DOJ and DOA Announce Workshops to Evaluate Agricultural Markets and Competition
By Guest Blogger Joel Dahlgren
Last week the Justice Department and U.S. Department of Agriculture announced that the two federal agencies will hold joint public workshops to explore competition issues affecting agriculture in the 21st century, including the appropriate role of the federal government in antitrust and regulatory enforcement. The first workshop will be held in 2010. Some workshops will be held in Washington, D.C., while others will be held regionally around the country.
The public and press are invited to attend these conferences. Written comments may be submitted ahead of time at agriculturalworkshops@usdoj.gov. Paper copies of comments should be submitted in addition to electronic copies, preferably by courier or overnight services. Agendas and schedules for the workshops will be posted at www.usdoj.gov/atr.
The federal government has a long, firmly held interest in agricultural markets, the competition in those markets, and concentration of the firms that compete in those markets. Just since the turn of the century, the General Accounting Office (GAO) has produced 15 reports on these issues. The latest report prepared by the GAO on the subject of concentration and competitive issues in agriculture was released a little over a month ago on June 30, 2009. The GAO summarized its findings to Senators Kohl and Grassley as follows:
In summary, we found the following:
• Concentration generally has increased at all levels of the food marketing chain in all agricultural sectors since the 1980s. At the farm level, less than 2 percent of farms accounted for 50 percent of total sales in 2007. At the food processors’ level, in general, a small number of companies accounted for a large and growing portion of sales in each of the five major agricultural sectors. For example, in the pork sector, the market share of the largest four hog slaughtering firms increased from 36 percent in 1982 to 63 percent in 2006. In addition, at the retail level, the share of grocery store sales held by the largest four firms more than doubled, from 16 percent in 1982 to 36 percent in 2005.
• While real annual per capita food expenditures have increased since 1982, households now spend a smaller share of disposable income on food. Total annual per capita food expenditures rose from $3,358 in 1982 to $3,888 in 2007, in constant 2008 dollars. Meanwhile, household spending on food decreased from 13 percent of disposable incomes in 1982 to 10 percent in 2007. Since 1982, overall food prices and food prices in each of the five major agricultural sectors have increased about as much as prices for consumer goods and services overall. However, from July 2008 through December 2008, food prices increased faster than the prices of other goods and services. Since then, food prices generally have not changed significantly.
• Since 1982, farmers have generally received higher monthly prices for their commodities, but these prices have increased less than food prices and inflation in the broader economy. Specifically, prices farmers received, including for beef, pork, dairy, and grains, increased by 34 percent from January 1982 to April 2009. For the same period, food prices rose by 128 percent, and prices in the general economy rose 102 percent. Commodity prices increased significantly in 2008, reaching a high of 68 percent above their 1982 levels in July 2008, but have declined since then.
• The empirical economic literature has not established that concentration in the processing segment of the beef, pork, or dairy sectors or the retail sector overall has adversely affected commodity or food prices. Most of the studies that we reviewed either found no evidence of market power or found efficiency effects that were larger than the market power effects of concentration. While a few studies found some evidence of market power, it is unclear whether this market power was caused by concentration or some other factor. All of the experts we spoke with said that concentration probably did not cause the 2008 increase in commodity and food prices, which were more likely due to factors such as higher energy costs and growing global demand for grains. Experts generally said that concentration is likely to increase in the future. Some said further increases in concentration may raise greater concerns in the future about the potential for market power and the manipulation of commodity or food prices. One expert said further increases in concentration would continue to generate efficiency gains and be beneficial. Enclosure II provides further information on the views of experts, and enclosure IV lists the studies we reviewed prices in these sectors.
The report (GAO-09-746R, June 30, 2009) is titled U.S. Agriculture: Retail Food Prices Grew Faster Than the Prices Farmers Received for Agricultural Commodities, but Economic Research Has Not Established That Concentration Has Affected These Trends. It can be found at http://www.gao.gov/new.items/d09746r.pdf.
After Second Try, House Passes Food Safety Enhancement Act of 2009 (HR 2749)
U.S. House of Representatives approved HR 2749 moments ago. This action followed some confusion yesterday where it was brought to the floor needing a 2/3 vote and failed. Here’s a link to a report by the Rules Committee including the language of the bill as approved today by the House. Changes to the bill from what was proposed by the Energy and Commerce Committee include amendments aimed at concerns by smaller farmers of the $500 “facility registration fee,” performance standards and record keeping.
The legislation has been the subject of heavy debate inside and outside the beltway. Here’s a link to the Editorial in the New York Times in support of the bill. The Grocery Manufacturer’s Association (GMA) also has expressed support in a June press release for the bill as marked-up by the Energy and Commerce Committee. From some opposed to the bill, here’s a link with an impassioned argument from yesterday.
Note that the registration requirements in the bill as currently written “does not include farms; private residences of individuals, restaurants, other retail food establishments; nonprofit food establishments in which food is prepared for or served directly to the consumer.”
The bill further exempts from registration farms that sell food primarily at farmers markets. Also exempts farms that “manufacturer grains or other feed stuffs” grown on those farms and distributed to other farms for “consumption as food by humans or animals on such farm.”
Also note that traceability provisions remain. Section 107(c)(2) recognizes that work remains on the regulatory level for FDA to collect information, and develop technology and systems, and establish pilot programs before traceability becomes a reality.
Food Safety Legislation Proposed by House - User Fees and Traceability Are Among Highlights
Last week, members of the U.S. House of Representatives Committee on Energy and Commerce released a discussion draft of the “Food Safety Enhancement Act of 2009.”
The draft proposes beefing up the FDA registry of “all food facilities serving American consumers” and charging every facility $1,000 per year to fund FDA food safety activities. The new legislation would expand the types of facilities that need to register by eliminating certain exemptions from the 2002 Bioterrorism Act, though for now it appears to maintain exemptions for retailers, restaurants, farmers and nonprofits.
The proposal’s most ambitious and controversial proposal may be traceability.
The draft legislation proposes to require FDA to “by regulation establish a tracing system for food that is located in the United States or is for import into the United States.” The legislation gives the FDA few specifics other than to “maintain the full pedigree of the origin and previous distribution history of food,” “link that history with subsequent history,” “establish and maintain a system for tracing food that is interoperable with the systems established and maintained by other such persons” and “use a unique identifier for each facility.” No doubt the devil will be in the details.
Verbatim, here is the Summary of Discussion Draft of The Food Safety Enhancement Act of 2009:
1. Creates an up-to-date registry of all food facilities serving American consumers: Requires all facilities operating within the U.S. or importing food to the U.S. to register with the FDA annually.
2. Generates resources to support FDA oversight of food safety: Requires registered facilities to pay an annual registration fee of $1,000 in order to generate revenue for food safety activities at the FDA; requires registered facilities to pay for FDA’s costs associated with reinspections and food recalls; allows FDA to charge a fee to domestic firms requesting export certificates for exported food.
3. Prevents food safety problems before they occur: Requires all facilities operating within the U.S. or importing food to the U.S. to implement safety plans that identify and protect against food hazards. FDA would have the authority to specify minimum food safety plan requirements and to audit food safety plans.
4. Requires safety plans for fresh produce: Directs FDA to issue regulations for ensuring the safe production and harvesting of fruits and vegetables.
5. Increases inspections of food facilities: Sets a minimum inspection frequency for all registered facilities. High-risk facilities would be inspected at least once every six to 18 months; low risk facilities would be inspected at least once every 18 months to three years; and warehouses that store food would be inspected at least once every three to four years. Refusing, impeding, or delaying an inspection is prohibited.
6. Improves traceability of food: Enhances FDA’s ability to trace the origin of tainted food in the event of an outbreak of foodborne illness. FDA would be required to issue regulations that require food producers, manufacturers, processors, transporters, or holders to maintain the full pedigree of the origin and previous distribution history of the food and to link that history with the subsequent distribution history of the food; and to establish an interoperable record to ensure fast and efficient traceback (current law permits facilities to hold a record in any format — paper or electronic — making efficient tracing of foods difficult for FDA). Prior to issuing such regulations, FDA would be required to conduct a feasibility study, public meetings, and a pilot project.
7. Enhances the safety of imported food: As an additional layer of protection, FDA can require food to be certified as meeting all U.S. food safety requirements by the government of the country from which the article originated or by certain qualified third parties. Third party certifying entities must meet strict requirements to protect against conflicts of interest with the firm seeking certification.
8. Expands laboratory testing capacity: Requires FDA to establish a program to recognize laboratory accreditation bodies and to accept test results only from duly accredited laboratories. Gives FDA the ability to require laboratories to send test results to FDA.
9. Provides strong, flexible enforcement tools: Provides FDA new authority to issue mandatory recalls of tainted foods. Strengthens criminal penalties and establishes civil monetary penalties that FDA may impose on food facilities that fail to comply with safety requirements.
10. Creates fast-track import process for food meeting security standards: Permits FDA to develop voluntary security guidelines for imported foods. Importers meeting the guidelines would receive expedited processing.
11. Enhances the safety of infant formula: Enhances FDA’s ability to assure the safety of new infant formulas before they go on the market.
12. Advances the science of food safety: Directs the Secretary to include food in an active surveillance system to assess more accurately the frequency and sources of human illness. The Secretary is also directed to identify industry and regulatory approaches to minimize hazards in the food supply.
13. Enhances FDA’s ability to block unsafe food from entering the food supply: Strengthens FDA’s authority to administratively detain unsafe food products. Grants FDA “quarantine” authority under which the agency may restrict or prohibit the movement of unsafe food products from a particular geographic area.
14. Directs FDA to assess the use of carbon monoxide in certain foods: Requires FDA to conduct a safety review of the use of carbon monoxide in meat, poultry, and seafood products.
15. Enhances transparency of GRAS program: Requires posting on FDA’s website of documentation submitted to FDA in support of a “generally recognized as safe” (GRAS) notification.
16. Requires country-of-origin labeling and disclosure: Requires all processed food labels to indicate the country in which final processing occurred. Requires food manufacturers to identify the country of origin for all ingredients on their websites. Requires country-of-origin labeling for all produce.
General Provisions
1. Creates an up-to-date registry of importers: Requires all importers of drugs, devices, and foods to register with the FDA annually and to pay a registration fee.
2. Requires unique identification numbers for facilities and importers: To enhance information about FDA-regulated entities, creates unique identification numbers for all drug, device, and food facilities and importers.
3. Creates a dedicated foreign inspectorate: Requires FDA to establish and maintain a corps of inspectors to monitor foreign facilities producing food, drugs, devices, and cosmetics for American consumers.
4. Grants FDA new authority to subpoena records related to possible violations.
5. Provides protection for whistleblowers that bring attention to important safety information: Prohibits entities regulated by the FDA from discriminating against an employee in retaliation for assisting in any investigation regarding any conduct which the employee reasonably believes constitutes a violation of federal law.
Supreme Court Asked to Hear Preemption Case Involving Methylmercury; FDA Issues Draft Documents Regarding Consuming Commercial Fish
By Guest Blogger Bryan Anderson
The maker of Chicken of the Sea products has asked the U.S. Supreme Court to grant certiorari in a case we reported on involving preemption of state-law tort claims. In August 2008, the Third Circuit in Fellner v. Tri-Union Seafoods, LLC reversed the district court and held that Food and Drug Administration (FDA) actions regarding methylmercury content in tuna did not preempt the plaintiff’s claims under the New Jersey Product Liability Act. Tri-Union Seafoods’ certiorari petition presents two questions for the Supreme Court’s consideration:
1. Whether state-law tort claims based upon failure to warn of the risks of methylmercury in tuna fish products are preempted by the Federal Food, Drug, and Cosmetics Act and regulatory actions of the FDA, including a written determination that state-law warning requirements concerning methylmercury in tuna products are preempted by federal law and denial of a petition to require such warnings; and
2. Whether a “presumption against preemption” applies in conflict preemption cases.
If the Court grants the petition and hears the case, it certainly will have implications concerning local and state labeling requirements vis-à-vis federal agency action. Stay tuned; we will update you on this case as the plaintiff/respondent submits her brief opposing the petition.
Also related to methylmercury, the FDA yesterday published a notice in the Federal Register announcing the availability of two draft documents assessing the benefits and risks of consuming commercial fish.
The first document attempts to quantify the impact of eating commercial fish on three health endpoints: (i) fetal neurodevelopment, (ii) risk of fatal coronary heart disease, and (iii) risk of fatal stroke. The FDA notes that “[e]ach of these health endpoints has been associated in the scientific literature both with adverse effects of methylmercury exposure (including through fish consumption) and beneficial effects of regular fish consumption.”
The second document provides an overview of published scientific literature regarding beneficial effects of fish consumption and Omega-3 fatty acids for neurodevelopmental and cardiovascular endpoints.
Salmon Labeling Probably Headed to Supreme Court
The U.S. Supreme Court signaled last week that it may review a California Supreme Court decision finding that federal law does not preempt claims for violations of state consumer protection laws concerning “selling artificially colored farmed salmon without disclosing to . . . customers the use of color additive.” Following a petition for certiorari filed in April, the Supreme Court issued an order last week inviting the Solicitor General “to file a brief in this case expressing the views of the United States.”
The Bush administration generally favors federal preemption of state consumer protection laws. Most Supreme Court watchers believe that the Court will grant certiorari if the Solicitor General advocates doing so. This case, if considered by the Supremes, is sure be significant with wide ranging implications for consumer protection claims concerning food product labeling.
