Packers and Stockyards Programs

Cattle and hog producers have raised concerns about changes in their industries that affect competition, such as mergers among meatpacking companies, increased marketing of livestock through contracts, and greater control by meatpacking companies over livestock production and marketing. Under the Packers and Stockyards Act, the U. S. Department of Agriculture (USDA) is responsible for monitoring the cattle and hog industries and halting unfair and anticompetitive practices. USDA has assigned this responsibility to the Grain Inspection, Packers and Stockyards Administration (GIPSA). Because of continued concerns about whether GIPSA is adequately protecting competition in the livestock markets, GAO reviewed USDA's efforts to implement the Packers and Stockyards Act. This report discusses the number and status of investigations conducted by GIPSA in response to complaints about anticompetitive activity and factors that affect GIPSA's ability to investigate concerns about anticompetitive practices. GAO recommends several actions to improve GIPSA's investigations, including integrating USDA attorneys into GIPSA's investigative teams and adopting more systematic approaches to its investigative work. GAO summarized this report in testimony before Congress; see: Packers and Stockyards Programs: Investigations of Competitive Practices Need Improvements by Lawrence J. Dykeman, Director of Food and Agriculture Issues, before the Subcommittee on Administrative Oversight and the Courts, Senate Committee on the Judiciary. GAO/T-RCED-00-299, Sept. 24 (13 pages).

GAO noted that: (1) from October 1, 1997, through December 31, 1999, GIPSA investigated 74 allegations or concerns about anticompetitive activity involving cattle or hogs; (2) 36 of these investigations were in direct response to specific complaints about anticompetitive activity, and 38 were initiated by GIPSA; (3) at the end of March 2000, 57 of these investigations had been completed and the remaining 17 were ongoing; (4) GIPSA identified a total of five alleged violations of the Packers and Stockyards Act; (5) these alleged violations involved acts by one or a few companies in such areas as deceptive pricing; (6) two principal factors detract from GIPSA's ability to investigate concerns about anticompetitive practices in the cattle and hog markets; (7) the agency's investigations are planned and conducted primarily by economists without the formal involvement of attorneys from USDA's Office of General Counsel (OGC); (8) in contrast, the Department of Justice (DOJ) and the Federal Trade Commission (FTC) have teams of attorneys and economists to perform investigations of anticompetitive practices--attorneys lead the investigations from the outset so that a legal perspective is focused on assessing potential violations of law; (9) also, as GIPSA has built up its staff to include 18 economists to investigate competitive concerns about the cattle and hog markets, the number of OGC attorneys assigned to GIPSA's cases overall has decreased since 1998 from eight to five because of budget constraints, according to USDA's OGC; (10) in addition, most of the 18 economists conducting GIPSA's investigations were hired since 1998 and have limited experience with investigative work related to competition; (11) GIPSA's investigative methods were not designed for addressing complex anticompetitive practice concerns--they were designed for the trade practice and financial issues that the agency has emphasized for years; and (12) in comparison to DOJ and FTC, GIPSA does not require investigations to be: (a) planned and developed on the basis of how a company's actions may have violated the law; and (b) periodically reviewed as they progress by senior officials with anticompetitive practice experience.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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