Cattle passports intended to ensure the origin and safety of beef are being bought and sold on the black market, say trading standards officers.
All cattle destined for the food chain must have a passport
The passports were introduced to stop the spread of BSE and foot-and-mouth disease, and every British cow bound for the food chain must have one.
But trading standards officers found them being traded for up to £50, BBC Radio 4's Farming Today has learned.
A Lancashire farmer was arrested and freed on bail after an investigation.
Paperwork was removed from the man's farm, following the investigation into the movement of hundreds of animals.
Trading Standards spokesman Derek Smith said: "This could have serious consequences in terms of confidence in the British meat industry.
"Most farmers adhere to the rules and know they are there to restrict potential diseases.
"What we are looking at is probably the biggest breach of the rules seen in Britain."
Government rural advisor Lord Haskins said the discovery highlighted the inadequacy of the UK's food tracing system.
He also questioned whether the passport scheme was worth keeping.