News From the
Committee on Small Business
Subcommittee on Regulations and Healthcare
Kathy Dahlkemper, Chairwoman

For Immediate Release                       CONTACT:  Zac Petkanas (Dahlkemper), (202) 225-5406
                                                                                                     Alex Haurek; Duncan Neasham
March 11, 2009                                                                                                    (202) 226-3636

Food Recalls Hit Small Businesses Hard

WASHINGTON, D.C. — As the country reels from the Peanut Corporation of America (PCA) recall and Congress contemplates legislation to reform the nation’s food safety system, Congresswoman Kathy Dahlkemper (D-PA), Chairwoman of the House Subcommittee on Regulations and Healthcare, held a hearing today to examine the effects of recalls on small, responsible businesses in the food industry.  Testifying before the key Congressional Committee, representatives from the restaurant, food retailing and agriculture industries described how recalls can devastate even those small businesses that have played by the rules and made safety a priority.  Lawmakers also quizzed Food and Drug Administration and U.S. Department of Agriculture officials on the steps they are taking to close the gaps in the nation’s food safety net.

“When lax regulatory oversight ignores problems at facilities like those owned by PCA, consumers’ safety is put at risk and we end up with massive product recalls,” said Chairwoman Dahlkemper.  “Unfortunately, these recalls don’t just affect the bad actors. Small businesses, like restaurants, grocers and farmers, who have strong safety records, end up being punished through a loss in consumer sales as well as the burden of clearing tainted product out of their inventory.”

During food recalls, grocery stores, restaurants, bakeries, and food manufacturers are responsible for protecting consumers from the tainted food.  These recalls may require already hard strapped small businesses to track down and destroy items in addition to reimbursing their customers.  While these small businesses can sometimes recoup these expenses, if the culprit declares bankruptcy, as in the PCA recall, companies may never recover their losses.  With food-related businesses operating on an already slim 2-5% profit margin, coping with a massive incident—like the PCA recall—can push a firm over the edge.

“Quick responses by all levels of the food industry are critical to save lives and protect consumers during product recalls,” continued Chairwoman Dahlkemper. “Too often, however, small businesses bear the brunt of financial losses, even when they were not at fault in the first place.”

Currently, food safety law enforcement is spread over fifteen federal agencies, with over 400 state agencies participating in regulatory efforts.  Critics have charged that safety regulations suffer as a consequence, with activities poorly coordinated across agencies often lacking sufficient funds and staffing.  They have called for improvements to the complex food safety system, such as establishing a central regulatory agency, and granting the Food and Drug Administration (FDA) and the U.S. Department of Agriculture (USDA) mandatory recall authority. 

“The recent rash of food recalls, from salmonella in peanut butter, to E. coli in spinach to the enormous meat recall last year, have made clear the need to strengthen our nation’s food safety net,” Dahlkemper said.  “We need to reform the food safety system to protect consumers and help small businesses who too often are left holding the bag due to the irresponsible actions of a bad actor like PCA.”

Peanut Corporation of America (PCA) announced a nationwide recall of its peanut products in January of this year, after a nationwide salmonella outbreak was traced to the company’s facilities.  Witnesses at Wednesday’s hearing testified that the recall has hurt small grocers, ice cream manufacturers, restaurants and farmers.  While estimates of the recall’s total effect on small business vary, witnesses at Wednesday’s hearing said that the PCA recall could cost the rural economy as much as $1 billion.    

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To view video of the hearing, click here.