FOOD MARKETING FOOD MARKETING REGULATIONSREGULATIONS

Types of Types of regulationsregulations– EconomicEconomic– Food safetyFood safety– Consumer Consumer

protectionprotection– Intellectual propertyIntellectual property

Regulating Regulating agenciesagencies

Types of Food Marketing Types of Food Marketing RegulationsRegulations

Food quality and Food quality and safetysafety– Food contentsFood contents– HandlingHandling– LabelingLabeling

Fair competition lawsFair competition laws– Anti-monopolyAnti-monopoly– Price discriminationPrice discrimination– Collective negotiationsCollective negotiations

Consumer price Consumer price regulationsregulations– MinimumMinimum– Maximum (?)Maximum (?)– Price maintenancePrice maintenance

Advertising and Advertising and promotionpromotion– Standards for deceptive Standards for deceptive

advertisingadvertising– Disclosure Disclosure

requirementsrequirements

Fair CompetitionFair Competition

Anti-monopoly lawsAnti-monopoly laws– Outright monopolyOutright monopoly– ConcentrationConcentration– CollusionCollusion

Boycott prohibitionsBoycott prohibitions

Break-up of monopolies or large share firms

Review of mergers and acquisitions

Levels of CompetitionLevels of Competition

– Agricultural suppliers and service (e.g., Agricultural suppliers and service (e.g., transportation)transportation)

– Large scale purchasersLarge scale purchasers– Farmers supplying larger buyersFarmers supplying larger buyers

Permitted to negotiate jointlyPermitted to negotiate jointly

Price DiscriminationPrice Discrimination

Robinson-Patman Act: Equal price Robinson-Patman Act: Equal price treatment to all buyers who compete treatment to all buyers who compete against each other unless discounts are against each other unless discounts are justified by price savings (e.g., volume justified by price savings (e.g., volume discounts)discounts)

Permissible to charge non-competing Permissible to charge non-competing buyers different prices—eg. institutional buyers different prices—eg. institutional buyers such as hospitals do not compete buyers such as hospitals do not compete with food manufacturerswith food manufacturers

Price MaintenancePrice Maintenance

Manufacturers may establish minimum Manufacturers may establish minimum retail prices for foodsretail prices for foods

Retailers may not agree to charge this Retailers may not agree to charge this minimum (thus no conspiracy)minimum (thus no conspiracy)

Manufacturers may “cut off” retailers who Manufacturers may “cut off” retailers who sell below the minimum but may not sell below the minimum but may not reinstate in return for a promise to charge reinstate in return for a promise to charge minimum (a conspiracy)minimum (a conspiracy)

Usually not practically useful in most of Usually not practically useful in most of today’s marketstoday’s markets

Regulations to Protect Smaller Regulations to Protect Smaller RetailersRetailers

U.S.U.S.– Minimum pricesMinimum prices– Restrictions on selling below costRestrictions on selling below cost

In some countriesIn some countries– Store size regulationsStore size regulations– Opening hoursOpening hours– Advertising restrictionsAdvertising restrictions

State or Federal Minimum PricesState or Federal Minimum Prices Some jurisdictions set minimum prices for certain Some jurisdictions set minimum prices for certain

specific productsspecific products Usually to protect small merchantsUsually to protect small merchants Minimum prices will upset the supply-demand Minimum prices will upset the supply-demand

equilibrium if demand is elastic (reduction in equilibrium if demand is elastic (reduction in category sales)category sales)

Supply and Demand Curves

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Minimum price

Equilibrium quantity

Reduced Quantity

Maximum PricesMaximum Prices Used in some countries and during war periods in Used in some countries and during war periods in

the U.S.the U.S. Greater concern is usually with prices being too Greater concern is usually with prices being too

lowlow U.S. laws generally favor competition to reduce U.S. laws generally favor competition to reduce

pricesprices Affordability problems for poor can be more Affordability problems for poor can be more

effectively addressed by welfare paymentseffectively addressed by welfare payments May impact supply of goods depending on supply May impact supply of goods depending on supply

elasticity (especially for retail operations in high elasticity (especially for retail operations in high cost, inner city areas)cost, inner city areas)

Supply and Demand Curves

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Shortage

Demand with welfare payments

Intellectual Property LawsIntellectual Property Laws

PatentsPatents– Exclusive right to use technology or process Exclusive right to use technology or process

developed for a specified period of timedeveloped for a specified period of time– Intended to provide incentive to innovateIntended to provide incentive to innovate– International variations in standardsInternational variations in standards

TrademarksTrademarks– Right to use “vigorously defended” term—Right to use “vigorously defended” term—

actual rules are complicatedactual rules are complicated Copyrights Copyrights

– Limited applicability to food productsLimited applicability to food products

Tax LawsTax Laws

Tax breaks to promote survival of Tax breaks to promote survival of family farms—e.g.,family farms—e.g.,– Delayed or reduced inheritance tax on Delayed or reduced inheritance tax on

farm valuefarm value– Accelerated depreciationAccelerated depreciation– Tax credits for investmentsTax credits for investments

SomeSome Federal Regulatory Agencies Federal Regulatory Agencies

U.S. Department of AgricultureU.S. Department of Agriculture– Food Safety Inspection ServiceFood Safety Inspection Service

Department of JusticeDepartment of Justice Federal Trade CommissionFederal Trade Commission Interstate Commerce CommissionInterstate Commerce Commission Internal Revenue ServiceInternal Revenue Service Environmental Protection AgencyEnvironmental Protection Agency U.S. Department of LaborU.S. Department of Labor Occupational Health and Safety Occupational Health and Safety

AdministrationAdministration