News 12.02.2013

Retailers are the culprits, not the victims

In light of the scandal about falsely declared horsemeat, foodwatch demands: it’s time to put an end to making it worthwhile to lie and cheat. Retailers have to be obligated to ensure that their products are safe and that they contain what’s listed on the label. If a retailer fails to maintain thorough controls for this, yet, like Real, generates revenues in the billions, it has to be made subject to seven-figure sanctions in the event of violations. Only in this way will it be in the retailer’s own interest to ensure that its goods are correct.

It has come to light that in Germany as well, a number of retail chains sold lasagne that contained horsemeat. When retailers offer store brands, they are essentially acting as producers – and they also have to be accountable for the quality of their products in the same way as brand-name producers. However, the provisions dealing with in-house controls have to date been extremely vague. It is virtually impossible to hold companies criminally responsible.

Retailers difficult to prosecute

In fact, retailers know very well that they are virtually immune to criminal prosecution when they sell store-brand products that are not suitable for circulation in commerce. Under current law, in the absence of unambiguous requirements about quality assurance, it is essentially impossible to prove that a retailer acted knowingly. Workers at giant retailers will nearly always be able to claim that they didn't notice anything, since there aren’t any specific, mandatory requirements that they verify whether the goods conform to the declaration.

Under food law, inaccurate but medically harmless declaration of ingredients can be punished with a fine of up to € 50,000 for private individuals (section 10, para. 3 of the German Regulation on Food Labelling [Lebensmittel-Kennzeichnungsverordnung, LMKV], sections 60, para. 2, no. 26a and para. 5, no. 2 of the German Food and Feedstuff Code [Lebensmittel- und Futtermittelgesetzbuch, LFGB]), provided the act was undertaken wilfully or negligently and the food product was introduced into commerce. The criminal sanctions are thus directed at the entire production and sales chain, up to and including retailers. As with fraud, intent requires positive knowledge of declaration errors. Negligence requires only that this was wrongfully overlooked.

foodwatch demands specific inspection obligations for retailers

foodwatch thus feels it is imperative that retailers and brand-name producers be specially obligated to inspect their products in order to ensure that they are correct. In the event of violations, they have to be held accountable – and not simply under civil law but under criminal law as well. This is because if companies are subject not only to insignificant fines, which they can pay from petty cash, but also to hefty financial penalties based on revenues, it is then in their interest to market only products that are correct.

It is constitutionally permissible to place a specific duty on retailers to inspect their store-brand products, since the inspection costs can be passed on to their producers. Moreover, these retailers are already treated as producers under civil product-liability law.

Penalties have to have an impact on business

This sort of specific statutory duty to inspect would give rise to the following situation: if staff at a retailer inspect the goods, ascertain a declaration violation, and nevertheless continue to sell them, this constitutes wilful misconduct, enabling them to be punished for having committed fraud. If they fail to inspect and therefore sell falsely declared goods, this is not generally considered to be fraud (unless they knew of the declaration violation from another source) but in any event an administrative offence committed negligently.

The potential fine must be so high that a discovered violation has grave consequences for the retailer's business. As is the case under antitrust law, penalties running into the millions should be imposed in order that food producers do everything in their power, if for no other reason than self-interest, to ensure that their shelves are stocked with items (particularly store brands) that conform to the law.

Also require authorities to inform consumers in cases of fraud

To date, authorities have not been required to notify consumers about cases of deceptive practices involving retailers and producers. If they were to be obliged to take proactive measures for consumer protection and make prompt, comprehensive information public about goods not suitable for circulation in commerce due to, e.g. false declaration, then consumers would be able to specifically avoid these products. And the responsible companies would hasten to resolve the situation as quickly as possible. All information from the European Rapid Alert System, along with the authorities’ own investigation results, must be immediately made public, as must information giving the all-clear. This creates clarity and helps to optimally protect the interests of consumers at all times.