Inside D.C.

Food Regs Have Costs

I read this week an article in one Capitol Hill rags about the “Food Industry Under Siege,” the premise of which is the Obama Administration – “arguably the most active on food policy in the past century” – has issued so many new rules, new proposals and new requirements for the industry, the effort results in “an intensifying battle royal against the food industry.”

However, the article makes one very dangerous assumption, albeit a common one when articles are penned about the “food industry,” and that is the industry is all big, multinational companies and that the pockets that will absorb the billions in added costs are the deep, deep pockets exclusive to fat, rich corporations.  Nowhere in the article does the author question the need for some of these new rules, the benefit to consumers of the new proposals, the impetus for some of these changes and the inevitable result of regulation per se, i.e. higher costs at the supermarket.

First, while regulators are sometimes fairly secular in their thinking, they must always remember the food industry begins on the farm and ends when the consumer unpacks grocery bags at home. The industry is not just multinational food processors, it includes restaurants, whether high-end or fast food; it includes those who provide food to schools and other institutions, and it includes everyone who takes what the farmer/rancher produces and turns it into what the commercial retailer and institution supplier sells.

Regulations on the food industry must take into account the industry is a farm-to-fork phenomenon, ergo higher costs anywhere along the chain from farmer to retailer mean higher costs or lower returns for each link in the chain. This is not just a scenario of fat corporations bemoaning a drop in profits from obscene to merely excessive.

No industry and no regulatory scheme are perfect, and much about food regulation has needed updating for several years. This is why the broad food industry worked to enact the Food Safety Modernization Act (FSMA) in 2012.  The entire food industry supported this modernization effort knowing full well these necessary, new regulations would bring new costs. We just hoped those costs would be a small price to pay for a better system.  However, this “siege” mentality must objectively question the need/benefit of new and/or different regulations so that unnecessary and generally disproportionately high costs of compliance – and the inevitable pass-through of such costs to consumers – are avoided.

Given these rules are to benefit consumers – and we’re all consumers – the true benefit of new rules must be that they responsibly fill a void that truly needs to be filled. They mustn’t be promulgated because a group believes “the consumer has a right to know” or because they placate an activist group with an active public relations machine.  At all times such rulemakings must take into account not only the real needs being met, but also the costs of meeting that need. The cost of  compliance is inevitably, in whole or part, passed along to the ultimate purchaser.

Keep in mind the real pain of the cost of valueless or unnecessary regulation ultimately falls on those least likely to afford higher food costs. Ultimately, it means very little if you win the “battle royal against the food industry” and that victory translates into pricing products out of the reach of most consumers, the very folks change advocates claim to be protecting.