California’s Prop 37: A feast for lawyers

Freakonomics, which published a critique of Prop 37 in June, explains how the law purposely sets a low tripwire for violations:

… the California law would impose a nearly twice as stringent purity standard [as Europe’s], tolerating only 0.5% GE content in non-GE food.

Such a high purity standard would likely require farmers to invest in separate planting, harvesting, storage, hauling, processing, and packaging equipment for GE production in order to avoid revenue losses and liability from contaminating their non-GE operations or those of competitors.

At this point some Prop 37 advocates will be thinking, “Great! Let them build separate storage and production lines. That’ll drive up the price of GE/GMO foods, as it should.” Not so fast: the effect cuts both ways, and whether it drives up costs more on one side of the divide or the other depends on, among other factors, economies of scale. By some estimates, 70 percent of the current American food supply would need a “contains GMOs” label. If certified GMO-free products remain a minority taste as to a given food category, middlemen may well balk at setting up a parallel system to handle only, say, one-tenth of the volume. Then it will be the GMO-free producers who get pushed to the margins and find themselves with a narrower and more expensive choice of processors and distributors, as is already the case with many organic products.

Proponents make much of the fact that snack chip titan PepsiCo is spending heavily to fight the bill. But let’s face it: PepsiCo is going to do okay either way. It can slap a boilerplate warning on all its packaging, accept the loss of some small fraction of consumers (many of whom it is already losing to alternatives labeled organic), and its remaining high volume will guarantee it a wide choice of processing and distribution options.

It’s makers and distributors who don’t label their products who will stumble into lawsuits under bounty-hunter provisions that, as with Prop 65, do not require lawyers on the attack to show that any actual consumers have suffered any harm.

Some California makers of non-GMO foods, including a big organic farm certification group, do support Prop 37, expecting it to give them a competitive edge. But many others quietly or not so quietly oppose it as cunningly designed to expose them to opportunistic litigation in the future, while excluding from the market the sorts of smaller food producers and distributors, including those outside California, who are unwilling to brave the new paperwork, insurance and legal burdens.

As for the Prop 65 lawyers looking for a profitable new line? They’re whetting their knives and licking their chops.

Walter Olson is senior fellow at the Cato Institute and edits Overlawyered, which has long covered Prop 65.