Food Labeling: Voluntary vs. Mandatory

Wednesday, February 22, 2017

A couple of news stories I encountered recently brought to my mind a common assumption about regulations, namely that we "need" them, or businesses will act haphazardly with regard to customer wants and needs.

In the first story, about new (and voluntary) industry-wide guidelines for use-by dating, shows that industries can and do regulate themselves. In this case, a haphazard and confusing number of labels is being replaced by two kinds of labels to help customers stop wasting food, and thereby save money:

We've long known that the expiration date on groceries is a mess of different terms that mean absolutely nothing. Now, the Food Marketing Institute and Grocery Manufacturers Association have put together a plan that simplifies the label you'll see on food.

Right now, more than 10 different date labels exist on food, like sell by, best before, best by, expires on, and whatever else. The new initiate will use just two phrases: Best If Used By and Use By. [links and emphasis in original]
The second story, by contrast (and despite its implicitly pro-regulation stand), provides a counterexample to the idea that, without our philosopher-kings to guide us, the market would degenerate into chaos, where we'd get nickeled-and-dimed to death:
Food labeling is increasingly controlled by federal regulations. What once was a requirement that food labeling must be truthful and non-misleading now occupies thousands of pages of regulations. Adding to this, the federal government now has four new food labeling regulations pending implementation (special labeling for foods sold in vending machines, menu labeling, remodeling the Nutrition Facts Label on almost all packaged foods and changes in labeling regarding partially hydrogenated oils, or PHOs). Moreover, four more regulations are in the works, including new rules for nutrient content claims, health claims, labeling foods "natural" and mandatory GMO labeling. Even for those who believe that all of these regulations are reasonable, repeatedly requiring label changes on foods over the next few years defies rationalization.

On average, it costs food companies up to $6,000 to update the label for each product or SKU (stock keeping unit). With over 800,000 food products on the U.S. market, the overall cost of a government-mandated label change may run in the billions. The Food and Drug Administration (FDA) has estimated that just one of the mandated label changes now scheduled for implementation may exceed $4.6 billion. When labels have to be changed repeatedly, those costs are multiplied. Of course, regulatory compliance costs are passed on to consumers in the form of higher food prices. [bold added]
These examples do not and can not, by themselves, make a case that industries can agree to labeling standards, and that these will tend towards being simple and helpful. But they should cause people to ask themselves why they think an army of bureaucrats is necessary to goad businesses who presumably are accountable to their customers into making them be clear about what they are selling.

-- CAV

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