To outsiders, Sweden is known as a model economy; home to successful export-orientated companies and haven of social peace and justice. Yet, recent revelations around grievances in the privatised health and elderly care sectors make of Sweden mainly an excellent example of the worst excesses that the profit-motive can lead to in formerly state-run sectors.
Over the past two or three decades Sweden has indeed had the doubtful privilege of being quoted by the ultra-conservative US Heritage Foundation as an example for pension reform and the country has privatised large parts of the social services sector including primary education. Certainly one of the most extreme examples of market-optimism and anti-statism comes from the Stockholm County Council. Between 1998 and 2002, when a centre-right alliance controlled the county, public property for SEK 30bn has been sold off in the region of Stockholm and 25% of the social services have been outsourced to private providers. Deregulation and privatisation have particularly touched the health system including care for the elderly. By 2008 all of Stockholm’s major hospitals had become public limited companies (plc and 100% of Stockholm county’s wards were in private hands. The outcome of this situation provides an impressive and depressing summary of everything that critics of neoliberalism think is wrong with private provision of public services.
Shortly after the first wards in Stockholm were sold to private providers it became clear that the privatisation did not have the promised effect of bringing the costs for the county council down. Rather than decreasing, the costs of health services rose by as much as 12% in one year, leaving the council with a deficit of SEK 2.4bn by 2004, while the now private wards made handsome profits. Even more disturbingly: the shareholders of the now incorporated wards – in many cases the formerly council-employed GPs – paid themselves dividends amounting to as much as a million SEK per year (
Dagens Nyheter
March 3, 2007 . The source of these profits in the health service sector were tax payers’ money because the County Council continues to pay the health bills of its citizens. Former county council employees thereby became entrepreneurs and tax-made millionaires within a couple of years after privatisation.
Soon, critical voices started to make themselves heard. The Council was accused of selling off the wards basically at the inventory price – not including any goodwill as would be the case in a takeover of one business by another. The Council justified this sellout of state property as a subsidy to start-up companies, which was what the new private wards were considered to be.
Yet, by 2007, the Stockholm County Council saw a need for action in face of increasing costs. The problem was quickly diagnosed, a solution found and the stage set for the second act of this Nordic drama: the rising costs were explained not by the increasing profits that went into private pockets, but by a lack of competition. There were simply not enough private providers on the ‘market’ and competition was not fierce enough. Stockholm County Council next elaborated a new programme called “Ward Choice Stockholm” in an effort to bring down costs. Ward Choice Stockholm – which entered into force on January 1, 2008 – aimed at stimulating competition between health care providers, by cutting subsidies and making payment of services dependent on some simple metrics. The new metric that would determine how much the Council paid health care providers was the number of patients that they treated in a given period of time. Higher payments for socio-economic underprivileged areas – where language problems and other problems related to poverty make treatments more difficult and hence time consuming – were scrapped. This put pressure on health care providers to lower costs as best they could. Among the measures used by the private providers to attract new ‘customers’ were longer opening hours (evening opening , a free health check-up on registration (worth SEK 200 and freebees for new ‘clients’.
As so often, free competition between private providers did not lead to innovative solutions – other than freebees on registration – but greatly favoured the economically and politically powerful over other market participants.
Thus, in an open letter published in the
Dagens Nyheter
(DN – close to the liberal Folkpartiet – five GPs accused Filippa Reinfeldt – then Stockholm’s conservative County Commissioner of Health Services and wife of Sweden’s PM, Fredrik Reinfeldt – of favouring major players in the industry by attending their opening ceremony of a new ward (DN 21 October 2008 . The health care provider in question was Carema Care one of the four largest – and stock market listed – health care providers in Sweden.
Yet, from the Council’s perspective the increased competition soon started to bear fruit: in 2008 a private drug abuse clinic – Maria Beroendecentrum – lost a bid for renewal of its contract with Stockholm’s County Council to Carema Care. During Maria Beroendecentrum’s appeal over the regional parliament’s decision to favour Carema’s bid, Folkparti county counsellor Birgitta Rydberg explained that the council was actually happy with how Maria Beroendecentrum had run the facility, but that Carema Care had promised to run the same facility for SEK 35m less (
DN
November 8, 2011 . This is a striking example that competitive markets often do not create a level playing field for perfect competition among equal participants, but that political influence or economic power (size help a lot in ensuring that one has an even leveller playing field for oneself.
To be sure one could argue that Carema Care, as a very large provider of health care services, simply was able to run said ward more efficiently due to economies of scale. A powerful argument indeed. Yet, over the past months it has become increasingly apparent that the reason for Carema Care’s competitive pricing may derive not from economies of scale but from a wholly different source. Since early October 2011,
Dagens Nyheter
has run a series of articles about alleged shortcomings in the caring standards at two of Carema Care’s nursing homes in Stockholm.
DN
had been granted access to reports from nurses in different elderly care homes run by Carema Care, complaining about working conditions and the standard of the facilities. The complaints concerned mainly cost cutting in terms of not replacing staff, cutting the budget to buy such basic necessities as toilet paper, soap and incontinence pads. The company had also ‘made redundant’ cleaning staff at one home, asking caring staff to do the cleaning themselves - with the only exception being the day before announced inspections when a professional cleaning service provider would be brought in.
The reports on caring standards at Carema Care have grown worse by the day ever since: from rather harmless cost-saving schemes such as the introduction of a sensor in patient’s incontinence pads that allowed it to reduce the number of incontinence pads used by measuring the degree of dampness of the diaper [sic!], to cases where a patient had to sleep on the floor for several weeks because her bed was broken and could not be replaced, to truly horrific cases where the ward personelle was aware of continuous sexual assaults on one elderly patient by another patient, but did nothing to prevent these assaults over a number of months!
Carema cannot fundamentally reject most of these claims. In a first reaction to the story about an elderly women sleeping on the floor, Kerstin Stalskog the company’s responsible for elderly care – in a statement full of (unintended irony – declared that there was no lack of beds in the concerned home, but that the ‘customer’ [sic!] had chosen to sleep on the floor (
DN
November 3, 2011 . (It remains an open question whether that is the sort of choice that free-marketers had in mind when they introduced ‘Ward Choice Stockholm’.
Carema Care has since created a weblog in order to address the numerous criticisms raised against it. The company now denies that a patient had to sleep on the floor and points out that the company had known about many of the grievances revealed by
DN
and it had started to take measures to improve the situation. Yet, a documentary on a public TV channel about the company further added to the list of grievances. It revealed that a secret bonus programme was in place, which incentivised the managers of Carema’s homes to compete with other divisions in bringing down costs. (Carema has since announced that the bonus programme in its ‘elderly care’ division would be put on hold and a new system will be adopted based on quality indicators rather than costs .
The reason why these grievances went unnoticed for so long, has to do for one with the fact that Carema Care had a reputation among its employees of doing anything necessary to keep staff in line. In at least two cases, it sued former employees for breaching professional secrecy. Moreover, the public authorities contributed their bit to hushing up any complaints from Carema’s employees or nursing inspectors in the event that they dared to pipe up.
Dangens Nyether
reported that at least in one case a report by an inspector was altered in order to embellish the situation described. Entire paragraphs had been cancelled and others had been rewritten.
Why should the British public care about this tale from the North? Beyond, the obvious lessons to be drawn from the Swedish horror stories in the context of the current debates about the Health and Social Care Bill, the UK played a direct role in the changes in Swedish welfare services. Indeed, Ambea – the holding company that owns Carema Care – was owned between 2005 and 2010 by the London-based private equity and venture capital fund 3i. The fund bought the holding in 2005 for SEK 1.85bn and resold it in 2010 for approximately SEK 8bn to Triton – an investment fund owned by several Swedish citizens – and KKR – the famous US private equity firm. When the company was taken over, KKR and Triton also extended large loans to the company and loaded it with external debt. Overall, Carema Care has debt to service amounting to SEK 8bn, approximately half of which stems from the two private equity firms that own Ambea. What is more, the loans from KKR and Triton were made at an interest rate of 12% - well above the current market rates for such a loan. This device allowed the owners to create artificial tax deduction, because any profits Carema Care would make were wiped out by interest payments. This allowed the owners to channel Carema Care’s profits around the Swedish tax authorities, because the interest payments were booked as ‘capital income’ in an off-shore tax haven rather than declared as taxable profits from a productive activity. After it has become clear over the last weeks that most major private health care providers pay literally no income tax in Sweden, the centre-right government has promised a tax reform for 2013, making this sort of internal loan at above-market rates illegal.
The Carema Care scandal illustrates in impressive fashion the discrepancy between what market-believers promise when they initiate privatisations and deregulation policies and what the actual reality of competition is. To be sure, for 3i’s, Triton’s and KKR’s investors the deal was by extremely rewarding…but the belief in efficient markets and that individual actors’ selfish and profit-seeking behaviour in a market place will ultimately lead to optimal outcomes for societies as a whole seem laughable at best and dangerously cynical at worst in face of the transformation of healthcare in Sweden. The Carema case – which also touches on other major healthcare providers such as Attendo – shows once again that privatisations are mainly about transferring public money to private individuals.
Pregnant women diagnosed with HIV often take what is known as
antiretroviral medication to prevent transferring the virus to their children. The likelihood of an HIV positive pregnant woman passing the virus to her unborn child is decreased from the range of 15%-25% down to less than one percent. Antiretroviral drugs are effective, however, researchers are concerned about the side effects of these medications affecting unborn children.
Some antiretroviral medications include Epivec®, EFV®, Viracept®, Ziagen®, and Retrovir®. They are often prescribed to HIV positive pregnant women to prevent the spread of the virus to their children.
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Researchers from the study are unsure whether there is a causal connection linking the increasing reports of birth defects found in children and whether or not these birth defects were in fact caused by HIV medications.
The Food and Drug Administration’s MedWatch program reported during a five year period that 26 children born to HIV positive women who are taking HIV medications were born with cleft palate or cleft lip. This rate is much higher than the general population, however, researchers caution that these finding are not sufficient in linking the drugs to these birth defects.
Congenital malformations, or physical defects present as birth, are caused by various reasons such as genetics or environmental issues. More studies are scheduled to be conducted in order to determine if it safe for pregnant women to use antiretroviral medications.
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According to Consumer Drug Report,
a drug information resource, a class action lawsuit has been filed against certain directors of The Cooper Companies for allegedly reporting false stock value. The Cooper Companies is the parent company for contact lens manufacturer CooperVision.
In 2011, CooperVision was under fierce scrutiny by the Food and Drug Administration for a manufacturing defect during the production of
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The Food and Drug Administration sent a letter to The Cooper Companies stating that they would perform a quality control inspection at one of the firm’s contact lens plant. The health regulating agency warned that if the manufacturing plant does not meet quality control requirements, the company would face fines or other necessary action.
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In 2006, 205 people in the U.S were sickened and 3 died in an E. coli O157:H7 outbreak linked to baby spinach grown in California. In the aftermath, both the Food and Drug Administration (FDA and California's Department of Health Services conducted extensive
investigations into the outbreak to determine how leafy green produce could become contaminated with a microorganism normally found in the stomach of animals.
While investigators were able to successfully track the contaminated spinach to one specific field in California, and identify potential health risks such as the presence of cattle feces and wild pigs, the investigators had less success identifying the exact method by which E. coli contamination had occurred.
In response, California, the largest producer of leafy green vegetables in the nation with roughly a 75 percent market share, created its own statewide
Leafy Green Marketing Agreement. Arizona, the second largest producer of leafy green vegetables with roughly a 15 percent market share, followed suite creating its own
statewide program in September of 2007.
Unfortunately, despite the widespread adoption of these voluntary programs at the state level, foodborne illnesses linked to leafy green vegetables continue to be a problem across the country. In 2010,
E. coli-tainted romaine lettuce was recalled in 23 states after 19 people became seriously ill in Ohio, New York and Michigan.
Just this last October, the U.S. Food and Drug Administration (FDA discovered
Listeria bacteria during a random sample of romaine lettuce grown in California. And as recently at this past New Year's Eve, "a
Texas company recalled 228,360 lbs. -- 114 tons -- of spinach because it tested positive for E. coli O157:H7."
In response to industry interest, the U.S. Department of Agriculture's Agriculture Marketing Service (AMS
published an Advance Notice of Proposed Rulemaking (ANPR on Oct. 4, 2007 to explore the idea of implementing a national marketing agreement focused on reducing microbial contamination in leafy green vegetables.
AMS received more than 3,500 public comments on the ANPR. On June 10, 2009, the agency received a petition for rulemaking and a request for a public hearing on a proposed National Leafy Green Marketing Agreement (NLGMA . The
proposed marketing agreement was submitted to AMS "by a group of producers, handlers, and interested persons representing a cross-section of the national fresh and fresh-cut produce industry."
This initial proposal was designed to operate in a similar manner to voluntary marketing agreements previously implemented in California and Arizona following the 2006 outbreak.
While many in the leafy green industry praised the proposal as a huge leap forward for product safety, the proposal was also met with stiff resistance from many farmers,
especially small-scale producers. The new rules also came under attack by
consumer food safety advocates who were upset that the proposed rules would essentially allow the industry to police itself.
After taking comments and holding public hearings on the issue, the AMS proposed a revised NLGMA in the spring of 2011. This report provides an overview of how marketing agreements function in general, provides a detailed examination of the latest proposed NLGMA rules, and examines whether criticism for the latest proposed rule is legally and/or factually justified. Marketing Orders and Agreements
The Agricultural Marketing Agreement Act of 1937 (codified at 7 U.S.C. Chapter 26A provides authority for federal marketing orders administered by the USDA. Under the supervision of the AMS, marketing orders have currently been established for milk as well as numerous fruits, vegetables, and other specialty crops. Not counting milk and the latest NLGMA proposal, there are
currently 32 active marketing orders and agreements.
Marketing orders and agreements provide legal tools for agricultural producers, aggregators, processors, manufacturers, and retailers to work together to mitigate financial turmoil in the supply chain. A new marketing order or agreement must be developed by industry representatives, and then proposed to the AMS. The agency will then hold a public hearing and take public comments prior to making a final decision on whether to proceed with a rulemaking.
Prior to a proposed program being implemented, the regulation must be approved in a referendum by a two-thirds or larger majority of producers. Once a marketing order or agreement is approved, local committees appointed by the Secretary of Agriculture provide administration of the program. Marketing orders and agreements are binding on all "handlers" in the geographic area covered by the order. In general, a handler is anyone who receives the commodity from producers, and is responsible for grading, packing, transporting, or placing the farm products into commercial channels.
Marketing orders are distinguished from marketing agreements, in that marketing agreements are binding only on handlers who are signatories of the agreement. Handlers must comply with the grade, size, quality, volume, and other requirements established under the specific program.
Proposed National Leafy Greens Marketing Agreement (NLGMA
Like all marketing agreements, the proposed NLGMA is intended to be a voluntary program so handlers can choose whether or not they wish to participate in it. Unlike other marketing agreements, the NLGMA has little to do with balancing financial interests in the supply chain, but is focused entirely on providing a legal structure for farmers and handlers to efficiently comply with a new system of national food safety requirements impacting all leafy green vegetables.
While no specifics are given in the proposal, such food safety requirements would be based on the FDA's
Good Agricultural Practices (GAPs ,
Good Manufacturing Practices (GMPs , and the USDA's
Good Handling Practices (GHPs .
Under the current proposal, the marketing agreement would be governed by a 26-member Board of Directors appointed by the Secretary of Agriculture. The Board would be responsible for making policy recommendations to the Secretary for final review and approval. Any major changes to the agreement, including the Board's recommended food safety requirements and exemptions, would be sent out for public comment prior to its adoption.
Board members would be apportioned from eight administrative zones, with state's divided into groups based on geographic and climate differences. Each administrative zone would be assigned representation on the Board relative to the amount of leafy green vegetables produced within that zone. For example, administrative zone 1 -- which includes Hawaii and California -- would receive 4 representatives as California produces roughly 75 percent of all leafy green vegetables grown in the country.
In addition, the Board would include 10 designated grower representatives, with two of the 10 grower positions designated for small farmers. No company would be allowed to have more than one representative on the board, even if its operations included multiple farms in different administrative zones.
A Technical Review Committee (TRC would assist the Board in developing guidelines and procedures. The TRC would consist of members who represent production, handling and food safety experts from each zone (including organic and small business interests , experts from the USDA's agencies, and other federal agencies such as the FDA and EPA. The TRC also would have the authority to work collaboratively with industry stakeholder groups, local and state authorities, and others interested parties whose expertise the TRC might require.
The
proposed NLGMA would cover a wide range of fresh leafy green vegetables and their varieties, including: arugula, cabbage, chard, cilantro, endive, escarole, kale, lettuce, parsley, radicchio, spinach, and "spring mix" -- an industry term that describes mixtures of baby lettuces, mustards, chards, spinach, and chicories that vary based on availabilities. These vegetables could be whole or fresh-cut, or in bulk or packaged form. Under the proposed NLGMA, the Board could recommend, subject to USDA approval, the addition or removal of any leafy green vegetable from this definition. Handlers of fresh leafy green vegetables in the 50 states and the District of Columbia, also known as the production area, would be eligible to become signatories. Once becoming a signatory, participants would only handle leafy green vegetables from producers or other handlers that are also in compliance with the NLGMA.
Signatories who handle product imported from outside the United States would be required to demonstrate that those products also meet the requirements of the NLGMA. Compliance by signatories with the terms of the agreement would be mandatory. A signatory would be obligated to participate for no less than one crop year in the program. After the initial year, participants would have the opportunity to withdraw or opt out of the program.
While the program is voluntary for handlers of all sizes, any producer who sells to a handler that is a signatory to the NLGMA would be required to adhere to the marketing agreement. Small farmers participating in farmers markets, CSAs, or other direct sales to consumers may choose not to participate in the marketing agreements, provided they don't sell any of their leafy green vegetables to a signatory handler. Once adopted, all signatory handlers and their growers would be subject to an audit by the AMS Inspection Service. AMS Inspection Service would have the authority to accredit other entities and license their auditors to audit on its behalf, including National Organic Program (NOP certified agents, FDA inspectors, and third-party auditing services accredited by FDA.
This presents the potential to streamline the audit process facing many producers in today's market, thus improving operations and reducing costs. For example, the proposal would permit the program to evolve whereby an organic producer could include the NLGMA food safety standards as a component of the overall organic system plan and receive a single audit. The proposed NLGMA "would provide the Board authority to establish marketing research and development projects, and or promotional activities, including paid advertising, to assist or promote the efficient adoption, implementation, and marketplace acceptance of the agreement and leafy green vegetables." A Research and Development Committee would assist the Board in carrying out these actions.
The costs of these programs and the audit verification fees would be paid for through assessments of the signatory handlers. The price of these assessments would be recommended by the Board and must be approved by the USDA. These assessments would not be allowed to exceed $0.05 per 24-pound carton equivalent of leafy green vegetables. As assessments are based on the volume of a handler's transactions, large handlers would pay more assessments than small handlers participating in the program.
The AMS believes the proposed NLGMA will have a number of important benefits for producers, handlers, and consumers. "A primary benefit of the proposed agreement is the reduced likelihood of food contamination outbreaks in leafy green vegetables... in the United States."
This would not only benefit consumer health, but also the economic viability of the industry since it is estimated "that a food contamination outbreak could lead to a 10 percent long-term reduction in demand for leafy green vegetables." The 2006 E. coli outbreak alone was estimated to have cost leafy green producers $12 million dollars, and U.S. retailers as much as $63 million in lost profits.
Criticism of the Latest NLGMA Proposal
Both proponents and opponents of the latest NLGMA agree that food safety is a priority that needs to be better addressed by regulation. There is also no question that the most recent NLGMA is a more well thought out and balanced version of the regulation that what was initially proposed in 2009.
Yet, critics of the latest proposal -- including the
National Sustainable Agriculture Coalition (NSAC and the
National Organic Coalition (NOC -- contend that the AMS failed to adequately address at least four main concerns:
- whether the AMS is the proper agency to handle food safety regulation governing leafy green vegetables
- whether a marketing agreement is the proper regulatory tool to carry out national food safety regulations
- whether Congress has already addressed this particular food safety issue with the Food Safety and Modernization Act passed in December of 2010
- whether the NLGMA still unfairly burdens small to medium sized producers who wish to participate in the program
Is AMS the Proper Agency to Oversee Leafy Greens?
Three federal agencies are traditionally involved in U.S. food regulations. In general terms, the
USDA is responsible for all issues involving meat, poultry, dairy and eggs. In contrast, the
FDA is responsible for all other food and food additives. Finally, the
Federal Trade Commission (FTC is involved in the regulation of food advertising.
The proposed NLGMA even recognizes the FDA's expertise in food safety regulations involving leafy green vegetables as the
AMS intends the Board's final food safety regulations to reflect the FDA's published GAPs and GMPs, in addition to the USDA's GHPs. It also makes clear that the AMS intends to follow any existing or new FDA regulations that would impact food safety regulation or audits carried out by the agency.
In contrast, AMS has not traditionally been involved in food safety regulations or their enforcement, even within the USDA. Instead the AMS is involved mainly in assisting producers to market their products. This includes providing standardization, grading and new services for its five commodity programs -- dairy, fruit and vegetable, livestock and seed, poultry, and cotton and tobacco. It also includes overseeing the
National Organic Program (NOP and facilitating both domestic and international marketing efforts for U.S. agriculture. Which is not to say that either USDA as a whole, or AMS in particular, lack expertise when it comes to developing or enforcing new production standards. After all, in addition to developing marketing orders and agreements, AMS is also responsible for helping to create international quality standards for agricultural products.
Its role in overseeing NOP has also provided it the opportunity to implement a farm-based audit program designed to facilitate the needs of both small and large producers. In addition, the USDA as a whole has been heavily involved in the implementation of the
Hazard Analysis Critical Control Point system (HACCP currently utilized in meat, seafood, dairy, and juice production. This flexible system of scientifically based production standards -- designed to reduce microbial contamination during processing -- has been widely adopted by the food industry in
Europe and much of the United States.
Thus, while AMS may not be the foremost expert in food safety regulation involving leafy green vegetables, the agency certainly has both the scientific expertise and experienced personnel to carry forth all the provisions proposed under the NLGMA.
Are Marketing Agreements the Proper Regulatory Tool for Food Safety Regulations?
When considering whether it is appropriate to use a marketing agreement to address food safety, it is important to examine how Congress has historically created food safety legislation. Over the past hundred years,
Congress has passed many acts to improve food safety in this country, including the Federal Food, Drug, and Cosmetic Act, the Public Health Service Act, the Egg Products Inspection Act, the Federal Meat Inspection Act of 1906, the Poultry Products Inspection Act of 1957, and most recently, the Food Safety Modernization Act of 2010.
In almost all cases, these acts did not set forth specific food safety laws, but delegated the responsibility to the FDA or the USDA. This was not an ethical consideration, but a practical consideration as Congress has generally relied on agency expertise to formulate science based standards for the safety of the public. Proponents of using a marketing agreement to enact food safety regulation thus contend that it is simply another example of how an agency can use its scientific expertise to carry out the intent of Congress under the Agricultural Marketing Agreements Act of 1937.
Critics of the recently proposed NLGMA provide two separate reasons why a marketing agreement is the wrong regulatory tool for food safety: (1 it is unethical to make food safety a marketing issue, and (2 Congress never intended marketing agreements to address food safety issues as just another quality issue.
The first question is challenging, as there is neither one set of ethical standards that society adheres to under all circumstances, nor one type of regulatory tool that Congress always uses to address food safety issues. However, in its
public comment to proposed NLGMA, NSAC stated the problem as thus: "The members of the National Sustainable Agriculture Coalition have issued a statement containing 16 core principles about food safety. The very first of those principles states: Food safety is noncompetitive and transparent. Everyone who lifts a fork has a right to safe and healthy food, just as they have a right to choose foods based on the qualities most important to them. "Food safety" should not be a competitive marketing food-trait, lest the most vulnerable people end up with access to only the least safe food, or simply fewer choices. Every person has a right to expect the safest possible food, and a right to absolute transparency about its production processes, no matter what they can afford to pay for it. Completely open, public information about what makes a food 'safe' is not negotiable."
While this argument is compelling, it does seem to suggest that the secret goal of the NLGMA is to create a more expensive, less microbial contaminated food, which will then be marketed to consumers as a superior product compared with those leafy green vegetables not produced under the program.
Given that marketing agreements are generally only targeted toward producers and handlers, not consumers, this is more than a little incongruous. The proponents of the NLGMA stated at the public hearing that the promotion and advertising to be conducted under the program would be targeted at those within the leafy green vegetable industry, and not consumers.
There is also nothing in the record that would suggest that the general public would be any more aware of the NLGMA than they are aware of other marketing orders and agreements regulating the sale of milk and other agricultural products. Moreover, even if consumers did believe there were tangible health benefits to eating NLGMA-certified leafy green produce, it would certainly not be any more of a competitive advantage than what is already enjoyed by organic and local food producers who often advertise that their product is healthier and safer than conventionally produced foods. Yet even if it is not unethical, there is still the question of whether Congress ever intended AMS to utilize marketing agreements to address food safety as just another quality issue.
In its public comment to the proposed NLGMA, NSAC stated the problem as thus:
"The House version of what became the 2008 Farm Bill (Food, Conservation, and Energy Act of 2008 authorized the implementation of specialty crop marketing agreements for food safety. Industry sought this amendment precisely because they believed, correctly, that current law did not provide for comprehensive food safety controls via marketing agreements.
After heated debate, the Conference Committee rejected the House provision, precisely based on the argument that marketing agreements are not the right instrument to address food safety concerns and that the Agricultural Marketing Service is not a food safety agency.
Put simply, the leafy green and other specialty crop industry associations lost in their legislative campaign to change the law to provide authority for food safety marketing agreements such as the pending NLGMA. In order to save face, the industry scrambled to get language added to the Conference Report indicating that some marketing orders already issued by USDA have included "quality related provisions intended to enhance the safety of commodities" and that therefore the proposed statutory change was unnecessary.
This "cover your losses" report language flies in the face of the industry's arguments in pursuing the amendment to begin with, and is at any rate irrelevant to the current consideration of the NLGMA. The NLGMA is not a broad marketing agreement that happens to touch on a few quality-related provisions that have some effect on food safety. It is through and through a food safety agreement, period."
While this legislative history may be 100 percent accurate, it does not change the wording of the Act, or the broad delegation Congress originally gave to USDA and AMS to create marketing agreements. In 1937,
Congress created the Act to protect farmers from price fluctuations created by market disruptions that impacted interstate commerce.
To accomplish this goal, Congress delegated to the Secretary of Agriculture several important duties, including the powers to: (1 "establish and maintain such orderly marketing conditions for agricultural commodities in interstate commerce as will establish, as the price to farmers, parity prices", and (2 protect producers and consumers from "unreasonable fluctuations in supplies and prices."
Given the detrimental impact of food safety outbreaks on agricultural markets, it is a problem that clearly falls within scope of the Act, regardless of later Congressional hearings and discussions. There is also no language in the Act that would exempt food safety issues from the wide range of other qualities issues covered under the Act. Therefore, the AMS is well within its delegated duties to utilize marketing agreements to address purely food safety related issues. Not because they are a quality issue, but because they directly impact the price of leafy green vegetables in interstate commerce.
Did Congress Already Address This Issue in the FSMA?
There is no question that the Food Safety Modernization Act of 2010 (FSMA was the most important food safety legislation passed by Congress in decades. The real question is whether Congress fully addressed the food safety issue the NLGMA intended to regulate, thus making the proposed NLGMA conflict with the governing law.
In brief, the
FSMA directs the FDA to: (1 develop preventative science based food safety standards for covered facilities, (2 conduct regular inspections of covered facilities to hold them accountable, and (3 require importers to perform supplier verification activities. It also provides FDA with mandatory recall authority and requires enhanced collaboration activities with other state and federal agencies involved in food safety.
Looking at the plain language of both the NLGMA and FSMA, there is some clear overlap when it comes to regulating leafy green vegetable producers and handlers. Under the FSMA, FDA is directed to develop preventative science based food safety standards for these groups and conduct regular inspections. Under the NLGMA, the AMS will be developing preventative science based food safety standards and conducting annual audits. In a best-case scenario, the two sets of rules would be identical and no conflict of law would be created.
Moreover, if the rules drafted under the NLGMA are more stringent than those drafted by FDA, then both systems could mutually exist and complement each other. After all, the NLGMA is a voluntary system so if its handlers and growers want to hold themselves to higher standards than the FDA then who is to complain.
On the other hand, if any of the food safety standards promulgated under the NLGMA are lower than those produced by FDA, than the rules promulgated by FDA would clearly take precedence. This is for two reasons: (1 the FSMA was passed by Congress more than 70 years after the Agricultural Marketing Adjustment Act of 1937, and (2 FSMA is a more clear delegation of Congressional power when it comes to developing science based food safety standards.
FDA also has mandatory recall authority if food produced under the NLGMA is not sufficient to meet FDA standards. Yet, such an outcome will only occur if the two agencies completely ignore each other's rule making processes, and this seems unlikely since the FSMA clearly directs agencies to work more closely on issues regarding food safety. In response, critics of the NLGMA point out that the FSMA also included the Tester Amendment which exempted qualified facilities--either a very small businesses or those making less than $500,000/yr.--from much of the new regulation. In its public comments, NSAC framed the issue as thus:
"We have sought repeated unqualified assurances from USDA that all of the protections carefully built into the FSMA by Congress to protect the interests of small and mid-sized farms, diversified farming operations, direct market operations, and local food producers would be fully recognized and scrupulously respected under the NLGMA. No such unqualified assurances were forthcoming. In fact, to the contrary, we were told by the Administrator that the ultimate decisions on issues like this would rest with the Review Committee and that while it is assumed that FDA regulations and implementation process will be adopted by the NLGMA, there is a chance these particular issues would be among those that the NLGMA might amend through the process established in the proposed Agreement."
The problem with this line of argument is that the NLGMA is a voluntary system, whereas the FSMA is a mandatory system. As such, the two systems of regulation are not really in conflict as no qualified facilities exempted under the FSMA have to participate in the NLGMA, and those facilities who choose to participate under the NLGMA essentially consent to be bound to USDA-AMS rulemaking.
This will be an important consideration to many small to medium sized operations who will need to balance the economic benefits of participating in the NLGMA, with the increased financial costs associated with annual audits and bringing their operations into compliance.
An Unfair Burden to Small- and Medium-Sized Operations?
As the NLGMA does not contain any specific production standards to date, it is difficult to know with any certainty what its financial costs will be for producers and handlers involved in the program.
In general terms, three financial costs are anticipated for those who wish to participate: (1 the initial costs of bringing one's operation into compliance with the program, (2 the cost of annual audits, and (3 the annual costs of maintaining compliance as the program evolves and changes. These additional costs could potentially be balanced out by increased market stability, and a greater ability for participants to sell product into both domestic and international markets.
Based on cost estimates from a University of California report, AMS estimates "the total one-time modification costs at the farm level" to be "between $1.2- and $3.0 million, and an estimated average range of $14-$34 per acre for modification costs." On top of this initial cost would be annual compliance costs estimated at $2.7- to $4.4 million, or $30-50 per acre.
Of course, these estimates do not include the costs for California and Arizona producers currently involved in state marketing agreements. The producers from these two states are estimated to have spent $6.1- $14.7 million to bring their operations into compliance with their current rules, and spend between $13- to $21.7 million in annual compliance costs.
Annual handler assessments for the program would range between $5.7- to $28.6 million depending upon the whether the assessment was the program minimum of $0.01 per carton, or the program maximum of $0.05 per carton.
Based on these estimates, a hundred acre leafy green vegetable operation in Arkansas would spend between $1,400 to $3,400 in one-time compliance costs and between $3-5000 annually to maintain compliance. Such costs are hardly insignificant for small to medium sized operations, especially for those who might otherwise be exempt from similar regulations under the Tester Amendment of the FSMA.
The only silver lining is that the proposed NLGMA is a voluntary program for handlers to participate in. As such, producers should definitely discuss their financial operations with their handlers to determine whether the economic benefits of participating in the NLGMA would offset their estimated costs.
Will Leafy Greens Producers Support the Agreement?
In drafting its proposed marketing agreement, the NLGMA has provided producers and handlers with one potential tool to help reduce foodborne contamination in their production systems.
Whether it becomes law will ultimately depend upon what changes the agency makes after the latest round of public comments, and whether the proposed marketing agreement will be supported by a 2/3 majority of all leafy green vegetable producers in the nation. The effectiveness of such an agreement is also difficult to estimate, as the Board will need to be appointed and make its recommendation to the Secretary of Agriculture.
This will lead to yet more rulemaking, and additional opportunities for public comment. As such, proponents and opponents of the NLGMA should not expect any final food safety production standards for at least another 18 to 24 months.
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Judd Jensen is pursuing his LL.M. in Agricultural and Food Law at the University of of Arkansas. Prior to returning to law school, he worked in food safety and quality assurance for nearly a decade.
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