No one ever thought it would happen in the new millennium – multiple food scares in major civilized European countries. Concerns over food products classified as genetically modified organisms ("GMO") have lead to a surge in items on the grocery shelf that are labeled as "GMO-Free." Billions of dollars of livestock have been destroyed in an effort to control the spread of a variant form of Mad Cow Disease and in early February 2001, officials in Europe took the extraordinary step of banning the sale of T-bone steaks and rib-eye steaks. In March 2001, the UK essentially banned travel in rural areas, virtually shutting down the tourist industry in many rural areas because of the spread of foot and mouth disease.
Banning the sale of T-bone steaks in an entire continent? It's time for business people everywhere to sit up and take notice. Food and livestock related diseases and issues are getting major publicity, which gets the attention of product liability lawyers. The lawyers are circling and if you do not take protective measures, this time the carcass may be your business.
The Spread of Public Concern.
According to the Animal and Plant Health Inspection Services of the United States Department of Agriculture, BSE has not been detected in the United States. The U.S. has implemented a BSE surveillance system, and thousands of bovine brain specimens have been examined. No evidence of BSE has been detected in the U.S. Further, to prevent BSE from entering the United States, severe restrictions were placed on the importation of live ruminants and certain ruminant products from countries where BSE was known to exist. Recently, these restrictions were extended to include importation of ruminants and certain ruminant products from all European countries.
A cousin of "mad cow" disease, Creutzfeldt-Jakob disease (CJD) is a rare, fatal neurodegenerative disorder found in humans that causes jerky movement, visual disturbances, and rapidly progressive dementia. The incidence of non-deviant CJD occurs in the U.S. at a rate of about 1:1,000,000 people. The symptoms are often compared to schizophrenia, but the disease is fatal. Death occurs 3 to 12 months after the onset of symptoms. Because CJD can incubate silently for up to 40 years, locating the source and detecting the disease before symptoms appear is often impossible. Following surgery or an autopsy on a person with CJD, the surgical instruments are frequently thrown away.
The most prevalent theory regarding transmission of BSE to humans is that the victims consumed meat that contained contaminated neurological tissue from the cow, and that the deviant prion protein passed to the human host. Scientists believe that the cuts of meat most likely to transmit the prion protein are those cuts of meat that come into contact with the vertebral column of the cow, such as T-bone steaks and ribeye steaks. Unlike most other pathogens, prions resist ordinary disinfection and sterilization techniques, and may pose a risk to health care providers. The form of CJD passed to humans from animals with BSE is called Variant CJD (vCJD).
Although vCJD has not yet been found in humans in the United States, it may only be a matter of time until the first case is reported. Due to the long incubation period, there is a reasonable chance that a U.S. traveler to Europe contracted the disease during the past two to ten years and that the disease has not yet been diagnosed. If vCJD disease is diagnosed in the U.S., the diagnosis is likely to be major news and could very well lead to the same types of changes in consumer habits that have been seen in Europe.
Ruminant By-Products Abound in the United States.
Millions of head of cattle are slaughtered each year in the world. Although most of the meat from a slaughtered animal is packaged and sold for human consumption, pound-for-pound there is about an equal amount of leftover fat, intestine, bone, and neurological tissue. Most people do not think about what happens to the rest of the animal, but in this age of re-cycling, most of the animal gets put to use by our 21st century postindustrial society. Historic uses for byproducts include protein supplements for animal feed, bone-meal for fertilizer, anti-aging creams, gelatin, and glue.
What is the Likely Impact on Business in the United States?
Food and animal related diseases can have a serious impact on business. In March 2001, due to the spread of foot and mouth disease among livestock, the UK announced a virtual ban on travel in rural areas in the UK, forcing U.S. tour operators to cancel vacation tours. USDA inspectors now question travelers coming into the U.S. from the EU, and travelers who have visited farms or come into contact with livestock may be subject to de-contamination upon entry into the U.S. If you donate blood, you may also be questioned about travel to the EU.
Many countries in the EU originally claimed "BSE-free" status, taking the position that their regulations had prevented the spread of BSE from the UK into their country. Unfortunately, many of those countries were proven wrong, and BSE has been detected in Spain and Germany. Two deaths were recently reported in France from vCJD. As a result, the United States has now put a ban on the importation of nearly all mammalian products from the EU and many other countries.
According to the Foreign Agricultural Service of the USDA, earlier BSE outbreaks in the EU increased the demand for pork in the EU and reduced the amount of pork available for export. This has created demand for U.S. exporters to third-country markets. "BSE-Free" certified producers are already emerging. The recent prices for hog futures have increased dramatically to prices not seen for more than five years. The domestic impact is already being seen in higher meat prices in the supermarket as U.S. producers export more meat.
Most commentators believe that the United States has done a good job of isolating itself from BSE. The most obvious likely impact on business in the United States is the continuing regulation of the importation of mammalian products and byproducts from other countries. The regulations are likely to become more extensive.
Protecting Your Business
In some respects, being able to label a product as "BSEFree" or "GMO-Free" can be a marketing benefit. Consumers in the EU are already purchasing products labeled as BSE-Free, and shelves in the United States contain a number of products advertised as "GMOFree."
Major companies in the U.S. are already asking their suppliers to certify, in a form prepared by the customer, that the supplier is selling GMO-Free product. But is your product GMO-free and what are the risks of signing that form? For example, the corn industry takes the position that bulk corn is not GMO-free due to intermingling of GMO corn with non-GMO corn. As a result, a number of finished goods that contain corn syrup, corn starch, or gluten may not qualify as GMOFree. Is your company signing on to liability for a major recall if you supply a GMO product after erroneously certifying it as GMO-Free?
Product liability in the U.S. is governed by state law, meaning that your business could possibly be sued for product liability in any state in which you do business. Product liability law is usually based on a combination of three different alleged failures:
- a design defect in the product;
- a marketing defect, such as misbranding or using erroneous directions for use; and
- the failure to warn of a dangerous propensity.
In order to comply with FDA regulations, many businesses that deal in mammalian products will need long-term record keeping. The animal feed business has been under strict regulations for the past several years. However, even if your company only uses domestic products derived from mammals, you may have to defend yourself in court and prove the source.
Likely Claims
Two types of claims are likely to result from an erroneous GMO-Free or BSE-Free designations. If cases of vCJD are detected in the U.S. or if there is a GMO related health issue, lawyers here may very well target U.S. companies in class action lawsuits rather than attempt to bring suits abroad. It comes as no surprise to many companies that class action lawsuits are frequently filed because of the strength of the damages claim, not because of the scientific evidence pointing to the liability of any particular company. As has been repeatedly demonstrated in some U.S. courts, scientific evidence will not always protect your business. Instead, the best-protected business may be the one with the best record keeping and the best insurance. The ability to track the source of mammalian products could prove to be the decisive factor in whether or not your company can withstand the attack.
Record Keeping
How can you prove that your products did not contain imported mammalian protein or GMO products unless you have records? You will need to review both how you document the quality of what you purchase from your own suppliers and how you document the quality of what you sell to your customers.
The best way to start a record-keeping program is to do an audit of the records that your company currently maintains. Find out if you are asking your suppliers to certify products supplied to you and how you maintain those records. A record-keeping program is only as good as its implementation. You should also find out who in your organization is responding to customer inquiries about certification. Is it your sales people? Do you even have a uniform method of responding? Do you have a central tracking and filing system for your responses?
In addition, you should consider reviewing your record retention program. Many businesses have a policy of discarding records after a few years. However, due to the long incubation period associated with vCJD, you may want to revisit the length of the retention period for certain corporate records.
Labeling and Disclaimers
Warning labels and disclaimers have become mainstream in the U.S. Many products sold in the U.S. are derived from mammalian protein and fat, but the label of the product may not make that clear to the average consumer. Whether or not a product should be labeled as GMO-free or as containing GMO product is a hotly debated and controversial issue and the subject of growing regulatory control in various countries. Although every product is different, careful consideration should be given to whether the ingredients list on the product should indicate that the product is made from a GMO product or from mammalian protein or fat.
Insurance
Insurance may also be a good way to protect your business. A review of your policies will reveal whether your company has coverage for lawsuits that stem from BSE or vCJD. Insurance companies offer a wide variety of insurance policies, including policies that cover claims against officers and directors, claims for business interruption, and general liability claims. However, many policies also contain exclusions that may preclude coverage at the time you need it most. An audit of your policies will reveal the coverage you have, or that you need.