But mandated labeling has its share of pitfalls. Regulators might require too much information on a label, increasing costs to consumers with little upside. They might reduce the amount of information on a product label by increasing the costs of using certain language. More bizarrely, they might require completely misleading information to be put on a label. Arguments in favor of different labeling requirements can come from consumer pressure groups, but often they come from within industries.
An example of the first problem is mandatory country-of-origin labeling (or MCOOL) of meat products. Though there are efforts in congress to repeal MCOOL, it is currently the law of the land. A fact sheet distributed by K-State concludes:
The overriding finding of limited awareness of MCOOL, narrow use of origin information in purchasing decisions, and no evidence of a demand impact following MCOOL implementation is consistent with the argument that voluntary labeling by country of origin would have occurred if it were economically beneficial to do so. More broadly, the findings of this project generally support the assertions of MCOOL opponents who have asked “where is the market failure?”
MCOOL creates international trade issues and increases costs to producers, processors, and retailers with little to no upside.
Regulation of labels might also reduce the amount of information communicated to consumers. In his book Everything I Want to Do is Illegal, Joel Salatin documents the negative effects of government control of labels. He describes a situation in which he was legally barred from using the term "organic" in any description of his operation whatsoever because he hadn't gone through a mandated (and convoluted) certification process.
Since certification has matured over the past decade and a half, of course, it has done precisely what I predicted would happen. It has locked out small producers. It has pitted the ins against the outs. It has added another whole layer of food police. And it has aided and abetted the empirization [sic] of organics. (pp. 113)After discussing the myriad components of certification (which almost no regular consumer understands), he notes:
What the certification process has done is automatically shut down the inquisitiveness into all these variables, creating hardening of the categories. The bad part is that when a person says they are organic, the conversation ends because everyone assumes they know what that means. Clearly, a whole lot of questionable practices can happen under the auspices of organic.The point here is that consumers end up with less information because some people are kept from using a specific term in the description of their product. Consumers are less informed because they assume that, since the government presides over the certification process, anyone with that specific word on their label produces the product in ways the consumer approves of. According to Salatin, this is not always the case.
Finally, the information on a label might have little to do with informing consumers. A small dairy in the Florida panhandle has been told by the Florida Department of Agriculture and Consumer Affairs that it must label its skim milk "imitation" because it hasn't artificially re-introduced certain nutrients back into the milk after skimming. The owners of the creamery are fighting the requirement, claiming that milk that comes out of a cow can't be "imitation" milk. It sure seems like an example of regulatory capture. A dairy that pulls in $1,000 to $1,500 per week in milk revenue probably can't afford the sophisticated machinery required to operate like larger dairies.
Of course, none of this is to say that consumers shouldn't be informed or that all large businesses fight for and win legal protection from competition. However, giving government agencies free reign to establish whatever labeling requirements they wish is not a recipe for creating informed consumers.