Packers and Stockyards Programs

Investigations of Competitive Practices Need Improvements Gao ID: T-RCED-00-299 September 25, 2000

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. This testimony summarizes the September report, GAO/RCED-00-242.

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) at the end of March 2000, 57 of these investigations had been completed, and the remaining 17 were ongoing; (3) GIPSA identified a total of five alleged violations of the Packers and Stockyards Act; (4) these violations involved acts by one or a few companies in such areas as deceptive pricing; (5) GIPSA has strengthened its ability to address competition concerns since a highly critical report was issued by USDA's Inspector General in 1997; (6) however, two principal factors continue to detract from GIPSA's ability to investigate concerns about anticompetitive practices in these 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) as a result, a legal perspective that focuses on assessing potential violations is generally absent when investigations are initiated and conducted; (9) GIPSA's investigative processes and practices are designed for the traditional trade practice and financial issues that the agency has emphasized for years and are not suited for the more complex competition-related concerns that it is also now addressing; (10) USDA has authority under the Packers and Stockyards Act, which has been delegated to GIPSA, to initiate actions to halt unfair and anticompetitive practices by meatpacking companies and by other parties involved in livestock marketing; (11) specifically, the agency can take action to stop companies from engaging in or using any unfair, unjustly discriminatory, or deceptive practice or device, or making or giving any undue or unreasonable preference or advantage to another party; and (12) in addition, the agency can take action to halt unlawful anticompetitive practices that are antitrust-type actions, such as a packer's activities that manipulate or control prices or restrain trade.

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