Law For Food: The law affects what you eat. What you buy to eat affects the law.

A Bright Side

Is American Cheese the new American Wine? Is the faltering dollar good for the domestic artisanal food industry — or at least those parts of it which don’t rely on imports?

What has been good for wine has been good for cheese. The rising wealth and strong dollar of the 1990s sent Americans flocking to Europe, returning with a new understanding and appreci­ation of continental eating. Food has emerged as hip entertainment, with its own vibrant press, TVnetworks, and rock-star chefs. Movies about food and wine have found large, sophisticated audi­ences (“Eat, Drink, Man, Woman,” “Sideways,” “Big Night,” “Like Water for Chocolate,” “Ratatouille”). Increased concern for health and a growing sus­picion of conventional agriculture, spurred by crises like mad cow, bird flu, and tainted spin­ach, have focused the nation on small-scale local farming and the sustainability and traceability of our food supply. Meanwhile, Whole Foods Market has planted 263 stores around the country (many through acquisitions of regional chains) since the first opened in 1980. And who could have pre­dicted the French Paradox—the notion, according to a bestseller about the eating habits of France, that you can eat plenty of fat and stay slim? Or Dr. Atkins urging eager dieters to eat pork and but­terfat? More recently, the flaccid dollar and robust euro have made American wines and cheeses seem veritable bargains.

I have for a while maintained that there is more excitement and energy in the U.S. artisanal cheese industry than there is in European cheese. In part, this is surely due to our having farther to go: try speaking, reading, or typing the words “American cheese” without picturing something gummy, preternaturally orange, oversalted and individually wrapped.

However, I also suspect that european cheesemakers and regulators have done the industry a disservice in the long term due to the AOC/PDO/DOP/DOC system of trademark regulation. (Each of these terms, in a different language, stands for “Controlled Name of Origin” and I shall refer to them all under the term “DOP” for simplicity’s sake.) The DOP system sets characteristics that must be met if a product is to be referred to under a traditional name; i.e., if you want to call your blue cheese Stilton you have to use milk from these sorts of cows, and make it into wheels this big and age them for this long and so on. In a number of cases, qualification is tied to a region: you can’t call your blue cheese Rocquefort, for instance, unless you have made it from sheep’s milk and then aged it in caves in the department Aveyron, where they will be exposed to the airborne, naturally-occurring penicilium rocqueforti that lives there. This system allows for the same sort of protection that individual firms get through trademark law, but enables the protection to be shared by every firm that makes a product meeting the qualification.

However, there are times and occasions in which the DOP system can backfire. Because the definitions are backed by law, it can be difficult to adapt them to new circumstances. Last year, Newcastle Brewing Company ran into this problem. Newcastle had successfully petitioned for the creation of a DOP defining “Newcastle Brown Ale” as ale that was, inter alia produced in the city of Newcastle-upon-Tyne. When the brewco decided to move its operations across the river to Gateshead, it was required to petition again to expand the legal defintion of “Newcastle Brown Ale” so that ale produced in its new facilities could be marketed under the same label.

As another example: the DOP for Stilton was written some years ago and requires that “Stilton” be made with pasteurized milk, despite the fact that pasturized Stilton is a historical latecomer, and that the cheese had been made with raw milk for centuries prior to industrial cheese production. When Joe Schneider and Randolph Hodgson revived the traditional stilton recipe, they were prohibited by law from calling the product “Stilton” and instead have had to market it under the name “Stichelton”, which is the Middle English name for the city of Stilton.

DOP protection has done some good in protecting quality standards for traditional food products, and I certainly do not oppose its use. However it seems to me that, absent DOP protection, artisanal cheesemakers in the U.S. have more opportunities to innovate in their cheesemaking techniques which are driving quality and variety in American artisanal cheesemaking. I have little doubt that if the DOP system were introduced into the U.S., it would in short order be co-opted by industrial producers, and thereby used to constrain this innovation, and I have some fears that European cheesemaking, which enjoys DOP protection, doesn’t have the same opportunities to innovate.


Food Patents and Antitrust

So, thanks to something the Ethicurean asked about last summer, I am working on a paper about Monsanto’s recently revoked seed patents, and I am unsure how I am supposed to think about a few things.

First, a short review of what I’m learning. Monsanto held the patent in glyphosate-based herbicides, which are non-selective (i.e., they kill your crop as well as your weeds) and which it sells under the RoundUp trade mark. While they held this patent they developed a way to insert DNA which codes for an enzyme into various germplasms. The coded-for enzyme confers glyphosate tolerance upon the plant. Monsanto sells crops with this nifty little bit of bioengineering under the RoundUp Ready trade mark.

The RoundUp patent expired, but the market hasn’t seen an increase in the sale or availability of generic glyphosate herbicides (which should still work with RoundUp Ready seeds) for a number of reasons.

First, Monsanto includes with the sale of RoundUp Ready seeds a crop failure guarantee called “RoundUp Rewards”, which protect farmers against crop failure. This guarantee is only available when RoundUp Ready seeds are used in conjunction with RoundUp, and is unavailable when generic glyphosate herbicide is used. Given that a crop failure guarantee adds substantial value to the RoundUp Ready seeds, farmers are unlikely to use generic glyphosate. This sews up the demand side for RoundUp.

Second, the dealer margins on herbicides are fairly slender, so Monsanto has a dealer rebate program which makes the sale of RoundUp profitable. This rebate program, however, is contingent upon the dealer hitting its sales targets with respect to the entire spectrum of RoundUp Ready seeds. This sews up the supply side for bioengineered seeds.

Farmers want RoundUp, so dealers have to sell it. Dealers want to make a profit on RoundUp, so they have to push RoundUp Ready seeds.

Now, I think there is a strong argument to be made that this behavior is in violation of section 1 of the Sherman Act and section 3 of the Clayton act, but I have to ask whether it is in the interests of opponents of genetically modified foods and of herbicides for these laws to be enforced in this case.

The aim of antitrust law (known in non-U.S. jurisdictions as competition law) is to promote competition within a market. Where an entity (be it a single corporation, or the concerted action of multiple colluding competitors) exercises market power so as to eliminate competition, the thinking is that the entire market, and therefore consumer choice and economic development, suffers. Competition brings prices down and more products to market. There are some economists who disagree, but antitrust law seems to me to be ultimately pro-market by ensuring that markets remain competitive.

Thus it seems to me that a real danger exists that if Monsanto is found to be in violation of these antitrust laws and is enjoined to cease these behaviors, the market may open up to other suppliers of generic glyphosate, which will simply reduce the total cost of growing glyphosate-resistant crops. That is, in a competitive market for glyphosate, we should expect to see an increase in the amount of glyphosate-resistant crops grown. Monsanto’s actions keep the market from being competitive, at least for now.

This is confusing to me, because in doing a lot of this reading I have developed a sense that Monsanto is a too-powerful company that needs to be stopped from abusing its patents and market power, but I have a suspicion that the harm Monsanto does to growers and dealers is that it is able to keep prices from dropping by keeping competitors out of the market. I am unsure whether this is a harm to society as a whole, given the premise that GM crops and non-selective herbicides are harmful to both our environment and our food supply.

Giving your Secrets Away
15 October 2007, 1:38 pm
Filed under: Intellectual Property in Food

On a related note, the 37 Signals blog noted recently that successful restaurants are restaurants that “give their secrets away” by selling cookbooks.

Comparative IP, Magician Style
15 October 2007, 1:32 pm
Filed under: Intellectual Property in Food, Regulation, Subsidies, Taxation, the-small-laws

In my comparative law class last year, we discussed at length the need for comparative lawyers to take a holistic look at the cultures which they are comparing before reaching their conclusions. It is often misleading to conclude that such-and-such a problem simply does not occur in the target jurisdiction when a strictly legal solution to that problem doesn’t show up in statutes and cases.

This article in Slate brings up the idea of extra-legal IP protection in two cases: magicians’ tricks, and chefs’ techniques and recipes. In neither case are the ideas and innovations that build a magician or a chef’s career protected at law, but that doesn’t mean that these markets don’t have extra-legal incentives to protect those innovations. Often the incentives are a function of the social network protecting its value and stability against outsiders and upstart. I thought you might appreciate this as a way IP is protected without recourse to the government.