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Paper 6: Compliance and Sanctions: Criteria and Tools for the Future

Managing Food Safety and Suitability in New Zealand
DOMESTIC FOOD REVIEW

June 2005

1 Introduction

This is Paper 6 in a Review of government involvement in the domestic food sector.

The Review is a significant long-term project that is likely to run over at least five years. Its purpose is to create a food regulatory programme across all sectors of New Zealand’s domestic food industry that promotes and delivers safe and suitable food in New Zealand.

This is only the second time in the last 30 years that the government’s role in the New Zealand domestic food sector has been critically examined at an official level. The last review was in the late 1980s, and led to the Food Amendment Act 1996 and eventually the establishment of the New Zealand Food Safety Authority (NZFSA).

This Paper proposes assessment criteria, with underlying policy principles, to help achieve a nationally consistent approach to compliance and sanctions across New Zealand. This Paper also seeks discussion on a range of additional tools to help the regulator to manage and redress non-compliance across the food sector. The Paper has been developed by NZFSA in collaboration with representatives from Public Health Units and Territorial Authorities who work with Local Government across New Zealand.

Other Papers in the series include:

• Paper 1: Introduction and context

• Paper 2: Regulatory roles, responsibilities and structures

• Paper 3: Food Control Plans

• Paper 4: Implementation of Food Control Plans

• Paper 5: Principles and possible methods for a cost recovery framework

• Paper 7: Criteria and processes for various approvals

Submissions

After public consultation on all the Papers, NZFSA will analyse submissions and provide policy advice to the Government.

A number of principles are proposed in this Paper, and it is primarily these on which submissions are sought. These principles will guide the development of the policy to underpin the Domestic Food Review.

NZFSA is particularly interested in the areas that impact on industry, such as the choice of assessment tools, the type of information the regulator collects and methods of analysis.

Submissions are sought from interested people and organisations and will be accepted in any format.

The closing date for submissions is 30th August 2005

Submissions should be sent to:

Submissions – Domestic Food Review

c/o Policy Group

New Zealand Food Safety Authority

PO Box 2835

WELLINGTON

Email: dfrsubmissions@nzfsa.govt.nz

Fax: (04) 463 2501

The discussion document will be available on the NZFSA website (www.nzfsa.govt.nz/policy-law/projects/domestic-food-review/index.htm). Following analysis of submissions, a summary of issues raised will be made available on the above website.

All submissions are subject to the Official Information Act 1982, which specifies that information is to be available unless there are grounds for withholding it. If you wish your submission or any part of it to be withheld, please indicate the grounds in the Official Information Act that apply. NZFSA will take your request into account when determining whether or not to release information. Please note that any decision by NZFSA to withhold information is reviewable by the Ombudsman.

2 Executive Summary

The New Zealand Food Safety Authority (NZFSA) and local Government play key roles in ensuring effective and efficient compliance with food legislation across the production to consumption continuum. This Paper seeks public comment on a set of assessment criteria to assist the regulator to respond more effectively to non-compliance (or omissions) with food safety and suitability requirements.

The overarching objective of the criteria is to achieve a nationally consistent approach to compliance and sanctions.

The assessment criteria are characterised by specific policy objectives:

• to support the wider objectives and policies of the domestic food review¹;

• to support consistent regulatory responses to non-compliance;

• to support transparency to consumers, industry and regulators on the decision-making process for deciding the level and type of response to a given non-compliance;

Five policy principles underpin these policy objectives:

Principle 1: The compliance and sanctions regime will be seamless and coherent and will apply regulatory and non-regulatory provisions consistently and equitably across all food sectors.

Principle 2: Persons have responsibility to ensure they understand and implement the requirements of current food safety and suitability legislation.

Principle 3: The range of tools available to manage and prevent non-compliance will be flexible and extensive and will comprise options for both non-regulatory and regulatory intervention.

Principle 4: The Regulator will apply a set of assessment criteria to measure the seriousness of the non-compliance and thus the appropriate response.

Principle 5: An incremental scale of sanctions will be applied consistently and equitably across all food legislation.

In addition, the Paper seeks discussion on a range of additional tools to assist NZFSA to manage and redress non-compliance across the food sector. It is notable that prosecution is the only legally allowable regulatory response in many cases across the food sector, and it is widely accepted that this is insufficiently flexible.

The proposed new tools are:

• incentive schemes;

• grading and public notification schemes²;

• public apologies;

• diversion schemes;

• award/recognition schemes;

• infringement notices;

• improvement notices;

• prohibition notices;

• demerit points.

The Paper does not comment on specific offences and penalties across food legislation, but instead approaches sanctions and compliance from a higher (macro) policy level.

3 Purpose of the Paper

The purpose of this Paper is to:

• Describe the current range of tools available to the regulator to manage non-compliance with food safety and suitability requirements as set out in food legislation;

• Identify issues associated with the current regulatory approach to compliance and sanctions;

• Propose a set of assessment criteria to guide the response to non-compliance (or omissions) that will:

• support the NZFSA's overarching objectives across the entire food industry on the production to consumption continuum;

• provide consistency in the decision-making process followed by the regulator when responding to non-compliance scenarios;

• provide transparency to consumers, industry and regulators on the decision-making process for deciding on the level and type of response to a given non-compliance;

• provide for incremental responses to non-compliance based on how the ‘seriousness’ of the non-compliance is judged;

• propose a sufficiently broad range of tools that enable the regulator to respond with appropriate flexibility to meet various circumstances.

4 Scope

Inclusions

The Paper considers the current range of tools available to administer food legislation, policies and guidelines to contain, manage and prevent non-compliance. The Paper also examines tools employed in other New Zealand law.

Exclusions

The Paper excludes discussion on the following areas (all are under review within the wider Domestic Food Review):

• specific offences and penalties;

• the structure of the current food regulatory framework and the relationship between NZFSA, District Health Boards and the Territorial Authorities;

• the roles and responsibilities for administering and/or managing compliance processes under the current structure;

• third party verifiers, Public Health Units and Territorial Authorities;

• training and education requirements (for both food industry and regulators).

This Paper also excludes export requirements where they are additional to domestic standards. However, it is recognised that in both domestic and export food the response to a non-compliance will be according to its seriousness.

Terminology

The terms compliance, sanctions, prosecutions and enforcement are central concepts throughout this Paper. To avoid confusion, the following definitions are used in this Paper.

Compliance refers to a state when a person(s) or organisation is operating within the law that apply to that person(s), food, or organisation.

Non-compliance refers to a state when a person(s) or organisation is operating outside the law that apply to that person(s), food, or organisation.

Sanctions refers to the application of legal powers in response to non-compliance or to the consequences of a non-compliance.

Penalties refers to court sentences imposed following a prosecution and/or to sanctions imposed by the regulator in response to non-compliance. Sanctions provide a continuing process of prevention; for example, deregistration or the closure of a business.

Persons refers to all food producers, processors, operators, businesses, sellers and importers.

Prosecutions refers to the application of legal court procedures to seek a conviction of an offence.

Enforcement refers to the process of restoring compliance, and/or containing and preventing a recurrence of non-compliance. It may involve the application of sanctions, or prosecution or both.

Non-Regulatory Response refers to a response to non-compliance that does not involve the use of legal powers.

Regulatory Response refers to a response that involves the use of legal powers.

The Regulator refers to the public agency with the legal power to enforce food laws in the relevant circumstances. In practice this ranges from NZFSA to a number of agencies and officers employed by Public Health Units and Territorial Authorities.

5 Background

The domestic food regulatory system attempts to ensure safe and suitable food by requiring 'persons' to comply with law. It is recognised that the majority of persons actively seek to comply with food legislation and that consumers require protection only from a minority of persons that flout the law.

Non-compliance includes a broad range of actions and omissions with varying effects on the safety and suitability outcomes of the food. These actions and omissions are currently managed through a variety of non-regulatory and regulatory responses.

Non-regulatory responses generally apply where the non-compliance is considered to have a minor impact, and these responses are normally generalised. For example, a regulator who identifies a minor breach may inform the business operator what is required to restore compliance, or may recommend training for staff.

In contrast, regulatory responses are applied where the non-compliance is considered to cause, or potentially to cause, a more serious risk or detriment. Regulatory responses are usually targeted to a specific part of a food operation and are tailored to the level of seriousness of non-compliance. Where a risk is perceived, the regulator may order the recall or seizure of a food, or the closing down of an operation. An increasing level of non-compliance, including repeat offences of a lower level of non-compliance, will result in an increasing level of seriousness of enforcement.

5.1 Criteria measuring the seriousness of non-compliance

The seriousness of non-compliance is largely measured by factors such as:³;

• the safety of food;

• the repetitive or long-standing nature of a non-compliance;

• the perceived suitability of food;

• the accuracy and truthfulness of the labelling and composition;

• the breadth of consumers exposed;

• the reputation of New Zealand as a preferred producer of food;

• the appropriateness of any voluntary claims for the food (e.g. organic produce).

Matrix A: Examples of Possible Responses to Non-compliance

Matrix A illustrates examples of possible responses available to the Regulator relative to the level of seriousness (i.e. the level of risk or potential detriment) of the non-compliance.

Preventing a repeat of the non-compliance is aimed at lower risk offences. These measures may be escalated where the non-compliance is at a lower end of the scale but a higher level of response is required, because, for example, non-compliance is recurring.

Negotiated compliance will often be appropriate at the higher end of the seriousness scale, for example when the non-compliance is acknowledged and the parties are willing to work in good faith toward a resolution.

Enforcement is the highest level of response and may be most appropriate when there has been repeat non-compliance by a person or business or organisation.

No single response would exclude the use of other responses, for example non-compliance may necessitate a combination of responses depending on the nature of the non-compliance.

5.2 What motivates compliance?

From a regulator’s perspective, voluntary compliance is preferable to imposing sanctions and penalties. There have been no New Zealand studies on what motivates compliance with food legislation, but anecdotally the key drivers appear to be:

• a 'persons' personal commitment to food safety practices;

• a 'persons' high level of understanding of food safety and suitability requirements;

• a relatively simple business structure, including the number of persons involved in the supply chain, making it easier for 'persons' to know their responsibilities;

• peer pressure from other businesses;

• the owner's relatively high level of investment and commitment to continuing the business;

• stability and length of time 'persons' involved in the business and support networks, including the level of staff turnover;

• a smaller physical distance between the consumer and the business 'persons';

• higher regularity of the clientele;

• the branding of the food (for example 'organic');

• publicity associated with previous regulatory action against a 'person' or published about a 'person';

• customers' requirements and their loyalty;

• the frequency and effectiveness of food audits; and

• cost of compliance.

5.3 What works against compliance

Factors that work against a food 'person' complying with food safety and suitability requirements are again anecdotal but would appear to relate to:

• financial pressure of business, or market competition (e.g. if things get financially tough 'persons may start cutting corners) and other economic factors such as cutting costs;

• 'persons' lack of commitment to safe food practices;

• poor understanding of legal requirements often due to limited understanding of the English language, education or experience;

• sick leave allowances and continually working while sick (i.e. "people are relying on me, I can't let them down");

• confusion about what part of food legislation relates to particular foods;

• perceived lack of industry standards or information concerning best practice options;

• perceived lack of incentive or reward for safe food practices;

• the operator's limited investment in the business and low commitment to continuing the business;

• lack of an immediate disincentive (i.e. it is not always possible for a 'person' to receive an immediate disincentive/penalty or response from the regulator);

• low personal standards and negative attitudes;

• high employee turnover;

• lack of national performance criteria for prospective food 'persons' that must be met prior to entry into an industry;

• distance from the regulator and regulator's commitment;

• the cost of compliance (e.g. equipment and training);

• perceived lax policing of the requirements, (i.e. “others get away with it, why not me?”);

• convoluted or vague accountability pathways, often due to the length of the supply chain making it difficult for people to perceive their responsibilities, or easier to ignore them;

• changes in demand putting pressure on compliance and safety systems;

• age and status of individuals, (e.g. "I've been doing this for years") and the use of young and/or cheap labour.

5.4 Costs associated with non-compliance

Actual and potential costs associated with non-compliance from a national perspective include:

• loss of consumer confidence in the integrity of the domestic food regulatory system;

• increase in New Zealand’s health care costs associated with medical treatment administered for foodborne illness;

• economic loss from lower work productivity and absences from work due to foodborne illness, and lost opportunities to sell and promote a food;

• loss of businesses due to closure affecting the gross domestic product;

• damage to New Zealand’s reputation for producing safe and suitable food; and

• damage to New Zealand’s tourism industry.

5.5 Identification of non-compliance and points of intervention

Current food legislation and policies provide for a range of responses, (regulatory and non-regulatory), to contain, manage and prevent non-compliance with the requirements for food safety and suitability.

5.5.1 Identifying non-compliance

Non-compliance is normally identified through:

• complaints and anecdotal information;

• routine inspections by a Health Protection Officer or Environmental Health Officer;

• foodborne illnesses notified to Public Health Units;

• regular audits conducted by a third-party verifier;

• feedback from trading partners;

• trace back from foodborne illness incidents;

• complaints from competitors;

• findings from investigations or system audits by NZFSA staff;

• product monitoring and surveillance;

• laboratory notifications; and

• referrals from other Government departments (e.g. Customs or the Commerce Commission).

5.5.2 Points of intervention

The regulator can intervene at a number of points after non-compliance is identified and a preliminary assessment of its level of seriousness has been completed.

The intervention points are:

• containing any food or associated inputs involved in the non-compliance;

• preventing further production, if necessary;

• investigating the cause and revising the scope of action taken relevant to the affected product(s). For example, when lead was found to be in baby food and the non-compliant ingredient was cornflour the scope was widened to capture other products that also contained the cornflour;

• determining and implementing corrective procedures;

• determining the current disposition of the non-compliant food or inputs (i.e. where is it being sold and can it be traced back to source);

• determining preventative actions to minimise future non-compliance. This may include increased audits and/or a period of monitoring and review.

5.6 Responses available to the regulator

It is useful to distinguish between two sorts of response: '

• non-regulatory' responses to less serious or more general non-compliance; and

• 'regulatory' responses to non-compliance that is more serious.

This distinction is consistent with the model Options for government involvement in food safety and suitability set out in "Paper 1: Introduction and Context" of the series.

5.6.1 Non-regulatory responses

Current non-regulatory responses available are:

• information or advice circulated by the regulator or others (industry associations do this too) – this may be oral, or published either on websites or in the form of fact sheets or pamphlets. Usually such advice or information is broadly targeted to food sectors or to the consumer population e.g. a fact sheet for Genetic Modification labelling for food manufacturers;

• training and education in food safety – this may be recommended by the regulator or initiated by industry, and in some cases may include assistance in compiling or delivering the training programme.

5.6.2 Regulatory responses

The following are regulatory responses (some of which are not available across all food legislation)

• oral or written warnings;

• compulsory training;

• increase in the frequency of audits or investigations;

• public advisory notice (e.g. recall of food or associated inputs);

• a direction to take action or not to take action (i.e. a compliance order);

• withholding or removing registration;

• downgrading of the food or associated input (e.g. designating the product as pet food);

• seizure of food or associated input/equipment;

• destruction of the food or the associated input;

• temporary closure or suspension of operations; and

• permanent closure of operations.

5.7 Prosecutions

Until now, prosecution has often been the only response available to regulators when faced with non-compliance. Prosecutions are costly, time and resource intensive, and the outcome is by no means certain. Prosecutions are made in response to a failure occurring in the supply of safe food. Earlier intervention in the production to consumption continuum to prevent non-compliance occurring may result in a reduction in the number of prosecutions. This may be achieved through the recognised industry safety programmes, for which there is no current legal provision.

For the future, this Paper proposes that prosecutions would be used where:

• there is repetitive or a very serious issue of non-compliance and/or where there is a clear intent to break the law;

• there is a need for a clear precedent (i.e. to establish case law);

• a strong public deterrent is needed;

• there are no other options available to the regulator (e.g. a business that is not registered and refuses to register).

5.8 Penalties

Penalties, both in terms of fines and/or imprisonment and wider sanctions, vary across food legislation. In the case of fines and/or imprisonment, the Court determines the level of sentence imposed within a range set in legislation. The availability of sanctions to the regulator is set out in legislation and may include withholding or removing registration, seizure of food, destruction of food, or temporary or permanent closure. Consideration will be given to aligning these as far as possible in consultation with the Ministry of Justice.

6 Current System: problems and solutions

6.1 Inconsistencies across food legislation

The current food legislation has been in place for several decades and reflects the accepted practices at the time the legislation was drafted and then amended over time. This incremental approach, combined with the lack of a back-to-basics review, has led to incoherence and inconsistency across the food sector. For example, under the Dairy Industry Act 1952 the regulator can only destroy but cannot seize non-compliant food. Even where provisions are relatively coherent, many are regarded as outdated in view of current knowledge and regulatory best practices. These anomalies are a source of confusion and frustration for 'persons' and regulators alike.

It is proposed that a national approach be applied consistently and equitably across New Zealand and, in the longer-term, be harmonised across all food legislation.

Compliance and Sanctions Principle 1

The compliance and sanctions regime will be seamless and coherent and will apply regulatory and non-regulatory provisions consistently and equitably across all food sectors.

6.2 Shift in regulator approach

In the past, compliance has mainly required the regulator to take responsibility for pointing out non-compliance issues. More recently, there has been a cultural shift involving 'persons' taking responsibility to meet the requirements for food safety and suitability by proactively complying with food law.

As part of this shift, regulators encourage food businesses to develop a ‘culture of food safety’. This trend can be observed in food regulatory agencies around the world, including the Food Standards Agency in the United Kingdom and the Food Safety Authority of Ireland.

NZFSA is proposing to apply this approach across the domestic food sector. Regulators will, however, continue to assist in informing persons about these requirements as set out under food legislation.

Compliance and Sanctions Principle 2

Persons have responsibility to ensure they understand and implement the requirements of current food safety and suitability legislation. (i.e. it is their responsibility to produce safe and suitable food. The legislation defines what ‘safe and ‘suitable’ means).

6.3 Limited range of tools

The current range of regulatory tools is not sufficiently flexible or extensive to manage the range of possible non-compliance. For example:

• a number of food businesses are not required to register under the Food Hygiene Regulations, making it difficult to correct problems;

• current penalties are often not precise in their effect. Collateral damage can have an impact on a wider group than those responsible for the relevant non-compliance. An example of this would be the poor performance of one franchisee of a multi-food producer and the only response is to penalise the whole food producer by loss of accreditation, or a blanket increase in audit frequency.

In response to such limitations, it is proposed that a wider range of responses and/or tools (regulatory and non-regulatory) be available to the regulator across the food sector.

Compliance and Sanction Principle 3

The range of tools available to manage and prevent non-compliance will be flexible and extensive and will comprise options for both non-regulatory and regulatory intervention.

Making better use of current tools

It is recognised that in some cases regulators might be able to make better use of the tools currently available in food legislation to manage non-compliance. Education or training could enhance the use of current and prospective tools. With the continuing work on the Domestic Food Review, a paper on training and education will be produced in the future.

Sanctions

There is little consistency in the current legislative provisions for different types and levels of offences, and sanctions against them, across New Zealand's food legislation.

It is proposed that a set of assessment criteria be developed to assist Regulators to judge the seriousness of the offence. These criteria are intended to be harmonised across food legislation to provide persons and regulators with consistent and transparent guidance on managing food safety and suitability issues.

Compliance and Sanctions Principle 4

The regulator will apply a set of assessment criteria to measure the seriousness of each non-compliance and thus the appropriate response.

The current range of sanctions (including court-imposed sentences) for offences varies greatly according to which legislation covers the sector. An incremental scale of sanctions is proposed in order to implement deterrents consistently across the food sector.

Compliance and Sanctions Principle 5

An incremental scale of sanctions will be applied consistently and equitably across all food legislation.

7 Possible Assessment Criteria for Measuring Non-compliance

It is proposed that assessment criteria for measuring non-compliance be developed and harmonised across food legislation. It is intended the criteria will identify factors that will assist the regulator to measure the seriousness of a non-compliant action or omission and will determine the type and level of response to the non-compliance. Each individual case of non-compliance will be considered against the criteria and the appropriate response by the regulator will result from assessment of the non-compliance or omission. Following consultation, it is proposed the criteria are developed into a policy guideline to assist regulators working at all levels of the regulatory system.

7.1 Assessment criteria

The proposed criteria for assessing the seriousness of non-compliance comprise three factors:

1. general issues, such as the rationale for the non-compliance, the frequency of the non-compliance, the newness of the relevant policy, knowledge of the non-compliance by the relevant 'person', and the person’s level of intent;

2. the impact of the non-compliance on food safety and suitability and the corresponding impacts on a consumer's health, employment and ability to participate in community life;

3. the impact of the non-compliance on New Zealand’s reputation as provider of safe food and on trading opportunities domestically and also overseas.

1. Considerations for assessing general issues

For criterion one, questions that might be considered are:

• what reason or excuse was provided for the non-compliance?

• how often has the same non-compliant activity occurred before (never, infrequently, regularly)?

• where there are implementation issues, is more information required, for example does a new business need guidance on best practice options?

• is there a trend of offending throughout the food sector because, for example, the legislation requires improvement?

• did the non-compliance occur knowingly or unknowingly?

• have consequences resulted from direct or indirect non-compliance?

• would the person be expected to know due care and attention?

2. Impact on food safety and suitability

For criterion two, questions that might be considered are:

• has the non-compliance resulted in the production of, or is it reasonably likely to result in, unsafe or unsuitable food?

• what influence or breadth of spread does the company/distributor have?

• for how long has the non-compliance been present, or how long ago did it occur?

• is any resulting unsafe or unsuitable food in the market place?

• has, or could, the consumption of the unsafe food cause:

• endangerment to human life (including a developing human embryo)?

• a short-term or long-term disability or medical condition that would reduce a person’s quality of life?

• consumers to require short-term or on going medical treatment?

• consumers to require short-term or long-term sick leave?

• consumers to reduce hours of employment or leave their employment temporarily or permanently?

• consumers to limit their social activities temporarily or permanently?

3. Impact on New Zealand's reputation as a of provider of safe food, domestically and internationally

For criteria three, questions that might be considered are:

• has or could the non-compliance cause, directly or indirectly:

• damage to New Zealand’s reputation as a provider of safe and suitable food?

• damage to the professional credibility or reputation of NZFSA as primary regulator for food safety and suitability?

• damage to the New Zealand economy?

• damage to the reputation of the food sector or the relevant type of business in general?

• damage to the confidence of the regulator?

8 Possible Additional Tools to Manage and Prevent Non-compliance

Several additional and more flexible regulatory tools to assist regulators manage have been identified. In some cases these may limit non-compliance with food safety and suitability requirements.

8.1 Incentive Schemes

An incentive scheme is based on the assumption that a 'culture of food safety' can be promoted in food businesses through the introduction of incentives. Businesses are thought to be more likely to comply when there are incentives such as reduced costs, reduced overheads, enhanced consumer confidence in the food, or marketplace advantages.

Performance-based verification (PBV) is one example of an incentive scheme, which is based on the concept that ‘high performers’, evaluated in terms of compliance with the proposed Food Control Plans and other legal requirements, will undergo less frequent and less intensive external verification. Equally, the prospect of increased verifications, because of non-compliance, may act as an incentive to comply. More details of these were set out in Paper 4: Implementation of Food Control Plans (p82-84).

Pros of incentives-based regulatory tools include:

• enhanced ability to target resources on poor performers;

• the ‘abuser’ pays;

• industry support based on potential savings in compliance costs;

• supporting industry commitment to safe and suitable food; and

• supporting industry to take responsibility to voluntarily comply with food safety and suitability requirements.

Cons of incentives-based regulatory tools include:

• the potential impact on any cost-recovery policy, due to reducing compliance costs to industry, (i.e. alternative ways to fund running costs might need to be considered); the focus of a business to primarily reduce costs may overshadow the key concerns of food safety and suitability.

8.2 Food safety award and recognition schemes

The establishment of an award or other form of recognition for food producers who have achieved excellence in food safety or suitability is a further potential initiative to promote industry-led compliance.

Pros of such recognition include:

• supporting industry’s commitment to safe and suitable food;

• increasing consumer confidence in the domestic food regulatory system; and

• supporting industry taking responsibility to comply voluntarily with food safety and suitability requirements.

Cons of such recognition include:

• impacts on ‘cost recovery’ baseline;

• it is a 'snapshot in time', (i.e. the award remains in place even if over time the standards slip); and

• the industry focus is self-serving.

8.3 Public notification and grading schemes

A public notification and grading scheme, for instance a ‘name and shame’ scheme, involves grading a food business and making the grade publicly available. This initiative assumes that businesses will be motivated to comply in order to avoid losing customers to competitors with better grades.

Several New Zealand territorial authorities have implemented a system that requires the grade to be publicly displayed. The results of the inspections are also displayed on the Internet. Some have reported a significant increase in compliance by businesses since the introduction of such grading systems.

One acknowledged drawback to such schemes is that the grades are based on a snap shot of the premises on one day. An alternative could be based on a business’ food control plan providing the information for assessing the grading of a food business and for non-compliance to be notified in the newspaper.

Overseas, similar types of grading and public notification initiatives have been implemented. For example, in Toronto, Canada, the Regional Council has introduced a colour-coded sign that reflects a grading system used by public health officers when inspecting food premises. As part of the initiative, food establishments are required to display a colour-coded sign – green means a pass grade, yellow means a conditional pass and red means a failure grade and the premises has been closed.

A further example is Denmark, which uses a ‘smiley face’ scoring system. One of four faces (varying from full smile to frown) are awarded to retail food outlets, summarising the findings of an unannounced audit by inspectors of regional veterinary and food control authorities.

Pros of grading and notification schemes include:

• clearly see how well a food business complies with food safety and suitability requirements;

• increased consumer confidence in the food/business and more generally the domestic food regulatory system;

• supporting industry’s commitment to safe and suitable food;

• supporting industry taking responsibility to voluntarily comply with food safety and suitability requirements; and

• encouraging consumer participation and decision making.

Cons of grading and notification schemes include:

• promotes an inspection attitude;

• mixed liabilities that are not easily covered (for example, a restaurant buying in non-compliant bread);

• oversimplification of the situation, (i.e. only two or three grades being available);

• risk of outdated information being published on the relevant website (i.e. no information may be preferable to incorrect information);

• difficulty in implementing an effective appeal process, since adverse publicity may have damaged the business before a grade is overturned on appeal;

• possible inconsistencies as the grading system is implemented by the regulator across the country;

• possibility of less industry support due to impact on consumer purchasing behavior;

• higher implementation costs;

• promoting an incentive for compliance;

• mixed messages about what grades are conveying.

8.4 Public apologies

Public apologies are an option that involves a public acknowledgement of non-compliance by the business or operator concerned. This option assumes the business voluntarily apologises for non-compliance and that, through corrective and preventative actions, it is seen to be acting responsibly. This response is best suited to minor non-compliances relating to the suitability of the food.

In cases relating to food safety a public apology may be considered as one aspect of a package of regulatory action taken against the non-compliance, as it may be inappropriate to be the only measure used.

Pros of a public apology approach include:

• supporting industry’s commitment to safe and suitable food;

• supporting industry taking responsibility for the consequences of non-compliance;

• supporting clear information about non-compliant activities and omissions;

• increased consumer confidence in the safety of a food and associated inputs, and in the oversight of the regulator

Cons of a public apology approach include:

• potential lack of industry support due to damaging impact on the reputation and profitability of businesses;

• reduced consumer confidence in a given food and/or food business.

8.5 Diversion schemes

In a legal sense 'diversion' is the application of a constructive penalty as an alternative to prosecution. Diversion is considered by the Police for first time offenders where the offence is not serious. It provides some restitution to the victim, plus an opportunity for the offender to understand what damage his or her actions have caused.

Diversion could reinforce the 'public apology' approach by providing restitution to those who were affected by the non-compliance, e.g. restitution may take the form of reimbursement for medical treatment. In addition, or alternatively, the offender might subsidise an information pamphlet that provides public education in the relevant area. For example, if a business has mislabelled a food item, it may be required to provide funding to educate the public on labelling, such as ‘use by’ dates. This approach is, however, limited in its application to relatively minor non-compliances.

Consideration of diversion for food safety non-compliance would be applied to situations that have a non-regulatory outcome, i.e. they would not be used for non-compliance incidents that would warrant a regulatory response. Unlike the Police diversion scheme, a proposed diversion scheme for food safety would not be decided in a court environment. The regulator would hold the responsibility to monitor and administer this.

Pros of the diversion approach include:

• likely support from industry, particularly from businesses that have committed a ‘first time’ non-compliance;

• supporting industry taking responsibility for the consequences of non-compliance; and

• benefits for everyone, in that the public sees something is done but industry considers that the regulator has not overreacted.

Cons of the diversion approach include:

• consumers potentially construing that the offending business is “buying its way out of trouble”;

• first offence approach is abused by regulator, and overused for some re-offending businesses;

• may result in increased costs and resource demands on the regulator;

• may result in increased costs to administer the recording of those persons or businesses who have been offered diversion;

• inappropriately using diversion to deal with serious offences; and

• the possibility that no 'constructive' penalty will be appropriate to the relevant offence.

8.6 Universal system of improvement notices

Under this approach, an 'improvement notice' is issued on detection of non-compliance. It sets out the corrective action and a specific time frame for addressing the non-compliance. A sanction or a prosecution may follow a non-compliance with an improvement notice.

Improvement notices are not explicitly provided for in New Zealand's current food legislation. Provisions for 'orders' and 'direction' exist in some food legislation⁴, but there is a lack of consistency across these provisions

Improvement notices are found in the New Zealand Health and Safety in Employment Act (Amendment) 1996 and in the United Kingdom (UK) Food Safety Act 1990. Both Acts include the grounds on which a notice may be issued, how the notices must be served and by whom, and the process for appeal against the notice.

UK legislation also provides for provisions that allow an improvement notice to be served without precluding parallel action such as prosecution for the same issues – a course that is more likely for serious non-compliance. The UK model also allows requests for an extension of time to address an improvement notice.

Pros of allowing improvement notices include:

• being suitable for a broader range of food offences than infringement notices;

• enabling 'persons' to address the non-compliance or omission within a limited time before stronger action is taken;

• likelihood of industry support as an alternative to prosecution;

• supporting industry taking responsibility for the consequences of non-compliance; and

• might increase liaison between the verifier and regulator.

Cons of allowing improvement notices include:

• increased cost and resource demands on the Regulator;

• possible perception of offering a ‘soft option’ compared with infringement notices;

• potentially disempowering consumers, to whom non-compliance is not transparent;

• potentially limited industry support due to increased compliance costs;

• difficulty of application in a verification; and

• liability of regulator depending on scale/detail of notice could undermine the audit system.

8.7 Infringement notices

In an infringement notice system an infringement fee (fine) is levied as soon as non-compliance is detected, and must be paid within a specified time period. Infringement notices are enforced under the Summary Proceedings Act 1957.

There are no provisions for infringement notices under New Zealand's current food legislation. However, examples of infringement notices in other areas of legislation include the Biosecurity (Amendment) Act 1996, the Hazardous Substances and New Organisms Act 1996, the Health and Safety in Employment Act 1992 and the Resource Management Act 1991 via the Resource Management (Infringement Offences) Regulations 1999. While the detail varies across these Acts, each Act defines when an infringement notice should be issued, how the notice is issued and by whom, and how the payment of the infringement fee should be made. There are provisions for infringement notices in the model Food Act being implemented in all States and Territories in Australia. An infringement notice system is, for example, currently being put in place in New South Wales with instant fines being applied to a wide range of non-compliance.

The Legislation Advisory Committee Guideline (May 2001) recommends that infringement offences be confined to offences that are judged minor and that are ‘strict liability offences’ that do not require proof of Mens rea (i.e. a person can be found guilty of the offence whether or not the offence was intentional). Offences of this type cover technical breaches, one-off breaches and breaches where the consequences are limited and minor in impact – for example, accidentally failing to declare illegal food at an airport.

The Ministry of Justice is reviewing the current infringement system, from governance through to the enforcement and resolution of penalties imposed by individual regimes. Recommendations are to be developed for the Government by 30 June 2005 on ways to achieve a simpler, streamlined and more effective infringement system. The outcomes of this review will need to be considered.

Within the food sector few offences would fit into this category but examples might include:

• failure to display a food hygiene licence;

• holding a food stall without a required licence or permit (if this becomes a future requirement);

• failure to comply with an improvement notice;

• failure to provide sufficient training.

Pros of infringement notices include:

• providing an immediate incentive to comply with food legislation (i.e. the avoidance of infringement fines on detection of a non-compliance);

• promotes consistency across regions as Regulators must work within the provisions prescribed in the legislation;

• supports industry taking responsibility for the consequences of non-compliance;

• successfully implemented in other non-food legislation.

Cons of infringement notices include:

• suitable for only a limited range of food offences;

• difficulty of collecting fines;

• potential for abuse if not applied fairly;

• may be seen as revenue collection;

• unpopularity of the regulator.

8.8 Prohibition notices

A prohibition notice is generally issued where the consequences are sufficiently serious that the source of the non-compliance must be fixed. For example, a prohibition notice might prevent a specific activity or use of equipment. It might also require withdrawal of employees from part or all functions of an operation until the non-compliance has been fixed. The breach of a prohibition notice is a knowing breach of the law.

While the Food Act 1981 specifically gives powers to an officer to restrict or prevent the use of equipment or other things, there is no specific provision within the legislation for prohibition notices to be issued. Prohibition notices are allowed in New Zealand legislation such as the Health and Safety in Employment Act 1992 and the UK's Food Safety Act 1990.

Desirable provisions for prohibition notices would include specifying conditions under which a notice may be issued, how the notice must be presented, and an appeals process against notices. The UK legislation allows for a prohibition notice to be a precursor to an infringement notice. This might fit with the objectives of proposed food control plans.

Pros of prohibition notices include:

• providing regulators with a prelude to prosecutions to respond to serious non-compliance;

• enabling regulators to respond quickly to non-compliance that might pose harm to the public;

• enabling regulators to target the specific source of a non-compliance (e.g. defective equipment) rather than over-reacting by closing an entire operation;

• fits well with the objectives, philosophy and concept of food control plans.

Cons of prohibition notices include:

• likely inconsistencies across regions due to differing judgements on when to use a prohibition notice;

• potentially limited industry support due to the costs resulting from prohibiting a function or operation;

• potentially limited application or limited favour in terms of application.

8.9 Demerit points

Demerit points would provide a tool that gives both the non-compliant 'person' an opportunity to comply, and the regulator a method of imposing a form of enforcement relevant to the seriousness of the non-compliance. Demerit points may be used when the non-compliance poses a medium risk to the public, but does not warrant a more heavy-handed regulatory intervention. Similar to the driver licence demerit point system, there would need to be a maximum demerit point level and consideration of what actions may be taken when continual non-compliance has led to the maximum demerit points being met or exceeded.

Pros of demerit points include:

• offers opportunity for 'persons' to have a 'second chance' to comply;

• potentially suitable for a broad range of food offences that may sit on the low to medium risk continuum;

• may provide a system of national surveillance, i.e. if non-compliant operators move around New Zealand records of non-compliance would still be available.

Cons of demerit points include:

• collection of data and operator movements may be too ‘big brother’ like;

• appeal process may prove costly to both regulator and persons/business;

• increased cost and resource demands on the regulator;

• potentially limited industry support due to increased compliance costs;

• difficulty in application of a verification;

• possible perception of offering a 'soft option' compared with infringement notices.

8.10 Conclusion

This paper has discussed the reasons people comply or do not comply with food law, the costs of non-compliance and how non-compliance is identified. It discusses the regulator's responses that can be non-regulatory or regulatory. It identifies current problems and suggests solutions by proposing five principles that should guide the application of sanctions in the future. It then discusses a set of criteria that might be used for measuring non-compliance and some tools that might be used in the future.

Comments are particularly sought on the proposed principles, the criteria for measuring non-compliance and the possible additional tools that might be used in the future.

¹ Key policies and objectives of the NZFSA domestic food review may be summarised as:

• persons producing, importing or selling food in New Zealand take responsibility for producing safe and suitable food;

• compliance costs and interventions are minimised consistent with adequate government control;

• trade and commerce in food is facilitated; and

• foodborne illness in New Zealand is reduced and consumers of New Zealand food are protected

² These are also known as ‘name and shame’ schemes

³ These factors are not mutually exclusive. For example, the truthfulness of labelling can impact on the safety of food, such as where undeclared allergens are present.

⁴ Examples include 'orders' and 'directions' under the Dairy Industry Act 1952 and 'directions' under the Animal Products Act 1999.