This is a guest post from Timothy D. Lytton, Professor of Law at Albany Law School and author of Kosher: Private Regulation in the Age of Industrial Food.
An endless parade of new food labels that misrepresent processed foods high in fat and/or sugar as “natural,” “fresh,” and “healthy,” highlights the shortcomings of government food label regulation and industry self-regulation. Amidst the pervasiveness of misleading food labels, a little-noticed area of industrial food regulation offers a model of success: kosher food certification.
Kosher food is big business. There are more than ten thousand kosher-producing companies in the United States alone, making more than 135,000 kosher products for over twelve million American consumers who purchase kosher food because it is kosher. The U.S. Kosher market generates more than $12 billion in annual retail sales, and more products are labeled kosher than are labeled organic, natural, or premium.
Interestingly, only 8 percent of kosher consumers are religious Jews. Most kosher consumers choose kosher for reasons related to health, food safety, taste, vegetarianism, lactose intolerance, or to satisfy non-Jewish religious requirements, like halal.
A network of more than 300 private kosher certification agencies throughout the United States reliably ensures that food labeled kosher is, in fact, kosher. Of the half-million products that the Orthodox Union (OU)—the nation’s largest kosher agency—certifies each year, its legal department investigates only about five hundred cases of questionable use of its kosher symbol, and it takes action in only fifty of those cases. These low rates of mislabeling are consistent with New York State’s Kosher Law Enforcement Division records revealing that, between 2005 and 2010, the agency conducted more than thirty-seven hundred inspections of nearly nine hundred industrial kosher food production facilities but found only four violations of the state’s kosher fraud law. Moreover, when mistakes are discovered, private kosher certification agencies routinely issue consumer alerts and product recalls, at significant cost to themselves and their food-company clients.
So what’s the secret to the kosher certification system’s success?
To begin with, sufficient consumer demand makes companies willing to open up their operations to kosher inspectors and to pay for reliable certification.
In addition, fierce brand competition based on reliability among kosher certifiers vying for food company clients counteracts incentives to cut corners. Market competition among certifiers creates incentives for them to lower their standards in order to reduce the cost of their services and ease the demands that they place on their clients. Brand competition counteracts these incentives, because an agency caught lowering its standards risks damage to its reputation among consumers and the value of its brand.
Brand competition works because a core of vigilant and active consumers scrutinizes products for certification mistakes, reports them to agencies, and shares information about the reliability of different certifiers online and through extensive social networks. Consumers discover problems such as items mislabeled pareve (i.e. indicating the absence of any milk or meat ingredients) that list dairy ingredients on the package, or counterfeit certification kosher symbols. These consumers help kosher certification agencies monitor their food industry clients, and they also police the agencies themselves.
Finally, interdependence among certifiers creates incentives for interagency oversight. Within industrial food supply chains, the reputation of finished-product certifiers depends on the reliability of ingredient certifiers upstream in the production process, who, in turn, require the trust of finished-product certifiers for acceptance of their certification downstream in production. The result is that finished-product certifiers scrutinize the operations of ingredient certifiers, who are eager to satisfy any concerns they may have. Since all of the major agencies certify both ingredients and finished products, this creates a network of interagency oversight.
The success of kosher certification holds many important lessons for reforming food label regulation in other areas, such as front-of-package (FOP) food labels.
Kosher certification illuminates why most private nutrition labeling schemes are unreliable. For example, industry-sponsored FOP nutrition labeling schemes suffer from a conflict of interest: the certifier is paid by the company being certified. The features of kosher certification that counteract this conflict of interest are lacking in FOP nutrition labeling. To begin with, there is little brand competition between FOP labeling schemes to produce more reliable dietary advice. To the contrary, companies and trade associations have increasingly favored cooperative efforts to establish uniform systems in order to prevent consumer confusion. In early 2011, the Grocery Manufacturers Association and the Food Marketing Institute, two leading industry associations, teamed up to launch an FOP nutrition labeling scheme called “Facts Up Front,” which has been adopted by member companies representing 70 percent of food and beverage products. In addition, consumer vigilance, on the scale and intensity of the kosher certification system, is also lacking.
A few private nutrition-labeling schemes, by contrast, have features like those that make kosher certification reliable. Supermarket-shelf nutrition-labeling systems, like Guiding Stars, for example, are characterized by a high degree of brand competition based on reliability. For a supermarket chain, getting consumers to shop in its stores is much more important than which brands or types of food consumers purchase once inside, and providing reliable dietary advice is an effective way to distinguish the chain from its competitors. Additional competition is also emerging from smartphone apps that provide nutrition ratings for food products and dietary advice, which also increases consumers’ capacity to police brands’ nutrition claims. In addition, certification at the supermarket level exerts supply chain pressure on manufacturers and their ingredient suppliers to improve the nutritional value of their products.
A recent study by the Institutes of Medicine (IOM) proposes a mandatory government FOP system for all packaged foods that displays calories per serving and rates overall healthfulness based on saturated and trans fats, sodium, and added sugars. Although a mandatory government scheme would certainly promote uniformity, there is reason to be wary of adopting this approach to regulating FOP nutrition labeling. First, allowing for experimentation and competition among private-sector groups is likely to advance knowledge in the areas of dietary guidance and food labeling more effectively than the imposition of a single, centralized government system. Disagreement among experts in industry and academia about the best approach to nutrition is significant and ongoing. The most effective role for government in this area is not to supplant private-sector experimentation and competition but rather to police them. Second, even many commentators who favor more government regulation in this area lament that administrative rule making has historically been subject to considerable industry influence and that agencies have lacked adequate enforcement resources.
These concerns about heavy-handed government regulation are reason at least to consider the alternative approach of developing a more reliable system of private nutrition labeling. Kosher certification offers a vision of what more reliable nutrition labeling might look like.
Timothy D. Lytton is the Albert and Angela Farone Distinguished Professor of Law at Albany Law School and author of Kosher: Private Regulation in the Age of Industrial Food, recently published by Harvard University Press. To read an interview with the author on his new book, click here.