USDA & Anti-Trust Enforcement: Surging Ahead At Glacial Speed

 

As part of a self-styled comprehensive government effort to promote fair competition in the nation's livestock and poultry markets Secretary of Agriculture Dan Glickman has announced this his department is launching three "major" probes of alleged anticompetitive practices in the nation's meatpacking industry, and a fourth investigation into reported unfair dealings with poultry producers in the South.

Targets of the investigation will include IBP Inc.; Excel, the Cargill subsidiary, and Monfort Inc., a subsidiary of the ConAgra Corp., who together control 83% of the nation's beef packing industry, and Tyson Foods, the nation's leading poultry producer. Tyson's Archie Schaffer and Cargill's Robbin Johnson suggested to the WALL STREET JOURNAL that the investigations could be preliminary inquiries or "research projects." A ConAgra spokesman couldn't be reached for comment.

In recent years the USDA has received numerous complaints from contract poultry growers in the Delaware-to-Oklahoma Broiler Belt, as well as from livestock producers nationwide about contract settlements and cattle and hog pricing. The department's Office of the Inspector General auditors has also reported that the Grain Inspection, Packers and Stockyards Administration (P&SA) has been ill-prepared to investigate price fixing and other violations. It recommended that the Clinton administration transfer the P&SA's antitrust duties to the Justice Department or the Federal Trade Commission.

Secretary Glickman has thus ordered a sweeping reorganization of the agency's headquarters and regional offices, with lawyers, economists and statisticians being reassigned to the field. New surveillance teams, Mr. Glickman said, are involved in two of the major investigations.

To strengthen efforts under the P&S Act to ensure fair trade practices in the market, including placing additional emphasis on investigations of potential anti-competitive practices, four major investigations are currently underway--dealing with cattle procurement in the Texas Panhandle, slaughter hog procurement in the central United States, poultry contract settlements in several states, and lamb procurement:

* The fed cattle investigation will specifically examine packer procurement and pricing practices, procedures, and will look for any evidence of anti-competitive activity or arrangements. It includes 16 months of procurement data, over 37,000 transactions, and approximately 6 million head of cattle.

* The Iowa-Southern Minnesota slaughter hog investigation will focus on 11 major hog slaughter plants accounting for about one-third of the slaughter hogs. This investigation will include an analysis of pricing and procurement methods, procurement areas, and contractual agreements.

* An investigation has been initiated to examine poultry contracts which compare a grower's cost of production with the cost of other growers settling during a given settlement period. The focus of the investigation is to examine the effects of this type of contract on individual growers by analyzing grower settlements over a period of time at several complexes. Data collected will include a year of settlement data from complexes in several states, including data from five of the top 10 firms in broiler production.

* An outside review of the program agency that administers the Packers and Stockyards Act (P&S Act) will lead to restructuring of that organization. Restructuring, which will affect both headquarters and field offices, will allow USDA to focus on core responsibilities under the P&S Act--protecting the industry and public from anti-competitive and unfair trade practices and provide financial protection for livestock sellers.

* Congress appropriated an additional $400,000 (approximately one-third of the increase in budget requested by the Department), in fiscal year 1997, for administration of the P&S Act. Surveillance teams created using personnel with specialized training and backgrounds will investigate competitive issues. Two projects have already been initiated using the surveillance teams: 1) the investigation of slaughter hog procurement practices in Iowa and Minnesota; and 2) the investigation of the lamb slaughter industry's use of supply contracts and formula pricing arrangements and their impact on market access.

* In its fiscal year 1998 budget request, the Clinton Administration requested an additional $1.65 million for increased legal, economic, and statistical expertise to pursue investigations of anti-competitive issues, and requested $750,000 for investigation and enforcement in the poultry area.

* The Department will also use the data gathered during the current investigation in the Texas Panhandle as well as the data compiled from the similar investigation conducted in Kansas in 1995 to perform additional economic analyses of the use and effect of captive supplies.

* On January 14, the Department published a notice in the Federal Register seeking comments on a petition requesting the initiation of rulemaking to restrict certain livestock procurement practices by meat packers, submitted by the Western Organization of Resource Councils (WORC). The Department published the petition to seek public comment on the issues raised, and received over 1,700 comments by the April 14 closing date. A USDA team with economic, legal, and industry expertise is currently reviewing and analyzing those comments.

* Reflecting the advisory committee's conclusion that the Concentration Study (released February 14, 1996) was inconclusive concerning the effects of concentration on livestock prices, the Department has funded two cooperative agreements with separate teams of university researchers. These teams will use the same data used in the Concentration Study but different theoretical models and methods to evaluate the effect of concentration on prices.

"I continue to be concerned about the concentration of more and more of the agriculture industry into fewer and fewer hands," Glickman said. "I believe it is USDA's responsibility to ensure that markets are fair and open, and to make certain our efforts keep pace with a changing market. We also must take all possible steps to promote opportunities for successful small- and medium-sized operations.

"The Clinton Administration is committed to achieving these goals, and we have already taken a wide range of important actions to address concerns about concentration. But, we believe Congress must provide us with additional tools to ensure fair trade and swift correction of anti-competitive practices," Glickman said.

Specifically, Glickman said that he will ask Congress to:

* Strengthen Enforcement of the Agricultural Fair Practices Act -- The Department will ask Congress to amend the Agricultural Fair Practices Act of 1967 (AFPA) to provide USDA with administrative enforcement and civil penalty authority. This will help ensure fair treatment of producers in the market, regardless of their membership or affiliation with a producers' association.

Currently, violations of the AFPA must be referred to the Department of Justice or pursued through private legal action. Civil penalty and administrative enforcement authority for USDA would enable more timely and effective enforcement of violations such as discrimination or failure to bargain fairly with producers because of affiliation with or membership in an association.

* Expand Enforcement of the Packers and Stockyards Act -- The Department will ask Congress to amend the Packers and Stockyards Act (P&S Act) to provide the Department with administrative enforcement authority for violations by live poultry dealers, as currently exists for violations by meat packers.

Currently, live poultry dealers are not subject to the same enforcement procedures as meat packers for alleged violations of section 202 of the P&S Act, and cases alleging violation of section 202 by live poultry dealers must be referred to the Department of Justice. New administrative authority for the Department Glickman claims will provide more uniform enforcement, maximize the effectiveness of current resources under the P&S Act, and provide a more effective and timely deterrent to behavior in violation of the Act.

In addition to these legislative proposals, Glickman also announced several new actions the Department is taking to address concentration or anti-competitive practices in agriculture, including restructuring the Grain Inspection, Packers and Stockyards Administration (GIPSA) in response to an independent review of its enforcement of the anti-competitive prohibitions found in the Packers and Stockyards Act.

"This fundamental restructuring will enable USDA to investigate more effectively anti-competitive practices in these industries and ensure producers that we are aggressively enforcing the law to keep the market fair and open to all producers, large and small," Glickman said. "But, for GIPSA to be equipped fully to address anti-competitive practices in the marketplace, we also need Congress to fund fully our fiscal year 1998 GIPSA budget request.

In addition to new market information reports issued last fall, USDA is now issuing a new weekly report detailing imports of meat and poultry products, and plans expansion of the pilot project for pork producer price reporting to three additional states. Final preparations are also underway to release a weekly report on live cattle, hog, and sheep crossings from Canada and Mexico.

Secretary Glickman also announced that the Department will launch an education and outreach effort to help producers use this new information in today's global marketplace.

* Broaden producer education and outreach in risk management and marketing -- The Department will convene a roundtable meeting this summer, inviting leaders of producer and agribusiness groups, and the research, academic, and cooperative extension system communities. The Department will seek comments to focus current and planned research and education initiatives to address risk management strategies, contracting, strategic planning and decision making.

Glickman also announced actions that USDA is taking to address concerns that USDA's research does not sufficiently benefit small farmers.

* Ensure unbiased research by USDA -- To ensure that USDA's research addresses problems of small- and medium-sized farming operations, the Research, Education, and Economics mission area has arranged for the National Academy of Sciences to conduct an independent review of the Department's research program.

"I am committed to doing everything possible to help small and independent farmers compete in today's marketplace," Glickman said. "This independent review by the National Academy of Science will help to ensure that these farmers benefit from the wide variety of research conducted by USDA."