September 22, 2000

Sens. Tom Harkin (D-IA) and Charles Grassley (R-IA) have taken somewhat different approaches to saying the same thing: A General Accounting Office (GAO) report USDA's enforcement of the Packers and Stockyards Act shows a need for improvement. It contains "valid recommendations for more effective action against anti-competitive practices in livestock markets," said Harkin. Grassley was more blunt: it shows USDA "has not effectively used its power to stop anti-competitive practices in the livestock and meat packing industries," he said.

Harkin said the report failed to address fundamental and critical obstacles to combating agribusiness economic concentration. The GAO report was required in last fall's mandatory price reporting legislation, which Harkin supported and was provided to him as ranking Democrat on the Senate Committee on Agriculture, Nutrition and Forestry.

"The GAO report recognizes that after years of prior neglect, this (Clinton) administration took major steps to breathe new life into enforcement of the Packers and Stockyards Act against anti-competitive practices, but found that further steps are needed," Harkin said. "For some time I have been urging more aggressive action by USDA, however, the recommendations of the GAO only touch on a limited aspect of the matter and do not get at the root of agribusiness concentration."

Grassley gave an equally partisan but not as charitable reaction. "The family farmer and independent producer deserve a USDA that aggressively and skillfully looks out for their interests against unfair competition," Grassley said. The report "proves that the administration has failed to protect independent producers by ensuring competition in the livestock industry, despite official warnings and recommendations made in 1991 and 1997."

He said he is promoting legislation to require USDA to implement the reforms suggested in a report. He said congressional action is necessary because "while USDA has acknowledged the need to make changes in the past, the agency's never gotten the job done. I want to make sure the agency works for family farmers. (The) GAO report provides the blueprint fixing the problems."

The GAO report made two major recommendations: 1) USDA should develop a teamwork approach between economists in the Grain Inspection Packers and Stockyards Administration (GIPSA) and attorneys in USDA's Office of General Counsel (OGC) and 2) USDA should determine the number of attorneys needed to participate in investigations.

"Again, these are valid recommendations, but focusing primarily on bringing more lawyers into the process is just not an adequate solution to the crushing effects of economic concentration on America's family livestock producers," Harkin said. "In the whole scheme of things, the GAO's procedural recommendations are like fighting a barn fire with a five gallon bucket. The report barely scratches the surface of the gaps in USDA's legal authority to attack anti-competitive economic concentration -- and the way in which that authority has been curtailed by the court interpretations of the Packers and Stockyards Act."

Harkin said that certain decisions by the courts, especially in the 1980s, had lost sight of the letter and the spirit of the Sherman Act, the Clayton Act, the Federal Trade Commission Act and the Packers and Stockyards Act. He said that it is becoming increasingly clear that enforcement of the antitrust laws -- including the Packers and Stockyards Act -- is not enough by itself to ensure healthy competition in agriculture, and that Congress must act.

He pointed to the bipartisan introduction of several bills this year as evidence of the need for enhancing USDA's legal authority against anti-competitive practices in the livestock industry. Those bills would give USDA additional legal authority and tools to address economic concentration and anti-competitive practices of agribusiness. Harkin is a cosponsor of legislation introduced by Sen. Tom Daschle (D- SD), the Farmers and Ranchers Fair Competition Act of 2000, which seeks to 1) strengthen USDA's legal authority and procedures to prevent and take action against anti-competitive practices, 2) allow USDA to stop or place conditions on agricultural mergers and acquisitions which would harm family farmers, ranchers, and rural communities, and 3) secure compensation for farmers who have been damaged by anti-competitive behavior.

Grassley noted that the report said USDA has broad authority to take investigative, enforcement and regulatory action under the Packers and Stockyards Act. The GAO also said that USDA's responsibilities to address unfair practices are based upon and go further than the Sherman Act, which is enforced by the Justice Department to address unfair practices.

The legislation he planned to introduce would require USDA to:

--implement the recommendations of the new GAO report within one year and in consultation with the Justice Department and the Federal Trade Commission;

--work with the Justice Department and Federal Trade Commission to identify and investigate complaints of anti-competitive activity and to enforce the Packers and Stockyards Act during this interim one-year period;

–develop and implement a training program for competition investigations within one year;

--provide an annual report to Congress on the state of the cattle and hog industries, identifying business activities that represent possible violations of the Packers and Stockyards Act;

--report to Congress within one year on actions taken to comply with the Packers and Stockyards Enforcement Improvement Act.

The 1921 Packers and Stockyards Act established within USDA the Grain Inspection, Packers and Stockyards Administration and gave the agency considerable authority to investigate and take enforcement action to protect the buyers and sellers of livestock. The GAO report found that two major factors have impacted GIPSA's capability to investigate and enforce allegations of anti- competitive practices in the cattle and hog markets.

"The bottom line is, GIPSA has been ineffective at addressing growing concerns about competition in the livestock market and because of the agency's shortcomings, potential violations may not have been pursued," Grassley said.

The GAO specifically identified that GIPSA had non-existent and inadequate investigation and case methods, practices and processes to deal with competition-related cases, and GIPSA staff was comprised primarily of economists, rather than the lawyers needed to investigate and develop cases, said Grassley. The GAO also said that lawyers needed to be at the lead of the investigation, as is done at the DoJ and FTC.

"USDA has mis-allocated resources provided to this enforcement agency. Headquarters has been restructured and specialists have been hired, but the critical mission of investigating allegations of anti- competitive practices has not been made a top priority. The proper guidance and procedures haven't been set-up, and it looks like it will take legislative action to focus the work of this agency," Grassley said. Congress has increased funding levels for GIPSA almost every year since 1991.

Grassley said that actions taken by USDA during the last two months in anticipation of the release of the report's critical findings reflect the strong nature of the new GAO report. "Attempts to distract the farm community and members of Congress from GIPSA's failings are a disservice to the family farmers for whom the agency is to be a watchdog. USDA cannot simply pass the buck to Congress and ask for more authority when it's failed to meet its existing responsibilities. I want to strengthen USDA's hand, but taking action for family farmers must first become a top priority for GIPSA," Grassley said.

In late July, Agriculture Secretary Glickman announced that USDA would issue new regulations to help ensure fair competition in the livestock and meat packing industries by increasing transparency of market transactions. In addition, USDA recently scheduled public forums to solicit input on issues pertaining to captive supplies, including the Western Organization of Resource Councils petition, which seeks to restrict packer use of forward contracting and packer feeding of cattle.