
The government of Canada, at the request of the Ontario government, directed a reference to the Supreme Court of Canada asking that court a number of questions on existing and proposed provisions in the Farm Products Marketing Act and regulations. The decision, handed down in 1957, is a most confusing one since the judges went different ways on different questions and, even where they agreed, did so for different reasons. The decision did, however, establish some major points:
In the 1970's, the Ontario Government directed a reference to the Ontario Court of Appeal asking that court a number of questions on the validity of the Farm Products Marketing Act, The Farm Products Marketing Agencies Act of Canada and The Agricultural Marketing Act of Canada. This case was appealed to the Supreme Court of Canada and the decision was handed down in 1978. The decision was much simpler than the 1957 case and established the following points:
As noted earlier, marketing boards came into being to address problems in the market place which voluntary organizations had been unable to resolve. Implicit in that statement is the recognition that a marketing board is, first of all, an organization to achieve a common position for all producers of a given product by compulsory means. Regardless of all of the other programs that marketing boards may develop, the need to enforce a common position among their own producers is paramount. If a marketing board fails to do that effectively, it loses the ability to carry out its mandate under the legislation. Indeed, the last occasion on which the government of Ontario forcibly dissolved a marketing board and put it out of business, arose for that very reason.
It is normal and expected that there will always be differences in opinion between producers on various points. It is vital for marketing boards that they maintain sufficient credibility among producers to persuade those producers who do not agree with the majority's decisions to abide by such decisions nonetheless. This credibility is attained by establishing the boards as producer organizations elected by producers. (There are two marketing boards that are not composed exclusively of producers, but those were so structured for reasons peculiar to those particular industries).
Of course, given that marketing boards are producer organizations, it is not to be excepted that producers, even with the best intentions, will always make decisions that are acceptable to the general public and that is why there is an Ontario Farm Products Marketing Commission and a Farm Products Appeal Tribunal.
How the various responsibilities are carried out and how the various and sometimes conflicting, interests are reflected, are governed by a complex chain of powers and responsibilities.
As noted earlier, the marketing legislation is enacted by the Legislature.
Our system of government is a representative democracy. Within its jurisdictional area, the Legislature, composed entirely of elected representatives, is the sole source of legal power. The Legislature cannot, given the complexity of modern government, exercise all of its powers directly. Thus, there has evolved a system under which the Legislature, by passing an Act, can delegate or provide for the delegation of its power. The other side of that coin is that all persons or bodies that are given power by the Legislature are called upon to account, directly or indirectly, to the Legislature for the way in which they employ that power.
When we look at the Farm Products Marketing Act, we see that it directly reflects this very fundamental concept: a complex line of power flowing down from the Legislature and an equally important complex line of responsibility flowing back.
It is appropriate to examine, in turn, each of the major participants in the marketing board system and outline the role of each participant's respecting power and responsibility under the Act.
1. In fall 2008, the Cabinet decision to move to a part-time chair was implemented with the appointment of a private citizen from the agri-food sector. Prior to that, the chair was a civil servant. The rest of the members also continue to be private citizens.
2. In 2010, an amendment was made to the Ministry of Agriculture, Food and Rural Affairs Act. As a result, a regulation, policy, order, direction or decision made by the Commission under the Farm Products Marketing Act or the Milk Act that is of general application cannot be appealed to the Tribunal. Where a person is aggrieved by an order, direction, policy or decision of the Commission, that person may request that the Commission reconsider the issue. However, "any order, direction or decision made by the Commission that applies specifically to the aggrieved person, to a group of persons of which the aggrieved person is a member or with respect to a particular dispute or incident involving the aggrieved person" can be appealed to the Tribunal.
Addendum to Factsheet, added in 2013 by Commission staff
Commonly called the Provincial Cabinet, this body has been given various powers by the Legislature under section 5 of the Act. The Minister of Agriculture and Food is, of course, a member of this body and plays a key role in any discussion at Cabinet about marketing boards, but when it comes to making a decision, the Minister is still just one member.
The powers given by the Legislature to the Cabinet are few in number but absolutely vital.
The key powers are:
In addition to those powers, also note that Cabinet has the power, under the Ministry of Agriculture and Food Act, to appoint the members and chairmen and vice-chairmen of both the Ontario Farm Products Marketing Commission and the Farm Products Appeal Tribunal, sections 12(1) & (2) and 14(1) & (2).
As can be seen, while Cabinet does not directly determine the details of a marketing plan, it holds the direct power on the most central and crucial issues; whether or not there will be a marketing board, what products it will regulate and how the directors of a marketing board get elected or appointed. (Election is the norm. Appointment is usually used only where a board is first established or for certain cases where a representative is needed on a board where election is not practical.)
Cabinet's responsibility is, of course, direct to the Legislature since, in general, members of Cabinet are also members of the Legislature. Usually, it is the Minister of Agriculture and Food who has the responsibility of satisfying the Legislature that Cabinet has carried out its powers properly under the Act.
The Minister has very few specially defined powers under the Farm Products Marketing Act. It is clear, under section 4 of the Act, that the Minister is the channel through which recommendations to Cabinet are made. Under section 11(1), the Minister has authority to appoint a Director for the purposes of the Act which primarily relates to certain licensing powers. Finally, the Minister is a signatory to any federal-provincial agreements respecting national marketing agencies under section 22, but only with Cabinet approval.
In fact, the Minister's authority is far broader than it first appears.
Again, I have to refer to the Ministry of Agriculture and Food Act. Under section 2 of the Act, the Minister presides over and has charge of the Ministry. Also, under section 4, the Minister has direction and control of the administration of the law relating to agriculture and food in all their branches and the administration of appropriations under the Ministry. As noted earlier, both the Ontario Farm Products Marketing Commission and the Agriculture, Food & Rural Affairs Appeal Tribunal are established under this Act. Clearly, therefore, they are both part of the Ministry within the charge of the Minister and the Farm Products Marketing Act is also his to administer.
As the member of Cabinet and the member of the Legislature responsible in this area, it is, therefore, the Minister's responsibility to account to the Legislature for any concerns relating to the Farm Products Marketing Act, the Commission or the Tribunal.
The Legislature has sprinkled powers to the Commission throughout the Act, but the main ones are set out in sections 3, 7, 8 and 9.
While it is Cabinet that makes the fundamental decisions, it is the Commission that decides on all of the nuts and bolts that go to make up a complete marketing plan. Basically, the Commission's powers fall into three broad categories.
There are some subject matters on which the Commission may exercise power directly or may, if it chooses, delegate its power to a marketing board, e.g. licensing. There are some subject matters where the Commission cannot exercise any power directly, but has the power to decide whether or not a marketing board can exercise power, e.g. establishing and operating a quota system or setting prices. Finally, there are a few, but very important areas where the Commission has a direct authority of its own that is not available to a marketing board, e.g. declaring a negotiated agreement in force.
Generally speaking, the powers set out in section 3(1) of the Act are ones that the Commission can exercise itself or delegate to a marketing board, as it chooses.
Section 7(1) of the Act is a mixture. Some of the powers may be exercised by the Commission or delegated. Others may only be delegated.
Section 8(1) is entirely composed of powers that the commission cannot itself exercise, but can delegate to marketing boards if it chooses to do so.
An important point here is that whenever the Commission delegates any authority to a marketing board, it can place limitations on that power and can, at any time, revoke the delegation of authority.
Finally, a brief note on two very important powers possessed by the Commission. Section 8(6) of the Act gives the Commission the power, among other things, to give directions to a marketing board. Section 9 of the Act, among other things, gives the Commission the power to revoke any regulation, order or direction made by a marketing board.
It is clear that the Commission has been given very substantial authority and that authority is seen as the means by which the Commission can carry out its responsibility to the Legislature and be accountable for the powers it uses or delegates.
Of course, the Commission does not report directly to the Legislature but rather answers to the Minister, who deals with this area within the Legislature.
The origins of the Appeal Tribunal have already been described. While it is not the purpose of this paper to examine the role of that body in detail, in general it can be stated that the Tribunal is strictly confined to an appeal function and has no day-to-day administrative tasks in supervising marketing boards. Accordingly, it is more removed from the line administration of the Ministry than the Commission.
The powers of the marketing boards are fairly quick to deal with. For all practical purposes the Legislature has not given any significant powers to the marketing boards directly. Fundamentally, the powers of the marketing boards come, as I noted earlier, either from Cabinet or from the Ontario Farm Products Marketing Commission.
The powers given by Cabinet are spelled out in a regulation called the 'Plan'.
The powers given by the Commission are spelled out in a regulation called 'Marketing'.
Those powers must then be exercised by the marketing board, which passes its own regulations, orders and directions to complete the full legal framework under the plan.
The marketing boards exercise those powers subject to lines of responsibility that flow in three directions.
The first, and most obvious, is through the Ontario Farm Products Marketing Commission. I earlier noted the considerable powers that the Commission possesses. The basic concept of the Act was to provide producer groups with the power needed to deal with certain problems. It is obvious that in carrying out those powers, a marketing board may make decisions that affect many groups other than producers.
The Legislature, which, of course, represents all citizens of the province, has constituted the Commission to take into account those broader interests.
The Commission provides for this by requiring regular and timely submission from each marketing board of minutes and other documents. Thus, the line of responsibility extends to the Commission and, ultimately through it to the Minister, Cabinet and the Legislature.
The second line of responsibility is through the Appeal Tribunal. The Tribunal's mandate is not general, but rather specific on a case by case basis. In essence, the Tribunal is not involved unless a specific appeal is brought before it. However, once an appeal is brought, it becomes, in that particular case, part of the line of responsibility flowing back to the Legislature.
The third line of responsibility and one most vital to marketing boards, is the responsibility to producers. This too can be regarded as part of their responsibility to the Legislature. The Legislature set up these producer organizations in the first place to achieve certain benefits for producers. Cabinet has consistently provided election procedures in the various marketing plans, which, of course, allow voting producers to call their directors to account for their actions. That process of calling directors to account obviously serves to ensure that the Legislature's original purpose is carried out. Not only that, but Cabinet has provided for producer meetings and reports from marketing boards to their producers so that producers can make informed decisions.
Section 12 of the Farm Products Marketing Act allows Cabinet to designate an existing, incorporated producer association to carry out programs for promoting their product and collect compulsory licence fees from producers for that purpose. The relationships are not unlike those for marketing boards except that all of the very limited powers involved come directly from Cabinet, not from the Commission. The Commission's role is limited to collecting information and appointing inspectors. It would seem clear that such associations discharge their responsibilities to the Legislature through reports to the Commission. However, if any action by government were needed in relationship to such an association it would have to be taken by Cabinet (presumably on the Commission's recommendations) since Cabinet alone has the necessary authority. There is no involvement of the Appeal Tribunal in the case of such designated associations.
The above discussion of Ontario's agricultural marketing legislation has been brief and to the point of being cursory, but will, I trust, at least serve as a useful quick reference to the principles embodied in that legislation.
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