Is There “Fishy Business” in Your Supply Chain?

Departments - Legislative Update

February 1, 2019

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DAVID ACHESON, Founder and CEO, The  Acheson  Group

A New York State investigation, targeting seafood fraud at retail supermarket chains, has found “a sky-high mislabeling rate” with more than one in four (27%) seafood purchases being mislabeled. The “Fishy Business” report from the Office of the New York State Attorney General (NY OAG) also noted that about two-thirds of the supermarket brands reviewed had at least one instance of suspected mislabeling. While NY OAG testing found substitutions for virtually every type of seafood investigated, it found “rampant mislabeling” in some species, including lemon sole, red snapper, grouper, chinook/king salmon, and wild salmon.

Sadly, this “rampant mislabeling” is not limited, by any means, to New York or to seafood. Food fraud is a known, but generally difficult to detect, issue. Whether it’s substituting a lesser quality version of the item (e.g., a lower grade of olive oil labeled as extra virgin), a wholly different species (e.g., tilapia for red snapper), inferior ingredients (e.g., sugar or molasses in honey) or dangerous additives (e.g., lead-containing dyes to spices), economically motivated adulteration (EMA) is not only a violation of both the FD&C Act and FSMA, it is a crime.

Food fraud not only causes consumers to pay a higher rate for lesser quality, it can have consumer health and environmental repercussions as well. Some of the fraudulent fish, for example, were substitutes which had higher mercury levels and other heavy metals, used more antibiotics or chemicals, or came from less sustainable fisheries. It is for just such reasons that EMA mitigation is required by FSMA’s Preventive Controls Rule and must be in the Food Safety Plan if there is a public health risk and it is reasonably foreseeable.

Some processors — and retailers — may be thinking that you’re not liable because you are simply following the labeling of the product you receive from your supplier. But with the number of reports, news items, and studies revealing the extent of food fraud, extensive supplier controls and validation should be implemented, particularly for foods often found to be adulterated. This makes EMA reasonably foreseeable — and brand damage a high risk.

If the potential of consumer health risk, brand damage, or FSMA non-compliance doesn’t sway you, perhaps the potential of a lawsuit will. Stemming from the NY OAG report, a New York consumer filed a class-action lawsuit against “the deceptive and misleading business practices of Stew Leonard’s,” stating “Given that Plaintiff and Class Members paid a premium for the Products based on Defendant’s misrepresentations that they were red snapper and sockeye salmon, Plaintiff and Class Members suffered an injury in the amount of the premium paid.”

The lawsuit was filed, not against the supplier, but against the retailer who sold the mislabeled fish. In a response to the NY OAG report, Stew Leonard’s stated that it had imported “what we believed to be red snapper. It had a red hue and it was snapper.” It also stated that the family did not know that only domestic snapper can be called ‘red snapper.’ Once alerted, the retailer changed its signage and labels.

Although the case is still pending, the damage has been done; not only to Stew Leonard’s, but to Food Bazaar, Foodtown, Uncle Giuseppe’s, and Western Beef, all of whom were noted in the report as responsible for a “vastly disproportionate share of suspected mislabeling” in New York, are subject to an ongoing consumer fraud investigation — and have been named in numerous news reports.

Countering food fraud is not easy, as indicated by Stew Leonard’s belief that it was indeed selling red snapper, and I completely agree with NY OAG’s assessment that, “Solving the seafood fraud problem requires industry-wide reforms, at all stages of the supply chain.” Additionally, I would apply the statement to all food fraud and emphasize that it does need to be addressed by all stages of the supply chain — from the source to the consumer.

Although fraud often begins at the source, it can occur anywhere along the chain. Thus, each stage needs to ensure it has a thorough supply chain program with absolute validation of the food and its ingredients, apply traceability and auditing standards to assist in EMA mitigation, and train workers to understand and alert management in any suspected fraud. Even consumers have a role to play, e.g., as NY OAG states, “If the price of seafood seems too good to be true, that may be a sign that they are not getting what they paid for.”