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Litigation: a necessary cost of doing business?

Related tags Food industry Regulation

In the US, the role of court action in defining limits not set by
regulators is generating a flood of costly court cases for the food
industry: much unnecessary, and all damaging.

At its worst, the nation's light regulatory approach is spawning a culture of take-risks-now-and-fight-the-class-action-later.

Take ephedra for example. A herbal supplement widely used for weight loss until it was subsequently found to have a negative impact on heart health. So the regulators swept in- belatedly- to ban it. Yet the issue remains held up in legal battles concerning dosage, while a web of legal activity is being spun as Mr Blogs and his neighbour claim their lives have been destroyed by the bad ingredient.

Such regulatory pussy-footing does no-one any favours. A whole lot of sorrow, time and money could be saved with the enforcement of some basic, and sound risk management policy.

And in the food industry, the key to this is science, whether conducted by industry or government. Without the science, we can ultimately expect to see a backlash.

In Europe, if it is not possible to definitively establish that a particular activity is safe, then as a precaution that activity is precluded. End of story until proven otherwise.

But in the US, only in relation to the financial services industry are regulators policing aggressively against risk - imposing huge fines for failing to apply advertised discounts, or selling inappropriate products. Elsewhere, the courts fill a gap by allowing voices to be heard that are simply being ignored in the construction of legislation and regulation.

Thus, we see non-governmental organizations and consumer safety advocates resort to litigation because they simply can't turn elsewhere. Often, the issues they raise should not have existed in the first place.

Who wants benzene in their soft drinks for instance? The issue has only reached its current proportions because 15 years ago the Food and Drug Administration allowed the industry to self regulate. The industry did nothing but keep very quiet.

Self-regulation can work, but only if the 'regulation' part of it actually occurs. Where it doesn't, the government needs to establish strict limits to prevent there being even the hint of a risk to consumers.

When neither of the above come into force, court action becomes the only remaining avenue.

But, most significantly, the food industry itself is losing out from the way the courts are being used to fill this void. Regulators who are applying unbiased and scientific assessments of risk are more reliable than courts where juries can be swayed through emotion to legislatively illogical awards.

Nor does the US court system have much by the way of built-in deterrents to non-cases.

Many suits are filed simply because the US legal system permits them to be, and in some ways even encourages them.

Thus, courts are used to raise awareness about some legitimate issues- which is fine- but also to indulge the activist's fancy and profile- which is not.

Frito-Lay has just had to change the labelling of its low-fat potato chips and pay out a $150,000 'award' to Harvard Medical School's nutrition division in order to avoid a suit filed against it for misleading marketing.

The suit claimed the company was trying to trick consumers into believing its products did not contain the controversial fat substitute olestra. But whether or not we agree with the use of the ingredient, the fact is that Frito Lay had already clearly displayed the olestra brand logo on its packets.

It's fine to fight to raise awareness for olestra, but why should this one firm have suffered such costs in that profile-raising, when it was playing straight with consumers?

If a legal device was established that filtered off the indulgent suits from the important ones, then the whole system would work more efficiently.

In the UK it is much harder to get claims off the ground because of a 'loser pays all' rule. That means that unless a suit has a strong chance of success, it isn't filed.

But this 'indemnity costs' rule also comes with a more responsible regulatory system and a more stringent approach to risk management. And this ultimately appears to work better and avoid a lot of unnecessary grief.

US industry may think it is winning from scant regulation, but take a look at the court records, and it is paying, and paying again. The limits on where the attacks can fall are so wide that no company can realistically be sure of avoiding suits.

In a world of powerful consumers and corporate responsibility, the US legislative free-for-all amounts to a serious and unnecessary cost of doing business. Please regulators, regulate.

Lorraine Heller is editor of FoodNavigator-USA and is a specialist writer on food industry issues. With an international focus, she has lived and worked in the UK, Cyprus and France.

If you would like to comment on this article, please contact Lorraine Heller​.

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