Why Some Companies Love Product Labeling Regulations

Is your dairy-free, non-GMO “milk” made from "free-range trees"? This one is. The company, Mikadamia, is trying to set its macadamia nut milk apart from almond milk by highlighting that its trees do not require irrigation like the almond tree.

The food labeling craze coupled with banner headlines about the dangers of gluten, GMOs, and hormones are leading to increasingly absurd results. For example, you can purchase "premium" water that’s not only free of GMOs and gluten but certified kosher and organic. Never mind that not a single drop of water anywhere contains either property or is altered in any way by those designations.

Brief History of Food Labeling

Up to 1960s:

Perpared foods offered and were required to tell consumers veru little about the content of prepared foods

Early 1970s:

Growth in processed foods led to a system of voluntary and mandatory nutrition labeling.

1990s

The Nutrition Labeling and Education Act of 1990 gave the FDA the authority to require companies to list certain nutrients and other details on food packages.

After 1990 Act to Present

Food labeling has gotten wilder. Federal guidlines offer strict rules to follow for certain labels such as "organic". Other labels, such as "natural" are not regulated. And conflicts arise such as "cage free" (not regulated) and "free range" (regulated) or "grass-fed" (not regulated) and "hormone-free" (regulated). As the price of the product can be affected by its labeling claims, spurious or not, the problem is more that just a transparency issue.

Economics

food labeling is designed to overcome the problem of "asymmetric information". The seller of a product knows more about the product than the buyer. With food, its characteristics can be sometimes be partially judged with the 5 senses, but the characteristics, such as flavor, of an apple you purchase can never be fully known until after you eat it. Contents of a box, jar or can of processed food are even more asymmetrically aligned. That's where food labels can help.

Mandated labels have helped narrow the knowledge gap disclosing calories and other data we have come to rely on. Some companies exploit the knowledge gap by preying on consumer concerns to sell at a premium or increase market share. As an additional example (other than gluten free water and Free range trees), while federal law requires that hormones not be used in pork or poultry, companies that advertise a chicken breast as "hormone-free" are simply trying to charge more or help its product stand out against others.

GMO Labeling and the Signaling Effect

A new law taking effect in the summer of 2018 makes GMO labeling of some foods mandatory. An economic theory related to asymmetric information called the signaling effect comes into play. The mere fact that label information concerning GMO facts signals that there is a problem with bio-engineered foods. However, all we really know is that While some countries have banned the use of GMOs, such as in Europe, the FDA has said that “credible evidence" has demonstrated that foods from the GE plant varieties marketed to date are as safe as comparable, non-GE foods.” But "GMO-Free" labels are showing up all all sorts of products now playing on the concerns of the consumer.

The worry is that consumers will become ever more mystified as more businesses make increasingly absurd claims on their labels so that their products stand out from the competition in the grocery store aisle. The only thing consumers will get in return for these “fake transparency” labels is a higher price tag.

See Quartz, Glutten free water shows how ridiculous food labeling has become, Brandon Mcfadden, September 4, 2017.

Other Signs that The Debate on Product Differentiation is Going Crazy

• Gatorade, owned by PepsiCo, agreed to pay $300,000 to settle the California attorney general’s complaint filed over Gatorade’s “Bolt” game, featuring track star Usain Bolt getting faster when he touched a Gatorade icon,and slowing down when he touched a water droplet.
• California’s AG Xavier Becerra cited studies that found this type of game can negatively affect a child’s desire for healthy food. The game was played 87 million times between 2012 and 2013, and roughly 70% of the players were aged 13-24.
• “Making misleading statements is a violation of California law,” Becerra said in a press release. “But making misleading statements aimed at our children is beyond unlawful, it’s morally wrong and a betrayal of trust. It’s what causes consumers to lose faith in the products they buy.”