MKTG 442 FOOD MARKETING REGULATIONS Lars Perner, Instructor 1 FOOD MARKETING REGULATIONS  Types of regulations –Economic –Food safety –Consumer protection –Intellectual property  Regulating agencies

MKTG 442 FOOD MARKETING REGULATIONS Lars Perner, Instructor 2 Types of Food Marketing Regulations  Food quality and safety –Food contents –Handling –Labeling  Fair competition laws –Anti-monopoly –Price discrimination –Collective negotiations  Consumer price regulations –Minimum –Maximum (?) –Price maintenance  Advertising and promotion –Standards for deceptive advertising –Disclosure requirements

MKTG 442 FOOD MARKETING REGULATIONS Lars Perner, Instructor 3 Fair Competition  Anti-monopoly laws –Outright monopoly –Concentration –Collusion  Boycott prohibitions Break-up of monopolies or large share firms Review of mergers and acquisitions

MKTG 442 FOOD MARKETING REGULATIONS Lars Perner, Instructor 4 Levels of Competition –Agricultural suppliers and service (e.g., transportation) –Large scale purchasers –Farmers supplying larger buyers  Permitted to negotiate jointly

MKTG 442 FOOD MARKETING REGULATIONS Lars Perner, Instructor 5 Price Discrimination  Robinson-Patman Act: Equal price treatment to all buyers who compete against each other unless discounts are justified by price savings (e.g., volume discounts)  Permissible to charge non-competing buyers different prices—eg. institutional buyers such as hospitals do not compete with food manufacturers

MKTG 442 FOOD MARKETING REGULATIONS Lars Perner, Instructor 6 Price Maintenance  Manufacturers may establish minimum retail prices for foods  Retailers may not agree to charge this minimum (thus no conspiracy)  Manufacturers may “cut off” retailers who sell below the minimum but may not reinstate in return for a promise to charge minimum (a conspiracy)  Usually not practically useful in most of today’s markets

MKTG 442 FOOD MARKETING REGULATIONS Lars Perner, Instructor 7 Regulations to Protect Smaller Retailers  U.S. –Minimum prices –Restrictions on selling below cost  In some countries –Store size regulations –Opening hours –Advertising restrictions

MKTG 442 FOOD MARKETING REGULATIONS Lars Perner, Instructor 8 State or Federal Minimum Prices  Some jurisdictions set minimum prices for certain specific products  Usually to protect small merchants  Minimum prices will upset the supply-demand equilibrium if demand is elastic (reduction in category sales) Supply Demand Minimum price Equilibrium quantity Reduced Quantity

MKTG 442 FOOD MARKETING REGULATIONS Lars Perner, Instructor 9 Maximum Prices  Used in some countries and during war periods in the U.S.  Greater concern is usually with prices being too low  U.S. laws generally favor competition to reduce prices  Affordability problems for poor can be more effectively addressed by welfare payments  May impact supply of goods depending on supply elasticity (especially for retail operations in high cost, inner city areas) Supply Demand Equilibrium price Shortage Demand with welfare payments

MKTG 442 FOOD MARKETING REGULATIONS Lars Perner, Instructor 10 Intellectual Property Laws  Patents –Exclusive right to use technology or process developed for a specified period of time –Intended to provide incentive to innovate –International variations in standards  Trademarks –Right to use “vigorously defended” term— actual rules are complicated  Copyrights –Limited applicability to food products

MKTG 442 FOOD MARKETING REGULATIONS Lars Perner, Instructor 11 Tax Laws  Tax breaks to promote survival of family farms—e.g., –Delayed or reduced inheritance tax on farm value –Accelerated depreciation –Tax credits for investments

MKTG 442 FOOD MARKETING REGULATIONS Lars Perner, Instructor 12 Some Federal Regulatory Agencies  U.S. Department of Agriculture –Food Safety Inspection Service  Department of Justice  Federal Trade Commission  Interstate Commerce Commission  Internal Revenue Service  Environmental Protection Agency  U.S. Department of Labor  Occupational Health and Safety Administration