Within USDA, GIPSA is responsible for implementing the Packers and  Stockyards Act. GIPSA initiates investigations and actions to halt unfair  and anticompetitive practices by meatpacking companies and by other  parties involved in livestock marketing. The subsequent OIG report noted that while GIPSA had a credible record  in certain areas, it (1) did not have the capability to perform effective  anticompetitive practice investigations and (2) faced formidable obstacles  to become effective in performing such investigations. In response, GIPSA completed a major  restructuring of its headquarters and field offices in 1999 and hired staff to  strengthen its investigations of alleged anticompetitive practices. Because of continued concerns about whether GIPSA was taking  sufficient action to protect competition in livestock markets, GAO was  requested to review USDA’s efforts to implement the Packers and  Stockyards Act. Subsequently, the OIG completed a  follow-up review on GIPSA’s administration and oversight of the Packers  and Stockyards Programs in January 2006. 2000 GAO Review Identified Critical Factors Detracting From GIPSA’s Investigative Capabilities

We identified two critical factors that detracted from GIPSA’s investigative  capability, as well as areas where GIPSA could improve its efforts to  develop and share key information. First, the agency’s investigations were  planned and conducted primarily by economists without the formal  involvement of attorneys from OGC. Second, GIPSA’s investigative  practices were designed for traditional trade practices and financial issues  the agency had emphasized for years and were not suited for the more  complex competition-related concerns it was addressing. Attorneys were assigned to lead and conduct  investigations from the outset so that officials with a legal perspective  focused on assessing potential violations of law. We concluded that GIPSA’s program needed additional steps to become  more effective and efficient in performing investigations and  recommended that GIPSA develop a teamwork approach for  investigations with GIPSA’s economists and OGC’s attorneys working  together to identify violations of the law. Processes and Practices For Anticompetitive Practice Investigations

We also found that GIPSA’s basic investigative processes and practices  were not designed for addressing the complex anticompetitive practices it  had begun to encounter in recent years—instead they were designed for  the more traditional trade practice and financial issues that the agency had  emphasized for years. They also agreed that GIPSA could  report on market activities and identify those that may raise concerns  about fairness and competition, as FTC had done. In our report, we  recommended that GIPSA provide industry participants and the Congress   with clarifications of GIPSA’s views on competitive activities by reporting  publicly on changing business practices in the cattle and hog industries  and identifying market operations or activities that raised concerns under  the Packers and Stockyards Act. GIPSA’s Actions To Address GAO’s Recommendations Fell Short in Several Areas

USDA’s General Counsel and the Under Secretary for Marketing and  Regulatory Programs concurred with our recommendations and provided  encouraging details about their planned implementation. They noted that OGC attorneys would  work closely with GIPSA’s economists, legal specialists, and other  technical specialists to ensure that investigative plans had a sound basis  and to address critical legal issues throughout the conduct of an  investigation. Overall, it appears that as GIPSA officials  responded to the prior OIG and GAO reports, they did so in a manner that  prevented, rather than facilitated the desired actions and results. Challenges and Other Issues Associated With Addressing Longstanding Weaknesses

Given GIPSA’s lack of progress in addressing prior report findings and  recommendations dating back almost a decade, continued vigilance and  monitoring of its key activities and management initiatives by the OIG and  other oversight bodies is essential. developing an internal review function to monitor and report on  the progress of corrective actions resulting from external  reviewers, such as the OIG and GAO; moving forward in identifying techniques used by DOJ and FTC  that are most appropriate under the Packers and Stockyards Act. GIPSA also stated that it will enable its legal specialists to consult with  OGC and will integrate attorneys into complex competition investigations  earlier in the process. Finally, as GIPSA moves forward in developing its processes, it  should consider the feasibility of assigning lead roles to OGC attorneys for  investigations that involve more complex anticompetitive practices—an  approach we have recommended that is also consistent with DOJ and FTC  practices. Going forward, it is also possible that GIPSA’s efforts to  periodically inform the industry and the Congress about its monitoring  efforts, as well as changing competitive conditions could be of further  usefulness. GIPSA has issued reports on the cattle, hog, and poultry  industries from 2000 through 2004, and has initiated a broad study on  livestock and red meat marketing practices. While informative to the  industry and policy makers, such analyses could also be internally  valuable to GIPSA as a tool for identifying current and emerging areas of  vulnerability and better targeting its oversight resources and activities.
Why GAO Did This Study

GAO discussed before Congress the U.S. Department of Agriculture's (USDA) management and oversight of the Packers and Stockyards Act. Within USDA, the Grain Inspection, Packers and Stockyards Administration (GIPSA) is responsible for administering the Packers and Stockyards Act and investigating concerns about unfair and anticompetitive practices in the $90 billion livestock market. Prior reports issued by the USDA Office of Inspector General (OIG) and our office have identified weaknesses in GIPSA's investigation and enforcement activities, and recommended actions to address them. A more recent OIG report shows that, in several key areas, GIPSA still has not taken sufficient steps to address those recommendations. This testimony focuses on our prior work and discusses (1) factors that have affected GIPSA's ability to investigate concerns about anticompetitive practices, (2) GIPSA's actions to address our recommendations and areas where their efforts have fallen short, and (3) challenges and other issues we believe GIPSA should consider as it moves to further strengthen its capacity to address competitiveness issues.

What GAO Found

In summary, in 2000, we identified two critical factors that detracted from GIPSA's ability to investigate anticompetitive practices in livestock markets, and another area where improvement was needed. First, the agency's investigations were planned and conducted primarily by economists without the formal involvement of attorneys from USDA's Office of General Counsel (OGC). As a result, a legal perspective that focused on assessing potential violations was generally absent when investigations were initiated and conducted. Second, GIPSA's investigative practices were designed for traditional trade practices and financial issues the agency had emphasized for years and were not suited for the more complex competition-related concerns it was addressing. Finally, while not a critical concern, we noted that GIPSA had an important role in keeping the industry and the Congress informed about its monitoring of livestock markets and could have done more to identify market operations or activities that appeared to raise concerns under the Packers and Stockyards Act. USDA concurred with our findings and noted specific actions it planned to take in response to our recommendations, including (1) formalizing consultations between GIPSA and OGC on complex investigations, and integrating OGC attorneys into its investigative teams; (2) developing a tiered process whereby routine investigations would be reviewed and approved by headquarters staff, while complex investigations received an additional OGC review; (3) adopting relevant procedures used by DOJ and FTC for planning, developing, implementing, and reviewing investigations; and (4) reporting publicly on changing business practices and activities that raise fairness and competition concerns. Despite these plans, the January 2006 OIG report identified substantial ongoing weaknesses in GIPSA's investigative processes and noted that GIPSA's actions to respond to the prior OIG and GAO reports had fallen short in key areas. In particular, GIPSA had not yet developed a teamwork approach for investigations whereby GIPSA's economists and USDA's OGC attorneys could work together to identify violations of law, nor had it taken sufficient steps to ensure legal specialists within GIPSA were used most effectively. In addition, GIPSA had not followed through in adopting appropriate investigative guidance similar to those of DOJ and FTC to strengthen its ability to investigate anticompetitive and unfair practices. Given GIPSA's lack of progress in addressing prior report findings and recommendations dating back for almost a decade, continued vigilance and monitoring of its key activities and management initiatives by the OIG and other oversight bodies is essential. In its response to the OIG's 2006 report, GIPSA noted that it intends to reassess and develop a defined process for managing investigations, enhancing communication among staff and managers, appropriately dividing responsibility for its varied types of investigations, and developing an internal review function to monitor and report on corrective actions resulting from the OIG and GAO reviews. Consistent with our prior recommendations, GIPSA also plans to define the role of OGC attorneys and GIPSA legal specialists in investigations and to move forward in identifying and adopting certain techniques used by the DOJ and the FTC. As GIPSA moves ahead in reexamining its processes it should consider assigning lead roles to OGC attorneys for certain investigations involving complex anticompetitive practices. Finally, going forward, GIPSA's efforts to periodically inform the industry and the Congress about competitive conditions could be of further usefulness. GIPSA plans to complete a study on livestock and red meat marketing practices later this year. While potentially informative to the industry and policymakers, it could also help GIPSA identify current and emerging areas of vulnerability and better target its oversight resources.