Yves here. This post illustrates a chief reason why regulation has become a bad word. It used to be that corporations would chafe under government rules for the obvious reason that they didn’t like being told what to do. The usual objection to regulation, that it reduces corporate profits, isn’t always true. For instance, McDonalds fought tooth and nail in the UK against giving up using styrofoam clamshells to keep takeout food warm. When it lost that battle, it found a more environmentally-friendly replacement that turned out to be no more costly. And regulations often spur rather than impede innovation. Detroit did itself a huge disservice in fighting fuel economy standards. The Big Three’s cars lost share in countries that had more stringent rules. Worse, foreign gas-sparing cars appealed to US consumers as well.
Major corporations have since learned to embrace regulations as a way to extract rents, by crippling smaller players and forcing customers to buy their product. In the case of the European olive oil fiasco, the product was simple and widely enough used that the media and consumers could see through the scam and made enough noise to put the proponents on the back foot. Too bad that didn’t prove true for health care and financial reform. But another contributing factor in the US is that our corporate lords and masters appear to have more lapdogs in the business press than their European counterparts do.
By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Cross posted from Testosterone Pit.
Like so many debacles in the EU, it started with the unelected European Commission. It’s immune to voters, but not to lobbyists and corporations. Under the guise of “consumer protection” or “food safety” or some other harmless moniker, it generates zany laws that tend to benefit large corporations. But last week, it went too far, even for Europeans – not that they don’t already have enough crises on their hands. It passed a law that banned restaurants from serving olive oil in refillable containers, such as cruets or dipping bowls.
On January 1, 2014, their use would become illegal. Instead, olive oil would have to be served in a one-use-only bottle, labeled in accordance with EU standards, and equipped with a tamper-proof “hygienic” spout. A restaurant owner in Germany, for example, who buys his special olive oil from an artisan producer in Southern France, would be out of luck; that small producer wouldn’t be able to comply with the costly stipulations. The restaurant would have to switch to an industrial supplier that can ship the special restaurant bottles with their tamper-proof spout and EU label. The small producer would be cut out.
The Commission’s decision was made under a Eurocrat procedure, called comitology – though it sounds like it, I’m not making this up! It allows for legislation that is binding for all 27 Member States to be passed into law automatically, without majority support from those Member States.
Exactly! The evil that this new law was supposed to cure: olive oil fraud. Admittedly, it’s a big issue in Europe, in the US, and elsewhere, and some of the largest industrial brands, such as Bertolli, have gotten caught with their pants down. But this law wasn’t going after fraud at the corporate level. On the contrary. It was passed under heavy lobbying from corporate producers.
The law targeted restaurateurs trying to make their own decisions about olive oil. Ostensibly it aimed to protect consumers and their taste buds from cruets or dipping bowls that had been refilled with low-quality or adulterated olive oil … the kind maybe that big brands like Bertolli and others were sued for selling in California. But when asked if they’d seen any evidence of adulterated olive oil on restaurant tables, an official told the Daily Telegraph, “We don’t have any evidence; it is anecdotal and that was enough for the committee.”
The decision exemplified what’s wrong with EU governance. But there were other issues with the harebrained law. It would create a cesspool of bureaucracy and mountains of additional trash, including the small one-use-only tamper-proof bottles with their spouts, boxes, and containers. And more oil would be wasted as the bottles – much like Ketchup bottles – would be designed to make it impossible to get all the oil out of them.
But this time, the Commission and its process of comitology were greeted with an outburst of loathing and mockery. Criticism was “universal and came from consumers and restaurant owners in all EU countries,” an EU official told the Telegraph. And it came from the very top. “This is exactly the sort of thing that Europe shouldn’t even be discussing,” explained UK Prime Minster David Cameron, with an eye on the real problems that are currently dogging Europe. “It shouldn’t even be on the table, to force a pun – so to speak,” he said. And Dutch Prime Minister Mark Rutte told his parliament, “I think it is too bizarre for words and incomprehensible to come with this sort of proposal at a time like this.”
European Commission President José Manuel Barroso, son of a small olive oil producer, apparently intervened, and on Thursday, European Agriculture Commissioner Dacian Ciolos threw in the towel. The law provoked some “misunderstanding,” though it was “intended to help consumers, to protect and inform them,” he said. But now that it was “clear that it cannot attract consumer support,” he’d withdraw it.
Not everyone jubilated. “It is totally ludicrous that the commission just withdraws this measure due to political pressure,” said Pekka Pesonen, general secretary of COPA-COGECA, a lobbying group representing industrial producers, and one of the forces behind the law. “Perhaps it wasn’t explained well enough. But it was necessary to ban refillable bottles and the traditional aceiteras found on restaurant tables….” etc. etc.
The thing isn’t dead yet. Ciolos said that he’d have a huddle with opponents and critics of the law in order to somehow resuscitate it – because it’s just too good to let die. So this law about olive oil in restaurants has morphed into a symbol of governance by Eurocrats – and their raggedy efforts to manage the economy of the EU.
The solar-panel industry, once fattened by taxpayer subsidies and false hopes, has been in a death spiral. In Germany, it has been brutal. Even large companies are licking their wounds. And yet, when the European Commission tried to protect manufacturers against cheap Chinese imports, the unexpected happened. Read…. Germany Fires Live Ammo In Sino-European Trade War … At Brussels