If these allegations are true, they raise multiple issues regarding food safety and quality. Most laypersons know that perishable food like milk and meat must be stored at proper cold temperatures to maximize food safety and minimize the growth of many dangerous pathogens. The USDA recommends discarding many perishable foods that have been held above 40 degrees F for more than two hours. Sysco clearly understands these concerns, as it (1) presents ServSafe “state-of-the-art food safety training” and (2) tells investors all about the high technology used in its climate-controlled warehouses.
Refrigeration is also critical to maintain food freshness throughout its recommended shelf life. Perishable foods that have been subjected to temperature abuse rapidly degrade in quality, so buyers may not be getting all of the freshness they paid for.
This also raises an issue of unnecessary food waste. Even utilizing modern temperature controls, each year, Americans throw away almost half of their food, worth an estimated $165 billion. This means more than just people going hungry; it wastes massive amounts of water, land productivity, and energy. Sysco represents that it takes its sustainability responsibility “seriously.”
So how can buyers protect themselves from temperature-abused food that might look just fine when it is delivered? Technologies like RFID provide data to verify proper holding temperatures throughout the supply chain, but they are not used as widely as they could be.
If the allegations are proven, “Sysco faces misdemeanor criminal charges and a one thousand dollar fine for each violation,” not including possible customer lawsuits.
NPR recently reported that a sushi chain owner in Japan paid $1.76 million for just one (489 pound) bluefin Tuna. Per pound, that is more than the price of “the very best connoisseur cannabis” in California. With such strong economic motivation and weak criminal penalties, is it any wonder that 39 percent of fish sold in the U.S. is mislabeled?
“Do you really know what kind of fish you’re eating?” And why that’s such an important question?
As recently reported in Food Safety News, food fraud (by way of species substitution) presents more than a risk of ripping off consumers. Pregnant women may be unwittingly exposed to toxins, gastric distress, and allergens from consuming seafood that is not what it purports to be. Honest employees of fishing companies, distributors, and retailers that sell genuine products can lose sales and their jobs.
U.S. Senator Barbara Boxer (D-CA) recently asked the FDA to increase its efforts to reduce seafood mislabeling. For bad actors, increased “traceability and enforcement . . . from bait to plate” presents risks of criminal prosecution and civil damages from class action litigation. However, for seafood companies that adopt best practices, it also provides promotional and marketing opportunities.
The latest reminder of the risks of perpetrating food fraud: on May 22, 2012, the U.S. government filed felony charges against a seafood importer for allegedly falsifying Country of Origin Labeling (COOL). According to the filing, Worldwide Shrimp Company and others conspired to violate the Lacey Act by labeling Mexican shrimp as a product of the U.S.
The defendants, of course, are innocent until proven guilty beyond a reasonable doubt. The purpose of this posting is not to suggest otherwise. Rather, it is to identify three (of many) underlying reasons why COOL laws are important to businesses and consumers.
Second, even if no one suffers personal injury from an imported food, in some states, economic injury is enough to provide standing for plaintiffs to sue, because labels matter. Consumers often are willing to pay more for foods from certain countries (or to avoid buying foods from others) for many reasons not directly related to safety, such as supporting local jobs or reducing energy use.
Finally, companies that are accused of violating COOL laws should keep in mind they risk conviction in the court of public opinion. Many consumers understand that companies willing to violate COOL laws may also be more likely to break other laws that affect food safety.
Food Fraud presents an emerging litigation risk in California and nationwide.
What is Food Fraud?
Food fraud occurs when someone sells a product that is not what it purports to be. A few examples include short weighting (e.g., including the weight of excessive ice glazing) of frozen seafood, species substitution, dilution of premium olive oil with inferior oil, and misrepresenting a product’s country of origin.
How do Fraudsters Get Away with It?
Many times, only minor distinctions differentiate competing products, so it can be difficult even for trained professionals to detect fraud. Almost two hundred years ago, British writer Cyrus Redding stated that consumers could avoid food fraud by becoming “perfect[ly] acquaint[ed] with that which is good.” But how can one become “perfectly acquainted” with the differences between conventionally-produced and “free range” eggs, other than by the price paid?
Why is this an Emerging Litigation Risk?
Food fraud is economic fraud, because labels matter, and customers want to get what they pay for. Some states have already seen food fraud class actions filed that allege honey laundering. Food fraud also presents a risk of food allergy personal injury litigation for companies that substitute cheaper finfish products like surimi for shellfish like crab. Food fraud also may result in criminal indictment and imprisonment. There are also the indirect costs of negative publicity arising from conviction in the court of public opinion.
What can be Done to Manage Food Fraud Risks?
The latest reminder that manufacturers must consider the costs and benefits of promoting health and nutrient content claims on product labeling:
Campbell’s Soup Company recently paid $1.4 million to settle a class action lawsuit that alleged its “Low Sodium” tomato soup labeling misled consumers. The soup allegedly contained the same amount of sodium as the company’s regular soup, but Campbell’s sold it for a premium price. (The complaint also alleged Campbell’s Healthy Request tomato soup claimed it was “Low in Fat,” even though it contained more fat than the company’s regular soup.)
Campbell’s denies liability and contends it complied with applicable laws.
The purpose of this posting is not to comment on the factual or legal support for the parties’ claims or defenses. The issue is that regardless of the merits, defending and resolving lawsuits arising out of product labeling claims can be very expensive. Companies that invest proactively to minimize their litigation risks may avoid incurring these costs.
Yale University’s Rudd Center for Food Policy and Obesity recently published a study that found parents often misinterpreted the meaning of nutrient content and health claims presented on kids’ cereals. The cereals included an “average [of] 3.1” “nutrition-related” messages per box, but they also contained an average of 35 percent added sugar by weight.
The study concluded that its participants misinterpreted the claims in two ways. First, they “inferred” that the sugary cereals were “more nutritious” than competing products, despite their “below average . . . nutritional quality.” Second, they attached broader meanings to the manufacturers’ health claims than their “literal interpretation.” For example, 74% of the parents believed that an “‘antioxidants and vitamins’ (i.e. immunity) claim meant it might keep their child from getting sick.”
Most critically, the authors concluded the parents’ “beliefs predicted greater willingness to buy the cereals.” Please recall my article regarding the Kwikset case that allowed a false advertising class action to proceed, because claims on “labels matter.” Manufacturers of foods that some authors may deem have “below average . . . nutritional quality” may want to conduct a cost-benefit analysis evaluating the potential increased sales from advertising health claims against the risk that findings like those from the Yale study may support an unfair competition class action claim, as well as possible negative publicity in the court of public opinion. Public interest groups may also attempt to support efforts to expand the jellybean rule to further limit manufacturers’ use of these claims.