Can a Consumer's Right to Know Survive the WTO?: The Case of Food Labeling

Author:Steve Keane
Position:J.D., Stanford Law School, 2006.

I Introduction - II Voluntary vs Mandatory Food Labels - A Circumscribing the Utility of Voluntary Labels - B The Power of Mandatory Labels - III Is the Consumer "Right to Know" a Sufficient Basis for Food Labeling in the United States? - A Legal Resistance to Voluntary Labels - 1 Consumer resistance- 2 Competitor resistance - B Legal Resistance to Mandatory Labels - 1 Resistance on... (see full summary)


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    Special thanks are due to Nancy Keane for her unending support and to Dick Morningstar for his guidance and enthusiasm.
I Introduction

In April 2004, the labeling of foods containing genetically modified organisms (GMOs) became mandatory in the European Union (EU). Despite a lack of convincing scientific evidence that consumption of GMOs posed any health risk, the labeling regulations were enacted because of uneasiness in the EU over novel foods. At their core, the regulations are based on a consumer "right to information" or "right to know," a notion with a strong legal and political foundation in the EU. Legal support for the regulations is found in the 1997 Amsterdam Treaty, which expressly promotes the right to consumer information as separate and distinct from health and safety interests.1 From a political standpoint, European food scares from the late 1990s have affected the public consciousness about food safety such that the demand for information about non-traditional foods cannot go unanswered without political ramifications.2

Although many non-governmental organizations (NGOs) and individual consumers around the world support a stand-alone consumer right to know,3 few governments outside Europe have openly endorsed Page 293 the concept as it relates to food labeling. In the United States, for example, where right to know legislation is common, the Genetically Engineered Food Right to Know Act4 has failed to gain any traction in Congress despite repeated introduction in both the House and Senate. Moreover, in 2000, a federal district court concluded that the Food and Drug Administration (FDA) has limited authority to mandate labeling when the sole justification is consumer demand.5 Were it not for the importance of international trade, there would be little need to resolve the conflicting treatment that the consumer right to know receives; each nation could decide what works best for its own people. However, nearly every domestic regulation is subject to analysis through the lens of the World Trade Organization (WTO), with its aversion to protectionist trade barriers. Thus, a nation does not have an unbridled right to regulate in the best interests of its citizens when those regulations conflict with WTO rules. This Article considers whether regulations based on a consumer's right to know would be permissible under WTO rules. I have chosen the issue of food labeling to contextualize the problem since government- mandated food labeling is typically high-profile, affects a large number of consumers, and is likely to be squarely addressed by a WTO panel in the near future.6

Part II of this Article provides some background information on the use of voluntary versus mandatory food labels, a distinction that turns out to be quite important when evaluating the right to know concept. Many commentators have argued that voluntary labels are preferable to mandatory labels when non-science rationales, such as a consumer's right to know, are involved. But, there are serious drawbacks to voluntary labels that dilute their effectiveness. Part III assesses the U.S. attitude toward the consumer right to know as it relates to food labeling. Although this Article ultimately attempts to answer the question of whether the consumer right to know, on its own, can justify a food Page 294 labeling regulation that substantially affects international trade, it is instructive to look first at the domestic situation in the United States, where both the right to know concept and food-labeling laws have an illustrious pedigree. Part IV evaluates the right to know concept under WTO agreements relevant to food labeling in order to assess whether the concept has any merit in the international trade regime.

II Voluntary vs. Mandatory Food Labels

Packaged food products are replete with labels. The most familiar types of labels include physical characteristics (e.g., volume or weight), nutrition information, ingredient lists, allergens, production methods (e.g., organic or dolphin-safe), safe handling methods, expiration dates, potential health benefits, and general descriptors (e.g., kosher or fat- free). Due to the vast amount of information food labels contain and the possibility of label misuse, most developed nations have highly specialized administrative agencies working full-time on food labeling issues. In the United States, the FDA is charged with "developing policy, regulations, guidance documents, and enforcement strategies governing all aspects of food labeling."7 Other federal agencies have supplemental jurisdiction over specific food labeling issues. For example, the Federal Trade Commission (FTC) monitors deceptive advertising practices on food labels8 and the United States Department of Agriculture (USDA) is in charge of organic food labeling.9 In the EU, Member States administer and enforce the food law directives and regulations adopted by the European Parliament.10 Page 295

Regulatory oversight of food labeling is clearly warranted. Reliance on inaccurate or incomplete labeling could lead to adverse health consequences, consumer confusion, and violations of religiously or ethically based dietary restrictions, not to mention taxing litigation.11Disagreement arises, however, over whether certain labels should be mandatory or voluntary.

A Circumscribing the Utility of Voluntary Labels

The difference between requiring certain information on a food label and merely allowing truthful and non-misleading information to appear on the label cannot be understated. Mandatory labels bind all manufacturers of a given product to provide standardized information about their product so that consumers can make essential choices. Mandatory labels usually appear where there is a significant risk that consumers will be harmed in the absence of the information provided. Voluntary labels, on the other hand, are typically utilized when a manufacturer wishes to distinguish his product from a competing product that consumers may perceive as inferior. The inferiority may be related either to a particular trait, such as ingredient quality, or to a method of production, such as the use of pesticides. Voluntary labels thus provide an important conduit to consumers because the information conveyed may not be available through other means.

However, voluntary labels are useful only to the extent that consumers can locate products carrying the label. A "GMO-free" can of tomatoes in a sea of unlabeled alternatives presents a consumer search cost problem that does not exist with mandatory labeling. Moreover, a consumer needs to understand the meaning of the voluntary label-both the literal meaning the manufacturer intends to convey and the meaning that is imputed to competing products. Clarifying the literal meaning requires regulation in order to standardize the definitions of certain terms. Many voluntary labels are, in fact, subject to strict regulation because the use of poorly defined terms poses a risk of false or misleading information. Labeling a food as "organic" in the United States, for example, requires compliance with the Organic Foods Production Act Page 296 of 199012 and depends on the percentage of organic ingredients used;13misuse of the organic label can result in a fine of up to $10,000.14 Even use of the word "fresh" has precisely defined legal requirements for many foods.15

Clarification of the implied meaning of a voluntary label is not as easily addressed, because it requires information external to the label. For example, if a manufacturer voluntarily labels his milk "antibiotic- free" but his product competes with five other products that are silent on the presence of antibiotics, the consumer could draw three alternative conclusions. First, she may infer that "antibiotic-free" labeling in milk is mandatory and, by omission, the five other products must contain antibiotics. This conclusion could be defeated by a regulation that requires a disclaimer on the voluntary label, explaining that the use of "antibiotic-free" is done voluntarily. However, the disclaimer places an additional burden on the voluntary labeler, decreasing his incentive to disseminate truthful information about his product.16 Second, the consumer may conclude that, even if the label is voluntary, the absence of the label on the other products means that they contain antibiotics. This conclusion would be incorrect if, for example, the voluntary labeling were prohibitively expensive or unattractive to manufacturers for some other reason.

The third inference the consumer might make is that the absence of the "antibiotic-free" label is not dispositive and that there is simply no way to make an educated determination without more information. This Page 297 is likely to be the most common result, and also...

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