Should a Company’s Failure to Comply with Food Safety Programs or Laws be Deemed an Unfair Trade Practice?

The Packer recently reported that the “CaliforniaCantaloupe Advisory Board is establishing the state’s first mandatory food safety program implemented by a commodity board.”  Although the actual details are still in the works, Steve Patricio, chairman of the California Cantaloupe Advisory Board, stated that “we have existing assessments and revenue we can convert to food safety” and “there will be an additional assessment, probably as high as two cents a carton.”   California Cantaloupe Food Safety Program Article – The Packer 

According to the article, the proposed Cantaloupe safety program utilizes USDA inspectors under the supervision of the California Department of Food and Agriculture (“CDFA”).  This is important because the CDFA stated that:

“noncompliance with the coming food safety metrics would amount to an unfair trade practice.”    

Under California law, 

“a marketing order may contain provisions which relate to the prohibition of unfair trade practices. In addition to the unfair trade practices now prohibited by law, applicable to the processing, distribution, or handling of any commodity within this state, the director may include in any marketing order which is issued provisions that are designed to correct any trade practice which affects the processing, distributing, or handling of any commodity within this state which the director finds, after a hearing upon the marketing order in which all interested persons are given an opportunity to be heard, is unfair and detrimental to the effectuation of the declared purposes of this chapter.” 

California Food and Agricultural Code Section 58890.  The foregoing means that the parties to a marketing agreement or other similar arrangement can agree that certain conduct shall be deemed a violation of California law.

Taken as a whole, the members of the California Cantaloupe industry, who make up approximately 70% of the domestic Cantaloupe supply, are working together to accomplish two significant goals.  See Leafy Green Marketing Agreement Article  The first is to promote and ensure food safety, which is great!  The second is to ensure that no one Cantaloupe grower is able to obtain a competitive price advantage over the other by electing not to incur the costs associated with a mandatory food safety program, which was reported to be approximately two cents per carton.  This is a good idea!

The PACA prohibits certain types of conduct by fruit and vegetable buyers and sellers as unfair trade practices.  Some examples of unfair trade practices include failing to make full payment promptly for produce purchases, misbranding or mislabeling of produce, making false and/or misleading statements in connection with produce transactions, and employing individuals under employment restrictions that were responsibly connected with a PACA violator firm.  What you don’t see addressed here is the subject of food safety and the unfair advantages associated with non-compliance with food safety laws.   Maybe it should… 70% of the Cantaloupe industry seems to think so! 

But, what the PACA does give the suppliers of perishable agricultural commodities (“Produce”) is the right to obtain trust protection on the sums “owing in connection” with their transactions in produce.   7 U.S.C. 499e(c)(2).  The cost of food safety (i.e. the two-cent per carton assessment discussed above) is a sum owning in connection with a company’s transactions in produce.  The cost of compliance with food safety programs and laws help ensure the safety of the produce itself and that serves the public interest. 

As such, the cost of food safety compliance should be considered an inseparable part of a company’s transactions in produce and it should be invoiced as such.  Any company that has ever been on the wrong side of a foodborne illness issue or incurred the costs associated with a major recall can attest to the fact that the cost of prevention is far less than the alternative, which often includes brand identity damage, loss of goodwill in the marketplace and litigation costs.   Moreover, as we see from the premiums placed on most organic products, consumers will seek out and pay for safer products.

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