Regulation of Food Industry in

India
The drama was written in almost two minutes: a big-shot food giant caught
in the red, got penalised for selling hazardous stuff to Indians. And as is the
nature of popular discourse when a big MNC is involved, the two minute
script remained pretty much unchallenged till now.
The latest twist came when The Bombay HC ordered fresh testing on Maggi
in three government accredited labs (Mohali, Jaipur and Hyderabad) and
termed the nationwide ban on Maggi as untenable, arbitrary and said it
violated the principles of natural justice.
Government action on Maggi was grievously wrong and Nestle thoroughly
deserves to be compensated. There are three questions that need to be
addressed:
1. Why was government wrong?
2. Why Nestle must be compensated by the government?
3. Whats the level of compensation?
Answer to first question that why was government wrong
The big question if food inspectors of 7 countries, including the US FDA, UK,
New Zealand, Singapore, Canada, Australia and Vietnam found no trouble
with Maggi and even the court doesnt trust the previous results, was FSSAI
grievously wrong about Maggi this whole time?
The Bombay High Court clearly said that the all India ban on Maggi was
based on test results of labs which were not even accredited!
FSSAI which deemed Maggi unfit and has found detergent in Mother Dairy
Milk, larvae in Nestls baby milk powder, is actually highly ill-equipped,
short staffed and works on outdated machinery itself. And were not saying
this, it comes from the admission of a former Director of the Central Food
Laboratory in Kolkata (Dr Satya Prakash).
The Delhi test results which snowballed into most states banning the noodles
was outsourced to a private lab. The Delhi state food laboratory, set up 37
years ago, is a level-1 laboratory out of 3 levels recognised by the FSSAI. It
has only 3 chemists, who can perform tests to trace the presence of
chemicals, but not of microbial toxins, heavy metals or pesticide residue, all
considered critical for food safety tests.

Therefore, government was grievously wrong on Maggi as Indias own food

regulation doesnt meet scientific and public accountability standards.
Answer to second question that why Nestle must be compensated by the
government
Nestle has clearly been wronged. And as government pays compensation for
wrongful action to citizens it must do the same to companies. There are
certain arguments that big companies having plenty of money dont need
compensation. It should be clearly understood that whether the wronged
party is rich or poor is irrelevant when determining whether compensation is
due. The bigger point is that government and its agencies must be held
accountable for its actions. Government must, therefore face up to the
consequences of its actions, and compensating the victim is a crucial first
step.

Answer to third question that whats the level of compensation

Since the controversy, for the first time in 15 years, Nestle clocked a
quarterly loss of Rs 64.4 crore, compared to a profit of Rs 288 crore last year.
The hullabaloo cost Nestle its reputation, financial loss, and an emotional
disconnect with generations of Indians who grew up snacking the two minute
noodles. To top that, the centre recently filed a case against the company,
seeking Rs 640 crore in damages for alleged unfair trade practices, false
labelling and misleading advertisements.
Nestle suffered four kind of loses: direct business loss, brand value loss,
stock price loss and the cost it will incur in relaunching Maggi.
Direct business loss has two components, the one-time cost of recall of Rs.
320 crore and the continuing loss in sales. As per earlier data Nestle suffers
from a monthly sales loss of Rs. 185 crore. How much loss Nestle suffers
depends on when it gets FSSAI clearance to reintroduce Maggi. If Maggi
suffers from 4 months of absence from shop shelves i.e. Rs 740 crore loss in
revenue. So, direct business loss for Nestle is Rs 1060 crore.
Brand Finance, a globally respected brand valuation consultancy, had
calculated in mid-June that government action had caused Rs 1270 crore
damage to the $2.4 billion Maggi brand.
Nestle Indias market cap loss from last week of May. To closing price on July
6 is Rs 9300 crore.

As per experts, Nestle will have to spend around Rs 450 crore in marketingmore than double the marketing spend on Maggi before controversy- to get
the instant noodle product back on track.
Adding up loss figures under four heads gives us Rs 12000 crore. Therefore
thats how much Government of India should pay Nestle.

It is not always the case that the government is wrong and the organization
get compensated. Majority of the times it is other way around. Here we are
providing examples of similar controversies like that of Maggi:
1. Nestle was in trouble for unethical publicity of unhealthy baby
milk alternatives
Countries- Canada, US, Australia, New Zealand and Europe
The company was accused of selling unhealthy alternatives for baby
milk, by using unethical publicity tricks. Groups such as
the International Baby Food Action Network (IBFAN) and Save the
Children claim that the promotion of infant formula over breastfeeding
has led to health problems and deaths among infants in less
economically developed countries. Formula must normally be mixed
with water, which is often polluted in poor countries, leading to disease
in vulnerable infants. Because of the low literacy rates in developing
nations, many mothers are not aware of the sanitation methods
needed in the preparation of bottles. Even mothers able to read in their
native language may be unable to read the language in which
sterilization directions are written. Many poor mothers use less formula
powder than is necessary, in order to make a container of formula last
longer. As a result, some infants receive inadequate nutrition from
weak solutions of formula.
In 1976, the company won a related lawsuit but had to face a boycott
in the US, Canada, Australia, New Zealand and Europe. The boycott

remains in some parts even though the company claims that the
product is fit by every standard.

2. Burger King got into trouble when horse-meat was found in its
beef samples
Country- UK
In 2013, the leading food chain landed into controversies because its
products had horse-meat in UK. The company denied the charges
initially but later blamed its suppliers for the fiasco.
Though it initially made "absolute assurances" that all of its burgers
were 100% beef, Burger King has been forced to admit that some of its
patties may have contained horse meat, after traces of equine DNA
were found at one of their processing plants.
The scandal started when supermarket chains in the UK and Ireland
began pulling certain beef burger products off the shelf after test
concluded that they contained varying amounts of horse meat. The
tainted product was traced back to three processing plants, one of
which Silvercreft Foods supplies Burger King Restaurants in both
the UK and Ireland with some of their patties.
As a result, Burger King has stopped doing business with Silvercrest,
and has hired a new suppliers based in Germany and Italy.
3. McDonald's got into trouble when it served beef flavoured
French fries to Hindus in the US
Country- US
A lawsuit was filed against the food-chain in 2010 by a group of
vegetarians and some Hindus for adding beef flavouring to its French
fries. The practice was later discontinued and the company had to
apologize for it.
McDonald's Corp. agreed to donate $10 million to Hindu and other
groups to settle lawsuits filed against the chain for mislabelling French
fries
and
hash
browns
as
vegetarian.

McDonald's also posted an apology on its Web site, acknowledging that

mistakes were made in communicating to customers and the public
about the ingredients in the fries and hash browns. The vegetable oil
used to prepare the fries and hash browns was not pure, but contained
essence of beef for flavouring purposes. Many Hindus consider cows
sacred and do not eat beef.
Under the agreement, the 11 named plaintiffs have each received
$4,000.
4. Starbucks Stops Selling Some Syrups in India Amid FoodSafety Scare
Starbucks India is withdrawing some of the signature syrups it uses in
drinks in India after food-safety inspectors here rejected many of its
standard flavorings. Starbucks decision comes after the Food Safety
and Standards Authority of India rejected the ingredients.
The authority document rejecting the products from Starbucks and
other companies said they had been rejected on assessment of risk /
safety without explaining what that meant for each product.
The move comes amid growing concerns about processed foods and
tensions between global brands and Indian regulators after the same
authority decided to ban a popular instant noodle made by Nestl SA.
5. Red Bull doesn't 'give wings', proved a $13 million lawsuit
Country- US
Benjamin Careathers, a regular consumer of Red Bull sued the
company for false advertising, arguing that after 10 years drinking Red
Bull, he neither had wings nor any enhanced athletic or intellectual
performance. Surprisingly, the company lost and pledged to refund $10
to any US customer who bought the drink since 2002 and agreed to
amend future advertising.

Submitted by:
Group 8
Ashish Kumar Verma (212)
Pratik Bhattacherya (209)
Mohit Pathaniya (142)
Chetan Mukhiyan (227)