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Private roles in food safety provision: the law and economics of private food safety

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Abstract

Private food safety standards play a crucial role in ensuring the safety of the foods we consume. A voluntary instrument, private standards are so widespread to have become de facto mandatory for suppliers who wish to access the most profitable markets. Developed by retailers and business coalitions and enforced through third-party certification, private food safety standards constitute one of the principal food safety governance instruments of agribusiness value chains. Albeit private and voluntary, such standards have profound public implications because they contribute to food safety and protect consumers’ health. This article uses law and economics theory to identify their strengths and vulnerabilities and understand the relationship between public and private regulation. Specifically, it examines whether private standards can fulfill the public interest objective of protecting consumers’ health and whether they compete with or rather complement public regulation. The article argues that private standards have emerged in response to food scares to coordinate complex food value chains and have become ever more relevant in the context of intense market globalization, an area in which public regulation often failed. Among the advantages of private standards, are their flexibility and ability to rapidly respond to new risks. Through their focus on management-based regulation and strong market incentives for producers, private standards promote compliance better than traditional inspection methods. Private standards also present several gray areas including increased risk of capture due to their limited transparency and gaps in enforcement by third-party certifiers. The article suggests areas that deserve additional scrutiny, especially the opacity of standards vis-à-vis consumers and the public sector and the quality and reliability of third party certification.

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Notes

  1. Although data on what share of food products is covered by private food safety standards is not available, food retailers of the caliber of Walmart (the largest global retail chain), Carrefour, Tesco, and Ahold as well as manufacturers such as Coca-Cola, McDonald’s, Cargill, Danone and Unilever use private standards indicating that a substantial share of food products complies with such standards. Source: www.mygfsi.com. Site accessed June 11, 2013.

  2. The private standards analyzed in this article are developed by organizations that are separate from the standards’ users and deal mostly with production processes, hence they should not be confused with the technical specifications that buyers impose on their suppliers.

  3. This article’s terminology often refers to public and private regulation. Public regulation (also referred to as government regulation) is intended as regulation issued by institutions that derive their authority from a public mandate, such as government agencies or multilateral public institutions, such as the World Trade Organization, or the World Health Organization. Private regulation, on the other hand, is designed and enforced by industry actors and does not derive its authority from government delegation.

  4. For an in-depth discussion of transnational private regulation, see the Special Issue in The Journal of Law and Society, 38th volume (March 2011), which was entirely devoted to this topic.

  5. Generally, private food safety standards include hygiene instructions for farm workers, guidelines for using fertilizers, for washing and packing produce and more.

  6. Although scheme management requirements are based on ISO documents on certification and accreditation (ISO/IEC Guide 65 or ISO/IEC 17021), they still differ significantly scheme by scheme. For example unlike other schemes, the BRC imposes transparency and rating systems on certified organizations as well as on certifiers. Source: www.brcdirectory.com. Site accessed June 25, 2013.

  7. GFSI Guidance Document. Sixth Edition, Issue 3, June 2012. pp. 62–63. Source: www.mygfsi.com. Site accessed June 25, 2013.

  8. Verification of compliance can also be conducted internally, through a self-audit, or by buyers, the so-called second party audit. In second party audits, buyers bear the costs of carrying out the audits.

  9. Source: consumergoods.edgl.com/getmedia/ade75401-cdf4-4ec4-a256-bd5217431004/accenture_cgbtlc11.pdf. Site accessed June 27, 2013.

  10. Source: www.nielsen.com/us/en/newswire/2010/the-global-staying-power-of-private-label.html. Site accessed June 27, 2013.

  11. Contractual agreements between buyers and suppliers establish which standard(s) the product should be certified against.

  12. The eight original retailers were Carrefour, Tesco, ICA, Metro, Migros, Ahold, Wal-Mart and Delhaize, but they have been joined by other companies since the inception of the GFSI. Source: www.mygfsi.com/about-gfsi/about-gfsi-main.html. Site accessed June 14, 2011.

  13. Source: walmartstores.com/pressroom/news/7918.aspx. Site accessed May 1, 2011.

  14. Some of the private standards presented in Table 1 derive from a paper that Henson and Humphrey prepared for WHO/FAO Henson and Humphrey (2009). The Impact of Private Food Safety Standards, FAO/WHO.

  15. Source: www.tescofarming.com/standards.asp. Site accessed May 9, 2011.

  16. This position was expressed by most industry leaders at the Global Food Safety Conference attended by this author in Orlando, FL, February 15–17, 2012.

  17. Source: www.ers.usda.gov/Briefing/GlobalFoodMarkets/Industry.htm. Site accessed May 18, 2012.

  18. As of March 5, 2012 the USDA Food Safety Inspection Service started testing E. coli serogroups O26, O103, O45, O111, O121 and O145, besides O157:H7. Source: http://www.usda.gov/wps/portal/usda/usdahome?contentidonly=true&contentid=2011/09/0400.xml. Site accessed November 27, 2011.

  19. William Neuman, “Food Companies Act to Protect Consumers From E. Coli Illness,” The New York Times, 15 July 2011. Source: www.nytimes.com/2011/07/16/business/food-companies-act-to-protect-consumers-from-e-coli-illness.html?_r=1&ref=costcowholesalecorporation.

  20. Michelle Simon, “How Did a Hepatitis A Virus Get Into Organic Berries,” Food Safety News, 13 June 2012. Source: www.foodsafetynews.com/2013/06/how-did-a-hepatitis-a-virus-get-into-organic-berries/.

  21. Regulation (EC) 178/2002.

  22. Some standards, such as the Global GAP, have become more inclusive and take into account also the opinions of stakeholders, such as producers in developing countries, which has slowed down standard approval time. Stakeholder involvement, however, is not the rule among private schemes.

  23. Source: www.anab.org/media/27264/overview-gfsi-accredited-certification.pdf. Site accessed February 1, 2012.

  24. Source: http://www.ers.usda.gov/Briefing/GlobalFoodMarkets/TradePolicy.htm. Site accessed March 21, 2012.

  25. Countries that wish to adopt food safety requirements that are stricter than Codex standards need to justify that on scientific grounds.

  26. Source: Department of Health and Human Services, Office of Inspector General, FDA Inspections of Domestic Food Facilities, OEI-02-08-00080, April 2010, at 2.

  27. H.R. 2751 § 201, 111th Congress.

  28. H.R. 2751 § 201, 111th Congress.

  29. As discussed later in this article, audits do identify violations with private standards, however they are generally scheduled in advance, which gives suppliers a chance to “clean up” their operations to prepare for the audits.

  30. Compliance with private standards requires resources and capacity that some smaller producers may not have, pointing to the distributive effects of private regulation. The most important literature in this area is summarized in the introduction of this article.

  31. Haufler cites the case of Nestle’s marketing of baby formula in developing countries and the exposure of the risks of artificial milk over maternal one, which led to an international boycott of Nestle products and damaged Nestle’s reputation for decades Haufler (2003). Globalization and Industry Self-Regulation. Governance in a Global Economy. M. Kahler and D. A. Lake. Princeton, Princeton University Press: 226–252.

  32. Source: www.mygfsi.com/gfsifiles/GFSI_Stakeholder_Meeting_London_February_2011.pdf. Site accessed February 1, 2012.

  33. This point remains controversial. The fact that food safety standards are extremely detailed and expansive, one the one hand provides a competitive advantage to producers that are certified, on the other may represent a barrier to entry for smaller producers who are not able to sustain the necessary investments for compliance.

  34. Mattli and Woods consider regulation that is put in place but not enforced a form of capture. This aspect does not apply to the case of private food safety standards because they are enforced by third-party audits.

  35. The BRC standard also offers unannounced audits on a voluntary basis. Source: www.brcglobalstandards.com/globalstandards/standards/food.aspx. Site accessed June 30, 2013.

  36. These opinions were gathered from conversations with industry representatives during the 2012 Global Food Safety Conference attended by this author in Orlando, FL, February 15–17, 2012.

  37. Source: http://www.mygfsi.com/structure-and-governance/gfsi-technical-committee/auditor-competence.html Site accessed February 20, 2011.

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Acknowledgments

The author would like to thank three anonymous reviewers for their valuable comments. She is also indebted to Alessandra Arcuri, Michael Faure, Archon Fung, and to participants in the ECPR’s Standing Group on Regulation and Governance Conference 2012 at the University of Exeter for valuable comments.

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Authors and Affiliations

  1. Harvard Kennedy School, Ash Center for Democratic Governance and Innovation, Cambridge, MA, USA

    Elena Fagotto

  2. Rotterdam Institute of Law and Economics, Erasmus University Rotterdam, Rotterdam, The Netherlands

    Elena Fagotto

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Correspondence to Elena Fagotto.

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Fagotto, E. Private roles in food safety provision: the law and economics of private food safety. Eur J Law Econ 37, 83–109 (2014). https://doi.org/10.1007/s10657-013-9414-z

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