United States Government Accountability Office

GAO Testimony 

Before the Committee on Agriculture, 

Nutrition, and Forestry 

United States Senate

PACKERS AND 

STOCKYARDS PROGRAMS 

Continuing Problems with 

GIPSA Investigations of 

Competitive Practices 

Statement of Daniel Bertoni 

Acting Director, 

Natural Resources and Environment 

For Release on Delivery

Expected at 10:30 a.m. EST 

Thursday, March 9, 2006

 

GAO-06-532T 
Mr. Chairman and Members of the Committee: 

I am pleased to be here today to discuss the U.S. Department of 

Agriculture’s (USDA) management and oversight of the Packers and 

Stockyards Act. Within USDA, the Grain Inspection, Packers and 

Stockyards Administration (GIPSA) is responsible for administering the 

Packers and Stockyards Act and investigating concerns about unfair and 

anticompetitive practices in the $90 billion livestock market. 

As you know, prior reports issued by the USDA Office of Inspector 

General (OIG) and our office have identified weaknesses in GIPSA’s 

investigation and enforcement activities, and recommended actions to 

address them.1

 A more recent OIG report shows that, in several key areas,

GIPSA still has not taken sufficient steps to address those 

recommendations.2

 My testimony today will focus on our prior work and 

discuss (1) factors that have affected GIPSA’s ability to investigate 

concerns about anticompetitive practices, (2) GIPSA’s actions to address 

our recommendations and areas where their efforts have fallen short, and 

(3) challenges and other issues we believe GIPSA should consider as it 

moves to further strengthen its capacity to address competitiveness issues. 

In summary, in 2000, we identified two critical factors that detracted from 

GIPSA’s ability to investigate anticompetitive practices in livestock 

markets, and another area where improvement was needed. First, the 

agency’s investigations were planned and conducted primarily by 

economists without the formal involvement of attorneys from USDA’s

Office of General Counsel (OGC). As a result, a legal perspective that 

focused on assessing potential violations was generally absent when 

investigations were initiated and conducted. Second, GIPSA’s 

investigative practices were designed for traditional trade practices and 

financial issues the agency had emphasized for years and were not suited 

for the more complex competition-related concerns it was addressing. 

Finally, while not a critical concern, we noted that GIPSA had an 

 

1

U.S. Department of Agriculture, Office of Inspector General, Agency Efforts to Monitor 

and Investigate Anti-competitive Practices in the Meatpacking Industry, Report No. 

30801-01-Ch (Washington, D.C.: February 26, 1997) and GAO, Packers and Stockyards

Programs: Actions Needed to Improve Investigations of Competitive Practices

(Washington, D.C.: September 21, 2000). 

2

U.S. Department of Agriculture, Office of Inspector General, Grain Inspection, Packers

and Stockyards Administration’s Management and Oversight of the Packers and

Stockyards Programs, Report No. 30601-01-Hy (Washington, D.C.: January 10, 2006). 

Page 1 GAO-06-532T 
important role in keeping the industry and the Congress informed about its 

monitoring of livestock markets and could have done more to identify 

market operations or activities that appeared to raise concerns under the 

Packers and Stockyards Act. In our September 2000 report, we 

recommended that USDA better integrate attorneys from USDA’s Office of 

General Counsel into GIPSA’s investigative processes and develop a 

teamwork approach to investigations similar to that of the Department of 

Justice (DOJ) and the Federal Trade Commission (FTC). We also 

recommended that GIPSA adopt more systematic approaches for selecting 

cases and conducting investigations. 

USDA concurred with our findings and noted specific actions it planned to 

take in response to our recommendations, including (1) formalizing 

consultations between GIPSA and OGC on complex investigations, and 

integrating OGC attorneys into its investigative teams; (2) developing a 

tiered process whereby routine investigations would be reviewed and 

approved by headquarters staff, while complex investigations received an 

additional OGC review; (3) adopting relevant procedures used by DOJ and 

FTC for planning, developing, implementing, and reviewing investigations; 

and (4) reporting publicly on changing business practices and activities 

that raise fairness and competition concerns. Despite these plans, the 

January 2006 OIG report identified substantial ongoing weaknesses in 

GIPSA’s investigative processes and noted that GIPSA’s actions to respond 

to the prior OIG and GAO reports had fallen short in key areas. In 

particular, GIPSA had not yet developed a teamwork approach for 

investigations whereby GIPSA’s economists and USDA’s OGC attorneys 

could work together to identify violations of law, nor had it taken 

sufficient steps to ensure legal specialists within GIPSA were used most 

effectively. In addition, GIPSA had not followed through in adopting 

appropriate investigative guidance similar to those of DOJ and FTC to 

strengthen its ability to investigate anticompetitive and unfair practices. 

Given GIPSA’s lack of progress in addressing prior report findings and 

recommendations dating back for almost a decade, continued vigilance 

and monitoring of its key activities and management initiatives by the OIG 

and other oversight bodies is essential. In its response to the OIG’s 2006 

report, GIPSA noted that it intends to reassess and develop a defined 

process for managing investigations, enhancing communication among 

staff and managers, appropriately dividing responsibility for its varied 

types of investigations, and developing an internal review function to 

monitor and report on corrective actions resulting from the OIG and GAO 

reviews. Consistent with our prior recommendations, GIPSA also plans to

define the role of OGC attorneys and GIPSA legal specialists in 

investigations and to move forward in identifying and adopting certain

Page 2 GAO-06-532T 
techniques used by the DOJ and the FTC. As GIPSA moves ahead in 

reexamining its processes it should consider assigning lead roles to OGC 

attorneys for certain investigations involving complex anticompetitive 

practices. Finally, going forward, GIPSA’s efforts to periodically inform 

the industry and the Congress about competitive conditions could be of 

further usefulness. GIPSA plans to complete a study on livestock and red

meat marketing practices later this year. While potentially informative to 

the industry and policymakers, it could also help GIPSA identify current 

and emerging areas of vulnerability and better target its oversight 

resources. 

The Packers and Stockyards Act was passed in 1921 in response to 

concerns that, among other things, the marketing of livestock presented 

special problems that could not be adequately addressed by existing 

antitrust laws. The provisions of the act were based, in part, on prior 

antitrust statutes including the Sherman Act and the Federal Trade 

Commission Act. The Packers and Stockyards Act prohibits packers 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. The act also makes unlawful 

packer anticompetitive practices that are antitrust-type actions, including 

a packer’s activities that manipulate or control prices or restrain trade. 

Background 

Within USDA, GIPSA is responsible for implementing the Packers and 

Stockyards Act. GIPSA initiates investigations and actions to halt unfair

and anticompetitive practices by meatpacking companies and by other 

parties involved in livestock marketing. To prove that such an activity has 

occurred under the act, GIPSA, in most instances, must show that the 

purpose of the packer’s action or its actual effect was to carry out the 

prohibited activity. GIPSA may also choose to treat such activity as an

unfair practice, which may be easier to prove than a violation of the act’s 

antitrust-type provisions. Also, while mergers are a concern because they 

can reduce competition, the act does not provide USDA with premerger 

review authority. OGC also has an enforcement role and, among other 

activities, represents USDA in administrative and court proceedings 

addressing violations of the act. 

The Packers and Stockyards Act allows GIPSA to start investigations and 

administrative actions to halt packer practices that it deems to be unfair or

anticompetitive. When an investigation finds and develops evidence to

show that a packer may have engaged in an anticompetitive or unfair 

practice, GIPSA may file a complaint against the packer. The packer has a 

right to a hearing, which is held before a USDA administrative law judge.

Page 3 GAO-06-532T 
If, after reviewing the evidence presented by GIPSA and the packer, the

administrative law judge decides that there has been a violation of the act,

a cease and desist order may be issued, and a civil fine may be levied. An

administrative law judge’s decision can be appealed to USDA’s Judicial 

Officer, who acts on behalf of the Secretary of Agriculture. The packer, 

but not USDA, may file a further appeal to a Federal Circuit Court of 

Appeals. 

In 1996, GIPSA reported that dynamic changes had taken place in the

cattle and hog industries, including increasing concentration and vertical 

integration—where packers own the animals. GIPSA stated that these 

changes had reduced the role of the public markets, where terms of a 

trade are visible to all. That same year, an advisory committee to the 

Secretary of Agriculture reviewed the concerns of producers and others 

about changes in livestock markets and recommended, among other 

things, a review of GIPSA’s efforts to enforce the Packers and Stockyards

Act. The Secretary then asked the OIG to review GIPSA’s program. 

The subsequent OIG report noted that while GIPSA had a credible record 

in certain areas, it (1) did not have the capability to perform effective 

anticompetitive practice investigations and (2) faced formidable obstacles

to become effective in performing such investigations. The OIG found that 

GIPSA had not been organized, operated, or staffed for that purpose and 

stated that GIPSA should employ an approach similar to that used by DOJ 

and FTC, and integrate attorneys and economists from the beginning of 

the investigative process. In response, GIPSA completed a major 

restructuring of its headquarters and field offices in 1999 and hired staff to 

strengthen its investigations of alleged anticompetitive practices. GIPSA 

now has regional offices in Denver, Colorado, for its work on the cattle 

industry; in Des Moines, Iowa, for handling work on the hog industry; and

in Atlanta, Georgia, for its work on the poultry industry. Along with those 

changes there were relocations of staff and the addition of economists and 

legal specialists to assist with investigations of competitive practices. 

Because of continued concerns about whether GIPSA was taking 

sufficient action to protect competition in livestock markets, GAO was 

requested to review USDA’s efforts to implement the Packers and 

Stockyards Act. We issued our final report and recommendations for 

improvement in September 2000. Subsequently, the OIG completed a 

follow-up review on GIPSA’s administration and oversight of the Packers 

and Stockyards Programs in January 2006. It too issued a report with 

recommendations. 

Page 4 GAO-06-532T 
We identified two critical factors that detracted from GIPSA’s investigative

capability, as well as areas where GIPSA could improve its efforts to 

develop and share key information. First, the agency’s investigations were 

planned and conducted primarily by economists without the formal 

involvement of attorneys from OGC. Second, GIPSA’s investigative 

practices were designed for traditional trade practices and financial issues

the agency had emphasized for years and were not suited for the more 

complex competition-related concerns it was addressing. While not of a 

critical nature, we also found that despite prior dynamic changes in the 

livestock markets, GIPSA’s efforts to periodically update the industry and 

Congress on competitive conditions and emerging fairness and equity 

issues were lacking. 

2000 GAO Review 

Identified Critical 

Factors Detracting 

From GIPSA’s 

Investigative 

Capabilities 

Attorney’s Participation in 

Investigations 

At the time of our review, OGC attorneys did not usually participate at the 

start or throughout the agency’s investigations. Assignment of OGC 

attorneys typically occurred after GIPSA performed an investigation and 

forwarded a developed case file to them for review and action. Thus, the

agency’s investigations were planned and conducted primarily by 

economists, most of whom had limited investigative experience. GIPSA 

relied on OGC attorneys mainly for legal advice, and its OGC reviewed the

results of GIPSA’s investigations to determine if violations of law might 

have occurred. In contrast, we noted that DOJ and FTC utilized integrated 

teams of attorneys and economists to perform investigations of 

anticompetitive practices. Attorneys were assigned to lead and conduct 

investigations from the outset so that officials with a legal perspective 

focused on assessing potential violations of law. Economists were 

routinely assigned as an integral part of the investigation teams. This 

approach ensured that a legal perspective was brought to bear on the 

interpretation of law, development of evidence, and preparation of cases 

for presentation in administrative and judicial proceedings. 

We also reported that OGC officials provided GIPSA with only limited 

informal assistance which had declined over the years as the number of 

OGC attorneys assigned to assist GIPSA decreased. In fact, the number of 

OGC attorneys assigned to GIPSA cases had decreased from eight to five

because of budget constraints, according to USDA’s General Counsel. 

These attorneys were also not all assigned full-time to GIPSA’s financial,

trade practice, and competition cases; some had responsibilities in other 

USDA areas as well. 

We concluded that GIPSA’s program needed additional steps to become 

more effective and efficient in performing investigations and 

recommended that GIPSA develop a teamwork approach for 

Page 5 GAO-06-532T 
investigations with GIPSA’s economists and OGC’s attorneys working 

together to identify violations of the law. We also recommended that the

Secretary reassess current OGC staffing needs relative to current GIPSA 

investigations, assign attorneys to lead or participate in more complex 

investigations, and increase the effectiveness of legal specialists by 

providing them with leadership opportunities and better supervision. 

Processes and Practices 

For Anticompetitive 

Practice Investigations 

We also found that GIPSA’s basic investigative processes and practices 

were not designed for addressing the complex anticompetitive practices it 

had begun to encounter in recent years—instead they were designed for 

the more traditional trade practice and financial issues that the agency had 

emphasized for years. In comparison, DOJ and FTC had processes and 

practices specifically designed for guiding investigations of similarly 

complex competition-related issues. 

DOJ and FTC emphasized establishing the theory of each case and the 

elements necessary to prove the case. At each stage of an investigation, 

including selecting the case, planning, and conducting the investigation, 

regular reviews by senior officials-attorneys and economists--focused on 

developing sound cases. For example, DOJ and FTC required their 

attorneys, with the assistance of economists, to establish a theory 

explaining how a company’s (or companies’) behavior may be a violation

of the law. The case theory and evidence were reviewed early on by 

senior officials, and periodically as the factual underpinnings of the case 

came into focus. In contrast to DOJ and FTC, GIPSA does not require 

investigations to be (1) planned and developed on the basis of how a 

company’s actions may have violated the law and (2) periodically 

reviewed as they progress by senior officials with anticompetitive practice 

experience. 

GIPSA also did not have specific requirements for approving an 

investigation or an investigation plan. These conditions were reflected in

the comments of GIPSA’s regional office managers and economists, who 

said that they often had questions about how to interpret the law and how 

best to scope and perform investigations. Also, OGC officials told us that 

anticompetitive practice cases that GIPSA had forwarded often had 

weaknesses that needed to be addressed before they could determine 

whether a violation had occurred. Both OGC and GIPSA officials said that 

OGC’s reviews of GIPSA’s cases led to disagreements about the 

interpretation of the act and the sufficiency of evidence. Finally, we found 

that GIPSA’s investigative guidance manual had not been revised since the 

agency’s reorganization and did not contain specific guidance for 

anticompetitive practice investigations, such as the contents of an 

Page 6 GAO-06-532T 
investigative plan, the information needed for approval of an investigation,

or the frequency of reviews of the investigations. 

 

GIPSA periodically made educational outreach efforts and shared 

information via its Web site and annual reports. GIPSA also held and 

participated in numerous town hall meetings and conferences with 

producers and state and industry officials. Even so, GIPSA officials said 

they could do more to inform the industry and others on competitive 

conditions. In fact, at the time of our review, it had been several years 

since GIPSA had last reported on conditions in livestock markets, despite 

previous dramatic changes in industry concentration and vertical 

integration. 

GIPSA officials also recognized that it would be helpful if producers had a

more current understanding of the Packers and Stockyards Act and how 

the act applies to market activities. They also agreed that GIPSA could 

report on market activities and identify those that may raise concerns 

about fairness and competition, as FTC had done. In our report, we 

recommended that GIPSA provide industry participants and the 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 raised concerns under 

the Packers and Stockyards Act. GIPSA has published four such 

assessments from 2000 to 2004.3

USDA’s General Counsel and the Under Secretary for Marketing and 

Regulatory Programs concurred with our recommendations and provided 

encouraging details about their planned implementation. Among other 

things, they stated that GIPSA and OGC would formalize their relationship 

for complex investigations to ensure that all investigative, economic, and

legal issues were carefully considered before embarking on complex 

investigations. As part of that process, they stated that they were 

examining the procedures of the Antitrust Division of DOJ and the FTC 

and would adopt relevant portions for investigation planning,

development, implementation, and review. They also stated that GIPSA 

and OGC senior management would review plans for complex 

investigations to ensure the effective use of investigative resources and 

Developing and Sharing 

Information on 

Competitive Conditions 

With Key Stakeholders 

GIPSA’s Actions To

Address GAO’s 

Recommendations 

Fell Short in Several 

Areas 

 3

GIPSA’s report for 2004 was issued in April 2005. U.S. Department of Agriculture, Grain 

Inspection, Packers and Stockyards Administration, Assessment of Cattle, Hog, and

Poultry Industries (Washington, D.C.: April 2005). 

Page 7 GAO-06-532T 
facilitate successful litigation if evidence demonstrates that the Packers 

and Stockyards Act has been violated. 

The General Counsel and Under Secretary also stated that they would 

increase the integration of OGC attorneys into GIPSA’s investigative teams 

early in the investigative process. They noted that OGC attorneys would 

work closely with GIPSA’s economists, legal specialists, and other 

technical specialists to ensure that investigative plans had a sound basis 

and to address critical legal issues throughout the conduct of an 

investigation. In addition, the effectiveness of legal specialists was also to 

be enhanced. However, they stated that GIPSA’s legal specialists would 

not act as attorneys for either GIPSA or the Department, but would 

provide front-line legal advice on investigations. Legal specialists would 

also be trained by OGC attorneys and consult with them regularly. 

It is troubling that these plans, which appeared to be carefully laid out by

USDA in late 2000, were never wholly or effectively implemented as noted

in the OIG’s 2006 follow-up report. Unfortunately, as the report makes 

clear, GIPSA’s senior management review panel became a log jam to the 

progress of investigations. Investigations were thwarted by management 

delays in providing policy and investigative guidance and by inaction on 

on-going investigations when they required management concurrence or

direction. Further, GIPSA and OGC apparently have not effectively

implemented a team approach to the investigation of complex competition 

related investigations. Overall, it appears that as GIPSA officials 

responded to the prior OIG and GAO reports, they did so in a manner that 

prevented, rather than facilitated the desired actions and results. 

Given GIPSA’s lack of progress in addressing prior report findings and 

recommendations dating back almost a decade, continued vigilance and 

monitoring of its key activities and management initiatives by the OIG and 

other oversight bodies is essential. 

In response to the most recent OIG report GIPSA has stated that, among 

other things, it is: 

• developing a defined process for managing investigations, 

including controls for preliminary investigations to obtain 

sufficient facts to decide whether to proceed with further 

investigation; 

Challenges and Other 

Issues Associated 

With Addressing 

Longstanding 

Weaknesses 

• revising its organizational structure to appropriately divide

management responsibility for work plans, managing 

investigations, and the reporting of results; 

Page 8 GAO-06-532T 
• developing an internal review function to monitor and report on 

the progress of corrective actions resulting from external 

reviewers, such as the OIG and GAO; 

• moving forward in identifying techniques used by DOJ and FTC 

that are most appropriate under the Packers and Stockyards Act. 

GIPSA also stated that it will enable its legal specialists to consult with 

OGC and will integrate attorneys into complex competition investigations 

earlier in the process. 

Beyond increased monitoring, GIPSA’s success in fully implementing the 

above initiatives will require sustained management attention and 

commitment that has, thus far, been elusive. However, we continue to 

believe that such a focus is needed and will ultimately result in a more 

vigilant and skillful federal presence. It will also instill greater public 

confidence that concerns about the industry will be investigated fairly and 

diligently. Finally, as GIPSA moves forward in developing its processes, it 

should consider the feasibility of assigning lead roles to OGC attorneys for 

investigations that involve more complex anticompetitive practices—an

approach we have recommended that is also consistent with DOJ and FTC 

practices. Going forward, it is also possible that GIPSA’s efforts to 

periodically inform the industry and the Congress about its monitoring 

efforts, as well as changing competitive conditions could be of further 

usefulness. GIPSA has issued reports on the cattle, hog, and poultry 

industries from 2000 through 2004, and has initiated a broad study on 

livestock and red meat marketing practices. While informative to the

industry and policy makers, such analyses could also be internally 

valuable to GIPSA as a tool for identifying current and emerging areas of 

vulnerability and better targeting its oversight resources and activities. 

Mr. Chairman, this concludes my formal statement. If you or other 

Members of the Committee have any questions, I will be pleased to 

respond to them. 

For future questions about this testimony, please contact me at (202) 512-

5988. Charles M. Adams made key contributions to this testimony. 

Page 9 GAO-06-532T (360684) 
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