Although many changes have occurred in food regulation since the legislative reforms sparked by Upton Sinclair’s famous 1906 exposé on the meat industry, government regulation of the food industry still faces significant challenges.
Professor Lytton examines private alternatives to government food regulation in his recent article Kosher Certification as a Model of Private Regulation: Third-Party Certification Has Benefits over Both Government Regulation and Unregulated Markets, which appears in the fall issue of Regulation published by the Cato Institute.
[November 7: Conference on Meat Production]
Lytton argues that private third-party certification can overcome many of the obstacles that hinder effective government regulation of America’s food industry. Professor Lytton goes on to suggest that third party certifiers can learn a lot from the successful example of kosher food certification.
What can third party food safety certifiers learn from kosher certification?
According to Professor Lytton, kosher food certification has several key attributes that account for its success. To begin with, sufficient consumer demand makes companies willing to open up their operations to kosher inspectors and to pay for reliable certification. In addition, fierce brand competition based on reliability among kosher certifiers vying for food company clients counteracts incentives to cut corners. Market competition among certifiers creates incentives for them to lower their standards in order to reduce the cost of their services and ease the demands that they place on their clients. Brand competition counteracts these incentives, because an agency caught lowering its standards risks damage to its reputation among consumers and the value of its brand. Finally, interdependence among certifiers creates incentives for interagency oversight. Within industrial food supply chains, the reputation of finished-product certifiers depends on the reliability of ingredient certifiers upstream in the production process, who, in turn, require the trust of finished-product certifiers for acceptance of their certification downstream in production. The result is that finished-product certifiers scrutinize the operations of ingredient certifiers, who are eager to satisfy any concerns they may have. Since all of the major agencies certify both ingredients and finished products, this creates a network of interagency oversight.
What advantages does private food safety auditing have over governmental regulation?
Professor Lytton explained that federal food safety efforts are hampered by inadequate resources and political resistance to government regulation. Private food safety auditors fill gaps created by these obstacles to government regulation. A domestic food manufacturer is likely to see a government food safety inspector on average once every five to seven years, but that same manufacturer can be subject to multiple private food safety audits required by its supply contracts with retail sellers.
However, problems still persist in private food safety auditing. One of these problems is the conflict of interest created when the food manufacturer pays for the food safety audit. In order to address these issues, private foods safety auditors have created a network of oversight mechanisms that includes auditing the auditors, a uniform set of food safety standards, ethics training for auditors, mandated accreditation for third party certifiers, and exposure to tort liability for certifiers and auditors that do not meet these standards. Some of these issues are also addressed by brand competition between auditors—consumers support brands that develop a reputation for safer products.
In conclusion, Professor Lytton argues that these private food safety auditors can learn a lot from the success of private kosher certifiers, because “[w]hile kosher certification may not be the only example of successful private certification, it is surely one of the most remarkable.”