food safety regulation reform: when double standards are demanded
TRANSCRIPT
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Paper Title:Food Safety Regulation Reform: When Double Standards Are Demanded
Student Name: Loren CraryInstructor Name: Robert Gordon and Amalia Kessler
Course Name : Legal Studies Workshop
Quarter course taught: Winter 2009-2010 and Spring 2009-2010)Date of Submission : July 2nd, 2010
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Food Safety Regulation Reform: When Double Standards Are Demanded
Loren A. Crary
I. Introduction ................................................................................................................... 2
I. Market Forces and Legal Liability Can Supplement But Cannot ReplaceRegulation .......................................................................................................................... 4
A. Consumers Do Not Have Enough Information to Choose Safety in the Market for Food 5 B. Do you think it was something you ate? Would-be Plaintiffs Do Not Have EnoughInformation to Identify Defendants ............................................................................................... 9
II. Regulation of Food Safety Is Efficient and NecessaryBut Can HaveUnintended Consequences ............................................................................................. 10
A. The government has the advantage in regulating homogenous industry, and a handicap
in regulating heterogeneous firms ................................................................................................ 11B. A note on the importance, or not, of contributory negligence. .......................................... 16C. Unintended consequences: Can food be safer but not healthier? ...................................... 17D. Substituting to imports .......................................................................................................... 21
III. Current Federal Legislation on Food Safety Reform and Pitfalls for Health and
the Environment.............................................................................................................. 22H.R. 2749: Food Safety Enhancement Act of 2009 and S.510: Food Safety Modernization Act
of 2009 231. Registration and fees ........................................................................................................ 242. Food safety plans ............................................................................................................. 243. Performance standards ..................................................................................................... 254. Inspection schedule .......................................................................................................... 265. Traceability ....................................................................................................................... 266. Research ............................................................................................................................ 267. Penalties ............................................................................................................................ 26
IV. Conclusion ................................................................................................................. 27
I.INTRODUCTION
It is hard to think of a better candidate for government intervention that in the
regulation of food safety. Risks in the food supply are risks that every person faces every
day. They are risks that are invisible to the consumers and mostly out of their control, and
those who can exercise control to mitigate the risks get slight rewards for doing so.
Government regulation, demanded by both consumers and producers of food, can make
the country healthier and more able to feel trusting about a basic part of daily life.
Currently there are serious gaps in what products deserve trust, and which are a health
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gamble. A series of recent publicized outbreaks has reawakened debate over the best
ways to reform and strengthen food safety regulation, both in the media,1 on the House
and Senates floors.2 Bills are making their way through Congress to attempt to fill these
gaps and make more uniform the baseline safety we can expect of goods sold in the
country.
Food safety reform puts consumer advocates in a conflicted position. Foodborne
illness is a danger in the United States, resulting in 76 million illnesses and 5,000 deaths
annually,3 more than gun accidents, drowning, or fire.4 At the same time, public
awareness is growing of the obesity epidemic fueled by poor nutrition and of damage to
the environment from food production; both of this problems are tied to the kind of food
that is produced in this country and how it is produced, and therefore will be indirectly
affected by any regulation of food production, including food safety regulation. Any
food safety regulation, then, that pushes food production towards supplying unhealthy
foods or more pollution would have perverse effects for public welfare. Some proposed
reforms may seem to force us to ask, do we care more about consumer safety, health, or
the environment? This paper is an attempt to lay out a clear framework first for
evaluating food safety regulation and alternatives to regulation, and then for comparing
their effect on safety to indirect effects on health and the environment.
Before we ask how we should regulate food safety, it is worthwhile to ask the
threshold question of why regulate at all? The fact of foodborne illness outbreaks alone is
not enough to prove a need for regulation, of course. The only way to eliminate
1See, e.g., Editorial,Dangerous Food, N.Y.TIMES,Feb. 16, 2009, at A32; Editorial,More Than Peanuts:Tougher regulation is needed to keep food suppliers from putting '$$$$$' ahead of lives, WASH.POST,Feb.17,2009,available athttp://www.washingtonpost.com/wp-dyn/content/article/2009/02/16/AR2009021601186.html;Editorial, Food Safety for This Century, BOSTONGLOBE, Apr. 11, 2009, available athttp://www.boston.com/bostonglobe/editorial_opinion/editorials/articles/2009/04/11/food_safety_for_this_century/2
See, e.g.,Hearing on H.R. 2749 Before the Subcommittee on Health of the H. Comm. on Energy andCommerce,111th Cong. (2009); Keeping Americas Families Safe: Reforming the Food Safety System:Hearing on S. 510 Before the Sen. Comm. on Health, Education, Labor, and Pensions, 111th Cong. (2009);3Mead et al., Food-related illness and death in the United States, EMERGING INFECTIOUS DISEASE 607(1999). Note that these numbers are admittedly well out of date, but no comparable study has beenconducted since Mead et. al., which is universally cited for foodborne illness and death statistics.4 Total deaths in 2006 by cause: Accidental discharge of firearms: 642. Accidental drowning andsubmersion: 3679. Accidental exposure to smoke, fire and flames: 3109. Complications from medical andsurgical care: 2521 , CENTER FOR DISEASE CONTROL,57NATIONAL VITAL STATISTICS REPORTS 14:DEATHS,FINAL DATA FOR 2006, available athttp://www.cdc.gov/NCHS/data/nvsr/nvsr57/nvsr57_14.pdf.
http://www.washingtonpost.com/wp-dyn/content/article/2009/02/16/AR2009021601186.htmlhttp://www.washingtonpost.com/wp-dyn/content/article/2009/02/16/AR2009021601186.htmlhttp://www.washingtonpost.com/wp-dyn/content/article/2009/02/16/AR2009021601186.htmlhttp://www.washingtonpost.com/wp-dyn/content/article/2009/02/16/AR2009021601186.htmlhttp://www.washingtonpost.com/wp-dyn/content/article/2009/02/16/AR2009021601186.html -
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foodborne illness entirely is not to produce or consume any food, a cost we all agree is
too high, but realistically most consumers consider it too costly even to, say, check the
temperature of everything they cook with a thermometerthe sanctioned method for
assuring safety5and similarly it is only optimal for producers to take measures of
precaution that cause a marginal decrease in risk equal to the marginal cost of the
precaution.
Secondly, in a world of suboptimal food safety6 where it would be efficient to
induce firms to change their behavior, as with any kind of safety, there exist alternatives
to regulation: that is, the market and the liability system. I will discuss each of these
alternatives in turn in the first Part of this article.
Ultimately I conclude that introducing different values we hold as a society,
specifically health (as considered more broadly than freedom from illness) and the
environment, makes the answer to the question of how to regulate turn on who it is we
are regulating. Small farmers who grow more often what are known as specialty crops,
(fresh produce rather than commodity corn, soybeans, rice, and wheat, all contributors to
the national obesity problem) and who have better effects on average on the soil, water,
and air do not merit the same rules as farms that do worse by our national health and
environment. Costs of complying with regulations are higher to smaller operations, and
as costs drive down their production they also drive down the benefits we receive.
Further, smaller operations that vary more one to the next than the relatively
homogeneous large producers are less suitable to devising top-down requirements, and
where they are direct sellers to a smaller geographic area, the alternatives to regulation
are more viable.
I. MARKET FORCES AND LEGAL LIABILITY CAN SUPPLEMENT BUT CANNOT REPLACEREGULATION
5See, e.g., Food Safety Inspection Service, Food Safety Education,http://www.fsis.usda.gov/food_safety_education/thermy/6 We will see this is the most likely scenario for food safety in the United States, as a result of imperfectinformation, discussion infra Part II.
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A. Consumers Do Not Have Enough Information to Choose Safety in the Marketfor Food
The total cost of a foods safety to the consumer is the probability the food will
make her sick, the total harm from that illness, and the amount of that harm that the
consumer will bear without compensation. To make an optimal choice with regards to
safety, a consumer must have information on either the precautions taking by the foods
producer (or processor or its retailer) or their effect on the products safety, in terms of
the probability the product will cause an injury or on the magnitude of the injury, as well
as the cost of that injury.7
If the consumer had perfect information on these variables, the value of the foods
safety would be included in the observed effective price to the consumer, and the
consumer an then buy only foods whose total cost is less than or equal to their value.8
Food producers, then, would face a market where efficient safety precautions are
rewarded and suboptimal levels of safety penalized, as consumers would not purchase
foods that were inefficiently unsafe.9 But as consumers know less about each variables,
however, it follows that consumers will be less able to make efficient choices in an
unregulated market.
If consumers are unable to differentiate among levels of care by firms, the firm
will not have enough incentive to invest in research. In the case of food, consumers will
generally have poor information on each of the three kinds of information on precautions
we discussed infra Part I.A: (1) the precautions taking by a products producer (or
processor or its retailer) (2) and/or their effect on the products safety, in terms of the
probability the product will cause an injury or on the magnitude of the injury, and (3) the
cost of that injury (including the net expected amount of compensation.)
A consumers information varies greatly depending on where in the supply chain
the consumer purchases the food. In the case of producers (including farmers),
7 Taking into account the net expected amount the consumer will be compensated by the injurer through thelegal system. Insurance policies (health or other kinds) may also provide compensation. See W. KipViscusi, Toward a Diminished Role for Tort Liability: Social Insurance, Government Regulation, andContemporary Risks to Health and Safety, 6 YALE J. ON REG.65,72(1989)8Id. at679 Super-optimal safety levels will be penalized as well for being too safe and too expensive as a result.
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processors, and transporters, precautions are both difficult to observe or evaluate. A
consumer is unlikely to know about most safety measures made at those levels or to
differentiate among firms on that basis,10 particularly since few consumers buy directly.
For example, it is not observable to the consumer at time of purchase whether meat has
been held at an appropriate temperature throughout its processing, or whether spinach is
grown safely distant from feedlot runoff when it reaches him at the retail level point of
purchase. Nor is it observable whether a food has been irradiated, if pickers used
appropriate hygiene to prevent Hepatitis A spread. Even if the consumer bought directly
off the farm or feedlot, few consumers would be able to investigate or understand
precautions taken there.11 Similarly, in regards to the second kind of information,
consumer knowledge of the effect of precautions taken on outcomes on the foods safety
is weakfew consumers would know how much an extra buffer zone between a feedlot a
crop field would change the risk of contaminating produce, or even the change in their
risk of contractingE. coli if their food has a smaller expected load of pathogens. These
aspects of consumer information will weaken market forces that in a world of perfect
information would give producers incentives to take precautions leading to optimal food
safety. It is worth noting, moreover, that consumer are generally willing to pay for food
safety or would be if it were recognizable.12
The government is most likely to have better information than the consumer on
the producers precautions or their safety outcomes in terms of the probability or
magnitude of injury, especially when this information is technical and/or specialized.13
The cost of the injury, too, while more personal to each consumer who will have the best
information on their personal costs to an illness (individuals best know their own
vulnerability, the wages they would lose, the nonmonetary personal costs involved, etc.),
10See, e.g., U.S. DEPT OF AGRIC.ECON.RESEARCH SERV.,AGRICULTURAL ECONOMIC REPORT 831:FOOD
SAFETY INNOVATION IN THE UNITED STATES 3(2004), D. M. Souza Monteiro & J. A. Caswell, OptimalChoice of Voluntary Traceability as a Food Risk Management Tool, No 44394, 2008 InternationalCongress, August 26-29, 2008, at (Eur. Assn of Agric. Econ., 2008)
12 Diogo M. Souza-Monteiro & Julie A. Caswell,Economics of Traceability for Multiingredient Products:A Network approach, Paper Presented at the Annual Meeting of the American Agricultural EconomicsAssociation, Providence, Rhode Island, July 24-27, 2005 at 9, available athttp://ageconsearch.umn.edu/bitstream/19143/1/sp05so01.pdf13Id. at 76 n.67.
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will be similar across individuals and therefore inexpensive to discover for the
government. It will also have aspects that are technical questions that would benefit from
government agency expertise over consumer knowledge.
Even if consumers cannot recognize the quality of firms efforts to make food
safe, they could choose safety levels on the market if they could recognize the outcome of
those efforts, that is, the likelihood the foods in the market will make them sick. But food
safety, unfortunately, is usually unobservable. One way of describing the difficulty of
consumers in determining care is distinguishing search, experience, and credence
characteristics. Food safety here is a credence characteristic, which again leads to the
conclusion that it will not be well managed by the market alone.14
Search characteristics are characteristics that a consumer can seek out.15 In the
case of food, nutritional information is an example: A consumer seeking out a kind of ice
cream, say, with a particular calorie count per serving, can shop until she finds a product
whose nutrition labeling shows it satisfies her criterion. She knows it is the desired
calorie count when she buys it, and can return to that brand the next time she wants an ice
cream with that nutritional value.16 An experience characteristic is only evinced after it is
consumed. For example, the consumer will not know how the ice cream tastes until after
she purchases and tries it. She doesnt know when she buys it, but after she has bought it
once she knows with reasonable certainty that as a branded, processed food she can
return to that brand and product to get the same taste.17
Food safety, on the other hand, is neither. A consumer cannot tell, with limited
exceptions (e.g. visible mold or a frozen product that is thawed) how safe food is before
she buys it. Even after food is purchased and eaten, again, with few exceptions, (like a
foodborne illness like Vibrio parahaemolyticus with a very short incubation period and a
clear causal connectionit is almost always contracted from oysters),18 the consumer
14
Stearns, supra note 36, at 4-7; KATHLEEN SEGERSON,FOOD MARKETING POLICY CENTER RESEARCHREPORT NO.36:MANDATORY VS.VOLUNTARY APPROACHES TO FOOD SAFETY15 Nelson, supra note 16, at 312.16This is actually not strictly true because of the FDAs dramatic under-enforcement of labeling accuracy,but that is another story. GOVT ACCT.OFFICE,FOOD LABELING:FDANEEDS TO BETTER LEVERAGERESOURCES,IMPROVE OVERSIGHT, AND EFFECTIVELY USE AVAILABLE DATA TO HELP CONSUMERS SELECTHEALTHY FOODS,GAO-08-597 (2008), available athttp://www.gao.gov/new.items/d08597.pdf.17Id.18U.S. Center for Disease Control, Vibrio parahaemolyticus,http://www.cdc.gov/nczved/dfbmd/disease_listing/vibriop_gi.html. See Appendix.
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still does not know if the eaten food was safe. Any illness that it might cause might not
show up for days, weeks, or months. Even if it contained pathogens, it might not cause
any illness at all, depending on the individuals immune system, amount consumed, and
other variables. And even if the particular product consumed was in fact free of
pathogens, the next batch might not be, if only some percentage of final products are
unsafe. The credence aspect of food safety, and the support it gives for regulation
thereof, may relate to the common intuition of consumers that call for increased
regulation in the face of foodborne illness outbreaks: the feeling that the government
should act is strongest when the private individuals recourse is smallest.
The problem of the invisibility of food safety is exacerbated by the fact that many
foods are undifferentiated commodities to consumersfor many, an apple is an apple.
Where there is no brand awareness, consumers are even less able to use experience ot
differentiate among goods and firms are even less induced to take safety precautions
since the industry is viewed monolithically and all firms are punished for each firms
mistakes. Even an incorrectly attributed incident can hurt a whole industry, as when the
tomato market plummeted in a salmonella oubreak that turned out to be caused in fact by
jalapenos.19 Many spinach producers were safe, but consumers avoided all spinach when
theE. coli contamination was exposed. IN contrast, branded food retailers will live with
their individual safety recordfast food didnt sufferwhen Jack in the Box burgers
caused anE. coli outbreak, but Jack in the Box did. As one would expect and hope, Jack
in the Box invested heavily in food safety processes in response.20 The spinach
producers did have a recourse, and they took the exceptional step of creating a voluntary
marketing agreement for all leafy greens in California that was intended to reassure
customers of the safety of the product as a whole. The necessity of such an agreement
underscores the value of industry-wide rules in some situations, which may be better off
coming from the government than private parties with other motives.21
19 HEARING TO REVIEW FOOD SAFETY STANDARDS FOR HORTICULTURE AND ORGANIC AGRICULTURE 6,before the Subcommittee on Horticulture and Organic Agriculture of the Committee of Agriculture, Houseof Representatives, First Sess. 111th Cong. May 14, 2009. Hereinafter, HEARING.20 Helena Bottmiller, Q&A:Food Safety Since the Jack in the Box outbreak, FOOD SAFETY NEWS,(Sep. 18,2009), http://www.foodsafetynews.com/2009/09/q-a-food-safety-since-jack-in-the-box/21 Note there is an exception to antitrust law to permit agricultural marketing agreements. 17 USC 608(b).Small farmers have complained the leafy greens agreement is tailored to industrial growers with greaterbargaining power in the industry but that buyers are now demanding it to the detriment of different kinds of
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B. Do you think it was something you ate? Would-be Plaintiffs Do Not HaveEnough Information to Identify Defendants
The difficulty of identifying the cause of foodborne illness and the low incentivesvictims have to pursue suit makes food safety a difficult claim to litigate, which makes
the liability system poorly suited to enforce safety standards. In general, the less likely
an injurer will face suit after an accident, the less likely the liability system is to succeed
in internalizing the costs of accidents. Victims information varies greatly by industry and
type of injury. For example, a victim has near perfect information about an accident from
a ladder that collapses immediately upon normal use that is produced by an easily
identifiable firm sold without intermediaries. On the opposite end of the spectrum, a
victim of asbestosis whose symptoms arise with a delay of years from exposure and who
does not know the source of the exposure may have insufficient information to collect
damages under any liability rule.22
The better the information the victim has, the better and less expensively she will
be able to collect damages (either in trial or by settlement) from the injurer. The better
the victims information, then, the more likely tort liability will cause the injurer to in fact
bear and therefore internalize the accident costs of her product. The more difficult and
costly it is for the victim to obtain information and link the injurer to the injury sufficient
to prevail at trial, the less likely the injurer will bear the cost of accidents and thus
internalize total costs, making liability less attractive to achieve safety.
Foodborne illness is more like asbestosis than stepladders. While victims
information varies by pathogen, type of food, and structure of the relevant industry, it is
on average quite difficult to pinpoint the illness let alone its source and who is at fault. 23
growers. HEARING TO REVIEW FOOD SAFETY STANDARDS FOR HORTICULTURE AND ORGANIC
AGRICULTURE, before the Subcommittee on Horticulture and Organic Agriculture of the Committee ofAgriculture, House of Representatives, First Sess. 111th Cong. May 14, 2009. Hereinafter, HEARING.22See Viscusi, supra note 8, at 68. (The tort system can handle only hazards with discrete, easily traceablecauses.)23 There is a large literature on traceability of food products and its expense. See, e.g. Sebastien Pouliot,Traceability, Liability, and Incentives for Food Safety and Quality, 90 AM.J.AGRIC.ECON.15;U.S.DA.ECON.RESEARCH SERV.,TRACEABILITY IN THE U.S.FOOD SUPPLY:ECONOMIC THEORY AND INDUSTRYSTUDIES (2004).See also Neal D. Fortin, The Hang-up With HACCP: The Resistance to TranslatingScience into Food Safety Law, 58 FOOD DRUG L.J. 565, 575. (The delayed onset of certain types offoodborne illness compounds the difficulty of correlation by any means.) Fortin argues that the low
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Most people seem unaware how much time may pass between eating an unsafe food and
feeling symptoms of the illness. The typical question when someone suddenly feels ill of
Well, what did you eat today? is unlikely to be helpful in fact. Pathogens that cause
foodborne illness have a wide range of incubation periods, that is, the period between
ingestion and display of symptoms. While staphylococcus and salmoella may show up a
day or so later,E. coli, which causes some of the worst injuries,24 usually takes at least
two days to show symptoms. Few illnesses will show up the same day as the culprit food
was eaten. See graphic in Appendix for some more examples.25
Further, most foodborne illness is so minor that it is not worthwhile to the victim
to even investigate suit, especially when the chances of success are so low. The
information of the victim after the fact of an accident determines the likelihood of
successful suit. The probability of a successful suit in turn defines the probability the
producer will pay damages and bear the costs of the harm. The necessary amount of
information varies by the liability rule, but even in a regime of strict liability as applies in
food safety as a subset of product liability law.
II. REGULATION OF FOOD SAFETY IS EFFICIENT AND NECESSARYBUT CAN HAVEUNINTENDED CONSEQUENCES
Parts I and II show that we cannot rely on the market or liability rules to make the
food supply safe, so now we turn to the question of whether government regulation can
efficiently play a role in improving food safety. For many firms involved in the supply
chain, the government is well situated to intervene in establishing what practices must be
volume of suits per year is evidence of the difficulty of mounting a lawsuit based on foodborne illness. Thelow volume of suits alone is not enough to show insufficient possibilities of linking an accident to theinjurer, because it is also consistent with efficient care-taking coupled with realistic expectations ofpotential plaintiffs under a negligence standard or the use of settlements.
24 Including paralysis and organ failure, and even death. See, e.g., Symptoms of E. coli infection,http://www.about-ecoli.com/ecoli_symptoms_risks25 Note that ex post information is independent of ex ante consumer information on level of care; it mayhave been unobservable that a food product was not produced with appropriate care, but at the same timethat once a food safety accident occurs the consumer has adequate information to identify the responsiblefood and firm. For example, a consumer may not be able to identify that employees failed to wash theirhands, but exhibits clearly identifiable staphylococcus symptoms within hours before many potential culpritmeals have been consumed and before evidence in the form of leftovers has been disposed of and suit ispossible even though choice at point of consumption was not
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followed to mitigate risks. There are many segments of the food industry about which
the government has or can cheaply acquire information to make good rules which
industry would not voluntarily choose. But for some parts of the food industry, that
informational advantage is weaker, and countervailing concerns are stronger. Different
kinds of production merit different kinds and levels of regulation.
In general, we try to give the job of choosing rules to those who have the best
information for designing good ones and the best incentives to enforce or follow them.
This is the intuition we follow when we assign to government the task of monitoring drug
safety and to individuals the bulk of decisions of how to walk around safely. We cannot
rely on the market or the liability system, as examined above, to induce many of those
who produce and handle food to take cost-effective measures to prevent illness.
Regulators can, and so it is to them we turn to reduce the risks we all face, knowingly or
not, every time we eat. When regulators do not have good information, though, because
the industry in question is less homogenous and each firm has different ideal solutions,
when the information chain after an illness is shorter, when the average safety risk is less,
when the externalized benefits are greater, or when all four are true, the argument for
regulating and imposing regulatory costs is weaker.
A. The government has the advantage in regulating homogenous industry, and ahandicap in regulating heterogeneous firms
Industrial production of food which anonymously passes through transport,
processing, and retail into disparate markets is a paradigm case for government
regulation. Regulation is [a]ny rule for the ordering of affairs, public or private, whether
by statute, ordinance, or resolution;26 as used here it is rules that are not court-made.
Regulations are costly; first, they entail administrative costs, and second, as rules made at
a general level, affecting entire industries or even all private companies in the economy,
as applied to individual actors or situations they can be inefficient. This happens because
the costs and benefits of a regulation can both vary by firm. For a firm for whom the
required behaviors cost is greater than its benefit, the firm will either take the inefficient
precaution or decline to take it and pay the designated penalty. In either case, depending
on the difference between the cost and benefit, the size of the penalty and the frequency
26 BALLENTINES LAW DICTIONARY (3d ed. 1969)
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of enforcement, on the margin the firm will take the precaution too often, creating a net
loss in welfare.27 For example, there are proposed requirements to put electronic trackers
on all livestock in order to facilitate traceback after a foodborne illness outbreak. The
electronic system has high fixed costs, so it is proportionately more costly to small
operations, and has much less benefit as the size of the operation shrinks, as tracing is
easy when you only own a few cows. In this case a single-standard rule would be
efficient for some, and not for others.
The relative level of information injurers and regulators have about injurers
precautions and the costliness of acquiring it will determine the efficiency of putting the
burden of taking or inducing precautions on each group.28 In general, all things being
equal, it is more efficient to distribute the burden of precautions so that whoever knows
most or can learn most cheaply about the precautions in terms of the available
precautions technology, the cost of taking a particular precaution, and on its benefit to
probability and magnitude of safety outcomes.
Food producers take actions that prevent or reduce foodborne illness.29 These
precautions are costly to research or discover and to implement. Producers will
undertake these costs only when their benefit in terms of either increased demand for a
safer product, reduced costs from settlements or damages based on legal liability,
regulatory compliance fines, higher insurance premiums, or other penalties exceeds their
cost. The better placed government is to understand the costs of taking precautions, the
lower compliance costs are relative to private industrys choices of what mechanisms to
follow to achieve food safety. If government information is poor, it may inadvertently
enforce a precaution that is inefficiently costly to comply with. Firms will then either
bear the cost of compliance or the risk of government imposed penalty for
noncompliance.
27 See Charles Kolstad, Thomas Ulen, & Gary Johnson,Ex Post Liability for Harm vs. Ex Ante SafetyRegulation: Substitutes or Complements?, 80 AMER.ECON.REV. 888, 891. Kolstad et al. discuss in termsof firms that cause greater and lesser harm (i.e. greater benefits to precautions) but the principle extends togreater and lesser costs of precautions as well. Of course, a regulator could equally require too littleprecaution for a given firm or for an entire industry, which without market or liability incentives will resultin welfare losses from too little safety.Id.28 Shavell, supra note 7, at 359; Viscusi, supra note 6.29Throughout, I refer to producers, but the principles are generalizable for the most part to processors,retailers, and other firms in the supply chain.
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To choose precautions that will result in optimal safety, a producer must have
information on (1) the possible precautions available, (2) the cost of the precautions, and
(3) the benefit to the consumer, or, equivalently, consumer demand for the precaution or
for its result on safety. When the producer has perfect information on each, and the
consumer also is perfectly informed, the market produces optimal safety levels in
products. In this situation, again, regulation would only add costs. As producers know
less about these variables, however, the costs of government regulation declines relative
to the benefit of better precautions and we become more inclined to choose regulation.
In the case of food safety, we already know information on consumer demand is poor,
since the consumers themselves do not have good information on their own risks as
discussed above. In terms of the precautions available and their costs, the regulators
knowledge compared to the producers knowledge varies by the kind of firm at issue.
In a homogenous industry like an industrial food producer or processor, the costs
and benefits will be relatively uniform. This similarity also means that it is easier for
firms to copy the results of research done by other firms in the industry and free-rider
problems are likely, which is a classic opportunity for a governmental solution. We
would also expect a regulators information will be better in general for well-established
industries, such as the factories, or even fast food joints, that have been operating for
decades in standard ways across the industry, that change little because information on
precautions will be less dynamic and more yielding to centralized research than
experiential learning in the market. Unsurprisingly, government run research is a
hallmark of many other industrialized countries food safety systems.30
In contrast, the more information is idiosyncratic by individual producers, the less
the advantage of government in research.31 As a result, we expect government advantage
to be greater in regulating industrial food producers than small-scale operations with
quirkier characteristics. First, the costs and benefits of any particular precaution will
vary, meaning there would be fewer precautions which the government could mandate in
30 G.A.O, FOOD SAFETY: SELECTED COUNTRIES SYSTEMS CAN OFFER INSIGHTS INTOENSURING IMPORT SAFETY AND RESPONDING TO FOODBORNE ILLNESS (2008), available athttp://www.gao.gov/new.items/d08794.pdf31See Viscusi, supra note 5, at 76 n.67.
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confidence that the measure is optimal for all producers.32 Secondly, the heterogeneity of
optimal precautions solutions by producer means that the economies of scale earned by
consolidating precautions research in the government will be smaller. Finally, the
information costs will also be higher per food safety incidentsmaller producers will by
definition serve fewer consumers and so the number of individuals who could be affected
by any given food safety accident is lower.
Some small farm advocates argue that based on the greater visibility of a small
local producer, consumers may have better information the precautions taken (that is, a
consumer may observe whether or not optimal precautions can be taken).33 Though it is
more possible to observe care (especially as small farms are more open to visitors) I think
few consumers do or would know what to look for if they did visit.
Free-rider problems in producing safety technology and information can cause
inefficient levels of care even in a situation of perfect information by the consumer who
purchases foods with the most optimal safety of those offered on the market.34 A given
producer may not have incentives to invest in research to identify and develop optimal
safety procedures.35 In a market with many firms who can costlessly or cheaply co-opt
the product of any firms safety research, each firm confronts a classic free-rider problem
and safety innovations are underproduced.36 Safety innovation may be similarly
underproduced when there are economies to scale of research of low marginal costs.
Where free-rider problems, economies to scale/natural monopolies lead to suboptimal
research in safety precautions, public provision of research may lead to more efficient
safety precautions and increased safety.37 The producer may therefore not have incentives
32 The European Union member states have recognized this idea according to a European Commissionreport on the subject. EUR.COMMN DIRECTORATE-GENERAL FOR HEALTH AND CONSUMERS,REPORTFROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT ON THE EXPERIENCE GAINEDFROM THE APPLICATION OF THE HYGIENE REGULATIONS 5 (2009) available athttp://ec.europa.eu/food/food/biosafety/hygienelegislation/docs/report_act_part1_en.pdf (discussing
HACCP in particular and noting the flexibility intentional included in the statute.)33See, e.g., NATL SUSTAINABLE AGRIC.COALITION,FOOD SAFETY ON THE FARM:POLICY BRIEF ANDRECOMMENDATIONS 3,(2009)34 Steven Shavell,Liability for Harm Versus Regulation of Safety , 13 J.LEGAL STUD. 359, 36035Id.36Id.37 Research may make precautions cheaper or more effective; this amounts to the same thing as both typesof innovation reduce the average cost of reducing the probability of an adverse food safety incident. Bothtypes will result in higher levels of precaution, lower probabilities of food safety accidents, and feweradverse incidentsunless the firm never pays damages by being exempt from suit or by always prevailing
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to invest in research to identify and develop optimal food safety procedures.38 In a
homogenous industry, a single agency should be able to solve the free-rider problem
efficiently. Optimal precautions are likely to vary little among firms, and the public
agency should be able to promulgate regulations that are close enough to the precautions
a perfectly informed firm would take itself that welfare losses would be low. For smaller
scale, more innovative operations with higher variability in their particular circumstances,
though, free-rider problems are less likely and therefore invite a smaller role for the
government. Small farms in different places are more sensitive to local differences and
may face a very different set of concerns.
Information after injury, in contrast, is more easily obtainable for smaller scale
operations, to the extent that they are more likely to sell directly and to a smaller
geographic market.39 This suggests that ex post penalties can be more effective
supplements or replacements to regulation. Contrast direct sales, for example, with
processed goods. The number of ingredients and stages in the supply chain increases the
number of potential defendants and thereby increases the difficulty of identifying the
causer of harm.40 As an example, a salmonella outbreak in 2008 engendered a vast
at trial; or unless the consumers lulling effect as discussed infra (note 33 and accompany ing text) exactlyoffsets the products increase in safety because the consumers effort is perfectly inelastic to cost i.e.
increases in consumer precaution do not increase the cost of the prevention to the consumer, an unrealistic
assumption.Shavell takes from this analysis that free-rider and economies to scale in safety research favor regulationover a liability regime when the information is difficult to communicate, based on its technicality or thenumber of parties or the difficulty of identifying them. This can only be true, however, if you believe it isless costly for an agency to promulgate regulations than to communicate the results of research. Althoughsome research is more complicated to communicate than regulations (for example the benefits to reducedfire damage of a fire extinguisher versus requiring a fire extinguisher), a guideline backed by governmentresearch (the U.S. Safety Research Service has determined that fire extinguishers are a cost effective
mitigation to risk in the vast majority of cases) cannot be more complicated than a regulation (the U.S.Safety Research Service has determined that fire extinguishers are a cost effective mitigation to risk in thevast majority of cases and all facilities meeting the following criteria are required to have one in closeproximity to any open flame) If regulation is not otherwise favored, firms can use the innovation shared
by the public provider efficiently. If there is perfect information and a pure market system, firms will take
optimal precautions because competition will result in consumers only buying optimally safe goods. Afirm that used the public innovation better than the next would be able to take additional market share.38See, e.g., U.S. DEPT OF AGRIC.ECON.RESEARCH SERV.,AGRICULTURAL ECONOMIC REPORT 831:FOODSAFETY INNOVATION IN THE UNITED STATES 3(2004)(on importance of appropriability to innovation);Denis Stearns, On (Cr)edibility: Why Food in the United States May Never Be Safe , STAN.L.&POLY REV.(forthcoming, 2010).39See, e.g., NATL SUSTAINABLE AGRIC.COALITION,FOOD SAFETY ON THE FARM:POLICY BRIEF ANDRECOMMENDATIONS 3,(2009)40 Diogo M. Souza-Monteiro & Julie A. Caswell,Economics of Traceability for Multiingredient Products:A Network approach, Paper Presented at the Annual Meeting of the American Agricultural Economics
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investigation into the sources of all the ingredients in the salsa that was the common
element in the illnesses.41
On the other hand, the difficulties related to incubation period are identical, and
the supposed advantage of a closer relationship in terms of monitoring and identification
is illusory if consumers lack the knowledge to identify good practices or link illness to
poor ones. The average consumer has never been trained in any way that would allow
her to spot risky practices at an open market, let alone bad farming practices, even were
she to actually visit the farm. In fact, perversely, small scale operations may be even
harder to target in a liability suit because the number of individuals affected will be
smaller on average and so less likely to make an observable outbreak that would provoke
investigation and provide enough victims that a common thread could be found.42 This
provokes a separate question, which I do not examine here, of whether the smaller
number of victims created by smaller producers desirably diversifies risk.
B. A note on the importance, or not, of contributory negligence.The consumers role in food safety is often stressed, sometimes to deflect the
amount of costs imposed on producers. It is true that consumers are the last step in food
preparation and have the last chance to remove the pathogens introduced at the preceding
steps of the supply chain, but that is not possible in all circumstances, consumers do not
have good enough information to prevent illness. Ultimately, though, these arguments are
moot because as long as victims bear their costs, they will be induced to take precautions
to the extent they can, and where suit is difficult and rare, victims bear their costs, so it is
not a reason not to regulate.
In any case where the victim bears the cost of the accident, she must also have
accurate information on the proper levels of precautions. For the consumer to set the
optimal level of precautions she must have accurate information on (1) the probability of
Association, Providence, Rhode Island, July 24-27, 2005 at 9, available at
http://ageconsearch.umn.edu/bitstream/19143/1/sp05so01.pdf.41SeeTomatoes, Cilantro, Jalapeo Peppers, Serrano Peppers, Scallions and Bulb Onions Now BeingInvestigation in Salmonella Saint-Paul Outbreak - nearly 38,000 sickened, FOOD POISON JOURNAL,http://www.foodpoisonjournal.com/2008/07/articles/foodborne-illness-outbreaks/tomatoes-cilantro-jalapeao-peppers-serrano-peppers-scallions-and-bulb-onions-now-being-investigation-in-salmonella-saintpaul-outbreak-nearly-38000-sickened/(July 5th, 2009)42 Many successful suits result from public health investigators work. Sebastien Pouliot, Traceability,Liability, and Incentives for Food Safety and Quality, 90 AM.J.AGRIC.ECON.15,17;U.S.DA.ECON.RESEARCH SERV.,TRACEABILITY IN THE U.S.FOOD SUPPLY:ECONOMIC THEORY AND INDUSTRY STUDIES(2004).
http://www.foodpoisonjournal.com/2008/07/articles/foodborne-illness-outbreaks/tomatoes-cilantro-jalapeao-peppers-serrano-peppers-scallions-and-bulb-onions-now-being-investigation-in-salmonella-saintpaul-outbreak-nearly-38000-sickened/http://www.foodpoisonjournal.com/2008/07/articles/foodborne-illness-outbreaks/tomatoes-cilantro-jalapeao-peppers-serrano-peppers-scallions-and-bulb-onions-now-being-investigation-in-salmonella-saintpaul-outbreak-nearly-38000-sickened/http://www.foodpoisonjournal.com/2008/07/articles/foodborne-illness-outbreaks/tomatoes-cilantro-jalapeao-peppers-serrano-peppers-scallions-and-bulb-onions-now-being-investigation-in-salmonella-saintpaul-outbreak-nearly-38000-sickened/http://www.foodpoisonjournal.com/2008/07/articles/foodborne-illness-outbreaks/tomatoes-cilantro-jalapeao-peppers-serrano-peppers-scallions-and-bulb-onions-now-being-investigation-in-salmonella-saintpaul-outbreak-nearly-38000-sickened/http://www.foodpoisonjournal.com/2008/07/articles/foodborne-illness-outbreaks/tomatoes-cilantro-jalapeao-peppers-serrano-peppers-scallions-and-bulb-onions-now-being-investigation-in-salmonella-saintpaul-outbreak-nearly-38000-sickened/http://www.foodpoisonjournal.com/2008/07/articles/foodborne-illness-outbreaks/tomatoes-cilantro-jalapeao-peppers-serrano-peppers-scallions-and-bulb-onions-now-being-investigation-in-salmonella-saintpaul-outbreak-nearly-38000-sickened/ -
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an accident, (2)the magnitude of an accident, (3)precautions technology, and (4)the
marginal returns to precaution. For example, in the case of a stepladder, the likelihood of
the ladder collapsing consumer must know the full cost of falling if the ladder collapses,
how she can help avoid its collapse, for example by bracing the feet against a wall, and
how much additional care of bracing the ladder or staying below the last step will reduce
the risk of collapse in order to decide how careful to be in its use.
Consumer behavior can of course play an important role in the occurrence of
foodborne illness.43 In the case of certain foods and certain pathogens, proper consumer
care is well known. For example, most people know the risk of salmonella from eating
raw eggs, and that cooking meat well reduces the risk of contracting foodborne illness.
Many fewer people, though, expect salmonella to be a risk of eating frozen potpies, as in
a 2007 outbreak.44 Further, consumer care is costly. For example, temperature gauging
with a thermometer is cumbersome, and many prefer burgers cooked more rare than what
you get at 165 degrees. Even recommended care, moreover, may fail to eliminate threat
of illness.45 Consumers do have access to private and public information,46 but learning
is costly and not foolproof, especially in the case of foods eaten uncooked. The
consumers role should not be ignored, then, but it is not a reason to shift the burden off
the producer.
C. Unintended consequences: Can food be safer but not healthier?Safety is not usually the first thing we consider when we think about eating
something. So when we are regulating anything that affects the food supply, we should
keep in mind the other things about food that we care about beyond pathogen load. Taste
is obvious, but healthfulness is probably a close second. And if environmental impacts is
43
See, e.g., Brian Roe, Optimal Sharing of Foodborne Illness Prevention Between Consumers andIndustry: The Effect of Regulation and Liability, 86 AMER.J. OF AGRIC.ECON.35944 Michael Moss, Food Companies Are Placing Onus for Food Safety on Consumers, N.Y.TIMES,at A1(May 15, 2009) The pies in question included instructions for heating, but testing of them showed reachingthe expected temperature would result in a burned pie. Id.45 Michael Moss,E. Coli Path Shows Flaws in Beef Inspection, N.Y.TIMES,at A1 (Oct. 4, 2009) (a testfollowing federal guidelines for safe handling of meat still spreadE. coli around a kitchen.)46 Peter King, Getting the Facts About Your Food, WALL ST.J.(NOV.19,2009)(demonstrating use ofcompanies consumer hotlines); see also resources at the U.S. Food Safety and Inspection Serviceswebsite, Food Safety Education, http://www.fsis.usda.gov/Food_Safety_Education/index.asp.
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not necessarily near the third for all eaters, it probably should be.47 While foodborne
illness causes 5000 deaths a year, diet related disease causes 310,00 to 580,000 deaths, 48
and the damage to the environment from food production is staggeringfor example,
some estimates put food industry energy consumption at 10 percent of national energy
use.49 Food safety regulation, it turns out, is closely if indirectly tied to both
healthfulness and sustainability. Regulators should be mindful, then, of the impacts on
both of regulating safety.
It is an unexceptional observation that many actors in the food supply chain cause
externalities that affect health and the environment.50 Nor is it particularly contentious
that some kinds of food production have positive effects on the environment and health.51
The costs of food safety regulations are one cost of operation among many that determine
how much any given firm will produce, and how many firms will be in a given industry,
whether one that generates collateral costs to society or one that generates collateral
benefits. Higher regulatory costs mean in aggregate less production and fewer firms in
the industry, and, in turn, fewer negative costs in the first case and fewer benefits in the
second.52 Where there are negative externalities not considered in the production
process, it is clear, we should be more worried about too much production and too many
firms in the industry in question. Where regulation and its costs do not efficiently reduce
activity levels, the production level that is too high with regards to safety has a double
negative effect on social welfare via its excess production of negative externalities.
Conversely, when there are positive externalities, high regulatory costs may undesirably
reduce the positive externalities to an industry.
47See, e.g., UNION OF CONCERNED SCIENTISTS,FOOD &AGRICULTURE,http://www.ucsusa.org/food_and_agriculture/48 CENTER FOR SCIENCE IN THE PUBLIC INTEREST,WHY POLICY:WHY NUTRITION IS IMPORTANT,http://www.cspinet.org/nutritionpolicy/nutrition_policy.html,citingMcGinnis JM, Foege WH. "ActualCauses of Death in the United States."Journal of the American Medical Association 1993, vol. 270, no. 18,
pp. 2207-2212.http://www.cspinet.org/nutritionpolicy/nutrition_policy.html49 Heller, Martin C., and Gregory A. Keoleian.Life Cycle-Based Sustainability Indicators for Assessment ofthe U.S. Food System. CENTER FOR SUSTAINABLE SYSTEMS 42 (2000)50See, e.g., HEARING.51See, e.g., id.52 Regulatory costs, that is, that are borne by producers and not the regulator. Often producers pay forinspections or audits in addition to the safety equipment and other costs of precautions, while thegovernment pays many of the administrative and other costs. The costs levied on producers will normallybe passed on in varying degrees to consumers.
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Food safety regulation and assigning liability raises the costs of the affected
products, and so on the margin will affect the mix of foods that are consumed. Safety is
only one relevant attribute of food. Foods and their methods of production have other
attributes that also relate to public health (e.g. contribution to obesity risk, micronutrient
content and other measures of nutrition, hormone presence, pesticides presence, use of
antibiotics in production) and that relate to other outcomes, notably effects on the
environment. 53 In a first-best world, these attributes would be included in the price of the
good to the consumer and result in optimal consumption and mix of the attributes in the
market.
If foods and their production create externalities that are not captured in the cost
benefit analysis of food safety regulation, standards of negligent, or market forces, (i.e.
the cost is not internal to the producer or the consumer), then legal changes relating to
food safety will change the levels of these externalities in the market. (Unless the
regulated attributes are completely independent of the externality both directly and
indirectly). If the attributes regulated and the attribute creating externalities corresponds
precisely in occurrence and size of effect, (for example, if regulations reducing car use
have the same magnitude effect on car accidents and the environment, regulations on car
safety that reduce cars use optimally will also optimize environmental externalities; this
exact match is very improbable, but its possible there could exist approximately
corresponding matches.)
The more likely scenario is that changes in food safety related attributes will be
matched unevenly to externalities and changes to food safety will change the
externalities. Externalities may be associated with food safety attributes directly or
indirectly (and positively or negatively.) For an example of a direct relationship,
irradiation is a method of reducing foodborne pathogens in produce and meat.54
Irradiation may also decrease the level of some beneficial micronutrients that are not
observable by the consumer.55 Regulations or other food safety rules that increase
53See, e.g., P. Rosset, The Multiple Functions and Benefits of Small Farm Agriculture in the Context ofGlobal Trade Negotiations, 43 DEVELOPMENT 77(2000)54See, e.g., Center for Disease Control, Food Irradiation,http://www.cdc.gov/ncidod/DBMD/diseaseinfo/foodirradiation.htm#whatis55 WORLD HEALTH ORG.,HIGH DOSE IRRADIATION:WHOLESOMENESS OF FOOD IRRADIATED WITH DOSESABOVE 10 KGY 9(1997)
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irradiation will also reduce micronutrients. A cost benefit analysis only evaluating the
effect of rule on food safety will over-encourage irradiation, over-providing food safety
and under-providing micronutrients. (If irradiation has a positive effect on another
externality, the rule would result in too little of that attribute.)
If the consumer can observe both values, the market should allow optimal
distribution of the two; consumer preferences will determine the premiums paid for
safe/micronutrient-high food. Assuming (realistically) the consumer cannot observe both,
to determine the optimum rule given the nutritional externality, the rulemaker should
compare the safety benefit and the nutritional benefit of the irradiation to find its net
social benefit and irradiation should occur until its marginal cost is greater than the
marginal net social benefit.
In contrast, currently, a higher proportion of small farms use crop rotation, which
has environmental benefits.56 A rule that advantages farms applying irradiation (a
process with a high fixed cost57) will on the margin shift the market towards larger farms.
This in turn will reduce the use of crop rotation, resulting in an impact on the
environment. To determine the optimum rule given the environmental externality, the
rulemaker should compare the safety benefit of irradiation to the environmental benefit of
crop rotation times the share of small farmers compared to that of large farmers using
crop rotation times the change to the number of small farmers resulting from a rise in a
firms internal benefit to irradiation.58 This calculation involves considerably more
uncertainties than a direct relationship. The difficulty of including externalities when
making food safety rules depends, then, on the uncertainty of: the relationship of the food
safety attribute to the externality producing attribute, with two or more steps in the case
of an indirect relationship, the magnitude of the attributes effect on food safety, and the
magnitude of the effect on the externality, which again may have two steps.
Realistically, no regulator is going to even try to compare these values precisely.
56 Mahdi Al-Kaisi et al., Crop Rotation Considerations for 2004 Management Season Rotation, 490INTEGRATED CROP MGMT.185(2003)57 Elizabeth L. Andress, Food Irradiation: Questions and Answers, COOP.EXTENSION SERV.UNIV. OFGEORGIA,http://www.fcs.uga.edu/pubs/PDF/FDNS-E-2.pdf(Jan. 2001)58Cf. SEGERSON,supra note 34, at 4 (a program of government subsidy to integrated pest management ororganic farming techniques could have the dual goal of reducing water pollution and reducing pesticide
residues on food i.e. increasing food safety.)
http://www.fcs.uga.edu/pubs/PDF/FDNS-E-2.pdfhttp://www.fcs.uga.edu/pubs/PDF/FDNS-E-2.pdfhttp://www.fcs.uga.edu/pubs/PDF/FDNS-E-2.pdf -
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III.CURRENT FEDERAL LEGISLATION ON FOOD SAFETY REFORM AND PITFALLS FOR
HEALTH AND THE ENVIRONMENT
Food safety was an active legislative issue in the 111th Congress, an inevitable
response to public outcry over a spate of recent foodborne illness outbreaks.60 The House
of Representatives passed the Food Safety Enhancement Act of 2009 on July 30th,
2009,61and the Senates food safety bill, the Food Safety Modernization Act,62 was
referred out of committee December 18th, 2009. As food safety reform efforts have
moved through Congress, some observers have consistently voiced concerns about
potential differential impacts on small-scale producers as compared to larger firms.63 To
the degree that new food safety regulation imposes higher fixed costs on producers,
processors, storing facilities, and marketers, that are not offset this fear must be at least
partially justified. If all farms must produce a food safety plan, for example, (as required
by the House but not the Senate bill) and there is some fixed cost of doing so that is not
proportional to the farms size, that cost is spread among fewer units of output. A
summary of the major provisions of each bill follows accompanied by a brief assessment
of each measure against the framework established above.
It is important to note that each bill explicitly applies only to FDA-regulated food
products USDA regulated foods and facilities,64 nor does it address the fragmented food
safety system, which many cite as a major source of food safety failures.65 I do not
60See, e.g., Bill Marler, United States Food Safety Legislation 2009: Quite a lot to "chew" on!, MARLERBLOG,(March 29th, 2009), http://www.marlerblog.com/2009/03/articles/lawyer-oped/united-states-food-safety-legislation-2009-quite-a-lot-to-chew-on/(Bill Marler is a specialist food safety lawyer and activist.)61H.R. 2749: All Actions, http://thomas.loc.gov/cgi-bin/bdquery/z?d111:HR02749:@@@X (last visitedJan. 3, 2010)62 S. 510, 111th Cong. (as reported by S. Comm. on Health, Education, Labor, and Pensions, Dec. 18th,2009)63See, e.g., Senator Al Franken, Press Releases: Franken Calls for Streamlined Regulation of OrganicFood,
http://franken.senate.gov/press/?page=release&release_item=Franken_Calls_for_Streamlined_Regulation_of_Organic_Food (Nov. 18, 2009) (U.S. Sen. Al Franken (D-Minn.) was joined by five of his colleaguesin urging Sen. Tom Harkin (D-Iowa) to include streamlined regulations of organic and sustainable foodproducers in the [Food Safety Modernization Act.]); Cornucopia Institute,Action Alert: Senate Bill 510:FDA Food Safety Modernization Act, http://www.cornucopia.org/2009/11/action-alert-senate-bill-510-fda-food-safety-modernization-act/(last visited 1/3/2009)64 H.R. 2749 5; S.51065See, e.g. U.S. GOVT ACCOUNTABILITY OFFICE, FEDERAL FOOD SAFETY AND SECURITY SYSTEM:FUNDAMENTAL RESTRUCTURING IS NEEDED TO ADDRESS FRAGMENTATION AND OVERLAP (2004),available athttp://www.gao.gov/new.items/d04588t.pdf.
http://www.marlerblog.com/2009/03/articles/lawyer-oped/united-states-food-safety-legislation-2009-quite-a-lot-to-chew-on/http://www.marlerblog.com/2009/03/articles/lawyer-oped/united-states-food-safety-legislation-2009-quite-a-lot-to-chew-on/http://thomas.loc.gov/cgi-bin/bdquery/z?d111:HR02749:@@@Xhttp://franken.senate.gov/press/?page=release&release_item=Franken_Calls_for_Streamlined_Regulation_of_Organic_Foodhttp://franken.senate.gov/press/?page=release&release_item=Franken_Calls_for_Streamlined_Regulation_of_Organic_Foodhttp://www.cornucopia.org/2009/11/action-alert-senate-bill-510-fda-food-safety-modernization-act/http://www.cornucopia.org/2009/11/action-alert-senate-bill-510-fda-food-safety-modernization-act/http://www.cornucopia.org/2009/11/action-alert-senate-bill-510-fda-food-safety-modernization-act/http://www.cornucopia.org/2009/11/action-alert-senate-bill-510-fda-food-safety-modernization-act/http://franken.senate.gov/press/?page=release&release_item=Franken_Calls_for_Streamlined_Regulation_of_Organic_Foodhttp://franken.senate.gov/press/?page=release&release_item=Franken_Calls_for_Streamlined_Regulation_of_Organic_Foodhttp://thomas.loc.gov/cgi-bin/bdquery/z?d111:HR02749:@@@Xhttp://www.marlerblog.com/2009/03/articles/lawyer-oped/united-states-food-safety-legislation-2009-quite-a-lot-to-chew-on/http://www.marlerblog.com/2009/03/articles/lawyer-oped/united-states-food-safety-legislation-2009-quite-a-lot-to-chew-on/ -
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address that debate here, except to say that we would expect uniformity in standards to at
the least have a positive effect on consumer standards and on firms choices of what to
produce. Consumers can make better decisions about what to purchase when they have
better information about what food safety precautions or standards characterize foods and
their information for any given food will be cheaper to obtain if all food is subject to the
same processes or standards. Establishing different governing rules for different foods
introduces the information cost of knowing what body is regulating the food.
H.R. 2749: Food Safety Enhancement Act of 2009 and S.510: Food Safety
Modernization Act of 2009
The Food Safety Enhancement Act (FSEA)66 passed by the House in July of
200967 gives greater powers to the FDA to impose requirements related to food safety
prevention by firms and responses after the fact of a food safety problem. In terms of
prevention, the Act requires facilities covered by the act to register with the agency and
pay a flat fee per facility, and makes a significant increase in the required frequency of
inspection by FDA agents. It also mandates government investment in foodborne illness
surveillance and information sharing, public education campaigns aimed at consumers
and health practitioners, and research into prevention methods, monitoring, testing and
other relevant areas. In terms of response, the Act imposes criminal and civil penalties
for violation of the Act, gives the FDA mandatory recall power, power to detain foods
and to establish geographic quarantines. The Senates food safety bill, the Food Safety
Modernization Act,68 referred out of committee December 18th, 2009 and yet to come to
vote,69is mostly indistinguishable from the Houses bill. Major differences include the
omission of the flat registration fee, an omission of the quarantine power, and the
inclusion of a federal food defense strategy against deliberate threats to food safety.
Although there is some built in sensitivity to small businesses, it is not included
all provisions of the bills, most obviously in the flat registration fee, and the bills are light
66 Food Safety Enhancement Act of 2009, H.R. 2749, 111th Cong. (2009)67 155 CONG.REC. H9140 (2009)68 S. 510, 111th Cong. (as reported by S. Comm. on Health, Education, Labor, and Pensions, Dec. 18th,2009)69 510 CONG.REC. S13458 (2009);Bill Summary & Status 111th Congress (2009 - 2010) S.510 AllCongressional Actions, http://thomas.loc.gov/cgi-bin/bdquery/D?d111:70:./temp/~bdBLwB:@@@X|/home/LegislativeData.php?n=BSS;c=111|
http://thomas.loc.gov/cgi-bin/bdquery/D?d111:70:./temp/~bdBLwB:@@@X%7C/home/LegislativeData.php?n=BSS;c=111%7Chttp://thomas.loc.gov/cgi-bin/bdquery/D?d111:70:./temp/~bdBLwB:@@@X%7C/home/LegislativeData.php?n=BSS;c=111%7Chttp://thomas.loc.gov/cgi-bin/bdquery/D?d111:70:./temp/~bdBLwB:@@@X%7C/home/LegislativeData.php?n=BSS;c=111%7Chttp://thomas.loc.gov/cgi-bin/bdquery/D?d111:70:./temp/~bdBLwB:@@@X%7C/home/LegislativeData.php?n=BSS;c=111%7C -
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on flexibility and distinction between organic producers. The language asking for
sensitivity to differences in how different kinds of operations are regulated are unspecific,
so the impact will mostly come out in the rulemaking stage.
1. Registration and fees
The registration and fees provisions70 have attracted a lot of attention from
opponents to the bill concerned about impacts on small-scale producers.71 While the fees
are relative small ($500 per facility per year), that can be a significant figure for a small
business, and at the least on the margin will favor larger facilities because it is not scaled
to size. Registration itself will add some fixed costs, both for facilities and for the FDA
in terms of enforcement (note that the Department of Human Health and Services reports
that current registry requirements, less stringent than those FSEA proposes, are
themselves very poorly complied with).72 It will have obvious benefits though to ex post
information in facilitating victims in identifying injurers for successful suit, and to
lowering the cost of halting an outbreak and so mitigating the harm to a particular food
safety hazard.
2. Food safety plans
The food safety plan requirement73 is a significant addition to current regulation,
whose text is ambitious in scope but whose effect will depend heavily on implementation.
It makes detailed requests of covered facilities, but leaves significant discretion to the
FDA and enforcement is vague. It requires: hazard analysis, descriptions of the
preventive controls and of monitoring of preventive controls, of procedures for taking
corrective actions, of verification activities, of procedures for determining effectiveness
of preventive controls, of the facility's recordkeeping procedures, of procedures for the
recall of articles of food, of procedures for tracing the distribution history of articles of
food, of the facility's procedures to ensure a safe and secure supply chain for the
ingredients or components used in making the facilitys food, and of the facility's
70 H.R. 2749 10271See, e.g., NATL SUSTAINABLE AGRIC.COALITION,supra note 33, at 2.72 Office of Inspector General of the Department of Health and Human Services,FDAs Food FacilityRegistry, http://oig.hhs.gov/oei/reports/oei-02-08-00060.pdf(last visited Jan. 3, 2010) (Seven percent ofselected facilities either failed to register or failed to cancel their registration with FDA, as required. . . .Almost half of the selected facilities failed to provide accurate information for the registry. . . . Over half ofthe managers at the selected facilities were unaware of FDAs registry requirements.) 73 H.R. 2749 102
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procedures to implement the Acts science-based performance standards.74 While this is
very comprehensive in scope, it does not provide any standard for quality of the
procedures or their descriptions, any mechanism for evaluation, or penalties for an
inadequate plan. The enforcing agency will fill in these gaps, and the standards it chooses
will establish the stringency of the requirement. The level of regulation, then, actually
established by this requirement is indeterminate. Similarly, it does require the FDA to
consider the impact on small businesses,75 but does not specify how or to what degree.
The section requiring a food safety plan also empowers the FDA to establish
specific requirements,76 which could be desirable according to our framework if they are
specified with respect to areas in which the regulator has an informational advantage.77 It
also allows facilities to use alternatives to the specified prevention measure if it can show
equivalency, which is desirable insofar as it allows facilities with atypical costs or
benefits of the measure or atypical alternatives, but it still does not allow for a firm for
whom it is inefficient to meet the standard by any method to choose not to without
penalty. The section also requires revision of plans at a fixed interval,78 which may not be
desirable for certain firms or industries for whom the cost, benefits, and available
technologies may change less often than average. Finally, the section requires
recordkeeping, another fixed cost disadvantageous to smaller operations.
3. Performance standards
Like requiring specific precautions methods, the section requiring all firms to
meet specific performance standards79 will risk inefficiencies wherever firms vary in the
cost and benefit of meeting the standard. This section also allows alternative methods of
meeting a standard, but again there is no flexibility included for firms for whom it is
inefficient to meet the standard by any means. These standards could easily still be
desirable, though, for certain standards whose efficiency in virtually all situations, for
example, at the extreme, a standard requiring a minimal or zero level for a deadly
pathogen whose avoidance is cheap or free.
74Id.75Id.76Id.77supra Part I.78 H.R. 2749 102
79 H.R. 2749 103
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4. Inspection schedule
The inspection schedule is an expensive increase to enforcement power. For the
same level of enforcement, an increase in the fine would be desirable, but the fine
necessary to achieve optimal enforcement here might run up against judgment proof
problems such that this increase in probability of penalty is necessary.80 This will depend
on how the fine is set; the minimum will necessarily create an insufficient deterrent
because it is set at the level of harm, while optimal enforcement would require a higher
fine with less frequent enforcement.81
5. Traceability
The Act requires greater traceability capacity. To the extent is increases
likelihood of facing suit, this is in line with our expectations that increasing ex post
information will enhance the likelihood of successful suits, but to the degree the
provision applies equally throughout the supply chain, it may not distribute
improvements to tracing efficiently. It does, however, exempt direct sales of produce,82
which we would expect to be desirable as direct sales should be more traceable. Another
effect of the tracing requirement will be to impose fixed costs on covered facilities, which
could be substantial.83 To the extent this discourages small-scale facilities, this could
have unintended negative effects.84
6. Research
The surveillance, public education, and research sections,85 to the extent they are
targeted to areas where the government has an information advantage,86 are desirable
according to our framework in terms of increasing food safety without distorting
incentives. On the other hand, the areas they are targeted to and the amount of resources
and how they are distributed will be determined in implementation and the effectiveness
of the section, then, will depend on the Agencys choices.
7. Penalties
80See supra Part I.81 H.R 2749 105; see supra Part I.82 H.R. 2749 10783 See sources cited, supra note 23.84Supra Part I.85 H.R. 2749 121-2386Supra Part I.
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The heightened penalties, and particular the addition of criminal penalties, allow
for cheaper enforcement power, and some overcoming of the judgment-proof problem.87
The teeth given to the bill in this section enhance its power to make real reforms. Similar
enhancements are granted by sections 207, 209, 210, 211, 2112, 213, and 214. 88
IV.CONCLUSION
The United States stands to gain from improvements to food safety, via direct
economic and health benefits, and through improved consumer trust in the market for
food and the governments ability to protect against basic preventable health violations.
Improvements could come through measures allowing the market to work more
transparently towards achieving food safety, through increased regulation, or through
measures enhancing the power of the liability system. This Article has discussed the
different conclusions we come to with respect to these three areas particularly as applied
to large industrial producers and smaller scaled heterogeneous facilities, and also assesses
current reform legislation against the framework.
The implications from the basic framework tend to indicate that regulation is
more preferable for homogenous, industrial-scale producers than for small-scale
heterogeneous firms. Current legislative proposals, further, do not fully address this
difference. In order to avoid discouraging healthful and environmentally sustainable food
production and not to advantage industrial food producers externalizing costs to health
and the environment, the final statutory and regulatory requirements should be sensitive
to the wide array of operations they will be affecting. Thresholds for size are one option,
or allowing opt-in to programs, like the juice regulations that require either a particular
pasteurization process or a warning label, which smaller operations tend to choose. In
order to make the right choices, rulemaking should be determined at the local level
whenever practicable and avoid categorical requirements with blinders on to the other
aspects of food that we care about.
87 H.R. 2749 13488 H.R. 2749
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Appendix: Incubation periods