Blakes Food Report 2014
Upcoming SlideShare
Loading in...5
×

Like this? Share it with your network

Share

Blakes Food Report 2014

  • 103 views
Uploaded on

Agriculture and Agri-Food Canada’s Overview of the Canadian Agriculture and Agri-Food System 2013 describes Canada’s agriculture and agri-food system as a “modern, highly complex, integrated,......

Agriculture and Agri-Food Canada’s Overview of the Canadian Agriculture and Agri-Food System 2013 describes Canada’s agriculture and agri-food system as a “modern, highly complex, integrated, internationally competitive and growing part of the Canadian economy” — and we agree! There is a lot to be excited about when it comes to Canada’s food, beverage and agribusiness sector. It is a resilient sector that has responded positively to challenges and opportunities of increasing globalization, advancing technologies and evolving consumer demands. In 2013, the Canadian food and agribusiness sector was the subject of a number of high-profile transactions (see Food and Agribusiness Transaction Highlights, page 2).Canada continues to be a leading exporter, and a significant importer, of agricultural and agri-food products. In the coming year, we anticipate growth in the global food and agri-business sector to be fuelled by improving global economic conditions, and Canada continues to be wellpositioned to benefit from such increased growth in the global food and agribusiness sector.

This report was prepared by the Blakes Food, Beverage & Agribusiness group based on non-confidential information we have gathered in our practice as well as through a review of public information. The information was gathered in the first three quarters of 2013. Our goal in preparing and presenting this report is to highlight those trends and opportunities we found compelling and we believe will have an impact on the food, beverage and agribusiness sector going forward.

More in: Food
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Be the first to comment
    Be the first to like this
No Downloads

Views

Total Views
103
On Slideshare
103
From Embeds
0
Number of Embeds
0

Actions

Shares
Downloads
3
Comments
0
Likes
0

Embeds 0

No embeds

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
    No notes for slide

Transcript

  • 1. Food Report 2014
  • 2. NotableTransactions Food, Beverages and Agribusiness 2014Transaction Highlights...........................................2 Introduction........................................................................................................................1 Legislative & Regulatory Update Regulations Amending the Seeds Regulations................................................................... 11 Upcoming Amendments to Ontario’s Meat Regulation Under the Food Safety and Quality Act............................................................................... 13 Labelling and Advertising of Dietary Fibre-Containing Food Products................................ 14 An Act to Enact the Local Food Act, 2013............................................................................ 15 New CFIA Guidelines and Policies Surrounding the Use of “Local” in Food Labelling................................................................................... 16 Amendments to the Fertilizers Regulations........................................................................ 17 Bilateral Agreements The Canada-Costa Rica Organic Equivalency Arrangement................................................18 Animal Disease Zoning Agreement Between Canada and the United States............................................................................. 19 Featured Articles Country of Origin Labelling Requirements..........................................................................21 The Labelling Distinction: Natural Flavours vs. Natural Ingredients..............................................................................27 Undercover Investigations of Food and Agribusiness Operations: Ag-Gag Laws in Comparison to the Canadian Whistleblower Regime...............................33 Blakes Food, Beverage & Agribusiness Group.........................................................38 Index
  • 3. Introduction
  • 4. 1Food Report 2014 Introduction Agriculture and Agri-Food Canada’s Overview of the Canadian Agriculture and Agri-Food System 2013 describes Canada’s agriculture and agri-food system as a “modern, highly complex, integrated, internationally competitive and growing part of the Canadian economy” — and we agree!There is a lot to be excited about when it comes to Canada’s food, beverage and agribusiness sector. It is a resilient sector that has responded positively to challenges and opportunities of increasing globalization, advancing technologies and evolving consumer demands. In 2013, the Canadian food and agribusiness sector was the subject of a number of high-profile transactions (see Food and AgribusinessTransaction Highlights, page 2). Canada continues to be a leading exporter, and a significant importer, of agricultural and agri-food products. In the coming year, we anticipate growth in the global food and agri-business sector to be fuelled by improving global economic conditions, and Canada continues to be well- positioned to benefit from such increased growth in the global food and agribusiness sector. The last issue of this report provided an overview of the international challenges and opportunities facing the food, beverage and agribusiness sector. In this issue, we highlight notable M&A transactions in this sector, both globally and in Canada. We also provide an update of regulatory and legislative developments affecting the food, beverage and agribusiness sector in Canada. Finally, we present three feature articles: the first discusses the country of origin labelling (COOL) law in the U.S. and its effects on Canadian and U.S. livestock industry; the second highlights key takeaways from the recent Vigianno v. Hansen Natural Corporation decision relating to “natural food” claims on consumer food labels; and the third considers the resurgence of ag-gag laws in the U.S. and reviews comparable protections available to the food and agribusiness sector in Canada. This report was prepared by the Blakes Food, Beverage & Agribusiness group based on non-confidential information we have gathered in our practice as well as through a review of public information.The information was gathered in the first three quarters of 2013. Our goal in preparing and presenting this report is to highlight those trends and opportunities we found compelling and we believe will have an impact on the food, beverage and agribusiness sector going forward. The information presented in this report is intended for general informational purposes only, and does not constitute legal advice. While care has been taken to ensure the information herein is accurate, we make no representation as to its accuracy. This report should not be relied on to replace professional advice, legal or otherwise, relating to any specific circumstances.
  • 5. 2 Food Report 2014 Food, Beverage & Agribusiness 2014Transaction Highlights In 2013, the food, beverage and agribusiness sector benefited from modest improvements in global economic conditions and showed signs of recovery from the effects of the global financial crisis. The announcement of a number of high-profile transactions (such as Berkshire Hathaway’s investment in Heinz, Sobeys purchase of the assets of Canada Safeway, and several transactions flowing from Glencore Xstrata’s acquisition of Viterra) signalled a revival of deal activity in the sector. Looking ahead, we expect increased financial and strategic investments along the food and agribusiness value chain to drive increased transaction activity. While the Canadian food, beverage and agribusiness sector was the subject of a number of significant transactions in 2013, food, beverage and agribusiness transactions with a Canadian connection remained a relatively small percentage of the global food, beverage and agribusiness deal activity. However, the value of Canada’s agri-food trade is growing once again after slowing during the recession.1 Canada is the sixth- largest exporter and the sixth-largest importer of agriculture and agri-food products in the world2 , with exports and imports valued at C$40.3-billion and C$31-billion, respectively.3 In 2013, retail level transactions involving Canadian retailers represented a significant portion of Canadian food and agribusiness deal activity. Prominent examples include Loblaw’s announcement that it will acquire Shoppers Drug Mart and Sobeys’ acquisition of the assets of Canada Safeway.4 Looking ahead, we expect increased financial and strategic investments along the food, beverage and agribusiness value chain to drive increased transaction activity. 1 An Overview of the Canadian Agriculture and Agri-Food System 2013, Agriculture and Agri-Food Canada. 2 The European Union is treated as an economic block. 3 An Overview of the Canadian Agriculture and Agri-Food System 2013, Agriculture and Agri-Food Canada. 4 These charts display the data for the periods of Q2 2012 to Q3 2013. NotableTransactions
  • 6. 3Food Report 2014 Notable Transactions Value (USD Million) Number of Deals 0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 Global Deal Chart Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 0 100 200 300 400 500 600 700 800 900 Value (USD Million) Number of Deals $9,684 mil $219,789 mil Value of Deals Deals Announced Canadian Deals Global Deals Canadian Deals Global Deals 89 3530
  • 7. 4 Food Report 2014 Featured CanadianTransactions Maple Leaf Sells Potato Business to Cavendish Farms On December 10, 2012, Cavendish Farms, an affiliate of J.D. Irving Ltd., agreed to acquire Maple Leaf Potatoes, the frozen potato business of Maple Leaf Foods Inc. for C$60-million. The move represents New Brunswick- based Cavendish Farms’ first expansion into Western Canada. Maple Leaf, meanwhile, is jettisoning the potato business as part of its strategy of focusing on its core business of selling meat products to consumers. The transaction closed on January 4, 2013. Glencore, Richardson and Agrium Carve Up Viterra Glencore International plc (now known as GlencoreXstrata plc) completed its acquisition of Viterra for C$6.1-billion on December 17, 2012. Prior to closing the transaction, Glencore had struck “side-car” deals with Agrium Inc. and Richardson International Ltd. for the sale of most of Viterra Inc.’s Canadian assets worth C$2.6-billion. Richardson acquired 23 per cent of Viterra’s Canadian grain-handling assets and various agri-centres. Meanwhile, Agrium acquired the majority of Viterra’s retail agri-products business, including the acquisition of Viterra’s Canadian retail assets, which closed on October 1, 2013. The total consideration for the retail assets acquired in Canada and Australia was approximately C$300-million, which included C$300-million in established net working capital. Saputo Acquires Dairy Products Business of Dean Foods On January 3, 2013, Saputo Inc. completed its acquisition of Morningstar Foods, LLC, the dairy products division of Dean Foods Company, for US$1.45-billion. Saputo is the largest dairy producer in Canada and with the acquisition Saputo added a producer of creams, ice cream mixes, whipping cream, sour cream and cheese to its namesake Armstrong, Dairyland and Rondeau products. The transactions diversified Saputo’s U.S. business beyond cheese. Notable Transactions
  • 8. 5Food Report 2014 JBS AcquiresTroubled Canadian Assets of XL Foods On January 14, 2013, JBS Food Canada, a subsidiary of Brazil-based JBS S.A., completed its acquisition of the Canadian assets of XL Foods, a Canadian meat packer, for US$100-million in cash and shares of JBS. JBS had been operating the plant since October 2012 after it had been shut down by the Canadian Food Inspection Agency due to concerns over E. coli contamination. As part of that operational agreement, JBS was granted an option to purchase the plant, which was exercised. JBS is one of the largest animal protein producers in the world, and the acquisition of the XL Food assets adds to a portfolio that includes over 301 facilities worldwide. Metro Sells Part of Its Stake in Couche-Tard to Consortium On January 23, 2013, Metro Inc. sold nearly half its investment in convenience store operator Alimentation Couche-Tard Inc. to an investment group composed of BMO Nesbitt Burns, National Bank Financial and TD Securities for C$479-million. The sale of subordinate voting shares represented about 7.2 per cent of Alimentation Couche-Tard’s outstanding class B shares. Following the sale, Metro continues to own 10.7 million class A shares, representing 21.8 per cent of all class A shares, amounting to an economic interest of 5.7 per cent and a voting interest of 17 per cent. CPPIB Acquires Food Assets from HM Capital On March 5, 2013, Canada Pension Plan Investment Board (CPPIB) completed a transaction to acquire a portfolio of food assets from HM Capital Sector Performance and related co-investors for US$468-million. The assets consist of Milk Specialties Global, a producer of speciality proteins, Advanced H20 LLC, a private- label water bottler, and Natural Selection Foods, a supplier of specialty salads. CPPIB also committed an additional US$138-million to create Kainos Capital Fund, which will manage the newly acquired assets and seek out new investments in the food industry. Sobeys Acquires Canada Safeway Assets On November 4, 2013, Empire Company Limited and its wholly owned subsidiary Sobeys Inc. completed their purchase of substantially all of the assets of Canada Safeway in accordance with the asset purchase agreement announced on June 12, 2013, and the consent agreement with the Competition Bureau announced on October 12, 2013. Sobeys financed the C$5.8-billion purchase price through the application of proceeds from the following: • C$1.85-billion from Empire, primarily from Empire’s equity issuance completed in July 2013 • C$989-million net proceeds from Sobeys’ bond offering completed in August 2013 • C$991-million from the disposition of 70 Canada Safeway properties to Crombie REIT • C$1.97-billion in bank credit and cash on hand Notable Transactions
  • 9. 6 Food Report 2014 Notable Transactions
  • 10. 7Food Report 2014 Notable Transactions Loblaw Acquires Shoppers Drug Mart On July 14, 2013, Loblaw Companies Ltd. agreed to acquire Shoppers Drug Mart for C$12.4-billion in cash and stock. Shoppers Drug Mart shareholders will be able to choose either C$61.54 or 1.29417 Loblaw shares plus C$0.01 in cash for each Shoppers Drug Mart share held. Loblaw plans to finance the cash element of the transaction with available cash resources and committed bank facilities fully underwritten by Merrill Lynch, Pierce, Fenner & Smith Inc., Bank of America, N.A., Canada Branch and Bank of America, N.A. These committed facilities consist of a C$3.5-billion term loan and a C$1.6-billion bridge loan that Loblaw plans to replace primarily through the issuance of unsecured notes. To finance a portion of the cash consideration, George Weston Limited has agreed to subscribe for C$500-million of additional Loblaw common shares at a price of C$47.55 per share, Loblaw’s closing share price on July 12, 2013. After giving effect to this investment, Weston’s voting ownership will be approximately 46 per cent of Loblaw’s common shares upon completion of the transaction. On a pro forma basis, the combined company generated approximately C$42-billion in revenue, C$3-billion in earnings before interest, taxes, depreciation and amortization, and C$1-billion in free cash flow in 2012. TreeHouse Foods Acquires Associated Brands On October 8, 2013, TreeHouse Foods Inc. reported its completion of the previously announced acquisition of Associated Brands, a leading private-label manufacturer of powdered drinks, specialty teas and sweeteners from Toronto-based TorQuest Partners and other shareholders. Associated Brands had sales of approximately US$200-million for the 12 months ended June 30, 2013. TreeHouse paid C$187-million in cash for the business, subject to an adjustment for working capital. Maple Leaf Sells Food Rendering and Biodiesel Business to Darling On August 23, 2013, Darling International Inc. agreed to buy Rothsay, the rendering and biodiesel business of Maple Leaf Foods Inc., for approximately C$645-million. This transaction closed on October 28, 2013. The sale of Rothsay was in line with Maple Leaf Foods’ prepared meats strategy. Proceeds from the transaction will initially be used to pay down debt. Maple Leaf has indicated that upon completion of its prepared meats strategy, management will consider appropriate deployment of excess capital.
  • 11. 8 Food Report 2014 Notable Transactions Featured GlobalTransactions ConAgra Acquires Ralcorp On November 27, 2012, ConAgra Foods Inc., a U.S.- based packaged-foods company, agreed to buy Ralcorp Holdings Inc., a St. Louis-based producer and wholesaler of cereals and snacks, for an estimated US$5-billion. Ralcorp shareholders will receive US$90 per share, a 28 per cent premium. The deal creates a packaged-foods giant with US$18-billion in annual sales. SuperValu Sells Five Grocery Chains to Cereberus- Led Investor Group On March 21, 2013, an investment group led by Cereberus Capital Management acquired five grocery chains (Albertsons, Acme, Jewel-Osco, Shaw’s, and Star Market stores and the related Osco and Savon in- store pharmacies) totalling 877 stores from SuperValu Inc., a U.S.-based retailer, for US$100-million in cash and the assumption of US$3.2-billion of debt obligations. In connection with the transactions, Symphony Investors, a Cereberus-led investor consortium, completed a tender offer acquiring 5.475 per cent of SuperValu’s outstanding common stock at a purchase price of US$4 per share in cash. In addition, pursuant to the terms of the transaction, SuperValu Inc. issued 42,477,692 new shares of common stock (representing approximately 19.9 per cent of the outstanding shares) to Symphony Investors at a purchase price of US$4 per share. The tender offer, together with the primary stock issuance, establishes Symphony Investors as SuperValu’s largest shareholder holding 21.2 per cent of the total outstanding common shares. Berkshire HathawayTakes Heinz Private On February 14, 2013, Warren Buffett’s Berkshire Hathaway and an affiliate of 3G Capital, a Brazilian private equity firm, agreed to acquire the outstanding shares of H.J. Heinz Co. with the intention of taking the company private. The deal, which is the largest ever in the food industry at an estimated US$28-billion, was completed on June 7, 2013. Heinz shareholders received US$72.5 in cash for each share of common stock they owned at closing. As a result of the completion of the merger, the common stock of Heinz will no longer be listed for trading on the New York Stock Exchange.
  • 12. 9Food Report 2014 Notable Transactions Shuanghui Acquires Smithfield Foods On May 29, 2013, Shuanghui International Holdings Ltd. announced an agreement to purchase Smithfield Foods Inc., the world’s largest pork producer, for an estimated US$7.1-billion. Smithfield Food’s shareholders will receive US$34 per share, a 31 per cent premium. The deal represents the largest-ever Chinese take-over of a U.S. company. The transaction closed on September 26, 2013. InBev Acquires Grupo Modelo On June 4, 2013, Anheuser-Busch InBev SA/NV, the world’s largest brewer, completed its combination with Grupo Modelo, S.A.B. C.V., Mexico’s largest brewer, in a transaction valued at US$20.1-billion. In connection with the transaction, AB InBev agreed to sell Modelo’s Piedras Negras brewery to Rochester-based Constellation Brands and grant Constellation perpetual rights to the Corona and Modelo brands in the U.S. for US$2.9-billion. In addition, Constellation acquired the remaining 50 per cent interest of Crown Imports, a joint venture it had been engaged in with Grupo Modelo, for US$1.85-billion. The combined businesses of Anheuser-Busch InBev and Grupo Modelo will lead the global beer industry with roughly 400 million hectolitres of beer volume annually, bringing together five of the top six most valuable beer brands in the world.
  • 13. 10 Food Report 2014 Legislative and Regulatory Update
  • 14. 11Food Report 2014 Legislative and Regulatory Update Regulations Amending the Seeds Regulations On March 9, 2013, the Canadian Food Inspection Agency (CFIA) announced two proposed amendments to the Seeds Regulations (the Regulations). The Regulations, which operate pursuant to the Seeds Act, ensure that seeds sold and imported into Canada conform to labelling and quality standards. “Variety registration” is a means of governmental oversight intended to serve several purposes, such as guaranteeing that health and safety requirements are met, making variety information available so as to prevent fraud and ensuring varieties meet established standards for international trade. Variety registration is required for the seeds of most agricultural crops. The current variety registration regime is a three- tiered system wherein registration requirements differ depending on the category of a given crop. Specifically, Schedule III of the Regulations divides all of the crops whose seeds require variety registration into three separate parts. For all three parts, basic registration information is required. However, the parts are subject to differential pre-registration testing and merit assessment requirements. Crop kinds in Part I require pre- registration testing, which can involve field trials and laboratory testing, as well as merit assessments to gauge whether a candidate seed meets established standards. Crops in Part II require pre-registration testing but need not undergo merit assessments, whereas crops in Part III are not subject to either additional registration requirement. The first of the CFIA’s proposed amendments seeks to move oilseed soybeans and forages from Part I to Part III of Schedule III. The change is meant to reduce the administrative burden imposed on developers of these types of crops and increase the ease of market entry. In addition to recategorizing oilseed soybeans and forages, the CFIA’s proposal addresses comments made by the Standing Joint Committee for the Scrutiny of Regulations, which noted that there appears to be no practical difference between the suspension and cancellation of variety registration. As a result, the CFIA proposes to eliminate the option of suspending variety registration and simply provide for cancellation. The Regulations, which operate pursuant to the Seeds Act, ensure that seeds sold and imported into Canada conform to labelling and quality standards.
  • 15. 12 Food Report 2014 Legislative and Regulatory Update
  • 16. 13Food Report 2014 Legislative and Regulatory Update Upcoming Amendments to Ontario’s Meat Regulation Under the Food Safety and Quality Act On April 17, 2013, the Ministry of Agriculture and Food and the Ministry of Rural Affairs proposed several amendments to Ontario’s Meat Regulation, O Reg 31/05 (the Regulation). This Regulation initially came into force in 2005 under the Food Safety and Quality Act, 2001. The amendments are intended to modernize inspection, enhance food safety, and support industry competitiveness and innovation.1 Most of the amendments will take effect on January 1, 2014, with several provisions dealing with animal care standards coming into force on July 1, 2014.2 The Regulation requires that both slaughter and freestanding meat plants obtain licences in order to deal with carcasses and meat products. To clarify that the Ministry of Agriculture’s role is the inspection of slaughter and higher risk meat-processing operations, the government has made three changes that outline where a licence is not required.3 First, the Regulation states that assembled food products, such as pizza and sandwiches, are not considered meat products for the purposes of the Regulation. Assembled food products are those products that contain 25 per cent (or less) meat by weight, are combined with non- meat ingredients, and are generally thought of as food products. Second, the changes implement a small distribution volume exemption so that businesses do not require a licence if they engage in lower risk meat-processing activities or sell most of their products directly to consumers. Third, a food service exemption is introduced so that operations do not require a licence if their main business is preparing and serving meals directly to customers.4 The amendments also address a wide array of other issues raised by stakeholders. For example, the changes will give meat plant operators more flexibility in buying and receiving meat products. Operators will be permitted to obtain meat from unlicensed third parties if the meat product arrives at the meat plant in its original packaging and the packaging includes the inspection legend from an imported product or from a federal or provincial meat plant. In addition, the amendments make several changes intended to strengthen standards of animal care. Specifically, rabbits will no longer be wholly or partially hoisted or suspended while conscious prior to slaughter. Back-up stunning instruments must also be available in the event of equipment failure, and appropriate equipment must be available to restrain and euthanize animals that are found to be compromised, unfit or non-ambulatory. The Regulation also eliminates certain restrictive requirements for facility and meat plant construction and operations, mainly in regards to the use of space. For example, catch basins, grease traps and interceptors will no longer be kept in the inedible materials room of a slaughter plant so long as they can be located in other parts of the plant, and a separate room dedicated to the storage of dry goods will not be mandatory. 5 1 Canadian Food Inspection Agency News Release, “Agricultural Growth Act: Supporting Canada’s Agriculture Industry through Effective Government,” December 9, 2013, online: http://inspection.gc.ca. 2 O Reg 31/05. 3 Ministry of Agriculture and Food, Ministry of Rural Affairs, “Do the Changes to the Meat Regulation Affect My Business: Overview of Amendments to O Reg 31/05 and Useful Information for Operators,” January 2014, online: http://www.omafra.gov.on.ca. 4 O Reg 31/05 and Ministry of Agriculture and Food, Ministry of Rural Affairs, “Do the Changes to the Meat Regulation Affect My Business: Overview of Amendments to O Reg 31/05 and Useful Information for Operators,” January 2014, online: http://www.omafra.gov.on.ca. 5 Ibid.
  • 17. 14 Food Report 2014 Legislative and Regulatory Update Labelling and Advertising of Dietary Fibre-Containing Food Products In February 2012, Health Canada published a document entitled “Policy for Labelling and Advertising of Dietary Fibre-Containing Food Products” (the Policy). The Policy updated the definition of “dietary fibre” and reduced the caloric value for fibre from four kilocalories per gram to two kilocalories per gram to bring Canada in line with international nutrition standards. In particular, the Policy offers guidance on product labelling and addresses topics such as total dietary fibre declarations, soluble and insoluble fibre declarations and fibre-related health claims. Although the Policy was published in 2012, the CFIA took an educational approach to enforcement for the first year. However, this transition period has since ended, and all regulated parties are now responsible for ensuring food labels and advertisements comply with the current Policy.
  • 18. 15Food Report 2014 Legislative and Regulatory Update An Act to Enact the Local Food Act, 2013 On March 25, 2013, the Ontario government reintroduced legislation that aims to increase awareness, access and sales of local food throughout the province. The Local Food Act, 2013 (the Act) received Royal Assent on November 6, 2013, but has yet to be proclaimed.1 The new legislation is part of the government’s broader strategy to strengthen the Ontario agri-food industry, support communities and stimulate economic growth. When enacted, the Act will grant the government the option to set local food goals or targets in response to consultations with stakeholders. Moreover, the Act will require the Minister of Agriculture and Food to prepare a local food report at least once every three years. Finally, the Act proclaims the week beginning on the Monday before Thanksgiving in each year to be Local Food Week.2 1 Bill 36, Local Food Act, 2013, online: http://www.ontla.on.ca. 2 Ibid.
  • 19. 16 Food Report 2014 Legislative and Regulatory Update New CFIA Guidelines and Policies Surrounding the Use of “Local” in Food Labelling On May 10, 2013, the CFIA announced an initiative to modernize its food labelling policies. Over the next two years, the CFIA will launch a number of significant food safety enhancements, including a review of food labelling regulations, guidelines and policies surrounding the use of the term “local.”1 Under the previous policy, the CFIA interpreted the term “local” as food originating within a 50 km radius of the place where it was sold or food that was sold within the same local government unit in which it originated. In order to reflect current food production practices and consumer expectations, an interim policy has been implemented and is effective immediately. Until the CFIA completes its full review of the labelling policy, the meaning of “local” has been broadened to encompass food produced in the province or territory in which it is sold or food sold across provincial borders within 50 km of the originating province or territory.2 The CFIA is looking for Canadians to participate in the debate and will consult nationally with a wide range of stakeholders. A discussion paper was released on July 20, 2013, and an online consultation questionnaire closed in the fall of 2013. Draft recommendations are expected in winter 2013/spring 2014, and a similar consultation process to discuss opportunities to improve and modernize food labelling is scheduled for summer/fall 2014. A final report is expected by spring 2015.3 1 Canadian Food Inspection Agency, “Origin Claims,” May 10, 2013, online: http://www.inspection.gc.ca. 2 Canadian Food Inspection Agency, “Local Food Claims,” June 20, 2013, online: http://www.inspection.gc.ca. 3 Canadian Food Inspection Agency, “Discussion Paper for Food Labelling Modernization,” July 20, 2013, online: http://www.inspection.gc.ca.
  • 20. 17Food Report 2014 Legislative and Regulatory Update Amendments to the Fertilizers Regulations On April 26, 2013, the CFIA introduced amendments to the Fertilizers Regulations (the Regulations). The Regulations apply to fertilizers and other supplement products and operate under the authority of the federal Fertilizers Act. Under the amended rules, the CFIA will no longer regulate the efficacy and quality of fertilizers. Several sections of the Regulations were repealed to reflect this change, including pre-market efficacy assessments, verification of performance/benefit claims and marketplace monitoring of product quality. Instead, the CFIA will focus solely on ensuring that established standards of safety are met for both fertilizers and supplements. The change will allow the CFIA to prioritize safety assessment, while allowing the industry to assume a leadership role with respect to quality assurance.
  • 21. 18 Food Report 2014 The Canada-Costa Rica Organic Equivalency Arrangement On March 28, 2013, the federal Canadian Food Inspection Agency (CFIA) issued a letter to Costa Rica’s Ministry of Agriculture and Livestock recognizing an equivalency arrangement for the trade of organic products between the two countries.1 The arrangement recognizes that Canadian organic products that are (1) produced and certified in Canada, (2) in compliance with the Organic Products Regulations, 2009, and (3) certified by the CFIA under the Canada Organic Regime have met Costa Rica’s legal standards for organic certification. Similarly, agricultural plant products that are (1) produced in Costa Rica, (2) in compliance with Costa Rica’s Organic Agriculture Regulation- Decree No. 29782, and (3) produced and processed under an organic certification program meet Canada’s organic standards.2 It is anticipated that as a result of this arrangement, the import and export of organic goods between Canada and Costa Rica will now be more efficient and less costly. Bilateral Agreements 1 Canadian Food Inspection Agency, “Canada - Costa Rica Organic Equivalency Recognition – Guidance Document for Canadian Importers and Exporters,” November 11, 2013, online: http://www.inspection.gc.ca. 2 Ibid.
  • 22. 19Food Report 2014 Bilateral Agreements Animal Disease Zoning Agreement Between Canada and the United States On January 16, 2013, Agriculture Minister Gerry Ritz announced that Canada and the U.S. have signed an agreement (the Agreement) to recognize each other’s zoning measures during outbreaks of foreign animal disease. The goal of the arrangement is to minimize trade disruptions between the two countries without compromising human or animal health. A detailed guidance framework is under development and will involve extensive consultation with industry groups, states and provinces. The initiative fulfills a commitment made in the December 2011 Joint Action Plan of the Canada-United States Regulatory Cooperation Council. It is hoped that Canada can more effectively leverage its position as a major trade partner for the U.S. through coordination of both nations’ policies. Under the Agreement, each country will accept the other’s decisions about disease control and eradication zones if outbreaks of animal diseases, such as classical swine fever, occur. If Canada were to establish such a zone, the U.S. would continue to permit the importation of live animals and animal products from disease-free areas for the duration of the outbreak, and regular trade would resume as soon as Canada cleared the zone as safe.
  • 23. 20 Food Report 2014 Featured Articles
  • 24. 21Food Report 2014 Featured Articles Country of Origin Labelling Requirements Country of origin labelling (COOL) is a requirement under Title X of the United States Farm Security and Rural Investment Act of 2002 (known as the 2002 Farm Bill, as amended by the 2008 Farm Bill). The law, which became mandatory in 2009, requires retailers, such as grocery stores and club warehouses, to provide their customers with information regarding the source of certain foods. Specifically, beef, veal, pork, lamb, goat and chicken, along with fish, shellfish, fruits and vegetables, and several varieties of nuts, legumes and plants are captured by the COOL measures, with the intention that the strenuous labelling requirements imposed by the legislation enable consumers to make informed decisions about the food they consume.1 The Impact of COOL in Canada and the United States The COOL measures require the Canadian livestock industry to go through a lengthy labelling and internal tracking system. Producers face an extensive administrative burden in order to provide retailers with the required product information, and inaccurate records can lead to audits and fines by the United States Department of Agriculture (USDA). According to the Canadian Pork Council, COOL measures cost more than C$500-million per year to the Canadian hog industry, while the Canadian cattle industry has estimated its annual compliance costs associated with the COOL measures to be C$639-million.2 Over eight million American and over two million Canadian jobs depend on trade between these two countries, and COOL has been a lightning rod for dispute right from the initial passage of the legislation. 1 Agriculture Marketing Service, “USDA Issues Final Rule to Amend Labelling Provisions Under Country of Origin Labelling, United States Department of Agriculture” (May 23 2013), online: United States Department of Agriculture http://www.ams.usda.gov. 2 Canadian Pork Council, “CPC Releases Report on COOL Damages to Canada’s Pork Industry,” press release (January 14, 2013) and Dan Sumner, “Canadian Losses from U.S. COOL Implementation,” prepared for Canadian Cattlemen’s Association (September 27, 2012).
  • 25. 22 Food Report 2014 Featured Articles Similarly, U.S. meatpackers feel that COOL is a bookkeeping nuisance, and retailers have complained about the millions of dollars they will have to spend on different labels for meat products raised and/ or slaughtered in different countries.3 Industry implementation and record-keeping costs in the U.S. have been estimated by the USDA to be as high as C$3.9-billion in the first year and C$458-million in each subsequent year.4 Canada and the U.S. enjoy the largest bilateral trading relationship in the world, with two-way trade in goods and services of over C$649-billion in 2010. Agriculture and agri-food bilateral trade accounted for C$35-billion of this total. Over eight million American and over two million Canadian jobs depend on trade between these two countries, and COOL has been a lightning rod for dispute right from the initial passage of the legislation.5 WorldTrade Organization Intervention Starting in 2008, the implementation of COOL by the USDA was challenged by the Government of Canada at the World Trade Organization (WTO), particularly in regard to the labelling rules for meat and meat products. In 2009, several other countries joined the complaint as third parties, including Peru, Mexico and Argentina.6 The Government of Canada argued that the COOL requirements were discriminatory and trade- distorting by reducing the value and number of cattle and hogs shipped to the U.S.7 Following proceedings at both the panel and Appellate Body levels, it was ultimately determined in June 2012 that the COOL measures were in violation of the U.S. obligations under the Agreement on Technical Barriers to Trade (TBT).8 Section 2.1 of the TBT mandates that the technical regulations of one member country cannot treat similar products imported from the territory of another member country less favourably.9 The Appellate Body of the WTO found that although a large amount of information must be tracked and transmitted by upstream producers for the purposes of providing consumers with information on origin, only a small amount of this information is actually communicated to consumers in an understandable or accurate manner. Since a considerable proportion of meat sold in the U.S. is not subject to the COOL labelling requirements, it is a detrimental burden on foreign meat producers looking to sell their product in the U.S.10 Supporters of the May 2013 changes say that the new labelling requirements provide purchasers of meat products with more detailed and, consequently, more useful information. 3 Charles Abbott, “U.S. meat-labelling law, a WTO issue, now a farm bill target,” Reuters (October 30, 2013), online: http://www.reuters.com. 4 USDA, “Mandatory Country of Origin Labelling – Interim Final Rule,” online: United States Department of Agriculture http://www.ams.usda.gov. 5 Government of Canada, “Canada Wins WorldTrade Organization Case on U.S. Country-of-Origin Labelling” (November 18, 2011), online: www. international.gc.ca. 6 WorldTrade Organization, “Dispute Settlement: United States – Certain Country of Origin Labelling (COOL) Requirements,” (ongoing on September 25, 2013), online: WorldTrade Organization http://www.wto.org. 7 Ibid. 8 Ibid. 9 WorldTrade Organization, “Agreement onTechnical Barriers toTrade,” Section 2.1. 10 Supra, note 6
  • 26. 23Food Report 2014 Featured Articles Latest Developments The U.S. was given until May 2013 by the WTO to bring its COOL requirements into compliance with its WTO obligations. On May 23, 2013, the USDA responded by issuing a final COOL rule to amend the labelling provisions (Final Rule).11 However, the Final Rule is expected to actually increase the financial impact of the COOL measures in Canada. Not only must producers continue to label their meat products with source information, labels must now specifically break out the country where the animal was born, the country where the animal was raised and the country where the animal was slaughtered. The Final Rule also makes it unlawful to combine meats with different “born, raised and slaughtered” combinations.12 The Canadian Cattlemen’s Association predicts these amendments will cause an increase in the cost of the COOL measures to an estimated C$90 to C$100 per head of cattle, compared with the current C$25 to C$40 per head. Similar increases in the costs of production can be expected with respect to compliance costs for exporting other Canadian meats.13 The U.S. has explained the new rules on the basis that they promote transparency and that consumers have the right to know where their food comes from. Supporters of the May 2013 changes say that the new labelling requirements provide purchasers of meat products with more detailed and, consequently, more useful information.14 11 11 Supra, note 6 12 Agricultural Marketing Service, “FAQ: COOL Labelling Provisions Final Rule, United States Department of Agriculture,” (May 23 2013), online: United States Department of Agriculture http://www.ams.usda.gov. 13 Canadian Cattlemen’s Association, “Country of Original Labelling (COOL) Update,” online: http://www.cattle.ca 14 Supra, note 3.
  • 27. 24 Food Report 2014 Featured Articles Next Steps The recent announcement of an agreement in principle of a free trade with the EU may help to mitigate some of the losses expected by Canadian producers as discussed in our October 2013 Blakes Bulletin on International Trade – The Canada-EU Comprehensive Economic and Trade Agreement: New Opportunities Abound for Food and Agribusiness in the European Market. Nevertheless, given that the U.S. and Canada have the largest bilateral trading relationship in the world, the controversy over the USDA’s latest COOL amendments is far from over. Canada has requested that the WTO investigate the Final Rule to determine if the U.S. is in compliance with their WTO obligations. If it is determined that these changes do not comply with the WTO findings released in 2012, Canada is free to request authority from the WTO to retaliate to a level equivalent to damages resulting from the COOL requirements.15 15 In this case, the Minister of Agriculture announced in June that retaliation would take the form of a 100 per cent surtax on selected products imported from the U.S. The surtax would target producers of imports from the U.S. who have been strong supporters of the COOL requirements, such as glucose and pasta.16 Further, in the U.S., the American Association of Meat Processors, the Canadian Cattlemen’s Association, the Canadian Pork Council, together with other plaintiffs, have filed a lawsuit in the federal court challenging the constitutionality and legislative authority of the Final Rule.17 Members of a select House-Senate committee are also considering repealing the law altogether, and President Obama has listed the 2002 Farm Bill as one of three priorities to be considered this year.18 15 Richard Blackwell, “Ottawa weighs retaliation over new U.S. meat label rules,” The Globe and Mail (May 23, 2013), online:The Globe and Mail http://ww.theglobeandmail.com. 16 Ibid. 17 John Cotter, “Tyson Foods to Halt Canadian Cattle Purchases over ‘COOL’,” The Huffington Post (October 24, 2013), online:The Huffington Post http://www.huffingtonpost.ca. 18 Supra, note 3.
  • 28. 25Food Report 2014 Featured Articles
  • 29. 26 Food Report 2014 Featured Articles
  • 30. 27Food Report 2014 Featured Articles The Labelling Distinction: Natural Flavours vs. Natural Ingredients The decision of the United States District Court for the Central District of California in Viggiano v. Hansen Natural Corporation highlighted the significance of the label “all natural flavours.” Steven Viggiano brought a class action suit against Hansen Natural Corporation claiming that the labelling of their Diet Hansen’s Premium Soda line of products was misleading to consumers.1 The decision will be of interest to Canadian food businesses selling products in the U.S. More generally, the decision draws attention to the regulatory regime surrounding product labels containing the term “natural.” Hansen manufactures a variety of beverages, including a line of diet sodas sold across the U.S. These beverages come in various flavours, including creamy root beer, tangerine lime and pomegranate. The labelling of the diet soda line indicates that the product contains only “all natural flavours.”In addition to natural flavours, the sodas also contain two synthetic ingredients: acesulfame potassium (commonly known as “ace-k”) and sucralose. These compounds are commonly used in beverages as artificial sweeteners or flavour enhancers.2 Mr. Viggiano made a variety of claims regarding labelling under three California consumer protection laws: the Consumers Legal Remedies Act (CLRA); the False Advertising Law (FAL) and the Unfair Competition Law (UCL). Mr. Viggiano argued that because the sodas contained synthetic ingredients, the “all natural flavours” label misled consumers into thinking that all ingredients in the beverage are natural. He argued that reasonable consumers would understand “natural flavours” to mean the compounds have not been enhanced with synthetic ingredients. The FDA regulations draw a distinction between labelling a product as containing “natural flavours” as compared to “natural ingredients.”These regulations allow the label of “natural flavours” so long as the characterizing flavour is natural (such as the natural pomegranate flavour in some of Hansen’s sodas), even where the product contains artificial, non- flavouring ingredients. 1 Steven Viggiano v. Hansen Natural Corporation; Hansen Beverage Company; Monster Beverage Corporation; and DOES 1 through 100, inclusive, Defendants, (2013) 944 F supp 2d 877 at 881. 2 Ibid
  • 31. 28 Food Report 2014 Featured Articles In response Hansen argued that claims under state law were pre-empted by federal regulations enacted pursuant to the Federal Food Drug and Cosmetic Act (FDCA)3 and administered by the Food and Drug Administration (FDA). On May 13, 2013, Hansen successfully sought a motion to dismiss. In dismissing the case, District Judge Margaret M. Morrow agreed with Hansen because the label in question conformed to the federal regulations and the state laws were completely preempted.4 The FDA regulations draw a distinction between labelling a product as containing “natural flavours” as compared to “natural ingredients.” These regulations allow the label of “natural flavours” so long as the characterizing flavour is natural (such as the natural pomegranate flavour in some of Hansen’s sodas), even where the product contains artificial, non-flavouring ingredients.5 This allows compounds functioning as artificial sweeteners and flavour enhancers to be used generally in products where they add to or sweeten the characterizing flavour of the product without imparting a characteristic flavour of their own.6 The synthetic compounds in Hansen’s diet soda are classified by the FDA as artificial sweeteners or flavour enhancers.7,8 Accordingly, Judge Morrow found that they did not affect the correctness of a label indicating “all natural flavours” and the labelling was in compliance with FDA regulations.9 This result highlights the distinction between natural flavour and natural ingredients when complying with the U.S. regulatory regime. Although failure to comply with FDA regulations does not create a private right of action under the FDCA,10 offenders may be subjected to a fine or jail time.11 Further, the court held that even if the regulations had not preempted state law, the reasonable consumer would not be misled by this labelling because the “all natural flavours” label was consistent with the listed ingredients. Additionally, the product name contained the term “diet” in the label itself, and the defining characteristic of diet beverages is that they do not contain sugar. The court concluded that a reasonable consumer would understand that a product labelled “diet” would contain artificial sweeteners, even if this product contained a label such as “all natural flavours.”12 3 21 USC § 343(k). 4 Supra note 1 at 886-892. Part of the decision in Viggiano turns on the U.S. doctrine of preemption, which is not discussed in this article. 5 21 CFR § 101.22(i)(1). 6 Supra note 1 at 891-892. 7 Sucralose is classified as a sweetener. For further information, see: 21 CFR §172.831. 8 Ace-k is classified as a general purpose sweetener and flavour enhancer in foods generally. For further information, see: 21 CFR §172.800. 9 Supra note 1 at 842. 10 Supra note 1 at 887. 11 21 USC § 331; and 21 USC § 333(a). 12 Supra note 9.
  • 32. 29Food Report 2014 Featured Articles The Canadian Regime for Labelling Products “Natural” Similar to the FDA, the Canadian Food Inspection Agency (CFIA) has guidelines regarding the use of the “natural flavour” label.13,14 A substance imparting flavours from flavour plant or animal source may be claimed as containing natural flavour and other substances may be added to a flavour without altering its status as a “natural flavour.” These include acids, bases, salts and sweeteners used to impart sour, bitter, salty and sweet tastes. Although the characterization of a flavour as “all natural” is not affected, the labelling of ingredients is impacted by the addition of these compounds. Any product containing a compound of this type cannot use a label of “all natural ingredients” since it contains an added component. For example, citric acid is not a flavour but acts as an acid when combined with natural flavours.15 The addition of synthetically produced citric acid would therefore permit the flavour to be labelled as “all natural,” but it could not be labelled as including “all natural ingredients.” 13 Canadian Food Inspection Agency, “Guide to Food Labelling and Advertising – Chapter 4: Composition, Quality, Quantity and Origin Claims” at s. 4.7 (November 15, 2012), online: Canadian Food Inspection Agency http://www.inspection.gc.ca. 14 Canadian Food Inspection Agency, “Guide to Food Labelling and Advertising – Chapter 2: Basic Labelling Requirements Section” at s 2.10 (January 1, 2012), online: Canadian Food Inspection Agency http://www.inspection.gc.ca. 15 Supra note 13.
  • 33. 30 Food Report 2014 Featured Articles This is not the case where a product contains an artificial flavour compound and a food label suggesting a natural flavour source (such as the picture of an orange). In such a case, the product must be labelled as containing artificial flavour, even if the artificial flavour is used in conjunction with natural flavours.16 For example, the addition of “artificial orange flavour” to orange juice (with a food label suggesting a natural source) requires disclosing the presence of “artificial orange flavour” on the juice label. Viggiano and a review of CFIA guidelines emphasize the fact that in both Canada and the U.S., a “natural” label has two components: flavour and ingredients. When crafting food and beverage labels, it is important to carefully consider the application of FDA regulations and CFIA guidelines regarding labelling. This is of particular relevance for a wide variety of reduced-calorie products utilizing artificial compounds as sweeteners. Claims such as “all natural ingredients” must be avoided where artificial sweeteners are in use, though for the same product the claim of “all natural flavours” may be appropriate. Viggiano and a review of CFIA guidelines emphasize the fact that in bothCanadaandtheU.S.,a“natural” label has two components: flavour and ingredients. 16 Supra note 14.
  • 34. 31Food Report 2014 Featured Articles
  • 35. 32 Food Report 2014 Featured Articles
  • 36. 33Food Report 2014 Featured Articles Undercover Investigations of Food and Agribusiness Operations: Ag-Gag Laws in Comparison to the Canadian Whistleblower Regime Recent media coverage has focused public interest on so-called “ag-gag laws”,1 which are U.S. laws aimed at prohibiting the undercover recording of images of food and agribusiness operations. These laws are considered to be industry-specific exceptions to whistleblower protection legislation. More specifically, these laws are intended to protect the food and agribusiness industry from unauthorized undercover investigations into commercial animal husbandry and agricultural practices conducted by third-party non-governmental interest groups. Advocacy groups have opposed ag-gag laws on the basis of food safety, animal welfare, civil liberties and restrictions to freedom of speech. While similar undercover investigative tactics have also been used against the Canadian food and agribusiness industry,2 no Canadian equivalent to the U.S. ag-gag laws exists today. Ag-Gag Laws in the United States Ag-gag laws originated in the early 1990s when Kansas, Montana and North Dakota passed legislation to protect agricultural facilities from interference from animal welfare activist groups.3 The first ag-gag laws were part of a wave of animal enterprise interference laws4 intended to curtail physical damage to and interference with the commercial operations of animal facilities. In addition to these broader prohibitions, legislation in Kansas, Montana and North Dakota included prohibitions against photography or videotaping on an animal facility.5 Recently, ag-gag laws The ag-gag laws, like food libel laws, are intended to protect the food and agribusiness industry from undue and disruptive interference by third-party non- governmental interest groups, which can often interfere with the lawful operation of food and agribusiness facilities in compliance with standard practice. 1 The term “ag-gag” was initially coined by Mark Bittman in 2011. See: Mark Bittman, “Who Protects the Animals?” The NewYorkTimes (April 26, 2011), online: NewYorkTimes http://opinionator.blogs.nytimes.com. 2 Vivian Luk, “Alberta egg farms accused of cruelty: McDonald’s urged to enter fray over issue,” Calgary Herald (October 22, 2013), online: Calgary Herald http://www2.canada.com . 3 Kevin C. Adam, “Shooting the Messenger: A Common Sense-Analysis of the State ‘Ag-Gag’ Legislation under the First Amendment” (2012) 45 SFKULR 1129 at page 1157. 4 Beginning in 1988, some 28 states enacted laws (sometimes referred to as “animal terrorism laws” or “animal enterprise interference laws”) in response to tactics used by animal rights activists. Generally, these laws forbid entry to an animal facility with the intent to commit a prohibited act. Prohibited acts are broadly defined, some examples include: criminal trespass; and property damage with the intent to obstruct, impede, or disrupt operations on an animal facility. With the exception of legislation in Kansas, Montana and North Dakota, these first-wave animal enterprise interference laws are not considered ag-gag laws because they do not contain prohibitions against photography or videotaping. For further information, see: Cynthia Hodges, “Detailed Discussion of State Animal ‘Terrorism’/ Animal Enterprise Interference Laws,” Michigan University College of Law Animal Legal & Historical Center (2011), online: Animal Law Info http://www.animallaw.info . 5 See respectively: KSA § 47-1825 to1830 (Kansas); MCA § 81-30-101 to 105 (Montana); and NDCC § 12.1-21.1-01 to 05 (North Dakota).
  • 37. 34 Food Report 2014 Featured Articles have been passed in Iowa, Utah and Missouri.6 In contrast to the earlier animal enterprise interference laws, the more recent ag-gag laws are focused on undercover investigations at food and agribusiness facilities.7 In 2013, ag-gag bills were introduced but not enacted in Arkansas, Nebraska, New Mexico, North Carolina, Pennsylvania, Vermont, California, Indiana, New Hampshire, Tennessee and Wyoming. Generally, ag-gag laws and bills contain some combination of the following four elements: Prohibiting (punishable with criminal sanctions) photography or videotaping on food and agribusiness facilities without the consent of the owner of such facilities. 1. Prohibiting (punishable with criminal sanctions) the possession and distribution of photographs or videotapes of operations at food and agribusiness facilities without the consent of the owner of such facilities. 2. Prohibiting (punishable with criminal sanctions) individuals from obtaining or assisting others to obtain employment at food and agribusiness facilities under false pretences, such as making false statements during the hiring process.8 3. Requiring (punishable with criminal sanctions) individuals witnessing animal cruelty to make a report within a prescribed period of time, typically 24 or 48 hours, sometimes with a requirement to hand over any recordings.9 This element is intended to encourage the prompt reporting of animal cruelty in food and agribusiness facilities, making lengthy third-party non-governmental undercover investigations illegal.10 The absence of ag-gag laws in Canada does not mean the Canadian food and agribusiness industry is left without legal recourse in Canada in the face of undercover investigative tactics by third-party non-governmental interest groups. 6 Dan Flynn, “Common Element for 2013’s ‘Ag Gag’ Bills: Quick Reporting,”Food Safety News (Janruary 28, 2013), online: Food Safety News http://foodsafetynews.com [Flynn]. 7 Doris Lin, “First Ag-Gag Laws in United States Are OverTwentyYears Old; Iowa’s Ag-gag Law Was Not the First,” About.com (January 23, 2013), online: About.com http://animalrights.about.com. See also: KSA §47-1825 to 1830 (Kansas); MT § 81-30-101 to 81-30-101 (Montana); and ND ST §12.1- 21.1-01 to 12.1-21.1-05 (North Dakota). 8 Supra note 3 at page 1160. 9 Supra note 6. 10 Mandatory reporting provisions are not intended to create a global positive obligation to report all animal abuse, punishable with criminal sanctions for failure to comply. Instead, they are drafted to be restricted to the reporting of animal cruelty on agricultural operations. For further information, see: Flynn, supra note 6.
  • 38. 35Food Report 2014 Featured Articles Critiques of Ag-Gag Law Opponents of ag-gag laws have typically based their criticism on four broad categories: 1. Food Safety and Public Health – From a policy perspective, the public has a right to be made aware of unsafe and unsanitary practices or environmental conditions that may endanger the food supply chain. Some public health and food safety advocates argue that their ability to uncover and report threats to public health originating from the food supply chain is restricted by ag-gag laws, which limit the range of investigative tactics available to third-party non- governmental advocates. 2. Ethics of AnimalWelfare – Animal welfare activists argue that the food and agribusiness industry has an ethical obligation to treat animals (even those bred and raised for food) humanely, and ag-gag laws permit the industry to veil animal abuses. 3. Civil Liberties – A common feature of ag-gag laws is that they create an offence of fraud for knowingly making false statements as part of a job application. These provisions are viewed as overly broad and may allow employers to frame the application processes to extract from job candidates personal information unrelated to the job function. Ag-gag opponents suggest that these types of information may be used by employers to discriminate against employees based on their personal affiliations. Civil liberties advocates have challenged such provisions on the basis of violations of freedom of association, human rights and rights to privacy. 4. Restrictions to Freedom of Speech – Restrictions on possession and distribution of photographs of food and agribusiness facilities have been challenged as a restriction on freedom of speech. In fact, the freedom of speech issue has resulted in ag-gag bills being defeated in some states.11, 12 Of course, critiques of ag-gag laws must be balanced against the public’s interest in a secure and uninterrupted food supply chain. The ag-gag laws, like food libel laws,13 are intended to protect the food and agribusiness industry from undue and disruptive interference by third-party non-governmental interest groups, which can often interfere with the lawful operation of food and agribusiness facilities in compliance with standard practice. 11 “The HSUS Praises Florida Legislative Committees for Removing ‘Ag-Gag’ Language from Agricultural Bill,The Humane Society of the United States” (January 25, 2012), online:The Humane Society of the United States http://www.humanesociety.org. 12 Chas Sisk, “Gov. Haslam vetoes ‘ag-gag’ measure over constitutional issues,” TheTennessean (May 14, 2013), online:TheTennessean http://www.tennessean.com. 13 In the U.S., so-called “food libel laws” create a right of action against persons who release false information relating to the safety of a food product. Generally, food libel laws lower the burden of proof for plaintiffs in defamation litigation and increase the burden of proof for defendants.
  • 39. 36 Food Report 2014 Featured Articles The Canadian Perspective:The Absence of Ag-Gag Laws in Canada and What It Means for the Canadian Food and Agribusiness Operators To date, no ag-gag laws have been enacted in Canada.14 However, undercover investigations into the food and agribusiness industry by third-party non-governmental interest groups have taken place in Canada.15 The absence of ag-gag laws in Canada does not mean the Canadian food and agribusiness industry is left without legal recourse in Canada in the face of undercover investigative tactics by third-party non-governmental interest groups. In the case of criminal acts by interest groups, the Criminal Code (the Code) will apply appropriate sanctions. Likewise, the full range of causes of action in tort law (such as trespass, defamation16 and unlawful interference with economic relations) may also provide for economic recovery. 14 Matt McIntosh, “Egg industry panel offers feedback on undercover video,” Better Farming (October 23, 2013), online: Better Farming http://www.betterfarming.com. 15 Supra note 2. 16 Food libel laws discussed above are also not present in Canada.Therefore, plaintiffs will be required to prove all elements of a standard defamation claim.This contrasts with those states with food libel laws as described above, supra note13. For further information, see: CED Defamation I.1 at § 1.1(WL).
  • 40. 37Food Report 2014 Featured Articles Compliance with Canadian Whistleblower Protections At the same time, the food and agribusiness industry is required to comply with existing Canadian whistleblower protections applicable to the private sector.17 Some statutes, including the Employment Standards Act,18 Occupational Health and Safety Act 19 and Canadian Environmental Protection Act,20 prohibit employers from taking reprisals against employees filing complaints under the relevant statute. The broadest protections for whistleblowers available under Canadian law are contained in the Code. These protections make it an offence for an employer to take or threaten disciplinary measures, including termination, against an employee to prevent that employee from reporting an offence committed contrary to federal or provincial law. This protection is limited to where the reporting is made to persons whose duties include the enforcement of federal or provincial law.21 Importantly, employee disclosure made to anyone other than enforcement officials, including the media, is not prima facie protected. This is significant since undercover investigations often release information directly to the media or through other public broadcast channels. In addition, whistleblower protections under the Code are only available to employees reporting an offence under federal or provincial laws. So the reporting of practices that do not run contrary to provincial or federal laws (including relevant animal protection statutes,22 environmental protections and employment standards) are also not protected under the Code. This means whistleblower protections do not apply to employees recording videos depicting practices that are legal but that the employee finds to be personally distasteful. 17 Further whistleblower protections exist for public-sector employees beyond those available to the private sector, see for example the Public Servants Disclosure Protection Act, SC 2005 c 46. 18 Employment Standards Act, SO 2000, c C-41 s 74. 19 Occupational Health and Safety Act, RSO 1990 c C-O.1 s 50. 20 Canadian Environmental Protection Act, SC 1999, c 33 at s 16. 21 Criminal Code, RSC, 1985, c C-46 s 425.1 22 For example, acts in Alberta and Ontario provide for a standard of care for animals on agricultural facilities that is in compliance with “reasonable and generally accepted practices.” For further information, see: Ontario Society for the Prevention of Cruelty to Animals Act, RSO 1990 C O-36 at s 11.1(2)(a). See also Animal Protection Act, RSA 2000 C A-41 at s 2(2).
  • 41. 38 Food Report 2014 Blakes has one of the most active food, beverage and agribusiness practices in the country. In addition to mergers and acquisitions, lawyers in our Food, Beverage & Agribusiness group advise on a wide range of legal matters affecting the sector, including corporate/commercial, technology, intellectual property, financial services, labour and employment, pension and employee benefits, class action defence, consumer product safety, administrative and regulatory processes, and real estate. Blakes has substantial experience advising well-known consumer brands in the food and beverage industry with respect to regulatory compliance. We advise on the advertising and marketing of food and beverage products, including structuring promotions, offers and campaigns, as well as the negotiation of advertising agreements; product claim substantiation; labelling issues; product recalls; the acquisition, licensing, transfer and litigation of patent, trade-mark, copyright and industrial design rights; regulatory classification issues (food versus natural health product versus drug); dispute resolution between companies and regulatory officials when interpreting legislation, administrative and policy matters, including disputes and complaints with Advertising Standards Canada, the Canadian Food Inspection Agency, and Health Canada; merger reviews before the Competition Bureau and abuse of dominance cases; and international trade rights and disputes, including subsidies, tariffs, food and health regulations that impact market access, and import controls. Our multidisciplinary team has advised some of the most well-known brands and participants in the sector. Our clients include leading food, beverage and agribusiness companies, such as producers, processers, distributors, suppliers, retailers, manufacturers, co- operatives and marketers as well as crop protection companies, seed companies, dairy breed associations, agricultural fairs, biotechnology organizations, biofuel production and distribution companies, and animal nutrition companies. For more information on our Food, Beverage & Agribusiness practice, visit www.blakes.com or contact: Michael Stevenson Direct: 416-863-2458 michael.stevenson@blakes.com Arash Amouzgar Direct: 416-863-3338 arash.amouzgar@blakes.com Blakes Food, Beverage & Agribusiness Group
  • 42. 39 Food Report 2014 Food Report 2014 MONTRÉAL Blake, Cassels & Graydon LLP 600 de Maisonneuve Boulevard West Suite 2200 Montréal QC H3A 3J2 Canada Telephone: 514-982-4000 Facsimile: 514-982-4099 Email: montreal@blakes.com VANCOUVER Blake, Cassels & Graydon LLP 595 Burrard Street P.O. Box 49314 Suite 2600, Three Bentall Centre Vancouver BC V7X 1L3 Canada Telephone: 604-631-3300 Facsimile: 604-631-3309 Email: vancouver@blakes.com AL-KHOBAR* Dr. Saud Al-Ammari Law Firm in association with Blake, Cassels & Graydon LLP Apicorp Building, P.O. Box 1404 Al-Khobar 31952 Kingdom of Saudi Arabia Telephone: +966-13-847-5050 Facsimile: +966-13-847-5353 Email: saud.ammari@blakes.com OTTAWA Blake, Cassels & Graydon LLP 340 Albert Street, Suite 1750 Constitution Square, Tower 3 Ottawa ON K1R 7Y6 Canada Telephone: 613-788-2200 Facsimile: 613-788-2247 Email: ottawa@blakes.com NEW YORK Blake, Cassels & Graydon (U.S.) LLP 126 East 56th Street Suite 1701, Tower 56 New York NY 10022-3613 U.S.A. Telephone: 212-893-8200 Facsimile: 212-829-9500 Email: newyork@blakes.com BEIJING Blake, Cassels & Graydon LLP 7 Dong Sanhuan Zhonglu Suite 901, Office Tower A, Beijing Fortune Plaza Chaoyang District Beijing 100020 People’s Republic of China Telephone: +86-10-6530-9010 Facsimile: +86-10-6530-9008 Email: beijing@blakes.com TORONTO Blake, Cassels & Graydon LLP 199 Bay Street Suite 4000, Commerce Court West Toronto ON M5L 1A9 Canada Telephone: 416-863-2400 Facsimile: 416-863-2653 Email: toronto@blakes.com LONDON Blake, Cassels & Graydon LLP 23 College Hill 5th Floor London EC4R 2RP England Telephone: +44-20-7429-3550 Facsimile: +44-20-7429-3560 Email: london@blakes.com SHANGHAI* Blake, Cassels & Graydon LLP 1376 Nan Jing Xi Lu Suite 718, Shanghai Centre Shanghai 200040 People’s Republic of China Telephone: +86-10-6530-9010 Facsimile: +86-10-6530-9008 Email: beijing@blakes.com CALGARY Blake, Cassels & Graydon LLP 855 - 2nd Street S.W. Suite 3500, Bankers Hall East Tower Calgary AB T2P 4J8 Canada Telephone: 403-260-9600 Facsimile: 403-260-9700 Email: calgary@blakes.com BAHRAIN Blake, Cassels & Graydon LLP in association with Dr. Saud Al-Ammari Law Firm 5th Floor, GB Corp Tower Bahrain Financial Harbour P.O. Box 11005 Manama Kingdom of Bahrain Telephone: +973-1715-1500 Facsimile: +973-1710-4948 Email: bahrain@blakes.com
  • 43. MontrÉal ottawa toronto calgary vancouver new york london Bahrain al-khobar* Beijing Shanghai* *Associated Office© 2014 Blake, Cassels & Graydon LLP | blakes.com