China retailers face food vigilantes

by on August 30, 2017 at 1:46 am in Food and Drink, Law, Uncategorized | Permalink

1. Xue Yanfeng has now filed 40 lawsuits against supermarkets and retailers for violating food safety laws.

2. Under Chinese law, it is no longer the case that a victimized customer has to prove personal injury or loss to receive compensation.

3. Xue has found raisins with no nutritional labels, potato chips with proscribed additives, and biscuits with multiple production dates.

4. In the past 18 months, he has been awarded somewhat over $10,000 in compensation, plus there are 18 other settled cases where compensation was not disclosed.

5. Some provincial reports indicate that 80 to 90 percent of food safety complaints are from “specialist” plaintiffs.

China, of course, has had notoriously lax food safety practices in the past.  So might the actions of these individuals be efficiency-enhancing?  But more than 2/3 of the cases are based on labeling mistakes.

The above is from Bloomberg News.

1 prior_test3 August 30, 2017 at 2:27 am

‘biscuits with multiple production dates’

That is a bit more than a labelling mistake, actually. At least in any country where food safety is treated seriously, since it shows the manufacturer lacks the ability to actually control production lots reliably – including tracking recalls for lots that are not safe for human consumption (current example in Europe – https://www.theguardian.com/world/2017/aug/11/tainted-eggs-found-in-hong-kong-switzerland-and-15-eu-countries ). Unless, of course, the mistake involves confusion between the production date and expiration date, but considering that such detailed labelling is rare enough in Germany, it seems less than likely to be the source of the problem in China.

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2 Ray Lopez August 30, 2017 at 3:02 am

Germany has strict food purity laws and consequently food is expensive in Germany. I doubt anything concerning food in Germany applies to China, so any analogy between Germany and China is misplaced. In China probably the dates are all fake as well as the contents inside the package.

Bonus trivia: in Germany they serve warm beer.

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3 Ray Lopez August 30, 2017 at 3:03 am

+ In North Korea they served the hapless Warmbier.

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4 prior_test3 August 30, 2017 at 4:09 am

‘consequently food is expensive in Germany’

No, food is cheap in Germany, compared to the U.S. ‘Groceries Prices in Germany are 21.86% lower than in United States’ – https://www.numbeo.com/cost-of-living/compare_countries_result.jsp?country1=United+States&country2=Germany or

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5 Just Another MR Commentor August 30, 2017 at 6:26 am

Food in Germany is about21.85% less good too.

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6 prior_test3 August 30, 2017 at 10:04 am

Guess it depends on what you think of fresh baked bread and pastries. Or spätzle. Or various types of cheese. Or strawberries in season.

But the above are typically German foods. What has been noticeable in the last 25 years is how much food in Germany comes from somewhere else – like Italy. And strangely enough, Italian food (whether produce, pasta, rice/risotto, sauces/pesto, various crispy and generally not oily snack type things, olive oil, or various cheeses) has a very good reputation – which might explain why it is now so common to find. Then there is Baktat, a Mannheim based company that plays pretty much the same role in Germany that Goya does in the U.S., which offers quite a lot of food that is not considered typically German.

To put it differently – that was a more relevant observation 25 years ago.

7 JWatts August 30, 2017 at 10:56 am

“‘Groceries Prices in Germany are 21.86% lower than in United States’ ”

Of course incomes are 28.56% lower.

https://en.wikipedia.org/wiki/Household_income

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8 prior_test3 August 30, 2017 at 11:28 am

Are you counting the mandatory 5 weeks of paid vacation in that figure?

And if not, why not? Most of these comparisons glide over that reality, particularly ones presented to Americans.And vacation days are not impacted by illness – that 5 weeks has nothing to do with sick time.

To put it differently, and being exceedingly generous to America by positing that full time employees actually receive 2 weeks paid vacation their first year of employment, this means that an American is spending almost 6% more time at work. And since sick time is not deducted from vacation, and the number of sick days easily equals another 3% (7.5 days sick is lower than the German average, which is done by Bundesland, however), it would appear that Germans do not need to work as much as Americans to afford their groceries, which are still cheaper by a small amount after making an adjustment for the amount of time not spent at work.

9 Jeff R August 30, 2017 at 12:04 pm

Five weeks paid vacation vs 2-3 weeks for the average American….that’s maybe 5-10% fewer hours per year, up against 28% lower incomes. Ouch. What’s wrong with Germany’s economy?

10 JWatts August 30, 2017 at 12:21 pm

“Are you counting the mandatory 5 weeks of paid vacation in that figure?”

Since it’s paid, yes it’s counted as income.

11 A clockwork orange August 30, 2017 at 3:29 am

Up short, fat steps and across a narrow hallway, his square room—a dayton chair, a pinewood desk, a demilune cabinet. Augustine surveyed the lamplight along the lime-washed walls. He sat on the mattress, slipped off his shoes and tended to his socks. He stood to hang his coat and tie on the window hook. Between the curtains, he could glimpse the dim glow visiting the Great Lake.

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12 dave schutz August 30, 2017 at 6:23 am

I kindasorta like what this guy was doing in China, but I don’t like the guy who has been travelling across California looking for 2-inch failures to fully comply with ADA type requirements and squeezing hotels and restaurants. I think the difference is that I see the Calif guy as making a lot of money pestering people who are operating in good faith and largely in compliance.

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13 rayward August 30, 2017 at 6:47 am

I often use anecdotes to make a larger point, for which I would be ridiculed if I were a student in Cowen’s or Tabarrok’s economics class. Yet, both often use anecdotes to promote their version of anti-government libertarianism. Okay, I understand that this blog is part entertainment and that the snarling dogs must be fed. Besides, I enjoy their anecdotes. I hope they enjoy mine.

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14 Massimo August 30, 2017 at 6:55 am

I doubt that the melamine in the milk was in the label. I suspect that you can catch the serious violations only with serious lab analysis or because somebody gets sick for it. The best defense for consumers is brand reputation, rather than regulations.

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15 Crikey August 30, 2017 at 7:34 am

In the margin, the government orchestrated executions probably increased the safety of the portion of the population that wasn’t putting melamine in milk.

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16 Mark Thorson August 30, 2017 at 3:43 pm

They only executed one guy for that. The Chinese public would have wished for more.

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17 Crikey August 30, 2017 at 7:50 pm

Two.

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18 Harun August 30, 2017 at 11:38 am

Remember, the melamine was in the milk to fool a chemical test that was designed to prevent people from adding water to milk!!!!!

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19 dave schutz August 31, 2017 at 9:21 am

“Some circumstantial evidence is very strong, as when you find a trout in the milk. ‘ (Henry David Thoreau).

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20 Matt August 30, 2017 at 7:24 am

“But more than 2/3 of the cases are based on labeling mistakes.”

Whether this is reasonable depends to a large degree on whether these are mistakes or “mistakes” – that is, either reckless disregard for getting things right or flat-out lies. Lots of countries, including the US, has instances where they allow “private attorneys general” to enforce the law and get the relevant penalties as a reward (see qui tam actions under the false claims act in the US, for an example.) different countries will have different instances where such private enforcement of public law is reasonable or efficient, but the general idea is not as odd as people might think, especially if, as seems right, these are not mere innocent mistakes, at least in many cases.

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21 Bill August 30, 2017 at 8:09 am

Markets work with information. Private enforcement is a substitute for government enforcement. No enforcement is not an option, unless you are in the market for lemons, which explains why even businesses want enforcement if they comply and their competitors don’t.

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22 DanC August 30, 2017 at 8:44 am

I suggest you read the linked article. The situation in China has almost nothing to do with food safety. It is about people gaming the system to extract money with almost zero externalities for society.

It would appear that trivial errors in labels can become a non trivial expense for merchants.

On the surface private enforcement might be cheaper and avoid regulatory capture of government actors, but in practice in China poorly written laws that require little or no evidence of injury to plaintiff have just created silly lawsuits.

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23 Albert August 30, 2017 at 10:25 am

They seem like reasonable rules to me. Companies should label food, and those labels should be accurate.

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24 Harun August 30, 2017 at 10:58 am

This is because you’ve never actually dealt with these kinds of problems. They all seem very reasonable, until someone sues for a typo.

25 JWatts August 30, 2017 at 11:07 am

“This is because you’ve never actually dealt with these kinds of problems. They all seem very reasonable, until someone sues for a typo.”

I agree that a suing over a typo may be trivial, but some of those labeling issues were not trivial.

“and biscuits with multiple production dates”

If the manufacturing date is wrong there is not way to handle a food recall without recalling all of the product sold. Obviously a manufacturer is far more likely to voluntarily recall a days worth of production than they are everything that’s currently in the supply chain (often 90 days worth).

26 Harun August 30, 2017 at 11:21 am

I would like to know more about each specific case because I’ve seen incredibly ticky tack “violations.”

I have no idea about the biscuit case, and why would there be multiple dates and how would they ever catch that in the first place. I’d also need to know the volume of the supplier. We’re assuming they are Nabisco sized. They may be much smaller.

27 JWatts August 30, 2017 at 11:31 am

“I have no idea about the biscuit case, and why would there be multiple dates and how would they ever catch that in the first place.”

I can imagine a scenario that I’ve had to fix in the past. The company has multiple printers printing on different sides of a case. The printers are driven by two different printers. Good engineering practice is to have the print date come from one source, but it’s cheap and easy to just have the printer use it’s computer date-time. And naturally those can and do get out of sync. (If you’ve ever seen a date that should be the current year, but instead it’s 1998, that’s a classic example. The default date for AB PLCs is 1998.)

28 JWatts August 30, 2017 at 11:32 am

“The printers are driven by two different printers”

Should be: “The printers are driven by two different computers”

29 Harun August 30, 2017 at 11:36 am

That does sound like a problem that I could see a Chinese firm just blowing off. Or catching, but not wanting to remake and repack the boxes with bad dates.

30 Harun August 30, 2017 at 11:40 am

I’m also going to say that Chinese firms can be incredibly cheap sometimes. I could see not adjusting the packaging to reflect a tweaked formulation because they don’t want to pay for new printing plates.

Maybe its worth it to scare the bejesus out of them.

31 DanC August 30, 2017 at 12:19 pm

The penalty should be severe enough to correct or prevent the damage done. But it should also reflect the injury done to an individual or society.

A wrong label may cause an extensive and expensive recall. The resulting bad press will be something that most firms will seek to avoid.

Firms that are struggling are more likely to cheat or produce inferior products. Slowly bleeding them to death serves some purpose I suppose

32 Li Zhi August 30, 2017 at 10:45 am

I’ve been involved in product labeling. If it is cheaper to not spend the time and manpower to ensure the label is correct both from a regulatory and from (the subtly different) technical/scientific perspective, then companies will have some high school drop-out with < 3 months of experience writing them. When it comes to health, the penalties for failure to comply have to be sufficient to prevent profit motivated malign neglect as well as preventing malign intent. I learned a lesson about consumer tolerance watching the Beech-Nut Apple Juice scandal unfold. The fact that they're still in business speaks volumes.

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34 Careless August 30, 2017 at 12:05 pm

Well that’s the nicest spambot I can recall

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35 Thiago Ribeiro August 30, 2017 at 9:06 am

People who take . When Brazil was under a Nixonian prize freeze econimic plan in the 1980s and citizens got the right to close shops and supermarkets that were rising prices, most of the closures were the work of a militant minority. As Toynbee pointed out, such isnthe role of the creative minorities.

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36 JWatts August 30, 2017 at 11:11 am

“When Brazil was under a Nixonian prize freeze econimic plan in the 1980s …”

That would be under the alternate history timeline where the US conquered Brazil in the late 1970’s and Nixon was serving his 4th term in office?

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37 Thiago Ribeiro August 30, 2017 at 11:30 am

Maybe you would prefer “Nixon-like price freezing plan”. Evidently what I meant is that Brazil was applying price controls much like the ones Mr. Nixon resorted to when he was president. Shops increasing prices were closed and the mngers were jailed.

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38 JWatts August 30, 2017 at 11:35 am

Well a more intelligent, less ideological person would have just left the word “Nixonian” out and called it a price freeze. Tying all price freezes in Brazil to Richard Nixon is a stretch, even if you consider Brazil to be a US puppet state.

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39 Thiago Ribeiro August 30, 2017 at 12:04 pm

The Nixon price freeze is the most famous prize freeze program in peace time in Western history. We, Brazilians, are, by our very nature, cosmopolitans (apparently, Americans behave like Stalin, who hunted down what he called “rootless cosmopolitans”, and consider “cosmopolitan” to be a term of abuse http://www.politico.com/magazine/story/2017/08/03/the-ugly-history-of-stephen-millers-cosmopolitan-epithet-215454) . We all attend to the bigger picture when discussing national problems. In 1964, a military regime was established to fight the Castroite/Maoist/Hoxhaite/Titoist agitation in Brazil. In the 80’s, former minister Funaro promissed Swiss inflation and Japanese growth. In the 90’s, President Collor promissed Thatcherite reforms in Brazil. Now, President Temer is implementing the boldest economic reforms since Gorbachev’s Perestroika.

40 Jeff R August 30, 2017 at 12:06 pm

“The Nixon price freeze is the most famous prize freeze program in peace time in Western history.”

FDR just called you a ******* *****.

41 Thiago Ribeiro August 30, 2017 at 12:26 pm

You mean the Nixon–Galbraith-Henderson Office of Price Administration? It was created in the context of preparation for a war that was already unavoidable by then aginst the Fascist Japanese. Its peace time activities have alepready been forgotten ad are, at best, lumoed with the war years.

42 JWatts August 30, 2017 at 12:29 pm

“The Nixon price freeze is the most famous prize freeze program in peace time in Western history. We, Brazilians, are, by our very nature, cosmopolitans …”

Well if you mean that no one else in the world cares about what happens in Brazil, apparently including actual Brazilians, then I won’t dispute your expertise on the subject. It seems odd that Brazilians would refer to price freezes as “Nixonian”. Apparently Nixon, was more famous in Brazil than actual Brazilian leaders. Which seems really odd, but again I defer to your expertise.

43 Thiago Ribeiro August 30, 2017 at 12:42 pm

Kiteo, his eyes closed!! Again, there is the issue of precedence. Brazil never had a experiencemwith sweeping price controls, only partial controls over rents, energy, milk, wheat, etc. Comparing new measures with well-known past experiences is only normal for any country where coamopolitan is not a term of abuse. Brazil’s 1937 Fascist Constitution was called “Polaca” (pejorative term for “Polish/Pole”) because it was inspired by the Constitution of Poland under Marshall Józef Klemens Piłsudski, who repulsed the Bolshevik invasion of his country in 1921.

44 JWatts August 30, 2017 at 2:57 pm

First you say this: “When Brazil was under a Nixonian prize freeze econimic plan in the 1980s ”

Then you say this: “Brazil never had a experiencemwith sweeping price controls,”

You should really work on getting your narrative straight. It’s hard to follow along when it keeps changing.

45 Thiago Ribeiro August 30, 2017 at 3:21 pm

Before the 1980’s Nixonian price freeze, we had’nt have any experience with extensive price controls, hence the reference to the American experience and the adjective Nixonian.

46 maxwell davis August 30, 2017 at 9:06 am

I work in the food manufacturing industry. Labeling mistakes can be a HUGE deal. Products are often recalled based on that alone.

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47 EverExtruder August 30, 2017 at 9:19 am

+1

And the should be. Drugs aren’t food, but food can definitely make a person very ill. Especially in the TCM (Traditional Chinese Medicine) culture that is China, what you eat is sometimes just as important as what you take.

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48 GoneWithTheWind August 30, 2017 at 10:44 am

Same thing happens in the U.S. In California there is a wheel chair bound man who has sued over 1000 small businesses who failed to meet the confusing web of federal, state and local disabled access law/regulations. All of his law suits were frivolous but small enough such that it would have cost more to fight than to pay.

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49 JWatts August 30, 2017 at 11:01 am

” But more than 2/3 of the cases are based on labeling mistakes.”

It’s virtually certain that a manufacturing process that tolerates labeling mistakes (the most obviously visible item to the customer) is also making other more serious mistakes. It’s possible that a manufacturer will just fix their labeling mistakes but it’s also possible the manufacturers with less such mistakes will be more profitable and gain market share. I would imagine that just catching labeling mistakes and penalizing them will tend to result in higher quality products.

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50 Harun August 30, 2017 at 11:13 am

Please read about Heineken’s experience in Taiwan.

Do you think Heineken is putting out poor quality products?

And yet they ran afoul of labeling laws.

Sure, some mis-labeling could be due to poor quality controls, or bad management or even criminal activity. But I think one should be cautious. How new are these laws? How many are small producers who are product-oriented firms without massive compliance teams. Raisins could literally be some tiny firm in Xinjiang and not a multinational sized food processor.

That said, China has a lot of scumbags, too. Ingredients being left off – that seems more serious.

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51 Harun August 30, 2017 at 11:15 am

BTW, I probably would have taken your side until I experienced the Heineken case. That was insane.

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52 JWatts August 30, 2017 at 11:36 am

Yes, you make a very good point. If the labeling mistakes are trivial, then they are trivial.

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53 Harun August 30, 2017 at 11:05 am

I have personal experience in this area. Taiwan, too, allowed private individuals to get paid a “bounty” for finding mis-labeled products.

The government had draconian fees for mis-labeling based on units.

So, for example, Heineken made the grievous error of using the word “beer” instead of “beer type” on their labels in Taiwan. Some upstanding citizen ratted them out (probably a competitor because actual consumers understand the word beer.)

Heineken was going to have pay a US$ billion fine due the vast number of bottles they had in distribution that were all labeled as “beer” and not “beer type.”

So Heineken had to hire lawyers and get the case dismissed.

Also, we experienced the joy of a large city in Taiwan deciding that it preferred an “expiration date” rather than the previous acceptable “production date + months of validity.” Only one city changed this rule, but due to the above situation, it meant re-labeling thousands of bottles of beer. (They didn’t have a phase-in period, naturally.)

So, while I understand that food labeling is important and these may sound like serious violations, just remember labeling beer as “beer” and not “beer type” was also a violation. Where zero consumers were hurt.

啤酒 vs. 啤酒類

In case anyone wants the Chinese.

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54 Harun August 30, 2017 at 11:42 am

Speaking of regulation, I’ve noticed there are more and more Chinese sellers on Amazon, selling directly to US consumers.

I’ve purchased several sample products and noticed they often have zero compliance with state regulations.

I wonder if states will ever get hip to this.

They can literally sit in their office and order the items to test for compliance.

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55 Ricardo August 30, 2017 at 12:58 pm

Would like to see this policy extended to blog comments…

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56 Bill August 30, 2017 at 1:58 pm

Labeling is related to the strength of brands and reputation.

Firms which have established good reputations do not want to risk that with mislabeling or adulteration.

Firms with weak brands or no reputations could care less particularly if they change names every week.

Consequently the no brand can damage the entire product category, like baby food or milk substitutes.

For that reason strong brands want enforcement.

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57 DanC August 30, 2017 at 4:50 pm

Large market leaders will frequently invite government regulations or silly rules because they tend to be more burdensome on smaller or new competitors

Plus labels as described in the referred article have little to do with brand name

Violations are often about picky procedural errors i.e. Font sized used etc

Consumer protection regulations often fail to protect consumers but they are frequently anti-competitive and costly to consumers

The baby juice case was about managers who had a failing enterprise and added water to juice. If they had been making decent returns they wouldn’t have felt the need to cheat. Most food scandals are in firms that have managers who are failing. This even happens to big brands who have lost the ability to compete. It is easy for people to be honest when their pockets are flush, harder when you are desperate

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58 Bill August 30, 2017 at 8:31 pm

1. Costs of compliance the same for branded and unbranded, unless you mean they can’t make money from deception.

2. Baby juice manager is excused for watering down product because he was losing money? We want that guy to exit the market because he is not efficient and can only survive by cheating the public.

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59 DanC August 30, 2017 at 9:36 pm

1
Cost of compliance is much higher for smaller and startups. They typically lack the resources to pay for lawyers, compliance officers, accountants, lobbyists, etc. Large firms can spread these costs over a larger customer base. In many cases they have enough political clout to get favorable treatment. That should be rather obvious.

2
Stating the motivations of a killer is not a justification of murder. Again rather obvious. But if you are trying to find the root cause of a problem knowing the motivations for the actions helps to find real solutions. Silly regulations we rarely stop a manager of a failing firm from taking shortcuts. He is desperate and willl take risks to survive. A profitable firm has little interest in cheating the customer. Silly regulations are mainly an additional burden and often anticompetitive

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