Lei attended the Just Food Conference today and was in a food law workshop. Here are some notes from the workshop that might be of use to you. When slides are available, Lei will post them here.
The presenter was Jason Foscolo, Attorney at law, founder of Food Law Firm, a private practice that specializes in all aspects of food regulations and laws.
Food is subject to unique regulations
- Legal exceptionalism, special rules for food producers
- Unique obligations for food producers
- Exemptions to broadly applicable laws that confer advantages
Sources of food law
- Clean Water Act – food producers are exempt and as much as 40% of water pollution is related to food production
- Fair Labor Standards Act
- Capper Volstead Act – exempts food producers from anti-trust laws
- Farm Bill
- Chapter 12 Bankruptcy
- Packers and Stockyards Act
- Civil Liability
- Forward contract leases, labor laws, contracts, trademark
Types of risk
- Regulatory risk, absolute quantity of penalty known ahead of time
- Civil liability risk, there’s really no known quantity ahead of time. Depends how big your scale is and how many people you can get sick
- Economic risk, producers need to manage risks of planting crops
Strict liability
- Civil liability, the entire burden falls on you as food business
- Liability without regard for negligence
- If you make someone sick, you are liable. In a chain of distribution, all parties in the distribution chain can be collected from, the parties then need to settle what each party’s relative liability
- Litigation moves quickly, since it is strict liability
- If you are a small business, you have zero margin for error, since you have no defense and can quickly get bankrupted
- Does consumer have any liability? If they fail to follow instructions, it depends what makes them sick
Contracts
- Contracts are promises that stimulate the economy
- Interlaced promises are key to promoting trust among businesses
- Agreements facilitate risk management
Food product liability: risk management
How do you manage risk?
- Procedural controls, be preventative, invest heavily upfront in food safety all along your production chain
- Corporate shield, get limited liability, be careful and don’t abuse it
- Product liability insurance: you need it. If your business is new, go with the minimum $1M standard policy required by retailers. If you have a larger company and personal assets, buy more insurance, don’t go too minimal if you have a lot to protect.
- If you’re thinking of a home based business, you need commercial insurance. None of your existing homeowners insurance covers this. You need to be extra scrupulous to prevent food safety problems
- Top three things you need: legal incorporation (based on what benefits you most from a tax perspective), insurance, trademark your brand.
- Product recall plan: how do you get faulty product back as quickly as you can? Met a farmer who spent $500k to recall 800 lbs of beef. Traceability is key.
- Recall insurance
- Contracts with suppliers, know the rules, read contracts. Most retail outlets will not adjust their contracts to suit you. Most retailers will also try to direct all liability to you.
Why compliance is important in food labeling (retail and packaged food)
- Anything non-compliant is “misbranded”, it could be as little as a misplaced font!
- Warning letters, administrative detention
- You may face criminal sanctions
- Allergens, see below
- Wholesale buyers are gatekeepers to your success
- Small scale producers often get exempted
Allergen labeling, really really important (email for slide)
- 8 major food allergens: milk, egg, tree nuts, wheat, peanuts, shellfish, soybeans
- Declarations in plain English
- Labeling exemptions: less than $500k gross a year, but a wholesaler may require labels. Fresh produce, zero nutrient foods, deli and bakery goods are exempt
- You don’t make functional claims: nutrient content, health claims, qualified health claims
Trademarks
Why file a trademark?
- Offense, carving out a space, easier to issue cease and desist if someone treads on your toes
- Defense, don’t step on other people’s toes, do your homework with other brands or you’ll get a cease and desist
- National registry: check it for names
Statement of identity
- Product name as plainly and simply as possible
- Acceptable names may even be determined by law or regulation
Wordmarks
- Fanciful: Xerox
- Arbitrary: Apple (computers, try it for cider and good luck)
- Suggestive: Brewla Bars
- Descriptive: International Business Machines
- Generic: Hard Wood Flooring
Here are the slides:
Just Food 2013
Lean Food Startup 