In theory, USDA is supposed to enforce the laws that protect producers from anti-competitive practices by the meatpacking industry. In practice, the job isn't getting done, a federal probe has found.

The inquiry by USDA's Office of Inspector General (OIG), which acts as a watchdog to make sure USDA is doing its job, found USDA was doing little, if anything, to enforce laws governing meatpackers. For example, OIG found no meatpacker had been cited for anti-competitive practices since 1999, and USDA had failed to complete investigations of the packing industry because of management decisions, red tape and a shortage of trained investigative personnel.

To the outside observer, however, USDA might have appeared to be a hornet's nest of investigative activity focusing on the packing industry. By employing an unusual definition of what constituted an investigation, USDA claimed it had more than 1,800 investigations underway as of mid-2005.

What's an “investigation?”

For example, if USDA staffers monitored publicly available data on the packing industry, it was counted as an investigation. If USDA sent a routine letter to a packer for information, that was counted as another investigation. And, if agency staffers visited a packer to review its operations, that was classified as still another investigation. This “would inflate the number of investigations reported as completed in the agency's annual performance report,” OIG said.

In reality, OIG found real efforts by USDA staffers to investigate potential cases of wrongdoing went nowhere because of inhibitory USDA policies. No investigations were actually being completed. As a result, the cases weren't referred up the chain for enforcement.

“Since USDA wasn't performing investigations, no referrals were being made to the Office of General Counsel (OGC) for formal administrative action. The OGC filed no administrative complaints against market participants for anti-competitive practices since 1999.”

The investigation was requested by Sen. Tom Harkin, (D-IA). Upon release of the findings, Harkin said USDA had “failed to fulfill” its responsibility to enforce the Packers & Stockyards Act (PSA), the 1921 law designed to prevent anti-competitive behavior by the packing industry.

“The OIG report clearly finds that top officers were blocking employees from pursuing investigations and then cooking the books to cover up USDA's lack of enforcement actions,” Harkin said.

“We need to get to the bottom of this. America's livestock and poultry producers deserve to know why USDA failed to enforce laws specifically designed to protect them,” he adds.

Widespread reforms needed

Harkin says “sweeping changes” are needed at USDA, and he plans to introduce legislation to create an office of special counsel for competition matters to oversee more effective enforcement of the law and to coordinate with the Department of Justice and the Federal Trade Commission. In addition, Harkin and a bipartisan group of farm-state senators formally requested the Senate Agriculture Committee to hold hearings on USDA's failure to enforce PSA.

USDA didn't contest the OIG findings and promised to make widespread reforms. However, the agency faced similar charges from two earlier investigations in the past decade and failed to resolve them.

The first investigation, also by OIG, came out in early 1997. It found USDA lacked resources to keep tabs on the livestock procurement market for anti-competitive behavior. In response, the agency underwent a major shakeup.

The Government Accountability Office conducted a second probe in 2000. But when OIG took its look last year, it found USDA “had not taken sufficient actions to strengthen operations” in response to the first two investigations.

For example, running complex investigations of anti-competitive activities is difficult and requires specialized staff and smooth coordination between different units of USDA. OIG found USDA had neither.

It also found USDA failed to hire a manager with such investigative experience. And it failed to develop teamwork between agency staffers and attorneys at OGC, which is charged with carrying out enforcement when evidence of wrongdoing is found.

USDA also failed to resolve policy problems that hindered investigative work. For example, the OIG report found 64 policy issues awaiting decisions as of late 2005. In 55 of them, staffers had requested their resolution before 2004.

One of the biggest bottlenecks was a required review process by a panel of top managers before investigations could go forward. The investigation found the panel “inhibits the agency's ability to investigate anti-competitive activities and unfair trade practices in the livestock and poultry markets.

“The panel did not clearly establish a process for identifying the work to be performed, approving the work plans, performing the fieldwork and analysis, and reporting on the results… Consequently, no competition and complex investigations are being completed,” the report said.

Doug McInnis is a freelance business and poltical writer based in Casper, WY.

USDA pledges changes

USDA is pledging widespread reforms in response to a federal probe that found it failed to enforce laws designed to protect producers from anti-competitive practices by meatpackers.

Here's a summary of the investigation's findings, and USDA's proposed changes:

  • The probe found USDA management practices hindered its ability to investigate anti-competitive activities. USDA says it's now developing new procedures for handling investigations. These include new procedures for doing preliminary work to determine if sufficient grounds exist to proceed with a full investigation.

  • The probe found USDA classified routine procedures as investigations, which gave an inaccurate and inflated picture of agency efforts in countering possible wrongdoing by the meatpacking industry. USDA says it will develop a new policy for defining what is an investigation.

  • The probe found USDA hindered its staff's ability to conduct packing industry investigations because it failed to resolve scores of policy issues. The agency says it's developing a new structure for receiving, reviewing and acting on unresolved policy issues.

  • USDA also pledges other changes to streamline its investigation process. One new procedure makes it easier for legal specialists on meatpacking matters to consult USDA's Office of General Counsel (OGC). OGC is charged with carrying out enforcement when wrongdoing is found.