GAO

United States General Accounting Office

Report to Congressional Committees

September 2000 PACKERS AND 

STOCKYARDS 

PROGRAMS

Actions Needed to 

Improve 

Investigations of 

Competitive Practices

GAO/RCED-00-242

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Contents

Letter 3

Appendixes Appendix I: GIPSA’s Authority to Address Unfair and

Anticompetitive Activities in the Livestock 

Industries 26

Appendix II: Overview of Past and Current Conditions Affecting 

Competition in the Livestock Industries 31

Appendix III: Additional Information on the Results of GIPSA’s 

Investigations 35

Appendix IV: Objectives, Scope, and Methodology 38

Appendix V: Comments From the U.S. Department of

Agriculture 41

Appendix VI: GAO Contacts and Staff Acknowledgments 45

Tables Table 1: Results of GIPSA’s Investigations of Allegations of

Anticompetitive Actions From the Start of Fiscal Year 1998 

Through the First Quarter of Fiscal 2000 9

Table 2: GIPSA’s Implementation of the Recommendations Made by 

USDA’s OIG and GAO’s Analysis of the Actions Taken 14

Figures Figure 1: GIPSA’s Process for Handling Concerns About

Anticompetitive Practices 18

Abbreviations

DOJ Department of Justice

FTC Federal Trade Commission

GAO General Accounting Office

GIPSA Grain Inspection, Packers and Stockyards Administration

OGC Office of General Counsel (USDA)

OIG Office of Inspector General (USDA)

USDA U.S. Department of Agriculture
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United States General Accounting Office

Washington, D.C. 20548

Resources, Community, and

Economic Development Division

B-284827 Letr

September 21, 2000

The Honorable Richard G. Lugar

Chairman

The Honorable Tom Harkin

Ranking Minority Member

Committee on Agriculture,

Nutrition, and Forestry

United States Senate

The Honorable Larry Combest

Chairman

The Honorable Charles W. Stenholm

Ranking Minority Member

Committee on Agriculture

House of Representatives

The Honorable Charles E. Grassley

Chairman, Subcommittee on Administrative

Oversight and the Courts

Committee on the Judiciary

United States Senate

The production and marketing of cattle and hogs were U.S. agriculture’s 

first and seventh largest businesses in 1998 with cash receipts of $33.7 

billion and $9.4 billion, respectively. The responsibilities of the U.S. 

Department of Agriculture (USDA) under the Packers and Stockyards Act 

for monitoring the cattle and hog industries, and halting unfair and 

anticompetitive practices in the marketing of cattle and hogs, are assigned 

to the Grain Inspection, Packers and Stockyards Administration (GIPSA).1 

USDA’s Office of General Counsel (OGC) also has a role in enforcing the act 

and, among other activities, represents the Department in administrative 

and court proceedings addressing alleged violations of the act.

1

The act (7 U.S.C. 181 et seq.) also covers (1) other livestock, such as sheep and goats, and 

poultry and (2) the protection of industry participants by, among other things, ensuring that 

sellers are paid promptly and that the animals are weighed accurately. This report focuses 

primarily on the agency’s efforts to address competition-related concerns involving cattle 

and hogs.
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Cattle and hog producers have raised concerns about changes in their 

industries that affect competition. For example, they have pointed out that 

as mergers have occurred among meatpacking companies, there have been 

fewer bidders for livestock and some meatpacking plants have closed; that 

as livestock have increasingly been marketed through contracts, the 

volume of livestock sold through competitive open market bidding has 

decreased; and that meatpacking companies have been increasing their 

control over livestock production and marketing. GIPSA, the Department 

of Justice (DOJ), and the Federal Trade Commission (FTC) have monitored 

developments in these industries.2

 In recognition of producers’ concerns 

about these and other agricultural industries, DOJ appointed a Special 

Counsel on Agriculture within its Antitrust Division in January 2000. In 

addition, the Congress passed the Livestock Mandatory Reporting Act of 

1999 to ensure, among other things, better disclosure of livestock prices. 

Also, bills have been introduced in the Congress to provide additional 

oversight of agricultural industries by USDA and to better ensure 

competitive agricultural markets.3

 On the other hand, meatpacking 

company officials point out that livestock price fluctuations have resulted 

from changes in the supply of livestock and the demand for meat products, 

that producers often request private contracts with value-added features, 

that their industry is regulated and monitored and mergers have been 

reviewed by DOJ, and that GIPSA has not found anticompetitive activities.

In 1997, USDA’s Office of Inspector General (OIG) reviewed GIPSA’s efforts 

to investigate competitive practices. The OIG reported that GIPSA had a 

credible record of investigating claims of fraud and unfair business 

dealings, such as false weighing and failing to pay for livestock. However, 

the OIG stated that GIPSA (1) did not have the capability to perform 

effective anticompetitive practice investigations and (2) faced formidable 

obstacles to become effective in performing such investigations because it 

had not been organized, operated, or staffed for this purpose. The OIG 

recommended extensive improvements within GIPSA or, alternatively, 

2

In 1996, GIPSA published the results of several years of effort to examine cattle and hog 

market issues by GIPSA itself; university researchers; and advisers from DOJ, FTC, the 

Commodity Futures Trading Commission, and USDA’s Economic Research Service. GIPSA 

did not find anticompetitive activity but did call for continued monitoring of the industry. 

More recently, in 1999, GIPSA, DOJ, and FTC, under the direction of the National Economic 

Council, reviewed the sharp decreases in hog market prices and, among other things, 

commented that the industry should continue to be monitored for anticompetitive activity.

3

For example, S. 2252, S. 2411, and H.R. 4339, 106th Congress 2nd session include, among 

other things, authority for USDA to review mergers.
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transferring this responsibility to DOJ or FTC. In response, GIPSA 

completed a major restructuring of its headquarters and field offices in 

1999 and has hired staff to strengthen its investigations of alleged 

anticompetitive practices.

Because of continued concerns about whether GIPSA is taking sufficient 

action to protect competition in the livestock markets, Senator Charles E. 

Grassley, Chairman, Subcommittee on Administrative Oversight and the 

Courts, Senate Committee on the Judiciary, requested that we review 

USDA’s efforts to implement the Packers and Stockyards Act. Subsequently, 

USDA’s appropriation act for fiscal year 2000 required us to analyze USDA’s 

authority to ensure competition in the marketing of hogs. In response, this 

report discusses (1) the number and status of investigations conducted by 

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. In addition, appendix I contains information on GIPSA’s 

authority under the Packers and Stockyards Act to address concerns about 

anticompetitive and unfair practices in the cattle and hog markets.

Results in Brief From October 1, 1997, through December 31, 1999, GIPSA investigated 74 

allegations or concerns about anticompetitive activity involving cattle or 

hogs. Thirty-six of these investigations were in direct response to specific 

complaints about anticompetitive activity, and 38 were initiated by GIPSA. 

At the end of March 2000, 57 of these investigations had been completed 

and the remaining 17 were ongoing. GIPSA identified a total of five alleged 

violations of the Packers and Stockyards Act. These alleged violations 

involved acts by one or a few companies in such areas as deceptive pricing.

Two principal factors detract from GIPSA’s ability to investigate concerns 

about anticompetitive practices in the cattle and hog markets. First, the 

agency’s investigations are planned and conducted primarily by economists 

without the formal involvement of attorneys from USDA’s OGC. In contrast, 

DOJ and 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. Also, as GIPSA has built up its staff to 

include 18 economists to investigate competitive concerns about 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 General Counsel. In addition, most of the 
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18 economists conducting GIPSA’s investigations were hired since 1998 and 

have limited experience with investigative work related to competition. 

Second, 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. In comparison 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.

We are recommending that USDA improve its capability to investigate 

allegations of anticompetitive practices by having integrated teams of 

attorneys and economists perform GIPSA’s investigative work, improving 

the planning and review of these investigations, and consulting with DOJ 

and FTC on the design of program improvements. USDA concurred with 

our report and is initiating actions to implement our recommendations.

Background Under the Packers and Stockyards Act, GIPSA is responsible for providing 

financial protection for participants in livestock transactions and halting 

unfair and anticompetitive practices. GIPSA addresses its financial and 

trade practice responsibilities by regulating livestock buyers’ business 

practices to ensure, among other things, that sellers are paid promptly for 

their animals and that the animals are weighed accurately. GIPSA 

addresses concerns about competition by investigating complaints and 

concerns about anticompetitive activities4

 and by analyzing data on the 

structure and operations of the livestock, poultry, and meatpacking 

industries. Overall, these functions of GIPSA are referred to as its Packers 

and Stockyards Programs.

DOJ, FTC, and USDA have signed a memorandum of understanding to 

cooperate on monitoring competitive conditions in agriculture. In general, 

DOJ and FTC are responsible for enforcing federal antitrust laws that 

protect the marketplace from practices that adversely affect competition. 

DOJ is responsible for enforcing the Sherman Act, and FTC has 

responsibility for the Federal Trade Commission Act. DOJ and FTC also 

share responsibilities under the Clayton Act, including

4

GIPSA defines “anticompetitive practices” as those including antitrust types of violations 

and other unfair practices affecting competition.
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responsibility for reviewing proposed mergers. USDA’s responsibilities 

under the Packers and Stockyards Act were, in part, based on and go 

further than the Sherman Act in addressing unfair practices and aim to 

protect buyers and sellers of livestock. FTC also has a specific 

responsibility under the Packers and Stockyards Act to address 

anticompetitive and unfair practices in retail sales of meat and meat 

products. FTC does not, however, have jurisdiction over the livestock or 

wholesale meat industries.

In the past, cattle were usually sold by producers at stockyards through a 

bidding process to meat-processing firms, which are generally referred to 

as packers. In recent years, the process has changed such that packers 

usually purchase the animals at feedlots, where they are fed for a period of 

time before being offered for sale. Also, rather than being sold through 

open market bidding, cattle are now increasingly sold through contracts 

between producers and/or feedlot managers and packers.

The process is different for hogs. In the past, hog producers generally sold 

hogs through the spot market, delivering them either to a packing plant or 

to a centralized facility where the animals were sold through a bidding 

process. Now, most hogs are sold under contracts in which packers and 

producers coordinate production methods and delivery schedules, and less 

information about prices has been publicly available.

Concerns about competition in the livestock industries have varied over 

time. For example, in the earlier part of the 20th century, collusive 

practices by five large meatpacking companies resulted in their 

prosecution, a consent decree with these packers, and the passage of the 

Packers and Stockyards Act in 1921. Concerns about competition then 

generally subsided for many years until resurfacing over the last decade, 

when a small number of cattle and hog packers grew to control large shares 

of their respective livestock markets. For example, four firms account for 

over 80 percent of the steers and heifers slaughtered. As a result, producers 

are concerned that continued concentration, due to mergers and 

acquisitions that have taken place in the industry, has affected and will 

affect their ability to market animals and reduce selling prices. Appendix II 

further discusses the act’s history and the current conditions of and 

concerns about the cattle and hog industries.

In 1998, GIPSA started a major reorganization of the Packers and 

Stockyards Programs primarily to enhance its capability to address 

concerns about anticompetitive activity. At the headquarters level, the 
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reorganization included establishing the Office of Policy/Litigation Support 

with separate branch offices to oversee the agency’s competition, financial, 

and trade practice work. At the field level, the number of regional offices 

was reduced from 11 to 3: Offices are now in Atlanta, Georgia, to lead 

competition, financial, and trade practice work involving poultry; in 

Denver, Colorado, to lead work involving cattle; and in Des Moines, Iowa, 

to lead work involving hogs. During the reorganization, GIPSA experienced 

substantial employee changes: Over 40 staff relocated, and 44 staff left the 

agency. Also, the agency hired 67 new employees from April 1998 through 

July 2000.

GIPSA’s Packers and Stockyards Programs are funded through an annual 

appropriation. In fiscal year 1999, GIPSA used 153 staff years and had 

obligations totaling slightly more than $16 million on these programs, 

including, according to GIPSA’s officials, about $2 million on relocation 

activities. (In comparison, GIPSA used 587 staff years and $45.6 million of 

appropriated funds and user fees that year for work related to grain 

inspections.) According to information that GIPSA provided us with on its 

Packers and Stockyards Programs for fiscal year 1999, which includes the 

period when GIPSA was completing its reorganization and hiring new staff, 

about 30.4 percent of its staff time was used on financial work; 23.6 percent 

on trade practice work; 13.2 percent on competition work; and 32.8 percent 

on administrative activities, information resource management functions, 

and other activities.

GIPSA’s Investigations 

on Competition in the 

Cattle and Hog 

Industries

GIPSA conducted 74 investigations involving concerns about competition 

in the cattle and hog markets from October 1, 1997, through December 31, 

1999; alleged violations were identified in 5 cases. These alleged violations 

involved acts by specific meatpacking companies, such as deceptive 

pricing, rather than industrywide practices. During this period, GIPSA also 

conducted various other examinations that were designed primarily to 

develop information about the cattle and hog markets, including how 

prices for animals are determined. Specifically, a major examination of 

cattle buying in Texas was completed in 1999; another involving the 

procurement of hogs in four states in the Western Cornbelt was completed 

in 1998. Neither found violations of the Packers and Stockyards Act. In 

addition, at the time of our review, GIPSA had entered into cooperative 

agreements with university researchers to conduct three studies of 

livestock-marketing issues to obtain more complete information on the 

operation of the cattle and hog markets and had plans for other efforts to 

expand its knowledge of these markets. 
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Few Instances of 

Anticompetitive Activity 

Have Been Identified

GIPSA has found few instances in which meatpacking companies or other 

parties involved in the marketing of cattle or hogs engaged in 

anticompetitive practices. Specifically, 74 investigations involving 

allegations of or concerns about anticompetitive actions were ongoing at 

the start of fiscal year 1998 or were started during fiscal years 1998-99 and 

the first quarter of fiscal year 2000. Thirty-six of these investigations were 

in direct response to specific complaints about anticompetitive actions; the 

other 38 cases were initiated by GIPSA. As table 1 shows, the agency 

reported anticompetitive actions in 5 cases and no such actions in 57 

cases.5

Table 1: Results of GIPSA’s Investigations of Allegations of Anticompetitive Actions 

From the Start of Fiscal Year 1998 Through the First Quarter of Fiscal 2000

Note: The information on the status of investigations and whether GIPSA found anticompetitive actions 

is as of the end of March 2000.

a

The total number of cases that had or did not have anticompetitive actions exceeds the total number 

of closed cases because, for example, some cases that did not have violations were open for 

informational purposes at GIPSA’s headquarters when we were conducting our review.

5

We did not evaluate the effectiveness of GIPSA’s efforts and findings in these cases.

Status of 

investigation

Did GIPSA find 

anticompetitive action?

Alleged 

violator and 

type of animal

Number of

investigations Open Closed Yes No

Meatpacking 

company

Cattle 39 11 28 3 27

Hogs 12 6 6 2 7

Subtotala 51 17 34 5 34

Otherb

Cattle 21 0 21 0 21

Hogs 2 0 2 0 2

Subtotal 23 0 23 0 23

Total

Cattle 60 11 49 3 48

Hogs 14 6 8 2 9

Total 74 17 57 5 57
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b

Includes livestock markets, dealers, and others who buy or sell livestock on commission.

Source: GAO’s analysis of information obtained from GIPSA’s complaint/investigation automated 

system, the agency’s files and records, and the agency’s officials.

Each of the five cases in which GIPSA reported competition-related 

problems involved meatpacking companies; three of these cases remained 

open at the time of our review. In summary, GIPSA reported that some 

companies had engaged in improper pricing or bidding practices involving 

the acquisition of animals or had inadequate records covering purchases. 

For example, in a case involving a major company, GIPSA alleges that the 

firm engaged in deceptive practices by changing to its advantage the 

method used to calculate the price paid for hogs and then failing to notify 

producers of the change. A hearing on this case by a USDA Administrative 

Law Judge was started in July 2000 and is scheduled to reconvene in 

September 2000. Appendix III summarizes two other cases in which GIPSA 

found that anticompetitive actions had occurred.

Thirty-four of the 57 cases in which GIPSA did not find anticompetitive 

activities involved allegations that meatpacking companies had acted 

wrongfully. Twenty-three cases involved allegations that other parties, such 

as livestock markets, dealers, and others who buy or sell livestock on 

commission, had acted improperly. The following illustrates a case in 

which GIPSA received and investigated a complaint but did not find 

evidence to support anticompetitive practices. GIPSA initiated an 

investigation in August 1999 after receiving a complaint from a livestock 

market that buyers for two meatpacking companies were colluding by 

taking turns when bidding for cattle. The agency reviewed documentation 

covering purchases by the buyers at the market and did not find evidence 

to support the allegation. The investigation was closed in October 1999. 

Appendix III summarizes two additional cases that GIPSA closed after 

finding no evidence of violations of the act.

In addition to the 3 open cases referred to above in which the agency 

alleges competition problems, GIPSA had 14 ongoing investigations at the 

end of March 2000, each of which involved meatpacking companies. For 

example, GIPSA initiated an investigation in April 1999 after a major 

company (1) closed a plant where hogs were slaughtered and (2) 

purchased, but did not reopen, a hog-slaughtering plant that another 

company had closed. The purpose of GIPSA’s investigation is to determine 

if these actions restricted competition. GIPSA initiated another 

investigation in June 1999 after receiving a complaint that some major 

companies conspired to pay low prices for cattle after a state passed a law 

requiring the reporting of prices. Furthermore, some of GIPSA’s ongoing 
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investigations are designed to obtain information on the competitive 

implications of various methods that major meatpacking companies use for 

acquiring animals, including certain contractual arrangements and pricing 

methods for acquiring cattle.

There were also two investigations closed during the period covered by our 

review that the agency’s field staff said needed further work, which was not 

done. Specifically, in January 1997, the agency started an investigation after 

receiving complaints that a major meatpacking company had apportioned 

territory among cattle dealers to avoid competition. GIPSA decided to halt 

the investigation in July 1998 until its reorganization was completed and an 

economist could be assigned to the effort. GIPSA officials told us in May 

2000 that this investigation had not been restarted and there were no plans 

to do so because the agency’s Denver staff had been working on other 

efforts. In another case, which started in October 1997, the agency was 

investigating a livestock auction market to determine if there were 

competition problems. When this case was closed in November 1997, the 

agency’s field staff said that only a few buyers were purchasing cattle at the 

market and that an investigation of a local meatpacking company was 

needed. As of May 2000, the agency had not followed up on this suggestion, 

and had no plans to do so. In August 2000, GIPSA officials added that these 

efforts were not pursued further because of the agency’s priorities.

Other Efforts Have Focused 

Primarily on Market 

Conditions and Have Not 

Found Competition 

Problems

Two major efforts were started by GIPSA prior to fiscal year 1998 and were 

completed before January 2000; each was designed primarily to develop 

information on the operation of the livestock markets, including how 

prices for cattle and hogs are determined. Neither identified violations of 

the act. Specifically, one examined the procurement of cattle at four plants 

in Texas.6

 The initial result of this effort was statistical information on 

cattle procurements and prices. Subsequently, the data that had been 

collected were analyzed to determine if cattle owned or acquired through 

contracts by meatpacking companies (captive supplies) had an adverse 

impact on the prices paid for cattle bought on the spot market. This 

analysis was performed by two university economists and resulted in a 

finding that while differences existed in the prices paid for cattle acquired 

through captive supply and the spot market, the data did not show that 

reducing captive supply or increasing spot market purchases would 

6

GIPSA reported the results of this examination of cattle pricing in a paper entitled 

Investigation of Fed Cattle Procurement in the Texas Panhandle (Dec. 28, 1999).
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increase the spot market price. The second effort involved the 

procurement of hogs at 12 plants in four states (Iowa, Minnesota, 

Nebraska, and South Dakota).7

 In reporting on its results, GIPSA said that 

the sales prices reported to USDA for hogs were generally lower than the 

actual prices paid to producers and that hogs sold by smaller sellers tended 

to be of lower quality and received lower prices. Appendix III contains a 

more detailed description of these efforts.

Furthermore, to obtain more complete information on the competitive 

conditions in the cattle and hog markets, GIPSA has cooperative 

agreements with university professors to conduct analytical research on 

various livestock competition issues. For example, at the time of our 

review, a professor with Texas A&M University was performing a follow-up 

to GIPSA’s examination of cattle procurement in Texas; the study involves 

using an analytical approach that was not used in the initial effort. A 

second ongoing study involves professors from the University of Wyoming 

who are using simulations to analyze the possibility of collusive behavior in 

livestock auction markets; the purpose of the study is to compile 

information on bidding practices in a controlled setting to gain insights on 

possible bidding behavior in actual markets. A third ongoing study involves 

researchers from Utah State University who are using modeling to assess 

the possible use of market power by cattle packers.

GIPSA also has plans for other efforts to expand its knowledge about the 

cattle and hog markets. For example, the agency plans to develop 

economic models to provide a framework for analyzing and explaining 

packers’ use of various procurement and pricing arrangements and for 

identifying price and other market impacts that may indicate improper 

behavior. The agency also will be conducting statistical analyses of 

information on hog prices, which are reported by USDA’s Agricultural 

Marketing Service on the basis of reports submitted by packers, to 

determine if publicly reported prices accurately reflect what packers paid 

and if inaccuracies are due to packers’ erroneous submissions.

7

GIPSA reported the results of this examination of hog pricing in a paper entitled Western 

Cornbelt Hog Procurement Investigation (Oct. 8, 1998).
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Factors Affecting 

GIPSA’s Capability to 

Fully Investigate 

Concerns About 

Competition

GIPSA relies on USDA’s OGC attorneys for legal advice, and OGC reviews 

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

have occurred. However, OGC attorneys usually do not participate at the 

start or throughout the agency’s investigations. OGC attorneys are not 

assigned until GIPSA has performed an investigation and forwarded a 

developed case file to them for review. In addition, GIPSA’s investigative 

processes and practices were adopted to guide the financial and trade 

practice work that it has performed for years, rather than the competitionrelated concerns that it is also now addressing. Furthermore, GIPSA’s 

processes and practices for complex competition-related investigations are 

less developed than those in place in DOJ and FTC, where antitrust and 

anticompetitive practice investigations have been performed for decades.

Attorneys’ Participation in 

Investigations

DOJ and FTC assign attorneys to lead and conduct investigations of alleged 

unfair and anticompetitive business practices, and economists are 

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

agencies use this approach so that a legal perspective is brought to bear on 

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

of cases for presentation in administrative and judicial proceedings. 

GIPSA’s investigations, however, are led and conducted by economists or 

other technical specialists, who perform the agency’s anticompetition 

investigations without a USDA OGC attorney being assigned from the 

outset. OGC attorneys become involved after a GIPSA investigation is 

completed and a case report is forwarded for review and further action. 

OGC officials said that they do provide GIPSA with informal assistance and 

respond to inquiries about cases, but this assistance has been limited and 

has declined along with the number of OGC attorneys assigned to assist 

GIPSA.

In its February 1997 report, USDA’s OIG highlighted the importance of 

having attorneys participate in GIPSA’s investigations of complex 

anticompetitive practices. The OIG reported that only 4 of 84 investigations 

of anticompetitive practices from 1994 through 1996 had been referred to 

OGC for review because (1) the investigations had been conducted by staff 

without appropriate backgrounds or training, (2) attorneys from OGC were 

not involved in the investigations, and (3) there was a climate of 

noncooperation between various branches of GIPSA that were then 

responsible for the investigations. The OIG concluded that GIPSA had 

difficulty developing sufficient evidence to prove that an anticompetitive 

practice had occurred. Overall, the OIG reported that GIPSA faced 
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formidable obstacles to become effective because it was not organized, 

operated, or staffed for this type of work. The OIG 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. The OIG recommended that USDA either make extensive program 

improvements within GIPSA or that the responsibility for performing 

anticompetitive practice investigations be transferred to another agency, 

such as DOJ or FTC.

GIPSA agreed with the OIG’s report and has made improvements. 

Nevertheless, as table 2 indicates, the integration of legal and economic 

resources from the outset of investigations has not been achieved, and 

other related recommendations need further attention.

Table 2: GIPSA’s Implementation of the Recommendations Made by USDA’s OIG and GAO’s Analysis of the Actions Taken 

OIG’s 

recommendation Action taken in response to recommendation GAO’s analysis of actions taken by GIPSA

1. Reorganize 

GIPSA’s 

headquarters and 

regional offices.

In 1998, GIPSA started to reorganize its 

headquarters and field offices. It established 

branches for leading its competition, trade practice, 

and financial work. Regional offices were reduced 

from 11 to 3; Atlanta began leading poultry industry 

work, Denver began leading cattle industry work, 

and Des Moines began leading hog industry work.

GIPSA’s reorganization concentrates its resources on 

major industries and issues.

2. Assess staff’s 

qualifications and 

hire staff with legal, 

economic, and 

statistical 

backgrounds. 

As of July 2000, GIPSA had staffed its competition 

investigation units in Denver and Des Moines with 9 

economists each; about 15 of these economists 

were hired since 1998. In addition, GIPSA has hired 

four attorneys as legal specialists for its Denver and 

Des Moines offices to assist with its investigations. 

GIPSA also hired additional marketing specialists 

and auditors for trade practice and financial 

investigative work to replace staff lost during the 

restructuring of its field offices. 

GIPSA based its hiring levels primarily on its budget 

and the number of vacancies that resulted from 

reorganization.

GIPSA’s additional staff improve its organization. A detailed 

assessment of staffing levels was not performed, and 

USDA has requested a budget increase for additional 

GIPSA staff because of its workload.

The legal specialist position that GIPSA developed appears 

to be more limited than anticipated because OGC informed 

GIPSA that the legal specialists are not authorized to 

provide legal advice. In addition, OGC’s attorneys are not 

integrated into GIPSA’s investigations, and OGC’s 

assistance has declined since 1998 because of staff 

attrition. Consequently, GIPSA has insufficient legal 

assistance for its investigations.
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GIPSA and OGC officials agree that OGC should be more involved in the 

agency’s investigations of anticompetitive practices. GIPSA and OGC have 

attempted to work more closely and OGC has provided additional 

consultation. Nevertheless, according to GIPSA and OGC officials, OGC’s 

participation has been less than what is needed because relatively few OGC 

attorneys were assigned to GIPSA’s casework prior to the reorganization 

and the number of attorneys has decreased since then. From November 

1998 through May 2000, the number of OGC attorneys who were available 

to be assigned to GIPSA’s casework decreased from eight to five. Also, 

these attorneys are not all assigned full-time to GIPSA’s financial, trade 

practice, and competition cases; some are assigned to responsibilities in 

other USDA areas as well. OGC officials told us that at least six full-time 

attorneys are needed for GIPSA’s casework and the agency’s reorganization 

plan called for up to eight attorneys.

3. Integrate 

economists into the 

investigations.

The competition units in GIPSA’s regional offices 

have been staffed by economists who perform 

investigations. 

Economists have been hired. GIPSA managers are pleased 

with the new talents that have been brought into the agency 

but recognize that time is needed for the economists to gain 

experience with investigation work.

However, managers and staff of competition units in the 

regional offices reported that they have received insufficient 

expert advice about methods of investigation and 

interpretation of the law. GIPSA and OGC have started to 

develop specialized training and contacted FTC to obtain 

advice on alternative techniques for gaining access to 

company records.

4. Develop 

procedures for 

GIPSA to consult 

with OGC.

Procedures have not been developed. Some 

informal assistance has been provided.

OGC has made efforts to provide additional consultation. 

However, the number of OGC staff assigned has 

decreased. As of May 2000, five attorneys were available to 

assist GIPSA, as well as other USDA programs.

5. Obtain research 

assistance from 

USDA’s Economic 

Research Service.

USDA’s Economic Research Service has continued 

to report on concentration issues.

The reports of USDA’s Economic Research Service have 

addressed industry trends but do not analyze the actions of 

individual companies.

6. Hire a manager 

qualified in 

anticompetitive 

practice 

investigations or 

obtain DOJ’s or 

FTC’s assistance in 

GIPSA’s 

reorganization.

The GIPSA Deputy Administrator for Packers and 

Stockyards position was vacant for about 1 year until 

it was filled in May 2000 by a USDA OGC attorney 

with GIPSA case experience.

Also, in 1997, GIPSA hired a former DOJ economist 

to analyze and make recommendations on its 

reorganization plan.

The appointment of an OGC attorney as GIPSA’s Acting 

Deputy Administrator should be helpful.

During its reorganization, GIPSA did not have a manager 

qualified in anticompetitive practice investigations. Also, 

GIPSA did not consult directly with DOJ or FTC on its 

reorganization, structure, or operations. 

(Continued From Previous Page)

OIG’s 

recommendation Action taken in response to recommendation GAO’s analysis of actions taken by GIPSA
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Page 16 GAO/RCED-00-242 Packers and Stockyards Programs

To illustrate OGC’s workload on one of its large cases in recent years, the 

Assistant General Counsel of the Trade Practices Division said that after 

GIPSA investigated a major meatpacking company for an alleged 

anticompetitive practice, the full-time attention of two attorneys for over a 

year was needed to prepare the case for a judicial hearing. In addition, 

several other attorneys assisted the lead attorney for over 2 months in the 

preparation of the exhibits and witnesses to be presented at the hearing on 

the case. At DOJ and FTC, one or more attorneys are assigned to 

anticompetitive practice investigations, which, in some cases, may require 

more than a year to complete.

In addition, the legal specialist position that GIPSA designed for assisting 

its staff on legal issues appears to be more limited than GIPSA anticipated. 

Questions about the role of legal specialists surfaced after GIPSA hired a 

few attorneys as legal specialists. USDA’s General Counsel informed GIPSA 

that (1) its legal specialists can assist on investigations but that they are not 

lawyers for GIPSA and cannot give legal opinions even if they have law 

degrees and (2) only OGC’s lawyers are authorized to provide legal services 

in support of all USDA activities. Also, the legal specialists in GIPSA’s field 

offices are not supervised by attorneys. In July 2000, GIPSA’s Acting Deputy 

Administrator for Packers and Stockyards agreed that these conditions are 

a management concern and said that the role of the legal specialists within 

GIPSA was under review.

GIPSA has also had some difficulty recruiting economists with certain 

skills that are helpful in competition-related investigations. For its Denver 

and Des Moines offices, GIPSA has tried to recruit up to four economists 

with doctoral degrees in industrial organization economics and 

econometrics—two areas of expertise used in antitrust investigative work 

by DOJ and FTC. The grade levels that GIPSA authorized for its economists 

(up to GS-11) are similar to some of GIPSA’s other field staff grade levels 

but are not competitive with the grade levels that DOJ, FTC, and other 

USDA offices authorize for economists (up to GS-15). Consequently, GIPSA 

officials said that as of July 2000, they had hired only one of these 

specialists for their field offices and that the absence of these skills limits 

the agency’s capability to address highly complex industry practices. 

GIPSA officials recognized that recruiting could be improved by offering 

competitive grade levels.
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Processes and Practices for 

Anticompetitive Practice 

Investigations

GIPSA’s investigative processes and practices were designed for addressing 

financial and trade practice complaints. In contrast, DOJ and FTC have 

processes and practices specifically designed for guiding investigations of 

competition-related issues. DOJ and FTC emphasize establishing the theory 

of each case and the elements that will prove a case. At each stage of an 

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

investigation, there are reviews by senior officials—who are attorneys and 

economists—which focus on developing sound cases. Within GIPSA, 

investigation work is led by regional staff with minimal oversight; 

headquarters officials generally do not require reviews until investigation 

cases are developed. We identified nine steps in the process for handling 

concerns about anticompetitive practices; GIPSA’s headquarters reviews 

the case at the sixth step, and OGC is not involved until the eighth step, as 

shown in figure 1.
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Figure 1: GIPSA’s Process for Handling Concerns About Anticompetitive Practices

Legend: P&S Act = Packers and Stockyards Act

Note: There are no time criteria for completing any step in this process, except for step six, in which the 

initial review by GIPSA’s headquarters is generally to be completed within 30 days.

No

In part

In part

Step

A complaint of unfair or improper competition is filed with GIPSA.

Yes

Yes

Yes

No

Yes

No

No

Yes

Does the agency accept the complaint for investigation?

An investigation is started by GIPSA's field office. 

(Note: GIPSA's staff may initiate an investigation on their own.)

The field office staff meet with the violator to discuss the problem.

Does this meeting result in correction of the problem?

The case is referred to GIPSA's headquarters.

Result: no action taken. 

(Note: Complaints are not acted upon 

if GIPSA's field office decides the 

issue is not covered by the P&S Act.)

Result: the case is closed.

No Result: the case is closed.

OGC decides more information is 

needed; the case is returned to 

GIPSA for further development.

Result: generally the case is closed.a

Result: the case is closed. 

GIPSA's headquarters finds the 

report to be incomplete; the case 

is returned to the field staff for 

further work.

Action or question

The field office staff complete their investigation.

Do the field office staff believe there is a competition problem?

GIPSA's headquarters reviews the complaint and report.b

Does headquarters concur?

The case is forwarded to OGC.

OGC reviews the case file.b

1

7

8

2

3

4

5

6

Does OGC agree that there is evidence of a violation?

OGC will prepare the case for presentation to a USDA 

Administrative Law Judge. 9
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Page 19 GAO/RCED-00-242 Packers and Stockyards Programs

a

In some instances, the field office sends a case file to GIPSA’s headquarters for review for 

informational purposes. When this happens, the case remains open until the agency’s headquarters 

completes its review.

b

Step six is generally the first time that GIPSA’s headquarters becomes involved in a case, and step 

eight is generally the first time that OGC becomes involved.

Source: GAO’s analysis based on discussions with GIPSA officials.

GIPSA’s investigation guidance manual was last revised in 1996, prior to the 

agency’s reorganization to develop anticompetitive practice investigation 

capabilities. The manual covers GIPSA’s responsibilities for ensuring the 

prompt payment for livestock and fair trade practices in livestock 

transactions, such as those that apply to the grading and weighing of 

livestock, misrepresentation in sales, and bidding irregularities. DOJ’s and 

FTC’s operating manuals, however, were specifically designed for 

addressing concerns about competition. Several differences between 

DOJ’s, FTC’s, and GIPSA’s guidance manuals are described as follows.

Case Selection DOJ and FTC provide internal guidance on case selection. For example, 

DOJ’s manual contains guidance on the information and conditions 

necessary for approving a preliminary inquiry as well as a full investigation. 

A preliminary inquiry may be approved if there is sufficient evidence of a 

violation, if the amount of commerce is substantial, and if sufficient 

resources are available. GIPSA’s manual does not discuss case selection, 

and the agency attempts to respond to all complaints that are received.

Investigation Planning and 

Approval

DOJ and FTC require their attorneys, assisted by economists, to establish a 

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

violation of the law. DOJ’s premise in planning is that the staff’s theory of 

the case should be well defined from the outset of an investigation and that 

the theory of the case and an outline of the evidence should be refined as 

the case proceeds. The case theory and evidence are reviewed by senior 

officials after a preliminary inquiry, prior to approving an investigation, and 

then periodically as the factual underpinnings of the case come into focus 

as the investigation proceeds. The plan is to consider all the evidence that 

may be needed to determine if there is a violation. The theory of the case 

and an outline of proof are revised through the course of an investigation.

GIPSA’s manual does not set forth the contents of an investigative plan, the 

information needed to obtain approval of an investigation, or the frequency 

of reviews. According to GIPSA’s headquarters and OGC officials, regional 

staff informally discuss some plans for investigations with them, but the 

agency does not have specific requirements for approving an investigation 

or an investigation plan. These conditions were reflected in the comments 
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of GIPSA’s regional office managers and economists, who said that they 

often have questions about how to interpret the law and how best to scope 

and perform investigations. Also, OGC officials told us that the 

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 have led to disagreements over the act’s 

interpretation and the sufficiency of the evidence. These issues have been 

difficult to resolve, according to GIPSA and OGC officials, even, in a few 

cases, through high-level departmental meetings.

Conducting Investigations DOJ and FTC have guidance on many aspects of investigative work 

pertaining to antitrust and competition concerns. For example, DOJ 

provides guidance on proceeding with a civil or a criminal investigation; 

obtaining evidence through compulsory processes; consultation with 

economists; how and by whom cases should be developed, reviewed, and 

approved; settlement options; and the hiring of experts for presentations in 

court. In contrast, GIPSA’s investigation manual contains detailed 

checklists of documentation to be obtained for specific types of financial 

and trade practice investigations, such as those involving the failure of a 

buyer to pay for livestock; a packer operating when insolvent or without a 

required bond; a dealer providing payoffs, rebates, and kickbacks; false 

weighing; bait-and-switch selling; and price discrimination.

GIPSA officials told us that their program guidance and operating methods 

are not designed for complex competition-related investigations. They said 

that they would consider adding reviews of investigations in progress and 

develop guidance that addresses this area of responsibility. They also said 

that they would like to reform the agency’s work processes, including how 

GIPSA interacts with OGC. GIPSA’s Acting Deputy Administrator of the 

Packers and Stockyards Programs said that she would work to ensure 

improvement in the relationship of GIPSA and OGC. GIPSA officials further 

said that the agency could benefit from periodically consulting with DOJ 

and FTC as GIPSA develops its program.
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In addition, DOJ and FTC go beyond law enforcement efforts and promote 

competition by providing information and conducting other activities, such 

as issuing merger guidelines. Also, FTC’s Bureau of Economics has 

published documents, such as a 1999 report on the pharmaceutical 

industry, that analyze industries undergoing dynamic change with possible 

competitive problems.8

 The report on the pharmaceutical industry was 

intended to inform the industry’s participants, regulators, and the Congress 

of the industry’s competitive issues and possible antitrust concerns. The 

report also identified a need to evaluate alternative efficiency explanations 

for market practices before challenging any of the competition issues in the 

pharmaceutical industry. 

GIPSA also has conducted educational outreach efforts after major 

examinations as part of its efforts to respond to specific complaints, and 

through its Web site and annual reports. In addition, GIPSA has held and 

participated in numerous town hall meetings and conferences with 

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

that their efforts have room for improvement. GIPSA’s last reports 

providing an overview of competitive conditions in the cattle and hog 

industries were issued in 1996. GIPSA officials 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 has done.

Conclusions GIPSA has strengthened its program since 1997 by reorganizing to focus on 

specific livestock industries. Also, GIPSA’s economists, with some 

experience and guidance, will enable the agency to be more effective in its 

investigations of complicated market issues. However, several problems 

detract from GIPSA’s effectiveness: USDA’s OGC attorneys are not involved 

in the investigative process; GIPSA’s traditional process is not suited for 

anticompetitive practice investigations; GIPSA’s guidance does not address 

complex anticompetitive practices; and there are a few staffing issues to 

resolve. Presently, GIPSA is better positioned for performing economic 

analyses than fully developing the complete cases needed to prove that 

anticompetitive practices have occurred.

8

The Pharmaceutical Industry: A Discussion of Competitive and Antitrust Issues in an 

Environment of Change, FTC Bureau of Economics Staff Report (Mar. 1999).
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GIPSA’s program has additional steps to take to become more effective and 

efficient in performing investigations. One step forward would be to 

integrate OGC’s attorneys into GIPSA’s investigative teams. A teamwork 

approach has been used at DOJ and FTC and would also be beneficial in 

GIPSA’s investigations. Another step would be for GIPSA to adopt a more 

systematic approach. An approach similar to DOJ’s and FTC’s would start 

with a preliminary phase to develop a theory of the alleged violation and a 

plan of investigation. At this stage, senior officials within GIPSA and OGC 

would approve the initial theory of the case, the plan, and the commitment 

of resources. Thereafter, periodic reviews would be held at major decision 

points. If GIPSA and OGC officials consult with DOJ and FTC officials, they 

may obtain suggestions about how to promote teamwork on investigations 

and ideas about how to shape a program suited for GIPSA’s and OGC’s 

workload and organizational structures. In addition, the role of GIPSA’s 

legal specialists could be strengthened if they have the leadership and 

supervision of OGC’s attorneys, and GIPSA may also be able to improve its 

recruitment of economic specialists.

We noted that DOJ, FTC, and GIPSA have been involved in monitoring the 

industry and have taken producers’ concerns into account. We believe, 

however, that GIPSA and USDA’s OGC need to continue improving their 

investigative capabilities and processes. These improvements will reflect a 

more vigilant and skillful federal presence, as well as instill greater 

confidence that concerns about the industry will be investigated fairly and 

diligently.

GIPSA also has an important role in periodically keeping the industry and 

the Congress informed about its monitoring of livestock markets. Since 

GIPSA’s last major report in 1996, there have been further dynamic changes 

in the cattle and hog markets. These changes involve integration within the 

industry and changes in market operations and production margins. GIPSA 

could further help shape the understanding and views of industry 

participants by reporting again on such changes and by providing its 

perspective on issues involving competition.

Recommendations To improve GIPSA’s investigations of concerns about anticompetitive 

practices, we recommend that the Secretary of Agriculture do the 

following:

• Develop a teamwork approach for investigations with GIPSA’s 

economists and OGC’s attorneys working together to identify violations 
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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 the Federal 

Trade Commission on investigation management, operations, and case 

development processes.

• 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.

We also recommend that the Administrator, 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 appear to raise concerns under the Packers and Stockyards 

Act.

Agency Comments We provided USDA with a draft of this report for review and comment. 

USDA concurred with our report and recommendations. USDA’s comments 

discussed actions that GIPSA and OGC are taking or planning to take to 

improve investigations of anticompetitive practices. Specifically, USDA 

said, among other things, that it (1) will seek to formalize consultations 

between GIPSA and OGC on complex investigations of anticompetitive 

practices, and integrate OGC’s attorneys into GIPSA’s investigative teams 

early in the investigative process; (2) will adopt relevant portions of the 

procedures used by DOJ and FTC for planning, developing, implementing, 

and reviewing investigations; and (3) anticipates developing a tiered review 

process for investigations in which routine investigations are subject to 

oversight by GIPSA’s headquarters and complex investigations are subject 

to review and approval by GIPSA’s headquarters and OGC. USDA’s 

comments are contained in appendix V. In addition, USDA officials 

provided technical suggestions for clarifying the report, which we 

incorporated as appropriate.
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Furthermore, we provided officials in DOJ’s Antitrust Division and FTC’s 

Bureau of Competition, Bureau of Economics, and Office of the General 

Counsel with a draft of this report for review. These officials suggested 

various technical corrections and clarifications, which we made as 

appropriate.

Scope and 

Methodology

We performed our review of GIPSA’s efforts to address questions involving 

competition in the marketing of cattle and hogs from September 1999 

through August 2000 in accordance with generally accepted government 

auditing standards. Our scope and methodology are discussed in appendix 

IV.

We are sending copies of this report to the appropriate Senate and House 

committees; interested Members of Congress; the Honorable Dan 

Glickman, Secretary of Agriculture; Mr. James R. Baker, Administrator, 

GIPSA; the Honorable Janet Reno, Attorney General; the Honorable Robert 

Pitofsky, Chairman, Federal Trade Commission; the Honorable Jacob J. 

Lew, Director, Office of Management and Budget; and other interested 

parties. We will also make copies available to others upon request.

Please call me at (202) 512-5138 if you or your staff have any questions 

about this report. Key contributors to this report are listed in appendix VI.

Lawrence J. Dyckman

Director, Food and

Agriculture Issues
Page 25 GAO/RCED-00-242 Packers and Stockyards Programs
Page 26 GAO/RCED-00-242 Packers and Stockyards Programs

Appendix I

GIPSA’s Authority to Address Unfair and Apendxies

Anticompetitive Activities in the Livestock 

Industries ApendxiI

This appendix contains information on the authority of the U.S. 

Department of Agriculture’s (USDA) Grain Inspection, Packers and 

Stockyards Administration (GIPSA) to address unfair and anticompetitive 

activity in the cattle and hog industries.

The Congress passed the Packers and Stockyards Act in response to 

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

special problems that could not be adequately addressed by the existing 

federal antitrust laws. The provisions of the Packers and Stockyards Act 

were based, in part, on prior antitrust statutes, including the Sherman Act 

and the Federal Trade Commission Act. According to its legislative history, 

the Packers and Stockyards Act went beyond prior federal antitrust laws 

and aimed to safeguard both the interests of the public and elements of the 

industry from the producer to the consumer without destroying any unit of 

it.1

USDA has authority under the Packers and Stockyards Act, which has been 

delegated to GIPSA, to initiate administrative actions to halt unfair and 

anticompetitive practices by packers2

 in livestock marketing and 

meatpacking.3

 7 U.S.C. § 192 and 193 (2000).4 Also, GIPSA can issue 

regulations to address what it regards as an unlawful activity. 7 U.S.C. § 228 

(2000). However, GIPSA is not authorized to prescribe by regulation the 

price that packers may charge or the terms of packers and producers 

contracts. Also, the act does not confer on the Secretary of Agriculture the 

authority to directly regulate packers’ prices, discounts, or sales methods.5

1

61 Cong. Rec. 1805 (1921); H. Rep. 77, 67th Cong. 1st sess., at 2 (1921).

2

The act defines the term “packer” to include any person who in commerce (1) buys 

livestock for slaughter; (2) manufactures or prepares meat products for sale or shipment; or 

(3) markets meat, meat products, or livestock products in an unmanufactured form as a 

wholesale broker, dealer, or distributor.

3

Such practices by live poultry dealers are also unlawful under 7 U.S.C. § 192, but 7 U.S.C. 

§193 does not authorize the Secretary to bring administrative actions against such dealers. 

Injured parties may sue dealers under 7 U.S.C. § 209.

4

Under the Packers and Stockyards Act, the Federal Trade Commission is responsible for 

halting such practices with respect to retail sales of meat and meat products, 7 U.S.C. § 

227(b) (2000). Also, section 5(a)(2) of the Federal Trade Commission Act, 15 U.S.C. § 

45(a)(2) (2000), exempts from the Commission’s authority any activity assigned to USDA 

under the Packers and Stockyards Act.

5

Swift v. Wallace, 105 F.2d 848, 853 (7th Cir. 1939).
Appendix I

GIPSA’s Authority to Address Unfair and 

Anticompetitive Activities in the Livestock 

Industries

Page 27 GAO/RCED-00-242 Packers and Stockyards Programs

More specifically, GIPSA investigates complaints and initiates actions to 

halt various practices by packers that it has reason to believe are violations 

of the Packers and Stockyards Act. The 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.6

 To be unlawful, the act requires 

that a practice be unfair or unduly discriminatory. The act does not define 

“unfair practices” and consequently what is unfair must be determined by 

regulation or on a case-by-case basis. In interpreting these rules, GIPSA and 

the courts must apply “a rule of reason.”7

GIPSA’s implementing regulations provide some examples of unfair 

business (trade) practices by packers, such as inaccurate weighing of 

livestock, 9 C.F.R. § 201.71 (2000), and erroneous reporting of the price paid 

for animals, 9 C.F.R. § 201.53 (2000). The regulations also provide some 

examples of unfair practices affecting competition, such as a packer’s 

ownership interest in a market agency, 9 C.F.R. § 201.67 (2000), and a 

restriction of competition between a packer and a dealer, 9 C.F.R. § 201.70 

(2000). To prove that a practice is unfair, GIPSA must show that the packer 

intended to injure another party (predatory intent) or that its action caused 

injury (e.g., injury to competitors) or is likely to do so.8

 Recently, the 8th 

Circuit Court of Appeals has found certain contracting practices not to be 

violations of the act. In a 1995 decision, for example, the 8th Circuit Court of 

Appeals concluded that a live poultry grower was not entitled to the same 

kind of contract as offered by the dealer to other poultry growers.9

 The 

court noted that the act was not designed to upset the traditional principles 

of freedom of contract. This case was also referred to in the following 

example involving cattle. In a 1999 decision, the 8th Circuit Court of Appeals 

concluded that a packer’s contracting arrangement with a group of 

6

It is also unlawful under the act for any stockyard owner, market agency, or dealer to 

engage in any unfair, unjustly discriminatory, or deceptive practice in connection with, 

among other things, the marketing, buying, or selling of livestock on a commission basis. 

The Secretary of Agriculture may, pursuant to a complaint or on his own initiative, bring an 

administrative action to halt such practices. 7 U.S.C. § 213 (2000).

7

Armor & Co. v. United States, 402 F.2d 712, 717 (7th Cir. 1968).

8

Armor, 402 F.2d at 717; De Jong Packing v. USDA, 618 F.2d 1329, 1336-1337 (9th Cir. 1980); 

Daniels v. United States, 242 F.2d 39, 42 (7th Cir. 1957), cert. denied, 354 U.S. 939, reh’g 

denied, 355 U.S. 852 (1957); IBP v. Glickman, 187 F. 3rd 974, 977 (8th Cir. 1999).

9

Jackson v. Swift Eckrich, Inc., 53 F. 3rd 1452, 1458 (8th Cir. 1995).
Appendix I

GIPSA’s Authority to Address Unfair and 

Anticompetitive Activities in the Livestock 

Industries

Page 28 GAO/RCED-00-242 Packers and Stockyards Programs

producers to obtain cattle by matching the highest bid made by others 

(right of first refusal) was not unlawful.10

The Packers and Stockyards Act makes unlawful packer anticompetitive 

practices that are antitrust-type actions, such as a packer’s activities that 

manipulate or control prices, restrain trade, apportion territory, or create a 

monopoly. 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 any of such activities as an unfair practice, which 

may be easier to prove than a violation of these antitrust-type provisions.

Although mergers are a frequent concern because they can reduce 

competition, the Packers and Stockyards Act does not provide USDA with 

premerger review authority of packers. However, GIPSA may initiate 

administrative actions to halt unfair and anticompetitive practices of a 

company formed by a merger. Both the Department of Justice (DOJ) and 

the Federal Trade Commission (FTC) review business mergers under the 

Clayton Act, as amended, and decide which of them will review a proposed 

merger. Given FTC’s statutory limited jurisdiction regarding the livestock 

and meatpacking industries, DOJ has taken the lead on these issues in 

recent years. GIPSA has assisted in these reviews by providing information, 

if requested, about the markets and companies that are involved in 

proposed mergers.

Some of GIPSA’s responsibilities are similar to those of DOJ and FTC. For 

example, as previously indicated, GIPSA has authority to address antitrusttype violations under the Packers and Stockyards Act. DOJ addresses 

monopoly and restraint of trade issues under the Sherman Act. GIPSA 

officials said that when they identify an activity that appears to be criminal 

or a violation of antitrust law, after consultation with USDA’s Office of 

General Counsel (OGC), USDA may consult with DOJ on whether the case 

should be forwarded to DOJ for action.

Also, while GIPSA addresses unfair practices in livestock industries, FTC 

addresses unfair or deceptive acts or practices, and unfair methods of 

competition in other industries. By addressing acts that are anticompetitive 

or deceptive, FTC seeks to ensure that markets function competitively and 

free of undue restrictions.11 Furthermore, while DOJ’s antitrust actions and 

10IBP, 187 F.3rd at 977.
Appendix I

GIPSA’s Authority to Address Unfair and 

Anticompetitive Activities in the Livestock 

Industries

Page 29 GAO/RCED-00-242 Packers and Stockyards Programs

FTC’s unfair practice cases focus, to a large extent, on protecting 

competition and consumers, GIPSA’s actions are aimed at obtaining fair 

treatment for producers. As previously noted, the Packers and Stockyards 

Act provides FTC with authority only over the retail sales of meat and meat 

products.

To address violations by packers, the Packers and Stockyards Act sets up 

an administrative enforcement process to enable USDA to take action 

when evidence of an unlawful activity is found. Specifically, when GIPSA 

finds and develops evidence to show that a packer may have engaged in an 

anticompetitive or unfair practice, the case is referred to USDA’s OGC for 

review and action. If USDA’s OGC concurs that there is sufficient evidence 

to show that a packer has violated or is violating the act, or its activities are 

likely to cause competitive injury, OGC prepares and GIPSA may file a 

complaint.

The packer has a right to a hearing, which is held before a USDA 

administrative law judge. 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 packers, but not USDA, may file a further appeal to a 

Federal Circuit Court of Appeals. Also, any person may sue in federal 

district court to recover damages caused by any packer’s violation of the 

Packers and Stockyards Act or any cease and desist order of the Secretary 

of Agriculture (7 U.S.C. 209).

In recent years, some groups have expressed concern that GIPSA has not 

taken full advantage of the authority that the Packers and Stockyards Act 

provides. For example, a 21-member advisory committee to the Secretary 

of Agriculture reported in 1996 that the Secretary has a mandate under the 

act to address packers’ abuses of market power before harm is done or can 

11FTC may challenge alleged unfair methods of competition, including unfair methods of 

competition that would violate the Sherman Act through an administrative proceeding, as it 

does with unfair or deceptive practices. The basic consumer protection provision of the 

Federal Trade Commission Act is section 5(a), which provides that unfair or deceptive acts 

or practices in or affecting commerce are unlawful. 15 U.S.C. § 45(a) (2000). Unfair 

practices under section 5(a) are defined to mean those that cause or are likely to cause 

substantial injury to consumers and that are not reasonably avoidable by consumers 

themselves and not outweighed by countervailing benefits to consumers or competition. 15 

U.S.C. § 45(n) (2000).
Appendix I

GIPSA’s Authority to Address Unfair and 

Anticompetitive Activities in the Livestock 

Industries

Page 30 GAO/RCED-00-242 Packers and Stockyards Programs

be documented by studies. Furthermore, the committee stated that this 

mandate is to be proactive to (1) induce healthy competition rather than to 

react to unhealthy competition and (2) assure fair trade practices and not 

merely to prevent unfair practices. The Western Organization of Resource 

Councils, a grassroots farm organization, presented a similar viewpoint 

when it petitioned USDA in October 1996 to issue rules prohibiting 

meatpacking companies from owning or procuring cattle through contracts 

(captive supplies) unless the purchases occur through spot market bidding. 

The view of USDA’s OGC is that the Packers and Stockyards Act provides 

authority to halt a practice when GIPSA can demonstrate that a violation of 

the act’s provisions has occurred or is likely to occur. USDA’s OGC has also 

reported that to prohibit the activities of packers through regulation or 

administrative action requires GIPSA to develop evidence that the packers 

either intend to harm producers or there is a likelihood that the activity has 

resulted or will result in competitive injury or injury to competition.

In the petition of the Western Organization of Resource Councils, the 

organization said that packers’ ownership of cattle and use of captive 

supplies resulted in decreased prices paid to producers. The organization 

also said that these practices unjustly discriminate against some producers 

and provide unreasonable preferences to others. USDA published the 

petition in the Federal Register in January 1997 and requested public 

comments. In August 1997, GIPSA reported on its review of the petition and 

the public comments it had received. GIPSA reported that there was no 

compelling evidence to suggest that (1) anything other than basic economic 

conditions determined the general price levels in the cattle market and (2) 

captive supplies resulted in lower cattle prices. GIPSA concluded that the 

rules suggested by the Western Organization of Resource Councils were 

not warranted. Nevertheless, there has not yet been a final ruling on the 

organization’s petition, and on July 28, 2000, USDA announced that it will 

hold further public forums on the petition of the Western Organization of 

Resource Councils.
Page 31 GAO/RCED-00-242 Packers and Stockyards Programs

Appendix II

Overview of Past and Current Conditions 

Affecting Competition in the Livestock 

Industries ApendxiI

This appendix contains a brief description of the development of the 

Packers and Stockyards Act and an overview of concerns about 

concentration and competitive activities involving the livestock industries.

Historical Perspective 

on Competition 

Concerns

In a 1918 report, FTC concluded that five large packing firms had 

monopolistic control over the livestock industry. FTC found that five large 

packing firms of the era—“the big five”—dominated the industry by (1) 

owning and controlling public stockyards, (2) owning transportation and 

distribution networks, (3) slaughtering approximately two-thirds of all 

livestock, and (4) possessing financial interests in market outlets and retail 

stores. Thereafter, DOJ filed a criminal antitrust suit against the packers 

that resulted in a 1920 consent decree enjoining the firms from engaging in 

the retailing of meat, groceries, and livestock by-products. The consent 

decree also directed the firms to divest their financial interests in public 

stockyards, railroad terminals, and market outlets. In addition, the Packers 

and Stockyards Act was passed in 1921 to make unlawful various activities 

of packers, which had been reported on by FTC, and to authorize USDA to 

regulate activity at stockyards.

Subsequently, the conditions that gave rise to the passage of the Packers 

and Stockyards Act ended, including the control by meatpacking 

companies of railroad terminals, major stockyards, and market outlets. The 

meatpacking industry became less concentrated, and a larger number of 

buyers better assured competition for the available livestock. Therefore, 

USDA focused its efforts under the act on overseeing the fairness and 

promptness of livestock transactions and the financial protection of market 

participants.

Current Conditions Because of mergers and acquisitions in recent decades, the meatpacking 

industry has again become concentrated. For example, four firms account 

for over 80 percent of steer and heifer slaughter. In 1991, we reported that 

USDA’s monitoring of the livestock industry had not kept pace with the 

changes in concentration and market structure and that USDA needed to 

improve its monitoring of the industry’s activities. In 1996, GIPSA reported 

that concentration as well as vertical integration—where the meatpackers 

own the hogs—and coordination in the industry had reduced the role of 

public markets, where terms of a trade are visible to all; that past studies 

were inconclusive about whether the industry remained competitive; and 

that the industry should continue to be monitored.
Appendix II

Overview of Past and Current Conditions 

Affecting Competition in the Livestock 

Industries

Page 32 GAO/RCED-00-242 Packers and Stockyards Programs

In 1996, an advisory committee to the Secretary of Agriculture reviewed 

concerns about livestock markets and recommended, among other things, 

(1) increased monitoring of conditions in the cattle and hog markets, (2) 

enforcement of antitrust and regulatory policy, and (3) a review of GIPSA’s 

enforcement practices. The Secretary then asked USDA’s Office of 

Inspector General (OIG) to report on the act and GIPSA’s program, which 

the OIG did as discussed earlier in this report.

In the increasingly concentrated livestock industries, the number of 

producers has declined, and there is increasing coordination of production 

from the producer to the meatpacker. Hog production, in particular, has 

been revolutionized with the adoption of large production buildings, 

special diets, and other specialized production techniques. With both cattle 

and hogs, there has been an increasing use of contracts or other private 

agreements for buying and selling and less reliance on spot markets to set 

prices. These changes have been driven in part by industrywide efforts to 

control costs and raise the quality and consistency of the industry’s 

products. Since these changes have occurred over a relatively short time 

frame, they have affected producers and firms at each level of these 

industries.

Hog production has shifted to fewer larger producers. By the end of 1999, 

about 2,000 hog farms produced almost half of all hogs. About 98,000 farms 

were producing hogs in 1999—down from about 300,000 hog-producing 

farms 10 years previously. Also, farms marketing 5,000 or more hogs per 

year increased their share of hogs sold from 28 percent in 1988 to 63 

percent in 1997. In addition, the size of meatpacking plants has increased, 

and the largest four meatpacking firms slaughtered about 56 percent of all 

hogs in 1998—up from 32 percent in 1985. Hogs are also now more often 

sold through contracts in which meatpacking firms and producers 

coordinate production methods and delivery schedules. The selling price of 

these hogs has usually been based on the spot market price, but these 

prices have not been publicly disclosed. As contractual marketing 

arrangements and vertical integration have increased, spot market sales 

have fallen to 26 percent of all hogs produced and will likely fall further.1

Consequently, the hog industry is discussing pricing mechanisms to serve 

as alternatives to spot market pricing.

1

The reasons for the increased use of contractual marketing arrangements and vertical 

integration are discussed in Pork Industry: USDA’s Reported Prices Have Not Reflected 

Actual Sales (GAO/RCED-00-26, Dec. 14, 1999).
Appendix II

Overview of Past and Current Conditions 

Affecting Competition in the Livestock 

Industries

Page 33 GAO/RCED-00-242 Packers and Stockyards Programs

In view of hog production’s increasing industrialization and the packing 

industry’s increasing concentration, many hog producers have expressed 

concerns about packing firms’ procurement practices. For example, some 

producers believe that packers may be using their market power to depress 

spot market prices or otherwise manipulate the spot market to their 

benefit. In addition, some producers contend that the declining proportion 

of hogs sold in the spot market and the resulting decline in publicly 

disclosed price information make it difficult for producers to determine a 

fair price. Also, the 1996 USDA-chartered advisory committee concluded 

that improved transparency in price and other sales information is critical 

to both buyers and sellers for the efficient functioning of market systems 

and for evaluating whether markets are competitive. Many producers also 

have concerns that the contractual marketing agreements that packers 

have offered to some large producers are not offered to all producers and 

that contracts often have inequitable terms.

Structural changes in the beef industry have also occurred but more slowly 

than in the hog industry. Concentration among beef-packing firms is 

relatively high, and four companies controlled 81 percent of steer and 

heifer slaughter in 1998—up from 72 percent in 1990 and 36 percent in 

1980. Large meatpacking plants slaughtering over half a million steers and 

heifers a year handle 80 percent of the fed-beef slaughter—up from about 

16 percent in 1977. On the cattle production side, the number of cattle 

feedlots declined from 190,000 in 1987 to 111,000 in 1997. About 200 large 

commercial feedlots accounted for more than half of the 28 million to 29 

million steers and heifers sold to meatpackers, which is more than double 

the percentage of 20 years ago. Also, an increasing percentage of cattle are 

not sold on the spot market, and their selling price has not been publicly 

disclosed. In 1997, about 19 percent of the feedlot cattle slaughtered by the 

largest packers were not sold on the spot market. These cattle (captive 

supplies) either are committed to a packer more than 2 weeks prior to 

slaughter through a private marketing agreement or are owned by a packer.

Like some hog producers, some cattle producers believe that packers are 

using their market power at the expense of producers. These producers 

believe that increasing concentration among packing firms and captive 

supplies reduces competition among packers in the purchase of feedlot 

cattle and thereby reduces the price that packers pay for cattle.

Packers say that spot market prices are determined by supply and 

demand—not packers’ market power—and that this is consistently 

supported by economic studies. Furthermore, packers maintain that their 
Appendix II

Overview of Past and Current Conditions 

Affecting Competition in the Livestock 

Industries

Page 34 GAO/RCED-00-242 Packers and Stockyards Programs

contractual marketing arrangements with producers are, in some 

instances, requested by producers themselves; are motivated by consumer 

demand for high-quality meat products; often contain value-based pricing; 

help keep their plants operating at full capacity; and are not an effort to 

exploit producers. Studies of the cattle and hog markets have shown that 

changes in supply and demand are a substantial influence on prices.2

In response to producers’ concerns, the Livestock Mandatory Reporting 

Act of 1999 was passed as a part of USDA’s appropriation act for fiscal year 

2000. The act requires medium and large hog-slaughtering plants to report 

to USDA the details—such as the prices, volumes, and terms of sale—of all 

transactions involving purchases of hogs. Also, USDA is required to publish 

detailed reports on hog purchases and slaughter and must maintain an 

electronic library on hog-marketing contracts offered by packers. In 

addition, the requirements for medium and large beef packing plants 

include reporting prices to USDA on all cattle purchases, including nonspot-market purchases and boxed-beef sales. The act requires USDA to 

publish the data on beef at regular intervals—some of it several times per 

day. USDA plans to implement the mandatory price-reporting law in midto-late summer 2000.

2

For example, in December 1999, we reported that hog prices plummeted in 1998, 

principally because supply exceeded slaughter capacity. (See GAO/RCED-00-26, Dec. 14, 

1999). Also, a report that reviews studies on changes in the beef industry and cattle pricing 

is contained in Status, Conflicts, Issues, Opportunities, and Needs in the U.S. Beef Industry, 

Purcell, W.D., Research Institute on Livestock Pricing, Virginia Polytechnic Institute and 

State University (May 1999).
Page 35 GAO/RCED-00-242 Packers and Stockyards Programs

Appendix III

Additional Information on the Results of 

GIPSA’s Investigations ApendxiI

This appendix contains additional cases that were the subject of GIPSA’s 

investigations of anticompetitive practices. Also, a more detailed 

discussion of the agency’s two examinations to obtain information about 

the competitive conditions in the cattle and hog markets is provided.

Examples of Cases in 

Which GIPSA Reported 

There Were 

Competition Problems

GIPSA reported that it found competition-related problems in five cases 

involving meatpacking companies; three of these cases were open at the 

time of our review. One of these open cases is discussed in the body of the 

report; the following summarizes the other two open cases:

• In a case involving a major company, GIPSA alleges that the firm 

engaged in anticompetitive and deceptive practices by retaliating 

against a cattle feedlot. Specifically, the company would not bid on or 

purchase cattle at the feedlot. The feedlot’s manager had complained to 

GIPSA that the company’s action was in retaliation for an article he had 

written about its marketing system. This ongoing case is scheduled for a 

hearing before a USDA Administrative Law Judge in March 2001.

• In an ongoing case involving multiple major companies, GIPSA said 

there were deficiencies in the records pertaining to the acquisition of 

hogs. Specifically, the agency identified problems with the companies’ 

procurement records involving spot market purchases, forward 

contracting, and marketing agreements. GIPSA officials told us that the 

companies were notified of the deficiencies and that some, but not all, 

had taken action to correct their record keeping. The officials also said 

that the agency is developing a proposed regulation to address recordkeeping requirements.

Examples of Cases in 

Which GIPSA Reported 

There Were No 

Competition Problems

The following cases illustrate some of the complaints that GIPSA received 

and investigated but did not find evidence to support anticompetitive 

practices. One example is provided in the body of the report; the following 

is a summary of two additional cases:

• GIPSA received a complaint in September 1998 alleging that buyers for 

two meatpacking companies were conspiring at livestock markets to 

depress cattle prices and to force the complainant out of the market for 

slaughter bulls and cows. According to GIPSA’s field office officials, the 

start of an investigation in response to this allegation was delayed 

because of a lack of resources. Subsequently, an investigation was 
Appendix III

Additional Information on the Results of 

GIPSA’s Investigations

Page 36 GAO/RCED-00-242 Packers and Stockyards Programs

conducted, the agency did not find evidence to support the allegation, 

and the case was closed in September 1999.

• Another review was initiated in June 1999 after GIPSA received a 

complaint that major meatpacking companies were refusing to buy 

cattle through an Internet marketing system. The agency’s field office 

closed the case in August 1999 when it decided that the system was a 

marketing tool not covered by the Packers and Stockyards Act.

GIPSA’s Texas 

Panhandle and Western 

Cornbelt Procurement 

Examinations

Two major efforts were completed by GIPSA in recent years; one in 1999 

involving an examination of cattle buying in Texas and the second in 1998 

involving an examination of the procurement of hogs in the Western 

Cornbelt. Each examination was designed primarily to develop information 

about the competitive conditions in the livestock markets, including how 

prices for cattle and hogs are determined. A discussion of each effort 

follows:

Texas Panhandle Cattle 

Procurement

GIPSA initiated an examination in mid-1996 involving the procurement of 

cattle at four plants in the Texas Panhandle, which are operated by the top 

three meatpacking companies in the country. The overall objective was to 

obtain an understanding of the competitive conditions in the cattle market 

in that area, including information on the methods used to acquire and 

determine the price of cattle. In conducting this examination, GIPSA 

compiled extensive data on cattle procurements at the four plants from 

February 6, 1995, through May 18, 1996; interviewed feedlot managers and 

cattle sellers; and reviewed the pricing formulas used by the three 

companies. In an April 1997 report, GIPSA presented a series of tables, 

charts, and maps showing comparative and contrasting statistical 

information that it had obtained and tabulated. The report was silent on 

anticompetitive practices in the Texas cattle market.

Subsequently, the data collected during the examination were used to 

determine if the companies were manipulating prices. To accomplish this 

objective, GIPSA entered cooperative agreements in March 1998 with 

economists from two universities to conduct an econometric analysis of 

the Texas cattle data to determine if marketing agreements and other 

contracting methods used for procuring cattle (captive supplies) had an 

adverse impact on the prices paid for cattle on the spot market. According 

to GIPSA, the researchers said in a November 1998 draft report that the 

data showed some difference between the price paid for cattle acquired 

through captive supplies compared with the price paid for spot market 
Appendix III

Additional Information on the Results of 

GIPSA’s Investigations

Page 37 GAO/RCED-00-242 Packers and Stockyards Programs

purchases. The researchers also said that their statistical analysis did not 

support the notion that reducing captive supply purchases or increasing 

spot market purchases would result in an increase in the spot price. This 

was because, for example, feedyard managers control when cattle are 

delivered under captive supply arrangements and the captive supply price 

is set the week before the cattle are delivered. GIPSA then entered into 

cooperative agreements with seven other outside authorities to review its 

Texas cattle study and to “peer review” the analysis of the two economists. 

In 1999, the peer reviewers reported to GIPSA that they generally agreed 

with its study, but they raised questions about the overall scope of the 

effort, the data collection process, and the descriptive analysis of the data. 

The reviewers also generally agreed with the analysis of the university 

economists but raised questions about how the analysis could have been 

improved. Thereafter, the researchers incorporated the comments of the 

peer reviewers in a final report, which reiterated the findings of their draft 

report. GIPSA was provided with the final report in November 1999, and 

the agency announced its results in December 1999.

Western Cornbelt Hog 

Procurement

GIPSA also initiated an effort in 1996 involving the procurement of hogs at 

12 plants in 4 states (Iowa, Minnesota, Nebraska, and South Dakota) 

operated by 4 of the largest meatpacking companies in the country. GIPSA’s 

work was aimed at understanding the contractual arrangements between 

packers and producers and the relationship between the quality of hogs, 

seller size, and price. GIPSA’s Chief of the Competition Branch told us that 

the overall objective was to determine how packing companies set prices 

for hogs and not to address any specific complaints regarding prices. 

During its work, GIPSA compiled extensive data on hog procurements at 

each plant during January 1996. The agency’s field offices submitted 

detailed reports on each plant to GIPSA’s headquarters from August 1996 

through January 1997. In reporting its results in late 1998, GIPSA identified 

two areas of concern: (1) the sales prices reported to USDA did not reflect 

the actual prices paid to producers and (2) price variations exist between 

various groups of sellers. Specifically, GIPSA found that the reported prices 

were generally lower than the prices actually paid for hogs and that the 

hogs sold by smaller sellers tended to be of lower quality and received 

lower prices. 
Page 38 GAO/RCED-00-242 Packers and Stockyards Programs

Appendix IV

Objectives, Scope, and Methodology ApendxiIV

This appendix contains information on our objectives, scope, and 

methodology in conducting this review. Concerned about concentration 

and anticompetitive practices in the cattle and hog markets, Senator 

Charles E. Grassley, as Chairman of the Subcommittee on Administrative 

Oversight and the Courts, Senate Committee on the Judiciary, asked us to 

review GIPSA’s efforts to enforce the competition provisions in the Packers 

and Stockyards Act. Shortly thereafter, section 934 of USDA’s appropriation 

act for fiscal year 2000 (P.L. 106-78, Oct. 22, 1999) mandated that we analyze 

and report to the House Committee on Agriculture and the Senate 

Committee on Agriculture, Nutrition, and Forestry on USDA’s ability to 

ensure free competition in the marketing of hogs. In response, after 

discussing the request and the mandate with staff of Senator Grassley and 

majority and minority staff of the House and Senate agriculture 

committees, we reviewed (1) the number and status of investigations 

conducted by 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. In addition, we reviewed GIPSA’s authority 

under the Packers and Stockyards Act to address concerns about 

anticompetitive and unfair practices in the cattle and hog markets.

To compile background information on GIPSA and the issues surrounding 

competition in the cattle and hog industries, we interviewed agency 

officials, including GIPSA’s Administrator, Acting Deputy Administrator of 

the Packers and Stockyards Programs, Director of the Office of 

Policy/Litigation Support, Chief of the Competition Branch, and 

supervisors and various staff in the Denver and Des Moines offices. We 

interviewed USDA’s Associate General Counsel, Regulatory and Marketing, 

and the Assistant General Counsel of the Trade Practices Division. We 

discussed our findings and recommendations with USDA’s General 

Counsel. We also interviewed officials of four meatpacking companies, 

including a few of the largest meatpackers; representatives of livestock 

producer groups and farm organizations; agricultural economists; and state 

office officials.

We reviewed GIPSA’s annual reports and other materials that it has 

published on the Packers and Stockyards Programs; those parts of USDA’s 

1997 strategic plan involving GIPSA’s packers and stockyards program, the 

fiscal year 1999 performance report, and the revised performance plans for 

fiscal years 2000 and 2001; and reports issued by USDA’s Economic 

Research Service involving competition in the meatpacking industry. We 

also reviewed USDA’s Budget Explanatory Notes for Committee on 
Appendix IV

Objectives, Scope, and Methodology

Page 39 GAO/RCED-00-242 Packers and Stockyards Programs

Appropriations for fiscal years 1999 through 2001. Furthermore, we 

reviewed prior reports addressing GIPSA’s involvement in competition 

matters that were issued by USDA’s OIG and by us.

Our analysis of the investigations conducted by GIPSA in response to 

allegations of anticompetitive activities or initiated by the agency covered 

cases that were ongoing at the start of fiscal year 1998 and those that 

started in fiscal 1998, 1999, and the first quarter of fiscal 2000. We used 

GIPSA’s complaint/investigation summary log, which is the agency’s record 

system for identifying competition cases. Agency officials also provided us 

with log records for trade practice cases that they indicated had 

competition implications. We reviewed each case to determine, for 

example, the type of livestock involved; whether a meatpacking company 

or another party, such as a livestock market, was alleged to have acted 

improperly; the alleged anticompetitive practice and whether GIPSA found 

evidence to support the allegation; and the length of time the cases were 

ongoing. To ensure that we had a clear understanding of the cases, we 

discussed many of them with GIPSA’s Chief of the Competition Branch and 

regional staff in the Denver and Des Moines offices. Furthermore, we 

excluded from our analysis those cases that did not involve cattle or hogs, 

such as those involving poultry and lambs, and those that involved 

financial, trade, or other practices but not competition. Also, we did not 

evaluate the effectiveness of GIPSA’s investigations. To report on the status 

of the agency’s open cases, we used the end of the second quarter of fiscal 

year 2000 as the cutoff date.

We also included various other major efforts by GIPSA covering, for 

example, the procurement of feeder cattle in Texas and hogs in four 

Western Cornbelt states, which the agency reported on during 1999 and 

1998, respectively. These efforts were designed primarily to develop 

information about the competitive conditions of markets and the pricing of 

cattle and hogs. In addition, we reviewed GIPSA’s documentation covering 

studies of livestock-marketing issues being conducted by university 

researchers and the agency’s plans for future investigative efforts.

To identify factors that limit GIPSA’s ability to investigate concerns about 

anticompetitive practices, we interviewed officials at GIPSA’s headquarters 

and at its regional offices in Denver, Colorado, and Des Moines, Iowa; 

USDA’s OGC and OIG; DOJ; and FTC. We also discussed GIPSA’s efforts to 

address anticompetitive practices with, for example, representatives of 

livestock producer groups and farm organizations. We reviewed USDA’s 

OIG report of 1997 on GIPSA’s effectiveness in investigating 
Appendix IV

Objectives, Scope, and Methodology

Page 40 GAO/RCED-00-242 Packers and Stockyards Programs

anticompetitive activities and analyzed the actions taken by the agency in 

response to the report’s recommendations, including the agency’s 1997 

reorganization plan. We reviewed various closed GIPSA case files in 

Denver, Des Moines, and GIPSA’s headquarters to gain a perspective on the 

agency’s investigations and discussed GIPSA’s investigation planning, 

practices, and performance with regional and headquarters officials. We 

reviewed and compared the operating manuals that GIPSA, DOJ, and FTC 

use as guidance in conducting competition-related investigations and the 

budget requests of GIPSA and USDA’s OGC for fiscal years 1999 through 

2001.

To review GIPSA’s authority to address concerns about unfair and 

anticompetitive practices in the cattle and hog markets, we reviewed the 

Packers and Stockyards Act; the act’s legislative history, including the 

events that led to its enactment in 1921; the agency’s implementing 

regulations and internal memoranda; and relevant past cases, court 

decisions, and law review articles. We reviewed the records of 

congressional hearings on concentration and competition in agriculture. 

We discussed GIPSA’s authority with officials at the agency’s headquarters, 

USDA’s OGC, DOJ, and FTC, and law professors. We also discussed GIPSA’s 

authority with representatives of two grassroots farm organizations: the 

Organization for Competitive Markets and the Western Organization of 

Resource Councils. Furthermore, we reviewed the 1996 report by the 

advisory committee to the Secretary of Agriculture that addressed 

concerns in the livestock markets, the 1996 petition by the Western 

Organization of Resource Councils, and USDA’s response to the petition.

We conducted our review from September 1999 through August 2000 in 

accordance with generally accepted government auditing standards.
Page 41 GAO/RCED-00-242 Packers and Stockyards Programs

Appendix V

Comments From the U.S. Department of 

Agriculture ApendxiV
Appendix V

Comments From the U.S. Department of 

Agriculture

Page 42 GAO/RCED-00-242 Packers and Stockyards Programs
Appendix V

Comments From the U.S. Department of 

Agriculture

Page 43 GAO/RCED-00-242 Packers and Stockyards Programs
Appendix V

Comments From the U.S. Department of 

Agriculture

Page 44 GAO/RCED-00-242 Packers and Stockyards Programs
Page 45 GAO/RCED-00-242 Packers and Stockyards Programs

Appendix VI

GAO Contacts and Staff Acknowledgments ApendxiVI

GAO Contacts Lawrence J. Dyckman, (202) 512-5138

Charles M. Adams, (202) 512-8010

Acknowledgments In addition to those named above, Fredrick C. Light, Larry D. Van Sickle, 

Gary T. Brown, Alan R. Kasdan, Mary C. Kenney, and Patrick J. Sweeney 

made key contributions to this report.

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