Tatsuru Shibuya: Stamp out false labeling by rewarding tip-offs
THE ASAHI SHIMBUN
2009/5/20
To eradicate false labeling of food products, lawmakers have enacted legal amendments to immediately punish offenders, without issuing warnings or orders to rectify. The Diet on April 22 passed the bill that incorporates such a clause to the Japanese Agricultural Standards (JAS) Law.
Several times a year, I take part in consumer seminars on food labeling as a lecturer. At the seminars, I also heard voices calling for the reinforcement of the JAS Law and stricter inspections of food labeling by the central and local governments.
Some people had argued that false food labeling incidents were rampant because the JAS Law was too soft on violators.
The law had dealt with companies that falsely label their products according to the following three steps: 1) Instruct them to correct and disclose false labeling; 2) Issue an order to companies that do not comply; and 3) Punish those who ignore the orders.
As long as businesses make reasonable judgments, the labeling would be corrected by the time an order is issued at the latest and consequently no punishment is imposed. Therefore, the law lacked deterrence, critics had argued.
Imposing heavier punishment is said to have been effective in reducing accidents caused by drunken drivers. Given the situation, some people think the introduction of stricter and more direct punishment will also serve as an effective deterrent to prevent false food labeling. But such a view is too rash for the following reasons.
Firstly, administrative organizations had applied the JAS Law to cases of false labeling that were deemed devious, and sometimes violators also directly faced punishment under the Unfair Competition Prevention Law. In some cases, offenders were charged with fraud. Companies contemplating false food labeling would not care either way if they broke the JAS Law or the Unfair Competition Prevention Law.
Therefore, introduction of direct punishment under the JAS Law would not be so effective.
Secondly, companies that plan to falsely label their products weigh the advantages and disadvantages if they go ahead with their plans or desist, and make decisions accordingly. For that reason, even after direct punishment is introduced, they would only put their plans into practice taking into account the risks of direct punishment.
At the core of the problem is the fact that manufacturers are far better informed about the products they sell than the consumers who buy them. I call this situation "asymmetry of information."
Many of the false labeling scandals were exposed as a result of whistle-blowing by insiders who inform authorities by such means as the food labeling hotline set up by the Ministry of Agriculture, Forestry and Fisheries. Therefore, first consideration should be given to designing a system that would allow the market and buyers to have more or less the same level of information as the sellers.
Under the existing legal framework, the whistle-blower protection law is believed to be the most effective means of deterrence. The law, which went into force in 2006, protects whistle-blowers by prohibiting companies and other organizations from dismissing or otherwise harassing workers in retaliation for them informing relevant authorities and the media about wrongdoing.
The Diet discussed the introduction of a system to pay cash rewards to informers under the law. However, due to strong criticism from industry, the law was enacted without the cash rewards. But a supplementary provision of the law requires the government to re-examine the law approximately five years after it comes into force.
Introduction of cash rewards would prompt more people to come forward to offer inside information. The government should give first consideration to re-examining the whistle-blowing system and introducing cash rewards for tip-offs.
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The author is enrolled in a doctoral course at the Graduate School of Agricultural Science, Tohoku University.(IHT/Asahi: May 20,2009)