The Organic Foods Production Act, the Process/Product Distinction, and a Case for More End Product Regulation in the Organic Foods Market

Abstract

Congress passed the Organic Foods Production Act in 1990 and over a decade later, rules were finally promulgated implementing the Act in 2002. During the time between the passage of the Act and its implementation, the number of consumers purchasing organic food in the United States and globally has increased dramatically. This consumer interest in organic food is particularly striking given that the Organic Foods Production Act does not guarantee that food sold as “organic” will be free from toxins or pesticide residues and the legislative history of the Act makes clear that Congress did not intend to guarantee that food labeled “organic” would be free from toxins or pesticide residues. Rather, the Organic Foods Production Act focuses intently on process rather than end product regulation, and in this way, the Organic Foods Production Act has a different focus than much of American business regulation. This paper asserts that regulation of organic food products should be more product based for a number of reasons: the most important is that organic farming and marketing is unique in that not only does the process by which the food is produced matter to these particular consumers – consumers also care deeply about the quality of the end product. This paper will discuss consumer preferences for process and/or product information in this area, particularly as concerns about farming methods and their relation to environmental health are on the rise.Additionally, in analyzing this product/process distinction, this paper will discuss the “market for lemons” theory first espoused by Professor and economist, George A. Akerlof, in “The ‘Market For ‘Lemons:’ Quality Uncertainty and the Market Mechanism.” This paper explores the application of the “Market for Lemons” theory to the organic foods market and whether the organic market might be subject to collapse due to asymmetric information between buyer and seller. This paper asserts that ultimately, buying organic food has to do with a host of factors that will remain sound, despite asymmetric information about product quality, and that the market for organic food will remain fundamentally strong. For a multitude of other reasons, however, including the religious and ethical concerns of consumers relative to health and environment, the paper proposes a regulatory paradigm that would include stricter “organic specific” regulation, as well as thorough end product testing to support the continued expansion of this profitable market.