Whole Foods has come out with a new marketing program called “Responsibly Grown” — the only problem is that it is a really irresponsible thing to do.
The program consists of an Unrated, Good, Better, Best system — with the implication that produce deserving a non-existent “bad” rating must be the stuff sold at other retailers. Here is what they are doing:
Part of the problem is that the standards are not very transparent, with cryptic descriptions such as “water and energy conservation” qualifying growers for Better and Best standards.
Part of the problem is that no third-party is auditing any of this, so who even knows if the claims are true.
Then there is this issue of the special Whole Foods Prohibited Pesticides. Some of it is just odd. For example, the first prohibited pesticide is expressed this way:
Adherence to US EPA Registered Pesticides and Label Restrictions– For product sold to Whole Foods Market, all suppliers may only use pesticides that are registered for use by US EPA in a manner consistent with the US EPA-approved label, regardless of where the product is grown.
This is a grand statement, but “adherence to US EPA Registered Pesticides and Label Restrictions” is, in fact, the law. The California Department of Pesticide Regulation explains it simply:
“All food sold in the U.S. must meet the same safety standards.”
Beyond this kind of basic problem, this is an odd list because it treats individual pesticides as some kind of silver bullet killing sustainability. But that is not the way it works. Let’s agree, for the sake of argument, that the pesticides Whole Foods is banning are bad. But eliminating them doesn’t make the produce or the environment better. Perhaps to compensate for the loss of the single most effective pesticide, growers will have to use twice as much of a less effective pesticide. Is that better for the environment? Worse? What is the impact on worker health? None of these questions are easily answered; they require extensive case-by-case studies, yet Whole Foods is grabbing headlines by announcing bans.
They are certainly getting press… an AP story was headlined, Whole Foods to roll out ‘responsibly grown’ rankings for produce, but the market doesn’t seem to be oblivious to what might be behind this effort:
Whole Foods is trying to draw a sharper distinction between itself and its competitors, in part by making shoppers feel more empowered about their purchasing decisions. The grocery chain already has ranking systems for meat and seafood, which takes into account animal welfare and sustainability standards, respectively.
Whole Foods, based in Austin, Texas, has nevertheless seen its sales growth slow as traditional supermarket chains and big-box retailers have muscled in on the market for organic and natural products. To hold onto customers, executives have said they plan to more clearly state what makes Whole Foods stores different.
Emphasizing the unique characteristics of a store is a great idea, but in praising one’s own procurement standards, it is not right to imply that all the other produce in the world is not responsibly grown, especially when the evidence to support such a proposition is basically zero.
PMA’s membership renewal forms are in the mail. We had written a piece about PMA’s new dues structure titled, PMA Restructures Dues: New Plan Brings In More Revenue, Boosts Costs For Larger Firms, Breaks Longstanding Link Between Retail And Grower/Shipper Dues...Does PMA Need More Money?
We received a number of responses, mostly grumbling – who wants to pay more for anything? – and some from people who felt aggrieved because they wanted to protest by dropping membership, but couldn’t do so because it would raise the cost of their booths at Fresh Summit.
While we were out of the country, though, one company told us their plan. They were going to have their US subsidiary drop its membership. Since PMA had not increased the membership dues for non-US companies, the much larger foreign headquarters could join PMA, and its membership would include its US subsidiaries. By doing this, it would pay about a quarter of what it would pay if its US subsidiary was still a member.
Of course, it may just be a one-year sale. PMA has promised to unveil its new non-US dues structure for next year.
Karen Caplan, President and CEO of Frieda’s Inc. in Los Alamitos, California, maintains a blog, which we wrote about here when she first launched. Recently she wrote about employees, especially younger employees, and their use of social media, texting, the use of mobile phones, etc.
She called the piece, Why Texting in the Workplace is Here to Stay. In the piece, Karen recounted a public speaking engagement where she made some comments about the “younger generation” after the subject was raised in the Question & Answer period:
“How do you deal with all the different generations of workers in your business and how different they are?”
I especially like that question! Here at Frieda’s, we make a concerted effort to hire and retain all age levels — from the early 20s to older than 50s — because we like our team to be well-rounded so it mirrors our customer and supplier base.
I also shared my thoughts on Millennials (aka Gen Y) about their supposed lack of work ethics or inability to work hard. I am sick and tired of hearing that because it simply is not true. Millennials just have a different perspective from us Baby Boomers.
Instead of growing up expecting to have just one or two careers in their lifetimes, Millennials now know they will have multiple career changes throughout their lives — maybe 10 or more careers — some of which don’t even exist yet! They want to be challenged and valued and to be upwardly mobile in a short time.
Then Karen answered another question about texting:
“What do you do about all the instant messaging and texting in the workplace? How can you control it?”
That question was asked by a fellow Baby Boomer or possibly a Gen Xer (also known as the “skeptic generation”). I had to confide to the audience that it had been an adjustment for me to walk through the office and see people looking at Facebook or texting while at their desks “working.”
But I came to the conclusion years ago — with some coaching from my HR Manager and many seminars — that instead of worrying about controlling the social media activity and texting, I should ask myself one question: “Did they make their numbers?” or “Are they getting their work done?”
You see, the paradigm has shifted in offices today. And we can thank the multitasking Millennial generation that grew up being connected 24/7 to their friends and family.
We Baby Boomer bosses cannot judge others solely by how we were raised and trained. We have to condition ourselves that in order to attract and retain the best employees and team members, we need to be flexible and understand what motivates them. And we need to provide coaching and mentoring.
Although many of us grew up separating “business from personal” (e.g., limiting socializing with the folks you work with), for Millennials, some of their closest friends are those they work with. If we want to keep them, we’re going to have to be their friends too!
The last point gave the Pundit a little chuckle. We’ve known Karen Caplan for 30 years, been honored to be a guest in her home, and if she ever wanted to separate “business from personal,” this is the first time we are hearing about it! She is quite possibly the most socially connected person in the whole industry, a kind of walking produce industry Facebook, long before Mark Zuckerberg was a sparkle in his mother’s eye.
And it has worked out pretty well for her, which explains why efforts to deny use of social tools to appropriate staff are generally counterproductive. A sales executive who is checking out Facebook or Twitter is not necessarily wasting time — it is a way of gathering intelligence on who is where and what they are doing.
In fact, rather than banning social media, it should be incorporated into training — how to use it productively. After all, in the old days we used to have sales training courses and told people how to get past “gatekeepers” by sending flowers to secretaries on their birthday, so now the question is what to do when LinkedIn sends a note that someone has a work anniversary.
Some people try to maintain a separation between work and personal — they maintain a LinkedIn account for work and a Facebook account for friends — but this strikes me as counterproductive and unsustainable. You work your whole life to build a great relationship with someone, connect on LinkedIn and then that contact sends you a Facebook friend request — are you going to ignore it? Write them a note that you only allow “real” friends to be friends on Facebook? It just doesn’t work. Besides one of the lessons of social media — certainly a lesson to teach one’s children — is never post anything online you wouldn’t want your next employer to know. If one is going to follow that sensible rule, then there is no need to separate the personal and professional on line anyway.
Even among non-sales executives, these tools serve unexpected purposes. One retail produce executive told us he was upset as he saw one of his clerks stop stocking the shelves and start texting from the produce department floor. When the executive chastised the clerk, the young man showed him his phone; he had been texting his co-worker who was already in back loading a cart of produce to bring to the floor to include an item they hadn’t realized was running low. In other words, he was using technology to be more productive, not less. A generation ago, the same guy would have had to leave the floor, scream across the back room, etc. Companies could provide proprietary tools to accomplish the same tasks, but that is a big expense.
The problem, of course, is that though used well, these tools can enhance business operations, they also can allow disinterested employees to goof off. The cell phone itself is a clear example. In the old days, everything went through the receptionist and a loyal receptionist would whisper to the boss that “Joe’s friends call him 20 times a day.” Now anyone can call or text directly and nobody can know for sure what is going on.
And Karen’s analysis of the upcoming generation — that they “now know they will have multiple career changes throughout their lives — maybe 10 or more careers” — points to a big problem. Many behaviors that produce value do so after significant investments of time and effort. Karen’s social network in produce is a perfect example. It produces value both personally and professionally for Karen.
Yet, if one goes into work with the notion that you probably won’t be doing this for very long, it reduces your willingness and incentive to invest in the hard things that will pay off over long periods of time. It also reduces the willingness and incentive of the business to invest in the employee.
In other words, this perception of the future leads to an emphasis on quick fixes and short term pay-offs. This is a great societal problem. Public corporations are often attacked for being too focused on quarterly profit. Think of great societal commitments such as John F. Kennedy’s commitment of America to a decade-long project to put a man on the moon, or Dwight Eisenhower’s multi-decade long effort to build the Interstate Highway System. Is it likely we would undertake such commitments today? It is somewhat amazing to think that after World War II, we made commitments so that we still have troops in Japan and Germany after almost 70 years! Compare that with our rush to get our troops out of Afghanistan and Iraq.
For a business, having employees with a short term focus — as Karen explained, “They want to be challenged and valued, and to be upwardly mobile in a short time.” — is also problematic. Wanting to be valued is understandable but it would be better, for the employees and their employers, if they wanted to be valuable.
Even the notion of wanting to be challenged is kind of passive. The world is filled with challenges, for those who choose to seize them. The Pundit started work for the Pundit Poppa and was selling produce into export markets. Wanting to sell more, we started coming in on Saturdays, going through the old International Fruit World publications, identifying countries we didn’t sell to and telexing each company a personal note about our capabilities and services and offering to help.
Nobody ever asked us to do that, and nobody paid us extra to do that, but when the first order came in and the Pundit Poppa asked how we got that — he said, “If you are willing to work Saturdays, we are going to be very successful.” And so we were.
The whole notion of looking to be “upwardly mobile in a short time” is probably not the optimal way to think about things. It is college application season and to readers of this space, it probably won’t come as a surprise that we are asked to help the children of friends and family, both in and out of the produce industry, by helping them craft their application essays.
Of course, the best essays come about because the students have clear thinking, but it is very common for the students to have goals, such as “I want to get a joint MBA/JD,” but for the same students to blubber incomprehensibly when asked why he or she would have that particular goal.
The disconnect is because what the students want is to be successful and they choose these highly credentialed paths because they think that will make them successful. In fact, the key part of writing the essay is coming to understand what the young applicants really, substantively, hope to accomplish. What values they hope to embody in the way they live.
In the course of these discussions, we often actually change the school they are applying to and the program they wish to pursue.
Ambition is a powerful motivator, and so a yearning to be upwardly mobile in a short time is not a bad thing, but it would be more usefully expressed as a search for something substantive — with confidence that such competency will lead to upward mobility. So you really want a young buyer who says I want to master everything there is to know about procuring specialty produce. I want to be the best buyer of specialty produce on the planet.
After all, this is actually something the employee can work on. Sitting and waiting for the world to make oneself “upwardly mobile” is likely to be frustrating.
Of course, such “short-term-itis” is not only a business problem for the young. In many of the larger corporations in the industry, compensation is heavily built upon profit-and-loss numbers. But such numbers are a very imperfect photograph of business success. Perhaps there is a new competitor in the field and what you should do is crush him, but dropping prices in that manner would mean you don’t make your number this year and that means no bonus or your stock options don’t vest or any number of other consequences. But the decision to not act may actually reduce the total profit over the next five years.
So the challenge in business when dealing with employees, young or old, is how to structure the situation so that the employees do the right thing to obtain optimal business success.
Lots of companies ban things such as cell phones, or they give their employees proprietary communication devices to use during work hours that strictly work within the company. This may make sense in certain circumstances — say a cashier in a retail store or a waiter in a restaurant where the employee is supposed to be 100% “on” for the customer at all times. It may make sense in a processing plant or warehouse where the worker is paid strictly by the hour and is expected to be 100% committed and where the worker has no flexibility to work late or come in early.
In today’s offices, though, shutting people off from the intelligence that flows through social media just doesn’t make sense. It is also rather insulting. To tell staff that you expect them to act autonomously and creatively to, as Karen says “ make their numbers” or “get their work done,” and that you don’t trust their looking at LinkedIn won’t build goodwill.
But there are risks to these things. LinkedIn is a great example. We’ve found there to be a very high correlation between increased LinkedIn activity and people leaving their jobs. In the old days, there were actual court cases over possession of the Rolodex and, in general, that was company property and the departing employee was obligated to leave it behind. Sure people could secretly copy things, but it was generally seen as theft of corporate information.
Nowadays, LinkedIn becomes a legal way for employees to leave with their entire “Rolodex” intact.
Karen’s point is unarguable, that employers have to understand and adapt to generational expectations and the ability to get a text from a friend or a call from a relative in the middle of the work day may be part of that. But the real challenge for the employer is to inform and motivate the employees in such a way that they voluntarily will cut off non-productive behaviors.
Few of us want to block employees from dealing with a health emergency or a fire burning their house down, but day to day, the challenge is to motivate employees so they will care so deeply about achieving success that they won’t want to be distracted while they are trying to work.
Maria Cavit, Secretary General, World Union of Wholesale Markets (WUMM), based at The Hague in the Netherlands, recently sent along a note:
The Food and Agriculture Organization of the United Nations (FAO) and the World Union of Wholesale Markets (WUWM) have agreed to collaborate to identify and disseminate interesting good practices and lessons learnt in any country on improvements in food distribution infrastructure (assembly, wholesale, retail including storage) of any size in urban and periurban areas.
WUWM and FAO are interested in learning about a wide range of good practices and lessons learnt related to improvements in wholesale and retail markets as well as food storage facilities: new infrastructure, relocations, as well as approaches to solve operational and logistic constraints, integration of small farmers, facilitated access by consumers, improved compliance with rules and regulations, provision of better services, adoption of new technology, etc.
Lessons learnt can also refer to interventions or practices that may have been less successful than originally intended. Such experiences can often be more instructive than successful ones.
It sounded like a most interesting project, so we asked Pundit Investigator and Special Projects Editor Mira Slott to find out more, and Maria suggested we speak with the Chairman of the organization.
World Union of
Wholesale Markets (WUWM)
We were intrigued to learn more about the collaboration between the Food and Agriculture Organization of the United Nations (FAO) and the World Union of Wholesale Markets (WUWM) to identify and disseminate good practices and lessons learned in developing food market infrastructure to improve food distribution at local, national and international levels.
Q: Issues you’re addressing sound challenging, complex and far-reaching. Was there a particular trigger that pushed the project forward?
A: The initial idea was born in the FAO, conscious of the importance of having efficient fresh food markets that confront the challenge to bring safe, sanitary, healthy and widely accessible food to both local, national and international markets in an efficient and sustainable manner.
For a project like this, FAO has approached WUWM with which it has had a long-lasting relationship. WUWM has a market membership spanning five continents, but we are also a non-profit association that can take part in this project without the influence of economic interest. One of the main aims of WUWM is to ensure an exchange of information and experience exists in order to improve the management of food wholesale and retail markets everywhere.
Q: How will the collaboration work exactly? Is this effort unique in breadth and scope, and in the context of other projects undertaken thus far?
A: This is a unique collaborative opportunity, and we hope to carry out more of this type of joint initiative in the future, especially with some of the aims of the FAO and the WUWM being so very similar. WUWM is open to collaboration with all multilateral and international institutions sharing this common interest. Indeed, this project also involves the Sustainable Society Network (Imperial College London).
The modus operandi is very simple: the project partners will help to identify the best practices and lessons learnt by market management the world over. Those submissions of best practice will be reviewed by an editorial board, and then each will contribute towards the presentation and eventual dissemination of the results, aimed to be a publication of good value to markets the world over.
Q:What and where are the biggest areas of concern you are bent on tackling? WUWM has raised a broad range of complex issues in wholesale and retail markets as well as food storage facilities: new infrastructure, relocations, approaches to solve operational and logistic constraints, integration of small farmers, facilitated access by consumers, improved compliance with rules and regulations, provision of better services, adoption of new technology, etc.
A: You mention a number of aspects that are very important to turn traditional wholesale markets into real logistical food centers. The companies that operate in one way or another on such food centers (wholesalers, retailers, export-import companies, catering, restaurants suppliers, etc.) have all the services and facilities they need to be more efficient and competitive. This has already been achieved by many wholesale markets in, for example, Europe and North America -- what we would call the "third-generation wholesale markets". In other parts of the world, especially Latin America and Asia, food markets are taking very significant steps forward.
It is important that the management of wholesale markets, as with those of any company (either private or state-owned), know exactly where they want to be, having identified their goals for the mid- and long-term. Market management that keeps clear its aims needs to formulate a strategic plan in a systematic, organized and prioritized way, and many of these good practices and learnt lessons will support those efforts.
Q: Can you provide examples of pressing issues that you believe need to be urgently addressed? Do you have any notable stories to illustrate the value of pursuing this project?
A: There is a series of key points that should be the priority of every market manager: food safety and hygiene; the transparency of the market in the sense of generating competition among the wholesale operators themselves - and also between the traditional retail sector and the big chains of retail distribution (referring always to fresh product).
Another aspect is to guarantee internal safety inside the market. But this aspect, while being important, is not on its own sufficient. The market must be organized in an efficient way, so that there can be a reduction in operational costs as well as a minimization in food loss and waste. This latter part is one of the great worries of the present time (an FAO report published in 2011 estimated global food loss and waste as being one-third of the food produced for human consumption in mass, or one-quarter as measured in calories). Food wholesale and retail markets can effectively contribute to reducing this amount.
On the other hand, wholesale market management must be conscious that a large number of small and medium enterprises are born (and grow-up) in their premises and facilities. Studies show how market development can be a good tool for generating employment of youth as well as ethnic minorities. Food markets are "incubators" of companies and, because of that, all these good practices and learnt lessons may also be seen to contribute to facilitating the operative and ongoing development of these companies.
Q: Areyou targeting particular countries/areas or designating more efforts in certain locations due to need?
A: I believe that networking and benchmarking will generate interesting ideas for food markets whatever their socio-economic environment or level of development. We could certainly say that those food markets in the worst of conditions, and with major problems, would be the ones to profit most from an initiative like this. Nevertheless, for more than 20 years, I have visited many food markets worldwide, and I can say that in every visit to a wholesale or retail market, I have learnt something valuable or new.
Q: Could you share some of those insights?
A: It is clear that the problems facing food markets may vary according to the level of development of the country, their physical location, as well as the amount and nature of the food products they handle daily. For example, in some wholesale markets in Central America, child labor can be a real problem, while in some European markets the problem could be the quality and cost of the telecommunications network. As WUWM has many members from varying socio-economic environments, I consider our participation in this project to be both vital and beneficial for the project, providing access to information from an interesting, diverse and varied membership.
Q: With so many variables involved, such as economic and political obstacles, how complicated will it be to instigate these changes?
A: The exchange of information, ongoing communication, and ensuring an eagerness exists to take advantage of good ideas and experiences of third parties is a natural way of introducing good practice and learnt lessons. In WUWM, we do not have the power to impose, but we do have an opportunity to make recommendations. We would like that both the market authorities and its management (as well as local planners) have the opportunity to benefit from the experiences, solutions and ideas undertaken in other markets of the world.
There is a need to strengthen links between market infrastructure and territorial planning at urban, provincial and metropolitan levels.
Q: How challenging is it to get managers of wholesale or retail markets to provide meaningful information in the WUWM-FAO Questionnaire? Are there privacy issues, for instance? How many people actually participate, and is that participation concentrated in particular countries? (How does the selection of grants for papers work, etc.)
A: Of course, the challenge is to obtain as many answers as possible, and with most illustrative and explanatory content possible. We all know that statistically a questionnaire is never answered by 100% of addressees. Because of that, we want to transmit to food market managers the importance of this initiative, which we promoted at our conference recently held in London, UK (www.wuwmconference.org). We have mailed both members as well as non-member markets. The FAO has also disseminated the questionnaire to market contacts in its network. An editorial board comprising the project partners will ultimately determine those best practices worthy of further attention.
Q: How long do you anticipate the project to take? Are there different stages planned?
A: We are at the initial phase of the project, having recently launched it, and we took advantage of the opportunity at the WUWM Conference in London from 24-26 September to promote it further. Our priority is to do it right and take the necessary time. We hope it may be possible to present the results in our May 2015 WUWM Conference being held in Budapest (Hungary).
Q: Will you be conducting separate cost/benefit analyses based on the information collected?
A: It is a possibility that we must contemplate, provided that the nature of the gathered information allows us to do so.
Q: Will you be incorporating the WUWM concept of “Think Global & Act Local” with regional working groups to disseminate the information and help execute solutions?.
A: It is true that the food industry is globalized and that the international trade of fresh fruits and vegetables is very important. But it is also true that traditional wholesale and retail markets are very linked to the local or national food production, to the growers markets, and to the culture and local customs.
Due to the diversity of social and economic contexts, the WUWM has several regional working groups (Europe, Latin America, Asia-Pacific) so that the markets in these zones of the world may work more intensively on issues of common concern or interest. This allows for the implementation of appropriate ideas or solutions and, yes, "to act locally".
Q: How will this information be compiled and disseminated to maximize its usefulness through varied supply chains? Could you discuss your organization’s structure in this regard? Could you provide perspective on the number of wholesale markets across the globe? How interconnected are they, and how does WUWM help bring them together?
A: A comprehensive publication will be the final product of this project. We are at present treating these questions of procedure together with the FAO. The network contacts of WUWM are very wide and not only consist of our market membership, but also other markets, institutions, experts, journalists, professors and professionals with whom we keep contact.
Q: How can U.S. produce industry executives be most helpful in bringing your mission to fruition? In addition to participating in the Questionnaire, what other ways can produce industry executives get involved?
A: Traders and food industry executives are the real clients of food logistic and commercial complexes. Because of that, it is vital that the owners and management of these food centers understand well their clients -- their needs, objectives and achievements. In this way, market managers are "client-orientated," to the mutual benefit of both the management of the market, as well as the food industry/trade.
There was a call for papers launched by FAO, which opens the possibility also to researchers and academics to propose analytical articles on relevant aspects of food market infrastructure developments.
See "call for papers."
Our sense is that rising urban land values are putting markets around the world under pressure. This is because the cost of building a market or of not selling a market is obvious and quantifiable, whereas the benefits are difficult to quantify.
On the one hand, wholesale markets are the distribution centers for independent retailers and restaurants in major cities. These are the institutions that fill cities with life and interest and serve as portals for countless immigrants to begin a journey upward in society.
On the other hand, these markets are what make possible production of most fruits and vegetables. Supermarkets or multiples are a much-prized market, but they only buy what they want – certain sizes, certain grades, certain varieties. The wholesale market merchant is distinct as he sees himself as the agent for the producer and thus undertakes to help the producer sell what he needs to sell, the unusual variety, the off size, the imperfect grade. All over the world, the ability and willingness of market traders to help growers in this way provide the crucial margin that keeps growers profitable.
This project has the potential to help markets thrive, and anything that does that is good not just for market traders but for cities needing life and rural areas needing customers. We wish the WUWM and the FAO the very greatest of success in their collaboration.
When the Salmonella St. Paul crisis struck, we were among the earliest and most outspoken on saying that the FDA and CDC messed up.
Some of the tomato growers that took huge losses as a result of the government’s actions sued to recover damages, promulgating the idea that the government’s actions constitute a “Taking” of property in contravention of the constitutional prohibition.
The Fifth Amendment of the Constitution states in relevant part: “…nor shall private property be taken for public use, without just compensation.”
The question at hand was whether the government’s pronouncements urging people not to eat, and stores not to sell, tomatoes constitute such a taking.
The United States Court of Federal Claims rejected the tomato farmer’s argument and the comeuppance, as Business Week headlined the story: Rotten Tomatoes: Farmers Pay the Price for a False Food-Safety Warning:
Graves Williams, a farmer in Quincy, Fla., was just a few days into a six-week tomato harvest in June 2008, when the U.S. Food and Drug Administration issued warnings linking tomatoes to a salmonella outbreak in New Mexico and Texas. Americans stopped buying tomatoes. Williams let about 80 percent of his crop rot in the fields that summer. Other farmers couldn’t sell their tomatoes either.
The loss, it turns out, was for nothing: Serrano and jalapeño peppers were the real culprit. But that doesn’t mean the federal government owes tomato growers like Williams anything for their ruined harvest.
Williams joined a group of growers in a lawsuit against the U.S. government, and earlier this month a judge dismissed their complaint. While the FDA issued warnings about tomatoes, the judge ruled that regulators did not prohibit tomato sales and therefore did not “take their property.” The growers’ attorney, Stephen Turner, says he will appeal the decision.
We wish him luck but we predicted this outcome. We interviewed Richard Epstein, then the James Parker Hall Distinguished Service Professor of Law at the University of Chicago and now the Laurence A. Tisch Professor of Law at New York University Law School to discuss the matter. His book, Takings: Private Property and the Power of Eminent Domain, is the single best thing written on this subject .
As it turned out, the judge’s decision didn’t even get to issues of sovereign immunity. It just said that because the government never banned tomato sales, there was no actual “taking” — but Professor Epstein’s point was that even if there was a taking, it would be difficult to adjudicate and collect, due to sovereign immunity.
We titled our piece, With FDA/CDC Protected By Sovereign Immunity, Compensation For losses Looks Bleak Says Professor Epstein, and thought it would be timely to rerun below:
With FDA/CDC Protected By Sovereign Immunity, Compensation For Losses Looks Bleak Says Professor Richard Epstein
Back in the spinach crisis of 2006, many spoke of the importance of efforts to get compensation for innocent spinach farmers who had been crushed by the FDA’s action. Industry leaders emphasized how important it was to establish the principle that those producers who do the right thing should not be penalized, that penalties should be reserved only for those who have done something wrong.
These pleas, for the most part, fell on deaf ears.
Now, many are looking for paths that might get compensation for tomato and other farmers damaged by the broad sweep of FDA’s current actions.
We confess that we have seen little reason to be optimistic about any of these efforts. Yes, via legislation anything can be done, but it is hard to get the various groups to appropriate funds for one particular group. And the judicial approach has struck us as almost hopeless. This is because there is a legal doctrine known as Sovereign Immunity, which basically means that neither the state nor people acting as agents of the state can be sued for acts within the scope of their responsibility.
We say the approach was “almost hopeless” because 23 years ago, a book was published called, Takings: Private Property and the Power of Eminent Domain, which began a renaissance of interest in the “takings” clause of the Fifth Amendment to the United States Constitution.
That clause holds as follows:
“… nor shall private property be taken for public use, without just compensation.”
We wondered if we could make the following argument: In order to obtain a public purpose — in this case public health — the FDA de facto confiscated the property of innocent individuals by depriving them of a market. Could we make an argument before the Supreme Court that this constituted a “taking” of private property for a public use and thus required compensation?
We turned to the author of that book, a man not only brilliant, but with the exceedingly rare trait to not be influenced by the intellectual fashion of the times.
We asked Pundit Investigator and Special Projects Editor Mira Slott to speak with Professor Richard A. Epstein:
James Parker Hall
Distinguished Service Professor of Law
University of Chicago
Q: We are intrigued by your body of work and look forward to receiving your legal analysis and abstract thinking on FDA’s outbreak investigations and produce company restitution.
For example, would constitutional issues in your book, Takings: Private Property and the Power of Eminent Domain, apply to tomato growers who lost their entire crops, or by default couldn’t plant or harvest due to FDA’s consumer warning not to eat tomatoes, and the uncertainty of how long the warning would remain? Are there applicable cases of government compensation based on government actions taken to protect public health and safety, etc.?
A: I am happy to talk, but the information is all grim under the current legal system. Takings was a well known book not because it represented the law but because it attacked it. But here is the bottom line: When the CBS show dumped on Alar, the case for defamation against a private party was summarily thrown out. Government defendants are always in a stronger position, with absolute immunity from suit for all decisions done in the exercise of their discretion. The FDA and its officers get total protection against any and all losses, as far as I can see.
There are small hopes, such as “all clear” calls when the information turns favorable, which help mitigate losses. But once its wheels grind, it has the choice on having wide or narrow bans on any product or product group. There are no examples of restitution for these kinds of decisions. It took over 40 years to get some pittance in compensation for the Japanese interned during World War II, and that took legislation. I don’t like these rules very much, but they are unshakable.
Q: You describe bleak legal prospects for produce company restitution. Alas, sovereign immunity sounds very strong. Still, I know it would be incredibly valuable for our readers to hear your out-of-the-box thoughts, both legal and abstract, on several scenarios.
A: One of the things everyone has to understand is the interactions between regular business and government have multiple dimensions… drive businesses into lamp posts, oversee huge portions of the economy…
One of the largest organizations is FDA — your industry is interested in the food side, but the drug side is just as big and at least as controversial. One will see a lot of uncertainty and confusion. The central problem one has to face is that government itself gets sovereign immunity, and officials get their immunity for actions in the ordinary course of duties.
The essential line one tends to see drawn is this: with any action, be it legislative or administrative oversight, if it is not directed at a particular person or involving culpable malice, the government or government official will use the sovereign immunity defense. These have not narrowed but have grown in the last 20 years. With respect to physical accidents, any effort to try and use a legal remedy produces a breakdown in the inspection process and has failed, and food will be no different.
Q: Could you comment on the government settlement with the guy who was “a person of interest” in the anthrax situation — If the rule is ironclad, why did they give him money? And why wasn’t his lawsuit thrown out?
A: The reason why the anthrax case came out differently is because it combined leak and defamation of a particular individual — the government called him a criminal with little reason to believe it. The courts, to break the hold on sovereign immunity as being absolute, will find cases like that as targets of opportunity.
Q: Our interview with Dr. Michael Osterholm in our June 24 issue provides a blunt critique of FDA and CDC’s seriously flawed Salmonella Saintpaul outbreak investigation, resulting in the decimation of many innocent parties.
A: As disastrous and misguided as I suspect it was, it would be odd for the Saintpaul investigation to get the same status. Massive incompetence wouldn’t be a matter of defamation.
Q: The FDA’s Saintpaul outbreak investigation has already resulted in devastating losses for growers, packers, distributors and other companies down the supply chain. Florida tomato growers, among others, are intent on receiving government restitution for losses they’ve incurred, estimated at upwards of $100 million. Companies also project future sales declines from lingering lack of consumer confidence in produce safety. Are you saying their prospects are futile?
A: Courts don’t want to investigate those cases that involve thousands of decisions — determining what products were involved, whom to inspect first, how much to inspect, what public announcements and warnings, what seizures of individual goods you make — it’s very, very hard and courts are reluctant to enter into a case when they can’t see a clear goal post and limiting principles.
I’ve grappled with this for 20 years. Absolute immunity shields the worst kind of people. Error costs of any rule are extremely high. It just goes with the territory. That’s what’s involved. It’s a stark reality — not a recent development, but more important inspections have increased from security issues to food safety.
Q: Putting aside for a moment the current law, what legal rules could be established to deal with this kind of issue in the future? On the one hand, there is a public policy interest in not having administrators paralyzed by fear of lawsuits. On the other hand, if businesses can be destroyed with no consequence, we will have a lot of businesses destroyed.
A: The usual question, what can we do, and the realistic answer is to reform day-to-day operations, weaseling out the problems in the system. There is the question of voluntary compensation programs where Congress says, ‘here is x sum of dollars’; people are frightened to death of these schemes, myself included.
A: You could have a tomato farmer who misplanted tomato crops and was going to lose crops anyhow. Another said they plowed over crops when they never planted crops. Restitution programs are ripe for fraud because the government can’t superintend. How many people have farms? You can’t inspect them all and you can’t scrutinize crops before and after. It never quits. The question is can you sell private insurance? It’s very difficult to get anyone to write it. They face fraud risk and complementary risk.
Q: What do you mean by complementary risk?
A: If the government has a national inspection, it becomes a common mode failure. If it triggers one, it triggers all. That’s what happens. People realize how difficult it is to handle. It doesn’t get easier, it gets harder. When you insure risk, you want random acts.
Q: After many innocent spinach growers were bankrupted, and now tomato growers and jalapeno farmers unrelated to any outbreak facing the same fate, it is becoming difficult to attract investment. Could you speculate on what law Congress could pass — not so much to compensate the spinach, tomato or pepper farmers, but to establish a new system to prevent future harm?
A: How do you attract investment? The strategy is difficult to reconcile with small geographically isolated farms. It exposes them to all-or-nothing peril. Diversification is the way to deal with risk. Since you’re never sure if the crop business is good or bad in a particular commodity, invest in a diversified company, with 20 different farms in 20 locations, growing 20 different crops. Farmers can’t diversify like that, corporate shareholders can. It’s a calculated strategy; it doesn’t minimize risk but minimizes its consequences. As far as sovereign risk, I’ve never heard a persuasive account of what to do but diversify.
Q: As far as the current situation goes, what would the argument be if you were before the Supreme Court? Could a spinach grower in New Jersey argue that in banning his product, the government was de facto “taking it” for public use or purpose” to avoid any possible public health threat without paying him compensation?
A: As to your question of government taking property, this gets into an extremely complicated area. You’re combining two tracks. You have to keep them separate. Track one is taking property for public use. Say a government decided on the process of inspecting tomatoes. It needs a warehouse in the tomato belt and has no time to build one, so the government takes a farmer’s facility. The government has to pay rental and the amount of money to get premises back in the position it was in before the government took the lease.
Assume tomatoes are all up there, and the government doesn’t know if they are healthy or contaminated. The general rule is these are police power regulations, and the exercise of the police power never requires compensation. The theory is you have crops to sell into commerce; if the new crops are dangerous, the farmer turns them under. That’s the more simplistic scenario.
Q: What if the tomatoes weren’t even being produced during the time of the outbreak?
A: Suppose you don’t know the tomatoes are dangerous, but just the announcement and they get plowed under when those tomatoes were marketable. The answer from the Supreme Court is no compensation.
The problem you’re raising of the tomato farmer not producing at the time of the outbreak, when the FDA is looking at all these tomatoes: The government might say there could be some form of transfer contamination. No compensation. In an effort to protect government from being too cowardly, you make it too reckless. There is no way out. You can’t find a judge who would deny public health.
Q: The FDA justifies anything it does on grounds of “public health.” What is the constitutional standing of such a claim? Has it been established through case law and legislation that a specific person known to be contagious can be put under quarantine? If this is the case and we learn that one person had TB, could the government order all people with similar traits to go into quarantine for six months?
A: Is the government allowed to quarantine? You betcha. Could the government order all similar people quarantined? That’s an extremely hard question. With destruction of property, the government has more sway; it is easier killing tomatoes than locking people up. What makes it so complicated is that generally the law won’t allow people locked up when there’s a way to see if they were infected. The disease may be in the latent stage, which testing can’t detect, and then they could be contained.
There’s a famous Jew Ho case versus the City of San Francisco. The city wanted to quarantine everyone in Chinatown. The Chinese couldn’t leave but any white traders could enter. It was struck down because it was a phony quarantine. If you have a legitimate bona fide one, you can hold them, not more than six months I believe… there are some restrictions.
Q: In Florida, the state sought to control citrus canker and ordered all citrus trees within some radius of any infected tree destroyed. In the end, judges ruled it unconstitutional, I believe because the state had to seek out an individual warrant for each tree it sought to destroy. Could you help clarify this case?
I believe later the judges ruled that the program’s “compensation,” a gift certificate for a tree from Wal-Mart, was not sufficient.
A: In the citrus canker case, this was unquestionably OK to destroy the trees. Canker is rapidly contagious. You say “infected.” Infected and contagious are completely different words. If AIDS was contagious, all mankind would be dead. The pressure to put people in confinement would have been enormous. Infections go slower.
I haven’t read the case, but what’s going on is that the procedural hurdles have to be satisfied. We think a tree is contaminated, so we take all trees from a certain distance away. This appears to be a search warrant case from 2002 and there were some procedural defects in how the process was handled on the edges.
Q: The lawyers we interviewed in Miami claimed that FDA was utilizing “Import Alerts” in an essentially lawless way to avoid the restrictions Congress has legislated. Similarly, we are not aware of any statue that calls on FDA to issue recommendations not to eat things. It has recall authority and other authorities, but aren’t those restricted and subject to judicial review?
These actions are arguably not within the scope of authority Congress has given to FDA. Doesn’t that make a difference?
A: Import alerts. This is very serious stuff. It’s a form of defamation again if it’s false. It’s impossible to figure out how to cut back.
The standard rules on liability are either wildly restrictive or wildly generous. I don’t think where we are in the equilibrium there will be any major changes to the system.
Produce companies have to work for better administration on the ground. Maybe they are willing to contribute to a fund essentially to provide better research into epidemiology — self-help stuff. It doesn’t help that the nature of produce makes it difficult to control bacteria.
What’s happening is a tragedy for the produce industry. I think that these issues are interesting enough for further academic work. I would like to send them on to our Law Review so that they could think of possible topics for student notes.
We certainly gave Professor Epstein full permission to share the industry dilemma with his students at the University of Chicago as it just means some of the brightest and most rigorously educated law students will be advancing the thinking on these important topics.
Although Professor Epstein is not particularly optimistic about the chances for the produce industry to win compensation judicially — no real surprise there — he opens the door a bit to individual companies that have been defamed by a false Import Alert.
Our extensive analysis of the Honduran cantaloupe situation has pointed to a great injustice. Perhaps Agropecuaria Montelibano’s attorney ought to consider bringing Richard Epstein in as Special Counsel?
With the following three pieces, we define the weaknesses in the legal and scientific environment in which the CDC and FDA are operating.
Fix Suggested For FDA’s Vigilante System Of Banning Product
Through Import Alerts
Dr. Michael Osterholm, Esteemed Authority On Public Health, Speaks Frankly About The FDA, The CDC And The Incompetent Management of the Salmonella Saintpaul Tomato Outbreak Investigation
With FDA/CDC Protected By Sovereign Immunity, Compensation For Losses Looks Bleak Says Professor Richard Epstein
Although certainly much can be done by discussion with FDA and CDC, in the absence of reform in this basic environment, real progress seems likely to remain elusive.
Many thanks to professor Richard A. Epstein for taking the time to share his thoughts with the industry.
There is quite an extraordinary new food hall that is open in Rotterdam. We would say it is a must see for anyone in the produce and the broader food business:
Imagae credits: Ossip van Duivenbode
Imagae credits: Dijkstra
Imagae credits: Ossip van Duivenbode
Imagae credits: Daria Scagliola and Stinjn Brakkee
Imagae credits: Daria Scagliola and Stijn Brakkee
Imagae credits: Daria Scagliola and Stijn Brakkee
Imagae credits: Daria Scagliola and Stijn Brakkee
Imagae credits: Unknown
Imagae credits: Daria Scagliola and Stijn Brakkee
Imagae credits: Daria Scagliola and Stijn Brakkee
Imagae credits: Tsvisuals
Imagae credits: Markthalrotterdam
Imagae credits: Tsvisuals
Imagae credits: Osip van Duivenbode
Check out the website here.
The end result of the referendum on Scottish independence was reassuring to the trade as it had no desire to deal with another tax system, etc. Although, theoretically, had Scotland voted for independence and joined the EU, there would still be a single market – whether in fact Scotland could join the EU was not certain. Many EU countries have regions that would like to break away – the Catalan region of Spain, for example – and so these countries could have blocked Scotland’s EU membership to remind their own citizens of the economic risks of independence.
From an American perspective, the whole thing was both infuriating and shocking. Infuriating because there was no indication an independent Scotland was preparing to spend resources to defend itself -- in fact it had already been announced that an independent Scotland would demand the removal of the Trident Submarine Base from its territory. So it appeared that an independent Scotland would look to freeload on the American nuclear umbrella.
It was shocking because when some states wanted to secede from the American Union, we had the Battle of Antietam, the bloodiest single day in American history right up through today, with 22,717 dead. The Treaty of Union, which established The United Kingdom of Great Britain, is over 300-years-old and provides no option for secession. Although the British would point out that Scotland was a nation, not a state, it is unclear what that really means, as the attributes of a nation – its own military, its own foreign policy, etc. – had long ago disappeared.
We can’t help but see in the whole matter a kind of testimony to the decline of the West. It is just a reality that there is scarcely anything that the west is prepared to fight for, and David Cameron clearly was not going to send in the tanks if the Scotts wanted out, just as it is clear President Obama is not sending in the troops if Russia decided to nip into NATO-member Estonia, so an orderly referendum was probably the best policy.
Still the whole idea of referendums is a bad one.
First, if you accept the notion that whatever a majority of citizens want should happen, you basically ensure the issue is never settled. Ok, on this particular day the vote went with union; maybe in five years, the polls will show otherwise. If you accept the idea that the majority should settle these matters, you really have a moral responsibility to do another referendum.
Second, you turn democracy into some kind of petty arithmetic. So what if 50.01% of the citizens had voted for independence? Do we do major historical changes based on such small differences?
Third, the whole process is a caricature of democracy. America’s Founders clearly believed that the people were sovereign and that their will should prevail, but they also realized that “the people” are emotional and impulsive and that finding out the true and authentic “will of the people” is more complicated than direct democracy in the form of referendums can express.
The American Founders set up a multi-staged process to make sure that the public will had congealed before it became the law of the land. So the House of Representatives is elected every two years and can swing wildly based on sentiments at the moment. The President is elected every four years, serving as a block against a sudden swing of emotion, and the Senate turns over fully every six years, extending the time by which a sentiment must be sustained before it becomes law. The Supreme Court can take decades for a majority to change. The point is the people are sovereign, their will must be executed, but it must be a considered will, sustained over a period of time before we can be certain it represents the authentic voice of the people.
The whole idea of popular referendums is counter to this. They mostly provide politicians with an excuse to avoid hard decisions.
Yet even more dangerous is that more referendums may be forthcoming. The Conservatives have said they will hold a referendum on EU membership if the party wins the next election.
It is possible the vote might go against remaining in the EU, and for many good reasons, but in the end an economically isolated UK would benefit nobody.
Whatever decisions must be made, it is a cheap and easy thing for politicians to say they are going to “let the people decide” by holding referendums. Politicians are hired and paid by the people to study and learn about these issues and to reflect this considered judgment in their votes.
There will be more and more pressure to go to direct democracy as technology makes it easier and easier. We could have referendums now every minute on our smart phones. That might seem more democratic to some, but it is unlikely to result in better government.
Bruce Peterson was really the father of the produce industry’s traceability initiative. It was his insight while at Wal-Mart that many products had recalls, but they didn’t destroy whole industries because the recall could be constrained to specific lot numbers. Bruce theorized that if the produce trade could accurately trace any problems to specific lots, recalls would still happen, but their impact on the industry would be minimized.
When PMA went to work on the issue, it was Gary Fleming, then the Vice President of Industry Technology and Standards at PMA, who put the project together. We spoke with Gary many times, including these:
Gary Fleming Speaks Out:Produce Traceability Series Part 1: ‘Absent Of PTI’
Guest Pundit — Traceability And The Need For A Common Language
Guest Pundit — Pairing The Global Language With Technology
Guest Pundit: Traceability — A Forgotten Piece Of Food Safety
Pundit’s Mailbag — Traceability
Pundit’s Mailbag — Joint Response To Produce Traceability Cost Concerns
Now Gary is President and CEO of a relatively new company called ASAP Audits & Inspections. We wrote about his launch in Pundit sister publication PerishableNews.com, where the piece was titled, New Company Brings Automation to the Audits & Inspections Process.
The company is trying to position itself on the leading edge of a new generation of audit tools, all designed to both speed up and make auditing more efficient and use the same tools to enrich the results. Here is the vision:
For those conducting audits and inspections to not only capture data electronically, but to use the power of a computer to provide analytics, define patterns, mitigate risks and ensure compliance across multiple sites, multiple audits or multiple inspections… all at the push of a button. To integrate and facilitate the exchange of information between entities and their trading partners, including government, third party auditors, and supply chain members.
Gary has always been generous with his time in trying to educate the industry on this important issue. We wish him the best of luck in his latest venture.
It was a long time ago that we headed out to Australia to keynote the old United Fresh conference; we talked about the experience in a column in Pundit sister publication, PRODUCE BUSINESS, that we titled An American Abroad. As the fortunes of United and PMA changed in the US, so did the nature of associations in Oceania, and back in 2010 we ran a piece titled, A New Era Commences: PMA Australia-New Zealand Triumphs With Its First Event.
Then this year, we headed off to New Zealand as we were asked to present a plenary session on global consumer trends:.
Now we received a note from an industry veteran:
My ticket down to Australia on that long ago United trip was paid for by the Australian supermarket chain Woolworth’s, whose then produce director, Peter Pokorny, now runs produce for Metcash. Woolworth’s was generous, though, and although we spoke for several Woolworth’s groups, they also allowed me to speak for several groups at the No. 2 supermarket chain, Cole’s, where the produce department was run by none other than Martin Kneebone.
Martin raises an interesting question: To what degree are these long term trends influenced by industry actions as opposed to simply shaping the industry?
Certainly our statistics are not perfect. For example, generally all supermarket sales are considered “food eaten at home,” and all restaurant sales are considered food “eaten away from home” — which creates the bizarre effect that an Italian sub bought at Subway is considered a food “eaten away from home,” while the identical sub sold at Publix is considered “food eaten at home.”
As supermarkets move more and more into the foodservice arena, this is something to keep an eye on.
In general, though, it seems there are more likely reasons that suggest themselves, notably the economy. As the economy declines, consumers tend to “trade down” — that can be from a high-end store to a middle-range store or a mid-range store to a discounter. It also can be from a restaurant to eating at home.
Part of this is seeking to save money but, also, if there is increased unemployment, it leaves more households with someone available to cook.
Of course, how the retail industry facilitates people’s reaction to these broader economic trends makes a big difference.
Our bet is that when robust economic growth resumes, we will see the move to foodservice resume with gusto.
Many thanks to Martin Kneebone for this thoughtful note.