Ending Bad Oil: Deterrence and Compensation

Current regulations pertaining to food safety are insufficient, and repeat offenders often get away with their crimes. What can be done to fix the system?
C. Ed Hsu
By

The recent tainted food oil scandals in Taiwan have highlighted the ineffectiveness of the nation’s legal system and poor government oversight in regulating food products. The system fails to deter repeat violators of food safety laws, and do not duly compensate victims of the crimes, who might develop long-term, adverse health conditions over time as a result of consuming contaminated products.

Failure to ensure food safety and administrative oversight discredits the government at a high price. It damages domestic and export markets. The government predicts that the scandals will have a sizeable toll on Taiwan’s exports, with estimates of NT$124 billion (US$4.02 billion) this year. At the other side of the spectrum, compensation for the victims is insufficient; legal remedies for the victims are limited, with the result that many consumers can only resort to passive reactions such as boycotts and street protests. Fines payed by offenders often go to the government, rather than to injured consumers. Finally, failure to prove immediate, manifested physical injuries from the food consumption makes it nearly impossible for victims to receive compensation.

Repairing the legal loopholes is central to safeguarding public health and avoiding future violations. This article explores the challenges of the tainted oil scandals, including problems with current laws, and discusses opportunities for legal reform and compensation mechanisms.

 

Legal challenges: scope of violations and repeated offenses

Ineffective regulatory oversight of food oil products is underscored by the scope of violations and increased culpability, and repeated offenses commited by the manufacturers. This is alarming, given that the recently amended governing authority, the Governing Food Safety and Sanitation Act (食品安全衛生管理法, GFSSA), stipulates broader protections. However, the law remains unable to deter major offenses. Several manufacturers, such as Ting Hsin International Group and Chang Chi Foodstuff Factory Co have committed repeat offenses of increasing severity. These offenses range from adulteration of food oil products (e.g., olive oil mixed with soybean oil), fraudulent misrepresentation (by adding banned ingredients such as preservatives or emulsifiers into consumption food products, and labeling oil intended for animal consumption as for human consumption), to strict liability offense (e.g., plasticizers found in beverages, or polychlorinated biphenyl, or PCB, added to cooking oil).

The loopholes in food safety regulations may therefore have incentivized perpetrators to “game the system.” Repeat offenses that recently made the headlines have underlined the reality that the GFSSA is neither a proper deterrent nor an effective means to end recidivism: Ting Hsin, which 30 years ago was caught adding PCB, a dioxin compound and carcinogen, to its products, was allowed to return to Taiwan after a long exile in China. The Act is also not effective in deterring repeat offenses due to its failure to ensure proper compensation for victims, and the statute of limitations furthermore complicates matters.

 

Problems with legal loopholes

Loopholes in the GFSSA may therefore have contributed to increased offenses. First, current labeling requirements fail to ensure that additives in food oil products are appropriately labeled; as a result, consumers do not have all the information they need to make informed decisions. For example, Article 32 of the Act requires all food manufactures to keep records of ingredients for five years. However, it does not require the disclosure of all additives in the products, possibly due to trade secrets or to comply with international trade regulations. Meanwhile, Articles 22 and 24 require disclosure with clear labeling of ingredients and additives, but violators face only a combined five-year prison term and a fine of no more than NT$8 million, or seven years with less than NT$10 million for causing physical injuries. Such moderate penalties are clearly ineffective in preventing violations.

Second, barriers to trial discovery and proof. The GFSSA does not provide pecuniary awards to the victims: Even if the victim(s) sue to recover, and even if the defendant has demonstrably been negligent in his duties by using poisonous additives; absent material bodily injuries the victims are unlikely to succeed in the action. For example, court action two years over the addition of plasticizers in President Enterprise’s sports drink Bao Chien failed due to the inability of the plaintiffs to demonstrate bodily injuries or injuries to health.

Third, the statute of limitations often undermines the viability of a claim. An associated problem with the difficulty of proof — common to cases involving exposure to contaminated food and environmental toxins — is lag time between the exposure (consumption of tainted food) and onset of the disease. Several chronic diseases, including cancers that are known to be triggered by such carcinogens as PCBs and dioxins, usually take years to decades to develop clinically. Consequently, clinical manifestations can occur well after the statute of limitations has expired.

The GFSSA provides a statute of limitations of up to 20 years, but the latency of disease development may exceed that period: several PCB-related legal cases in the U.S. found it took between 15 and 40 years for PCB to develop clinical manifestations (916 F.2d 829, 852 (3d Cir. 1990).

Fourth, given the substantial time lag between tainted food consumption and clinical manifestation, there are limited legal remedies for the victims to monitor the long-term health effects or the slow progression of the diseases as a result of the exposure/consumption.

 

Medical monitoring/surveillance torts

There are usually two ways for victims to receive relief in public health-related actions: the government exercises parens patriae to press charges against the manufacturers for a prison term and fine (to the government), or the plaintiffs bring a civil action under tort such as negligence, only to fail, as we have seen, due to the lack of physical injury.

Lacking proof of material injuries renders recovery unlikely. Therefore, compensation of medical monitoring of disease development should be taken into account. Starting in the 1990s, U.S. courts have ordered such financial compensation with increasing frequency in PCB-related tort cases and in cases involving second-hand smoke in tabacco settlements. To date, almost half of the U.S. states recognize medical monitoring torts.

Medical monitoring originated in common law to compensate plaintiffs exposed to various toxic substances, while the diseases caused by this exposure are often latent. It is well justified and should be considered in Taiwan to protect public health. It is a cost-effective means to avoid future costly medical expenses, and does not require courts to speculate on the probability of future injury. It merely requires that the courts ascertain the probability that the far less costly remedy of medical supervision is appropriate.

The four-prone test of a medical monitoring claim is easier to satisfy than a traditional negligence tort:

 

(1) Plaintiffs were significantly exposed to a proven hazardous substance through the negligent actions of the defendant. In the tainted food oil case, the victims (the “plaintiffs”) consumed tainted oil products and were exposed to the toxins;

(2) As a proximate result of exposure, plaintiffs suffer a significantly increased risk of contracting a serious latent disease. Court-appointed technical experts (e.g., epidemiologists or physicians) provide either testimony or deposition that plaintiffs are subject to an increased risk of developing disease X.

(3) That increased risk makes periodic diagnostic medical examinations reasonably necessary. A court-appointed technical expert acting as an expert witness would attest to the efficacy of periodic diagnostic exams, and discuss the potential gains (in savings of long term health effects or medical expenses, etc) that warrant the allocation of resources for the examinations.

(4) Monitoring and testing procedures exist which make the early detection and treatment of the disease possible and beneficial. Tests should be in place to screen or monitor early onset of the diseases resulting from consumption of the tainted food.

 

A prerequisite for the “medical monitoring” tort to become successful is the professional testimony delivered by expert witnesses, who are “technical experts” (鑑定人) as defined by Taiwan’s civil and criminal procedure laws. These are not exactly the same expert witnesses as those in U.S. courts. In Taiwan, technical experts’ qualifications, education and experience have yet to be formalized in law.

 

Opportunities for legal reform on food safety

The first step would be to require the mandatory registration of all additives in food products. Current practices of reporting of food additives do not work, since many manufacturers fail to register critical food additives. Consumers have the right to know what additives are present in the food they purchase, and the laws should reflect that right.

A second requirement would entail amending the GFSSA to relax the statute of limitation for public health violations such as the intentional tainting of food.

Lastly, regulations should be amended to facilitate compensation for the medical monitoring of victims of tainted food crimes. Moreover, an expert witness law should be introduced to prepare and incentivize technical experts to provide reliable and admissible evidence to aid trials of tainted food cases.

 

C. Ed Hsu is adjunct professor teaching policy and health management in California. He is currently on leave in Taipei and can be reached at: chsu@faculty.umuc.edu

2 Responses to “Ending Bad Oil: Deterrence and Compensation”

November 26, 2014 at 5:28 am, TaiwanLawBlog said:

I think introducing medical monitoring claims is an interesting idea worth exploring. It falls under a larger conversation of civil litigation reform in Taiwan, including raising the current cap on attorney fees for individual cases and amending the overly restrictive class action rules where claims can only be prosecuted by approved organizations and attorneys cannot charge fees. A new cause of action is great, but the conditions need to be met for it to be used widely.

I’m assuming you’re using the the American expert witness system as the reference point in this article when advocating for reform in Taiwan. My contention is that the primary thing that needs to change in Taiwan is funding. The current system doesn’t work because courts do not have money to pay for the experts. Once there is funding, the current Code of Civil Procedure can actually work pretty smoothly provided courts are willing to change their practices and allow the parties more say in choosing the expert, which is actually already provided for in the law.

I’m not sure introducing an American expert witness system would work in Taiwan because without a system that allows for a possible windfall at the end through substantial punitive damages, plaintiffs would be at an even more disadvantageous position against the defendants who would have the vast resources to afford “better” experts. In most other common law jurisdictions, most notably the UK and Australia, the trend has been to change the expert witness system to be more similar to the expert systems in civil law countries where the parties are forced to be more cooperative in choosing experts/expert witnesses and their duties to be neutral and to answer to the court rather than the parties emphasized.

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December 02, 2014 at 8:25 am, C. Ed Hsu said:

I appreciate the reader’s cogent comments and welcome the opportunity to respond. My article was advocacy-driven with foci on crime deterrence and victims’ compensation. It did not cover specific, empirical devices at a greater detail. The reader raised crucial issues in considering a successful Medical Monitoring Claim (MMC) as a new cause of action, specifically on its adoption, reform and funding in Taiwan. The issues are broad in nature and may warrant thorough treatments in a separate article. I will hereby briefly render my observations below.

As discussed, the necessity of the proposed medical monitoring claim arose from the need for due compensation of the victims, who are often asymptomatic consumers sustaining injuries from consuming tainted food products. An expert witness is needed (as in Taiwan’s trials) to aid the trial of the law’s lack of medical knowledge, and to show that the benefits of continued medical monitoring outweigh the costs of future treatment of manifested diseases, which could be potentially of a substantial amount when the action is brought by a class. On this note, the introduction of expert witness is almost a sine qua non for a successful medical monitoring claim to aid the trial of the law to make an informed ruling to duly compensate asymptomatic victims.

There are potentially two ways to introduce the MMC reform and expert witness. One, expand the scope of current court-appointed “technical experts” to include medical/preventive health experts (such as epidemiologists) who have due knowledge, skills, and experiences and can testify to the merits of MMC over long-term treatment costs; and two, introduce American-style expert witness system which allows both plaintiff and defendant parties to retain own experts in the trial proceeding.

In addition to reforming on attorney fees, either system, if amended or adopted, should consider increasing compensations to incentivize technical experts, as current rate in Taiwan (that pays less than USD $50/day) does not adequately compensate technical experts to render their experts when appear in courts.

Since 2010, several interested parties in Taiwan such as the Ministry of Justice, medical communities, and family courts have been actively exploring expert witness system in the legal reform discussion. The recent case of tainted food oil products may be a touchstone for a revisit to this important subject matter to further social justice.

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