Mandatory versus voluntary approaches to food safety

TLDR

Food safety policy currently relies on a mix of voluntary producer measures and regulatory mandates such as HACCP, and regulators must be ready to enforce controls if firms fail to act. This article investigates whether reliance on voluntary approaches can provide adequate consumer protection. The authors develop an analytical framework, drawing on environmental protection literature and product liability models, to identify when firms will voluntarily invest in food safety. The analysis shows that for goods whose safety can be easily detected by consumers, market forces can drive voluntary safety, whereas for goods with hidden risks, market forces alone are insufficient, but the threat of mandatory regulation—possibly with financial incentives—can motivate firms to invest in safety. © 1999 John Wiley & Sons, Inc.

Abstract

Food safety policy is currently based on a combination of voluntary measures undertaken by producers and regulatory measures imposed, for example, by the US Department of Agriculture and the Food and Drug Administration (e.g., mandatory HACCP systems). This article addresses the question of whether reliance on voluntary approaches is likely to lead to adequate consumer protection. Drawing on recent literature on the choice between voluntary and mandatory approach to environmental protection and standard models of product liability, the article develops an analytical framework to determine the conditions under which firms are likely to invest in food safety voluntarily. The results suggest that for goods for which consumers can readily detect safety characteristics, market forces can create incentives for voluntary provision of safety. However, for goods for which consumers cannot readily detect food risks, market forces are not likely to be sufficient to afford adequate protection. Even in such a context, however, direct government regulation is not always necessary. The threat of the imposition of mandatory controls (possibly coupled with financial inducements for undertaking voluntary approaches) may provide firms with sufficient incentives to invest in food safety in an effort to avoid those controls. However, if firms do not respond, regulators must be prepared to follow through on their threats and impose a regulatory system of protection. © 1999 John Wiley & Sons, Inc.