The original 47 recommendations in the Interim Report have been condensed into 8, but initial reading does not indicate any real significant departures from the Interim Report which would affect consumers or indeed industry. The only major change is the Final Report does not call for the Food Standards Agency (FSA) to lead on the Food Authenticity Programme, leaving DEFRA to retain control over origin labelling. Clearly, Professor Elliott wished to avoid a turf war between the two Government Departments.
The Report recognises that the supply chain is complex and food fraud is an organised and sophisticated crime for which there is no easy fix. If the Government is serious about change then it will take time and money to affect these changes and there is no magic bullet. As such, the system envisaged by Professor Elliott is based on eight pillars of food integrity: Consumers First, Zero Tolerance, Intelligence Gathering, Laboratory Services, Audit, Government Support, Leadership and Crisis Management, with the Audit pillar attracting the largest number of recommendations.
The biggest changes which are likely to have the most impact on combating food fraud are the recommendations for intelligence gathering and the creation of a new Food Crime Unit. These are looked at in more detail below. However, for food manufacturers and retailers, the sections on Zero Tolerance and Audit contain some important recommendations.
Some of the key suggestions include:
- Food businesses ensuring that there are mechanisms in place to enable their staff and consumers to ‘whistleblow’ concerns about suspected and known food crimes.
- Knowing who you do business with: The Report emphasises that managing a supply chain must be much more than maintaining a paper trail. As such, he recommends that the risks are clearly identified and detailed in a company risk register. This should include details of the steps to mitigate risks.
- Improving procurement procedures: This is needed as Professor Elliott believes there is a culture of adversarial procurement and cautions against procurement of goods of less than the recognised reasonable price. He suggests that Industry incentive mechanisms should reward responsible procurement practice. He goes on to suggest that if products are purchased for below the recognised market price, then the retailer would need to produce evidence that it checked there were no grounds to suspect the products were counterfeit or adulterated. The implications of this are mind-boggling.
- Businesses overcoming their reticence to report intelligence relating to attempted or actual frauds. He argues that preventing food fraud should take priority over fear of anti-competitive practises, protecting information for fear of losing a competitive advantage and fear of regulators publishing the information. This, like the previous recommendation, while well-meaning is naive. Nevertheless, the worry is how regulators may latch on to this and rely on it in prosecutions.
- The FSA creating a central register for food law convictions: This he believes will ensure that major players would make sure significant resources are provided for compliance and let consumers make informed choices. The pros and cons for a central register are numerous but it is difficult to see how this would incentivise Industry any more than a potential scandal would. This, coupled with the subsequent recommendation that the Sentencing Council should look at the levels of fines for breaches, indicates that prosecutions may very well increase and tougher penalties will be imposed.
However, Professor Elliott recognises the benefits of earned recognition and the importance of the Primary Authority Scheme and points to these as a way to free up regulators’ time. Earned autonomy is something business has supported for some time and this will no doubt be a welcome endorsement of this position.
DWF’s Food and Retail experts have been working with companies since the horsemeat crisis to assist them to build a strong legal platform for their supply chain and would be delighted to discuss the implications of this report for your business. Please contact, Hilary Ross, Dominic Watkins or Paul Attwood.
The Report also makes extensive recommendations in relation to auditing. The key points are discussed below.
- A modular approach to auditing, with a core food safety and integrity audit recognised by the Global Food Safety Initiative (GFSI) and agreed by major retailers and standards owners. In addition to this core audit, individual retailers would design their own specific modules which would focus on their business priorities, to be conducted at the same time. What the Final Report recommends, is that once an audit scheme has earned recognition from the FSA, the food businesses subject to it gain from having fewer local authority inspections saving them time and money.
- There is a recognition that the auditing regime has, in some cases, become an industry in itself, and as a result, there is a danger that an audit regime can be used for raising revenue, placing unnecessary costs on food businesses. The Final Report recommends that the Government encourages industry to reduce burdens on businesses by carrying out fewer, but more effective audits and by replacing announced audits with more comprehensive unannounced audits.
- Industry and regulators are to work together to develop specialist training for employees and auditors to assist with detecting food fraud and dishonest labelling.
- The Final Report highlights the risks of food fraud taking place in storage facilities and during transport when food is vulnerable to tampering and so industry is required to incorporate storage and transport into the auditing regime.
- Currently there is no requirement on auditors to carry out product sampling as part of a standard food safety audit and again, conscious of costs to the industry, it is noted that sampling introduces an additional cost to businesses. However, the Final Report points out that sampling is not the same as testing, and sampling will provide a significant deterrent as fraudsters will not know when or if testing will take place, nor which products are being sampled. Therefore, Professor Elliott recommends the Government encourages third party accreditation bodies undertaking food sampling to incorporate surveillance sampling in unannounced audits.
It is clear from the Report that Professor Elliott recognises that, whilst Industry has a role to play in restoring consumer confidence, the Industry cannot tackle organised food fraud. This is most welcome given that at the time of the horsemeat scandal Industry shouldered the blame. He recognises that an effective regime will need Government support and to this end, he recommends the creation of:
- A Safe Haven which will collect and sanitise information from the industry through a confidential source register by an independent body: This independent body will then convert the information into intelligence that can be shared with regulators and across industry. It is recommended that the costs of the organisation is funded by industry and that steps are taken to ensure the information provided by contributors to the independent body is subject to legal privilege. This is clearly a point that needs much greater consideration as the proposed aims of the Safe Haven and the way of collecting information are not conducive to establishing legal privilege. The Final Report also acknowledges that further assurances will need to be given to industry before matters can progress.
- An FSA intelligence hub: Professor Elliot also recommends that the FSA takes the lead in the collection, analysis and distribution of information from a wide range of sources including local authorities, the Police and the EU. He recommends that the FSA works with the research sector to horizon scan for key indicators that can flag up areas of potential fraudulent activity and feed this information into a Food Crime Unit.
- Food Crimes Unit (FCU): The UK is one of the few large member states in the EU not to have such a unit. Countries like France, Germany and the Netherlands already have such units and Professor Elliott recommends adopting the Dutch model. This will involve establishing standards for criminal investigation of food crime, establishing links with technical experts and the development of partnerships with UK police forces. It will also require significant investment to ensure that a central investigative capability is in place, operating to Police standards, as well as ensuring the right skill sets, which will encompass not only the traditional TSO and EHO skills but also those relating to cyber and financial crimes.
Professor Elliott supports a two phase approach to the creation of an FCU. Phase one will involve evidence gathering and business case development periods, whilst phase two will put in place mechanisms to investigate and take forward actions. The proposal for a phased approach is curious and it indicates that there is still uncertainty about the ‘business case’ for such a unit. Given that the initial set up of the unit is estimated to cost between £2-4 million a year, it is likely that the Government will need to be utterly convinced of the business case before making such an investment.
Professor Elliott also recommends investment will be required to support the pillar of Laboratory Services. He calls for the maintenance of, and investment in, publically funded laboratories, albeit with a potential new structure to make them more effective. The timing of this recommendation is germane, as only last week it was announced that the only publically run food testing centre in Wales was to close due to a lack of resources.
Although the Final Report contains no major surprises and several recommendations were already subject to initiatives being implemented by regulators, Industry and trade associations, it is overall a bold report and if the recommendations are implemented, will result in significant changes as to how the UK tackles fraud. The details remain to be ironed out, and in relation to some issues, such as the Safe Haven, may prove challenging. However, the ball is now in the Government’s court to fund and support the real changes advocated by the Final Report - the Intelligence Hub and Food Crimes unit. The worst scenario for Industry would be for the recommendations to be cherry picked, leaving the burden on Industry and local regulators to tackle this issue alone.
The changes recommended for businesses will involve a review of the way in which they deal with their supply chains, both from an internal and external perspective. Internally, a joined up approach is required, breaking down potential internal silos and ensuring training on supply chain issues is consistently rolled out through each department. Externally, old systems need to be revisited and rethought to see how they can work more effectively. This does not necessarily mean that more precautions are required but rather the most effective precautions are in place.This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.