Giving government agencies free reign to establish whatever labeling requirements they wish may create more problems than it resolves.
One of the most contentious issues in the food world today is whether companies should be required by the government to add special labels to their food products indicating that they are made with genetically modified ingredients. Both sides of this issue are committed to their arguments: the pro-GMO crowd sees this labeling effort as a waste of money since GMOs (genetically-modified organisms) have not been shown to be harmful. The anti-GMO crowd sees labeling as a necessity given the potential for harm. In this column I want to address a broader issue related to labeling; do food labels always improve consumers’ information about a product?
Product labels are an important part of communicating information to consumers. Regulators and politicians have been in the business of mandating the content of labels for a whole range of products, especially food. While we often rely on other indications of quality such as brands, referrals, and reviews, labels are important to being fully-informed.
But mandated labeling has its share of potential pitfalls. Regulators might require too much information on a label, increasing costs to consumers with little upside. They might reduce the amount of information on a product label by increasing the costs of using certain language. More bizarrely, they might require completely misleading information to be put on a label. Arguments in favor of different labeling requirements can come from consumer watch dogs, but they often come from within industries.
An example of the first problem is mandatory country-of-origin labeling (or MCOOL) of meat products. Once the law of the land, MCOOL of meat products was repealed in late 2015. A fact sheet distributed by Kansas State University concludes:
The overriding finding of limited awareness of MCOOL, narrow use of origin information in purchasing decisions, and no evidence of a demand impact following MCOOL implementation is consistent with the argument that voluntary labeling by country of origin would have occurred if it were economically beneficial to do so. More broadly, the findings of this project generally support the assertions of MCOOL opponents who have asked “where is the market failure?”
MCOOL creates international trade issues and increases costs to producers, processors, and retailers with little to no upside, according to surveys.
Regulation of labels might also reduce the amount of information communicated to consumers. In his book Everything I Want to Do is Illegal, Joel Salatin documents the negative effects of government control of labels. He describes a situation in which he was legally barred from using the term “organic” in any description of his operation whatsoever because he hadn’t gone through a mandated (and convoluted) certification process. He writes:
Since certification has matured over the past decade and a half, of course, it has done precisely what I predicted would happen. It has locked out small producers. It has pitted the ins against the outs. It has added another whole layer of food police. And it has aided and abetted the empirization of organics. (pp. 113)
After discussing the myriad components of certification (which almost no regular consumer understands), he notes:
What the certification process has done is automatically shut down the inquisitiveness into all these variables, creating hardening of the categories. The bad part is that when a person says they are organic, the conversation ends because everyone assumes they know what that means.
The point here is that consumers end up with less information because some people are kept from using a specific term in the description of their product. Consumers are less informed because they assume that, since the government presides over the certification process, anyone with the word “organic” on their label produces the product in ways the consumer approves of. According to Salatin, this is not always the case.
The information on a label might have little to do with informing consumers. A small dairy in the Florida panhandle has been told by the Florida Department of Agriculture and Consumer Affairs that it must label its skim milk “imitation” because it hasn’t artificially re-introduced certain nutrients back into the milk after skimming. The owners of the creamery are fighting the requirement, claiming that milk that comes out of a cow can’t be “imitation” milk. This smacks of regulatory capture, the use of regulation to benefit a business or other private entity. A small dairy probably can not afford the sophisticated machinery required to operate like larger dairies, and certainly can not influence regulators to the same extent.
Of course, none of this is to say that consumers shouldn’t be informed or that all large businesses fight for and win legal protection from competition; however, giving government agencies free reign to establish whatever labeling requirements they wish may create more problems than it resolves.