Feb 5 2014, 3:48pm CST | by Forbes
Having begun a new year January 1st and now the year of the horse on the lunar calendar, China’s food consumers have been cooking for their celebrations and wondering whether their food is safe? Indeed, representatives from various agencies with responsibilities for food safety announced that they stepped up inspections of food facilities and markets as Chinese New Year festivities began.
China’s food safety record has become an international issue over the first decade of this century. The range of issues is vast, including anything from food contaminated by dangerous chemicals, to nutritionally substandard food, to relatively innocuous fake food. And, although the Chinese government is acutely aware of the problem, especially since the melamine-tainted milk incident in 2008, unsafe food continues to make headlines in China. What, then, is the likelihood of real change in 2014?
Considering what happened in 2013, here are three things to watch for in 2014.
A New (and hopefully improved) Food Safety Law
First, this year may see an amendment to China’s Food Safety Law, which is the centerpiece of a great deal of China’s food regulation. The Food Safety Law has been amended several times since its original enactment as an “experimental” “Food Hygiene Law” in 1982.
Now, after being completely revamped in 2009, the China Food and Drug Administration (CFDA) published a draft version of the latest amendment in late October 2013 for public comment. That draft indicates that food manufacturers and distributors can expect stronger regulation of their internal operations and supply chains, and that local governments in China can expect that the central government will be more closely monitoring the way they enforce the law. Pressure on companies and local governments to play more active, even aggressive, roles in solving the food safety problems in China has been mounting for several years now.
Under the latest draft, the penalties will be tougher. Punitive damages in consumer product lawsuits and the fines for violations could increase, and industry can expect that CFDA will be cooperating with prosecutorial agencies to bring about even more criminal cases for fake or substandard food. The number of these criminal prosecutions has been steadily rising since amendments to the food and drug crime provisions in China’s Criminal Code in 2011. During the past three years, over 2,000 people have been prosecuted for food safety-related crimes in China.
It could take more than a year for China’s congress to get around to enacting the revisions to the Food Safety Law. But, once that happens, CFDA and other agencies will likely be issuing a considerable number of new regulations. These changes may include new basic standards for food manufacturing and distribution, which the October draft specifically requires CFDA to enact. These types of changes could bring a rigor to China’s food regulatory system that has traditionally been associated with regulation of drugs and medical devices there.
Second, China’s Supreme People’s Court has made lawsuits by private plaintiffs over defective food easier in advance of the amendment of the Food Safety Law. That court issued a new “judicial interpretation” related to food and drug cases in December 2013, which takes effect in March of 2014. The interpretation instructs the lower courts on procedural and evidentiary issues in these cases. A number of the interpretation’s provisions will make it easier for plaintiffs injured by defective foods and drugs to bring suit. For example, among other changes, it is now clear that a plaintiff only need make an initial showing that he or she was injured by a food product, and after that, the burden shifts to the defendant manufacturer or retailer to prove that the food did not cause the injury. In addition, plaintiffs who buy food that is “clearly” substandard may still recover for their losses, and defendants will not so easily be able to claim that the injured party should not have assumed the risk of buying the food as a defense. In addition, plaintiffs will now be able to recover punitive damages for substandard food even if they are not physically injured.
While all of these changes will certainly remove some of the obstacles to food safety suits, it is not clear that large scale, game changing, and controversial class actions will be permitted to proceed. Past practice tells us that when the food safety issue reaches a certain scale, the government will set up a fund to compensate the injured, and the courts will not play such a big role after that. That is what happened with the scandal involving melamine-contaminated infant formula in 2008. It remains to be seen whether this new interpretation signals any change in attitude that will open the court house doors for those types of cases.
Continued globalization of Chinese industry
Last year also saw one of the most significant mergers in recent history between a Chinese and U.S. company, and both were food companies. The purchase of Smithfield Foods by Shuanghui Foods combines two of the largest pork producers in each country. The move was either encouraging or eyebrow raising, depending on who you ask. It was encouraging to some because the acquisition of Smithfield has the potential to introduce important quality-control measures to the Chinese market that could make the pork there safer. On the other hand, Congressional scrutiny of the deal raised concerns about food safety and national security, in particular, the long term implications of these acquisitions for food resource control and technology transfer. In the end, the merger was approved and moved forward, despite the concerns. China’s efforts to globalize its food industry have continued into the New Year, with China’s Bright Food Group, seeking to purchase the Western Australian Company, Mundella.
If these mergers continue, one of the natural questions is what effect they will have on the safety and quality of food produced in China. Will these mergers result in a vital exchange of information and practices that make food safer? Or will problems persist because of, for example, issues with raw ingredients and smaller companies along the supply chain?
As is often the case with China, it’s very difficult to predict, but there is much to watch for in 2014.
Source: Forbes Business
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