Packers and Stockyards Programs:

Actions Needed to Improve Investigations of Competitive Practices

RCED-00-242: Published: Sep 21, 2000. Publicly Released: Sep 21, 2000.

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Pursuant to a legislative requirement, GAO reviewed the Department of Agriculture's (USDA) efforts to implement the Packers and Stockyards Act, focusing on: (1) the number and status of investigations conducted by the Grain Inspection, Packers and Stockyards Administration (GIPSA) in response to complaints and concerns about anticompetitive activity involving the marketing of cattle and hogs; and (2) factors that affect GIPSA's ability to investigate concerns about anticompetitive practices.

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 for Executive Action

  1. Status: Closed - Implemented

    Comments: USDA has taken action to implement this recommendation. USDA changed its organization and process for investigating competition issues to assure it uses a teamwork approach and that its investigation plans are reviewed by GIPSA and OGC attorneys. GIPSA also is assuring that its attorneys are consulted in early stages of complex investigations, and is using economic, statistical, and legal expertise in its investigations. GIPSA reviewed DOJ guidance for investigation development as a basis for establishing its investigative process for competition issues.

    Recommendation: To improve GIPSA's investigations of concerns about anticompetitive practices, the Secretary of Agriculture should develop a teamwork approach for investigations with GIPSA's economists and OGC's attorneys working together to identify violations of the law. Also, improve GIPSA's investigation processes and practices by adopting methods and guidance similar to DOJ's and FTC's for selecting, planning, conducting, and reviewing investigations. In doing so, consult with the Attorney General and the Chairman of FTC on investigation management, operations, and case development processes.

    Agency Affected: Department of Agriculture

  2. Status: Closed - Implemented

    Comments: USDA has increased its staff of economists and attorneys assigned to competition cases. USDA also changed its process for investigating competition issues to assure that investigation plans are reviewed by GIPSA and OGC attorneys. GIPSA also is assuring that its attorneys are consulted in early stages of complex investigations, and is using economic, statistical, and legal expertise in its investigations.

    Recommendation: To improve GIPSA's investigations of concerns about anticompetitive practices, the Secretary of Agriculture should determine the number of OGC attorneys that are needed for USDA's OGC to participate in GIPSA's investigations and, as needed, assign attorneys to lead or participate in these investigations. Also, provide for senior GIPSA and OGC officials to review the progress of investigations at main decision points and provide feedback, guidance, and approval of investigations as they progress. In addition, ensure that legal specialists are used effectively by providing them with leadership and supervision by USDA's OGC attorneys and ensure GIPSA has the economic talents it requires by considering whether to modify the GS grade structure for GIPSA's economists.

    Agency Affected: Department of Agriculture

  3. Status: Closed - Implemented

    Comments: In June 2001, in response to this recommendation, USDA's Grain Inspection, Packers and Stockyards Administration issued a report entitled "Assessment of the Cattle and Hog Industries, Calendar Year 2000." This report clarifies the Administration's views on competitive activities in these industries and identifies market activities in these industries that appear to raise concerns under the Packers and Stockyards Act. In fiscal year 2003, GIPSA received $4.5 million in appropriations for a broad study of marketing practices in the entire livestock and red meat industries from farmers to retailers, food service firms, and exporters. The study will address many questions and concerns that have been raised about changes in the structure and business practices in the livestock and meat industries, including captive supply issues. In addition, GIPSA stated that in fiscal year 2004, it plans to start a comprehensive study of the Packers and Stockyards Act in response to issues raised in GAO's report.

    Recommendation: The Administrator, GIPSA, should provide industry participants and Congress with clarifications of GIPSA's views on competitive activities by reporting publicly on changing business practices in the cattle and hog industries and identifying market operations or activities that appear to raise concerns under the Packers and Stockyards Act.

    Agency Affected: Department of Agriculture: Grain Inspection, Packers and Stockyards Administration

 

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