[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |

Brussels, 30.1.2008

SEC(2008) 92

COMMISSION STAFF WORKING DOCUMENT accompanying the

Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the provision of food information to consumers IMPACT ASSESSMENT REPORT ON GENERAL FOOD LABELLING ISSUES

{COM(2008) 40 final}{SEC(2008) 93}{SEC(2008) 94}{SEC(2008) 95}

TABLE OF CONTENTS

1. Executive Summary 6

2. Procedural issues and consultation of interested parties 8

2.1. Evaluation of the food labelling legislation 8

2.2. Consultations 8

2.3. Consumers survey (Focus Group) 9

2.4. Data collection on behalf of the Commission 9

2.5. Inter-Service Steering Group 9

2.6. Ad hoc consultations 10

2.7. The Impact Assessment Board 10

3. Problem identification 10

3.1. Relationship between the revision of the general labelling and nutrition labelling legislation 11

3.2. Background on Food Labelling 12

3.3. Affected stakeholders and their needs 14

3.3.1. Consumers 14

3.3.2. Industry 14

3.3.3. International dimension 15

3.3.4. Member States Authorities 15

3.4. Rationale for the revision of the legislation 15

3.5. The Scope of the Impact Assessment 17

3.5.1. Policy Issue 1 – Legibility of information 18

3.5.2. Policy Issue 2 – Lack of information on allergenic ingredients on non-prepacked food 19

3.5.3. Policy issue 3 – Clarification of the use of origin labelling on foods 20

3.5.4. Policy issue 4 – Consistent application of ingredients listing rules 23

3.6. Regulatory Approach 25

3.6.1. No intervention - No EU action 25

3.6.2. Intervention was considered in the context of deregulation, national legislation, non-statutory approach or updating Community legislation. 25

3.6.2.1. Deregulation 25

3.6.2.2. National legislation 26

3.6.2.3. Alternative non-statutory approach (self-regulation, co-regulation, guidance) 26

3.6.2.4. Statutory EU Action 27

3.6.3. Form of act: Regulation 27

3.7. The right of the Union to act – Subsidiarity test 28

4. Objectives 29

5. Major Policy Issues 30

5.1. Baseline projection 32

5.2. Policy Issue 1 - Legibility of the information 32

5.2.1. Option 1: No EU action 32

5.2.2. Option 2: Non statutory approach 32

5.2.3. Option 3: Statutory approach 33

5.3. Policy Issue 2 - Lack of information on allergenic ingredients on non-prepacked food 33

5.3.1. Option 1: No EU action 33

5.3.2. Option 2: Non statutory approach 33

5.3.3. Option 3: Statutory approach 34

5.4. Policy issue 3 - Clarification of the use of origin labelling on foods 34

5.4.1. Option 1: No EU action 34

5.4.2. Option 2: Non statutory approach 34

5.4.3. Option 3: Statutory approach 34

5.5. Policy Issue 4 - Consistent application of ingredients listing rules 35

5.5.1. Option 1: No EU action 35

5.5.2. Option 2: Non statutory approach 35

5.5.3. Option 3: Statutory approach 35

6. Analysis of impacts 36

6.1. Approach taken in assessing the impacts 37

6.2. Food Labelling Process 37

6.2.1. Drivers for labelling changes 39

6.2.2. Familiarisation with the regulations and information to be provided 40

6.2.3. Design and printing costs 40

6.3. Administrative burden 41

6.4. Other impacts 42

6.4.1. Impact on innovation and research 42

6.4.2. Employment, equality, private life and access to social welfare systems 42

6.4.3. Environmental impacts 42

6.5. Policy Issue 1 - Legibility of the information 42

6.5.1. Economic Impacts 42

6.5.2. Social Impacts 46

6.5.3. Impacts on Member States 46

6.6. Policy issue 2 – Lack of information on allergenic ingredients on non-prepacked food 47

6.6.1. Economic Impacts 47

6.6.2. Social Impact 50

6.6.3. Impact on Member States 51

6.7. Policy issue 3 - Clarification of the use of origin labelling on foods 52

6.7.1. Economic Impacts 52

6.7.2. Social Impacts 57

6.7.3. Impact on Member States 58

6.7.4. Environmental impact 58

6.8. Policy issue 4 – Consistent application of ingredients listing rules 59

6.8.1. Economic Impacts 59

6.8.2. Social Impacts 63

6.8.3. Impact on Member States 64

7. Comparing the Options 64

7.1. Approach taken 64

7.2. Optimising the statutory options 64

7.3. Tables and scoring system 65

7.4. Policy issue 1 – Legibility of the information 65

7.4.1. Potential for optimising options 66

7.4.2. Analysis of current situation and justification 66

7.5. Policy issue 2 – Provision of information on non-prepacked food 68

7.5.1. Potential for optimising options 69

7.5.2. Analysis of current situation and justification 69

7.6. Policy issue 3 – Clarification of rules on the use of origin labelling 70

7.6.1. Potential for optimising options 71

7.6.2. Analysis of current situation and justification 71

7.7 Policy issue 4 – Ingredients listing for alcoholic beverages 72

7.6.3. Potential for optimising options 72

7.6.4. Analysis of current situation and justification 73

8. Monitoring and evaluation 73

ANNEX 1- Structure of the European food and drink industry 75

ANNEX 2 – Horizontal Labelling Objectives 78

ANNEX 3 - Extract of RAND Questionnaire – Questions on labelling costs 79

ANNEX 4 - Summary of results of assessment of Administrative Burdens associated with food labelling in Denmark, the Netherlands, Sweden and the United Kingdom 81

ANNEX 5 - Food labelling – estimation of administrative burden and labelling re-design costs 84

ANNEX 6 – Summary tables of estimated costs associated with policy issue 1 legibility and policy issue 4, ingredients listing for alcoholic beverages 90

EXECUTIVE SUMMARY

Food label is a powerful market tool that allows the consumers to make safe and well informed choices and enables the food operators to highlight the benefit of their products. General food labelling is governed by Directive 2000/13/EC which is a codified version of Directive 79/112/EC. Although one major recent amendment was introduced in 2003 (labelling of allergenic ingredients) most of the provisions date back to 1978. The evolution of both the foodstuffs market and consumers' expectations as to the information given on these foodstuffs renders the update and modernisation of this legislation necessary.

Clearly, food labelling today is a policy problem given that in spite of the existence of many rules there is a general consensus that the current legislation is not working as effectively as it could. Consumers' use of labels is inconsistent and the effectiveness of labelling as a communication tool can be questioned.

At the same time, nowadays food labelling legislation is perceived as politically problematic given that the nature of labelling rules tends to be very detailed and technical. Therefore, labelling rules are perceived by many as imposing administrative and financial burdens to manufacturers and look like the sort of rules to be scrutinised within the framework of better regulation. Yet a level of prescription is frequently asked even by economic operators because detailed rules save industry from the trouble of developing its own policy under its own responsibility and offer more legal certainty; yet any judgement as to the required level of prescription has to be made under the viewpoint of the benefits provided to the consumers and to the internal market.

To better identify the important points on which to focus modernisation efforts, a number of surveys and consultations took place over the last years. Although the different consultations show clearly a lack of consensus amongst interested parties as to the way forward, they visibly demonstrated a failure of the current legislation as to the following aspects:

( the volume and dispersal of texts renders the legislation confusing and sometimes incoherent;

( in spite of the important information that appears on the labels, consumers find it difficult to read, understand and use;

( the legislation acknowledges the importance of labelling in providing consumers with information related to health (allergens) but there is a significant part of foodstuffs that do not provide such information;

( legislation should ensure a level playing field for industry and provide consumers with assurance that they are not misled, however, there is a high level of misunderstanding among operators and consumers concerning the use of country of origin labelling;

( there is a legal limbo concerning ingredient listing of alcoholic beverages.

Hence, the challenge for the Commission is how to streamline and simplify the food labelling scene without undermining the high level of consumer protection pursued by the Community . Besides the recasting of the different horizontal labelling rules, the legal updating and clarifications and the introduction of a non statutory "bottom-up" approach for addressing some labelling aspects, four main issues were identified for possible review in the legislation and the implications of the possible solutions to those issues were considered in this impact assessment:

( Improvement of the legibility of the information provided on the labels;

( In general, the lack of provision of information on allergenic ingredients on non-pre-packaged food;

( Need for clarification of the use of country of origin labelling on foods;

( Consistent application of ingredients listing rules.

In addressing these problems, first the possible regulatory framework was considered and it was concluded that the options to deregulate completely or to have regulation only at national level would have not have been effective in achieving the main objectives of the food labelling legislation. Therefore, these regulatory approaches were not considered in relation to the individual policy issues.

The general view of stakeholders during the consultation activities has been that the repeal of the current horizontal labelling Directives, with replacement by one concise Regulation, will provide for better clarity, rationality and consistency of enforcement. The options of not changing the legislation, taking a voluntary approach or including specific requirements in the legislation were considered for each of the policy issues. The different options for each policy issue have been compared in order to provide a basis for the Commission to identify the preferred options.

The result is expected to be a modernisation and simplification package outlining the added value of the new Community act. Finding optimal solutions to the problems identified above through a modern and simpler legislation is expected to contribute to:

( meet the consumers' needs, who want to be better informed when purchasing foodstuffs and to have labels that are simple, legible, understandable and not likely to mislead;

( achieve legal clarity and a harmonised implementation;

( ensure the smooth functioning of the internal market;

( simplify technical requirements and remove unnecessary administrative burden;

( create a pro-competitive market environment in which dynamic, efficient, innovative operators can make full use of the power of labelling to sell their products.

PROCEDURAL ISSUES AND CONSULTATION OF INTERESTED PARTIES

Evaluation of the food labelling legislation

In 2003 DG SANCO in close co-operation with the representatives of the Member States, of consumers, of industry and of trade, launched an evaluation of the legislation on food labelling. The aim of this review was to enable the Commission to reassess the effectiveness of its labelling policy and its legal basis, and to identify the needs and expectations of today's consumers for information on food labels, taking into account the technical and logistical constraints for implementation by industry. The conclusions of this study, which were subsequently commented by the Member States, were published in 2004[1]. They identify the key points on which the Commission should focus in view of drawing-up a future proposal aiming at modernising the Community legislation on labelling and meeting the objectives of labelling and consumers' aspirations.

Consultations

DG SANCO launched a public consultation process on labelling in March 2006, by means of a consultative document[2] dealing with different areas of labelling, and among others, identifying on the basis of the above evaluation the major questions that have to be considered in the review of the food labelling legislation[3]. The consultation paper addressed in particular questions related to the strategic goal of labelling, the structure and the scope of the legislation, the legibility of labels, origin labelling and labelling of alcoholic beverages. As part of the consultation process there were discussions within the following groups: the Advisory Group on the Food Chain and Animal and Plant Health; the European Consumer Consultative Group; the Consumer Policy Network of senior consumer officials; and the Health Policy Forum.

The public consultation formally closed on 16 June 2006 and a total of 247 responses were registered, of which 73 were essentially the same. These were counted as one response, so it was considered that 175 contributions were received. 101 of the respondents provided views on the general food labelling aspects of the consultation. The breakdown of organisations were: 21 governmental organisations, 10 consumer groups, 5 public health NGOs, 55 food industry organisations or companies, 4 from individuals. A summary of the responses has been made available on the Commission website.[4]

Consumers survey (Focus Group)

A qualitative study on labelling was carried out by an external contractor (OPTEM) in 2005 in order to assess consumers' attitudes with respect to labels and their information content, and to analyse consumers' expectations.[5]

Data collection on behalf of the Commission

Between 26 October and 8 December 2006 there was a Small and Medium Enterprise Panel on Food Labelling organised by DG ENTR in consultation with DG SANCO which sought the opinions and data from small and medium sized enterprises (SMEs) in 19 Member States on certain aspects of general food labelling. Over 800 responses were received during the survey.

Finally, the internal process to develop the impact assessment was supported by an external contract, financed under a framework contract agreement, carried out by RAND Europe. The contractors provided an ex ante assessment on the economic impact of the different policy options identified following the public consultation in 2006 as set out in the task specification. As part of the contract, from 22 March to 16 May 2007 RAND Europe carried out an online consultation of the food industry in order to collect information and data on the possible impacts of the main issues under consideration for the revision of the legislation. More than two hundred responses to the questionnaire were submitted. The report of the contractor in support of the drafting of the impact assessment can be consulted at the web site of the contractor (add details of link when IA published)).

Inter-Service Steering Group

A Commission Inter-Service Steering Group on the Impact Assessment of the revision of the legislation was established. The Group was led by DG SANCO with the participation of the following Commission Directorate Generals and Services: Agriculture and Rural Development, Enterprise and Industry, Research Technology and Development, Trade and the Secretariat General. The group started its work on 10 January 2007 and met 3 times.

Ad hoc consultations

Member State authorities were consulted on the options for the revision of the legislation in the course of several Expert Working Group on General Food Labelling meetings in 2006-2007. Informal discussions and presentations have been held with various stakeholders groups e.g. representatives of the food industry.

The Impact Assessment Board

The draft Impact Assessment was submitted to the Board on 27 June 2007 and discussed at the Board meeting of 18 July. The final opinion of the Board included a number of recommendations for the improvement of the impact assessment report, which were largely taken into account prior to the submission of the Commission proposal.

The key amendments made to the impact assessment following the issuing of the Board opinion:

- Clarification of the problem definition by highlighting the main issues that were identified as a concern to various stakeholders during the extensive consultation process and inclusion of a section on the international dimension;

- Clarification about the relationship between the revision of general food labelling and the revision of nutrition labelling legislation;

- Setting out more clearly the expected simplification results in the objectives of the proposal;

- Clarification of the administrative burden.

PROBLEM IDENTIFICATION

There are two Impact Assessments supporting the Commission draft proposal on the revision of the existing food labelling Community legislation, namely two horizontal pieces of legislation: Directive 2000/13/EC providing for compulsory information on foods and Directive 90/496/EEC setting up harmonised rules on nutrition labelling which is in principle optional.

The main purpose of this labelling legislation - to inform and protect consumers and to ensure the smooth functioning of the internal market - is still valid and has not been questioned by stakeholders during the extensive consultations. The basic contents of the existing requirements are seen as a valuable acquis and there seems no general desire from stakeholders for a change in the core components of the legislation.

There is a general criticism about the piecemeal approach in the delivery of the entire spectrum of Community labelling legislation (horizontal and vertical) and, more specifically, a lack of coordination of implementation dates. For the horizontal food labelling and nutrition labelling legislation concerns have been expressed about the lack of clarity and legal certainty, and the failure of the current rules to address current stakeholders needs and expectations (which have changed over time).

The process of consultation demonstrated clearly that certain main issues are in need of review. However, stakeholders have very different views on how these issues should be addressed.

The label is an important means for information about prepacked foods to be passed to the consumer. The consumers indicate that they would like clear and better information about different aspects of a food product but there needs to be balanced against the space available on the label and increased burdens on the industry. In considering those interests account must be taken of the fact that much of the information on a label is not required by law but is essentially marketing information. Therefore, improving the legibility of the information is not necessarily incompatible with the addition of any new labelling requirements especially since the legislation provides derogations in case of space limitations on the label.

Relationship between the revision of the general labelling and nutrition labelling legislation

( Currently there are two separate, and in certain aspects fairly prescriptive, measures. However, they are both dealing with horizontal labelling issues and it would be important to have a coherent approach in the revision of both legislative measures.

( Two separate impact assessments were presented since it was considered that the presentation of one impact assessment would appear to prejudge the outcome of the impact assessment process so two reports were prepared. Indeed, if the preferred option on nutrition labelling was to make such labelling mandatory then the combination of the two legislative measures would be appropriate. On the contrary, if nutrition labelling was to remain in principle voluntary then consideration would need to be given to whether to maintain separate measures, as is the case with the Regulation on nutrition and health claims, or to combine the two measures.

( Specific areas of overlap between the two impact assessments are:

- consideration of the regulatory approaches including the alternative flexible approach of the exchange of information and development of best practice;

- the estimation of the fundamental costs associated with food labelling; and

- legibility of information on the label.

Background on Food Labelling

The current Community policy on food labelling was developed during a recent but relatively long historical period, which approximately started in mid-to-late 1970s'. Although the main political will that motivated the first "horizontal" legislative instrument on food labelling (Directive 79/112/EC) was to provide rules for the labelling of foods as a tool for the free circulation of foodstuffs in the Community, the legislation clearly had positive repercussions in terms of consumers' protection. Over time the protection of consumers' rights emerged more and more as a specific objective of the European Community.

Horizontal labelling legislation prescribes compulsory sales descriptions, determines the rules for products where no sales description has been set by law and establishes principles which help to avoid the obstacles to the free movement of products lacking harmonised sales descriptions. The basic horizontal text on food labelling is Directive 2000/13/EC (the "general food labelling" Directive). This is a framework legislation which lays down common labelling requirements applicable to all foodstuffs to be delivered as such to the ultimate consumer, and to foodstuffs supplied to restaurants and mass caterers. This is a codified version of Directive 79/112/EC to which amendments and new requirements were added through the years. The Directive sets down the mandatory information that must appear on food labels (see box below).

Mandatory Information that must appear on food labels

(1) the name under which the product is sold;

(2) the list of ingredients;

(3) the quantity of certain ingredients or categories of ingredients

(4) in the case of pre-packaged foodstuffs, the net quantity;

(5) the date of minimum durability or, in the case of foodstuffs which, from the microbiological point of view, are highly perishable, the ‘use by’ date;

(6) any special storage conditions or conditions of use;

(7) the name or business name and address of the manufacturer or packager, or of a seller established within the Community.

(8) particulars of the place of origin or provenance where failure to give such particulars might mislead the consumer to a material degree as to the true origin or provenance of the foodstuff;

(9) instructions for use when it would be impossible to make appropriate use of the foodstuff in the absence of such instructions;

(10) with respect to beverages containing more than 1,2 % by volume of alcohol, the actual alcoholic strength by volume.

The general labelling requirements are complemented by a number of specific provisions applicable to all foodstuffs in particular circumstances or to specific groups of products. The horizontal food labelling texts are the following:

( Directive 2000/13/EC as amended by Directives 2001/101/EC (category name “meat”) and 2003/89/EC (allergenic ingredients);

( Directive 87/250/EEC (indication of alcoholic strength);

( Directive 89/396/EC (lot);

( Directive 94/54/EEC (additional indications on labelling provided for in cases where certain ingredients are present) as last amended by Directive 2004/77/EC (glycyrrhizinic acid);

( Directive 1999/10/EC (indication of the quantity of volatile ingredients);

( Directive 2002/76/EC (foods containing caffeine or quinine).

In addition to the horizontal labelling rules, there are a number of rules of a specific nature which are applicable to certain foodstuffs and are included in the so-called "vertical legislation". Most vertical legislation (composition standards or common marketing standards or quality schemes) covers the definition of the sales descriptions of the products concerned and their possible conditions of use: i.e.: a) composition standards for chocolate, coffee, milk, fruit juices, b) common marketing standards for fish, olive oil, eggs etc., quality schemes such as organic food, protected appellations of origin, protected geographical indications. These are technical rules specific to the products concerned and cannot be separated from the other aspects of the standard.

Estimates suggest that there are over 100 pieces of such legislation that contain labelling rules.

Affected stakeholders and their needs

Consumers

In relation to consumers' needs and desires, it is important to note that the term “consumer” is an overarching category that covers a variety of characteristics, interests, priorities and concerns. Be this within a country or across countries (see box below). In addition, socio-economic factors, education, and gender can play a role in how consumers view food information and in how they use this information[6]. Consequently trying to meet the needs of all European consumers in terms of food labelling is difficult, if not impossible, and there must be careful consideration of the kind of information that is required. Especially as differences in how consumers use food information do not necessarily translate into how consumers want information to be presented. What is known is that consumers are mostly interested in clear, understandable, simple, comprehensive, usable, standardised and authoritative information .

Studies on Consumer Interest Labelling

Research on consumer priorities of the Food Standards Agency of the United Kingdom showed important regional differences in how consumers interpret labelling and how they form priorities.[7] An AC Nielsen survey in 2005 compares how consumers in different countries have different priorities in how they use food labelling.[8] Southern Europeans, in particular Italians, are distinct in wanting to eat 100% wholesome and natural foods, with less regard for calories. For instance, 56% of Italians check for food additives (e.g. preservatives) while only 30% check for calories on food labelling.

Industry

The term "industry" is also an overarching category that covers small, medium and large enterprises that manufacture and sell an extensive and diverse range of products (see Annex 1). As with consumers there is also a variety of characteristics, interests, priorities and concerns that categorise different parts of the industry. Therefore, in relation to labelling views will vary and therefore, it would be difficult, if not impossible, to meet the needs of all of the industry. What is clear, however, is that cost is a concern . Not the least as, depending on what is proposed, a change to the legislation could require a change to every label within the European Union.

International dimension

During the consultations the international issues was not identified as a specific issue separate from the general issues for the food industry overall. In fact the basic principle of food labelling means that traders need to ensure that the label is in a language that is understandable in the country of marketing, therefore, manufacturers frequently need to amend their labelling to the local markets. Any additional cost associated with the policy options would depend on the need to include additional information or presentational requirements that would lead to a fundamental redesign of their label.

However, third countries can benefit from the harmonisation of the Community approach to labelling issues as it can make it easier for manufacturers to export their products to the Community as they do not need to accommodate their labelling to different approaches at Member State level.

Member States Authorities

Member States obviously wish to balance the needs of consumers and industry with respect to the general food labelling legislation, taking account, where necessary, of any consumer or industry issues that are specific to their particular country. However, their capacity to act and the effectiveness of the implementation of labelling legislation depends on the design of the labelling legislation. Therefore, in terms of governance, there is a trade-off for the Member States between the desire for flexible solutions to labelling and the requirements of the single market and the desire of industry for a unified regulatory framework.

Rationale for the revision of the legislation

In considering problems with the current situation, and how they can be addressed, it is important to reflect on why legislation in this area is needed, i.e. why is there a need to provide information on food labels. The most important reasons relate to health and safety issues. For example, the provision of durability dates on food (e.g. “use-by” dates), information on the presence of ingredients to which certain consumers are allergic or intolerant (e.g. nuts or gluten), storage conditions and conditions of use. Label is clearly helpful in allowing consumers to make an informed choice about the products they purchase. In addition, it can also minimise the chance of them being misled. Having such legislation at Community level supports the internal market which is beneficial for food business and also for consumers.

The need for a revision has been brought to the fore by consumers and industry, over a period of some years, expressing dissatisfaction with certain aspects of the current legislation. These concerns are by no means consistent nor is it obvious that the concerns expressed are actually valid. However, put simply, consumers tend to press for more and "better" information on food labels; industry consider that there are simply too many labelling requirements which involve the industry having to implement detailed, technical rules but at the same time, they ‘voluntarily’ add extra information which cuts back on space for the mandatory information. In addition, the volume and dispersal of texts gives the impression that the legislation is confusing and that there is a proliferation of binding provisions lacking any real coherence.

The responses to the consultation in 2006 confirmed the polarisation of views on a number of issues and demonstrated that the labelling legislation and the label itself are not used to their full potential. More specifically criticism focuses on the following:

( In spite of the many detailed rules, the current legislation is not working as effectively as it could;

( in spite of the important and interesting information that appears on the labels, consumers find it difficult to read and understand;

( in spite of the fact that legislation acknowledges the importance of labelling in providing consumers with information related to health (allergens), there is a substantial part of foodstuffs from which such information is still missing;

( in spite of the plentiful rules that should ensure a level playing field for industry and provide consumers with assurance that they are not misled, origin labelling today is a problematic area.

The above lead the Commission to pay particular attention, in the context of the revision to issues related to the simplification of the structure of the legislation, the lack of information about allergens in non pre-packaged food, a complex situation in the market regarding origin labelling and ineffective rules concerning certain aspects of labelling of alcoholic beverages. Bringing optimal solutions to these problems is expected to streamline the food labelling landscape.

The Scope of the Impact Assessment

To resolve the problems encountered by the piecemeal legislation, the need for simplification of the current legislative scene is obvious. Restructuring the legislation would be feasible. Such an approach seeking to present, simplify and clarify the horizontal labelling provisions spread across these texts. Making the legislation more accessible through reducing the number of legislative texts has the potential of reducing the information costs for food businesses. The available evidence suggests however, that costs of gathering information constitute a small part although not negligible of the overall costs of administrative burdens related to food labelling. Information costs are estimated to contribute up to 5 percent to labelling costs in Denmark and up to 13 percent of all food legislation in the United Kingdom. Changes in the structure of the legislation thus should have a modestly positive impact on the cost of producing labels, this impact is however likely to be small.

There are, however, other potential direct impacts for stakeholders if the issues that have been identified in the various consultations over the last few years are addressed in the revision. For some issues ("problems"), the impacts for the different stakeholders could be significant and these are the focus of this impact assessment, namely:

( Legibility of information;

( Lack of information on allergenic ingredients on non-prepacked food;

( Clarification of the use of origin labelling on foods;

( Consistent application of ingredients listing rules.

Although the consultation in 2006 also covered the question of a specific animal welfare labelling, the development of possible policy options is not sufficiently advanced to submit them to an impact assessment at this stage. For other issues, impacts would not be expected to be significant essentially changes that will be part of an overall objective of renovating and modernising the legislation, such as rationalisation (update and clarification) of the compulsory information required by Article 3.1 of Directive 2000/13/EC; spelling out the principles of food labelling and the food operators’ responsibilities; clarification of the provision of information in case of foodstuffs sold by internet or catalogues.

Policy Issue 1 – Legibility of information

Summary

The current legislation requires certain aspects of labelling information to be marked on the labels of a food product 'in a conspicuous place in such a way as to be easily visible, clearly legible and indelible' . However, as any visit to a supermarket will demonstrate the extent to which this is followed is questionable. There are numerous examples where it would be difficult for the consumer to read, for example, the ingredients list of a product. As such information is there to help in making purchasing decisions, and in some cases these relate to health issues (e.g. allergens), there would appear to be failure of the current legislation in relation to the legibility of information .

Background

Food labels have to be clear and comprehensible in order to be useful for consumers wanting to make better-informed food and diet choices. They are of little benefit if difficult to read and indeed there are studies that show that legibility is an important element in “maximizing the possibility that labelled information will influence its audience”[9]. And yet, this is one aspect of labelling that is continually being criticised by consumers and consumer organisations. The failure of products to properly comply with the legibility provisions in the current legislation is a common complaint in the various Commission consultations, and this is backed up by consumer research. For example, a review of various European studies of label usage amongst consumers found that one of the main causes of consumer dissatisfaction is that the size of print is often too small[10] and in the Commission funded OPTEM study, legibility was reported as a serious problem for short sighted or elderly consumers who represent an increasing part of the population.

Although difficult to prove, the situation with legibility has perhaps become worse over the last couple of decades because of the internal market and increased cross border trade. Manufacturers seek new markets for their products, yet to keep costs down aim to use the same label in many countries. The consequence of this being that multi-lingual labelling is very common. Whilst there do not appear to have been any detailed studies looking at the number of languages appearing on labels, the RAND survey showed that 2 is relatively common (27%) and 9 not uncommon (5%). Obviously there is limited space on a label and consequently an inverse relationship between the number of languages and the size of the text.

In discussing legibility, text size is the factor that is most commonly mentioned . However, there are other factors which also affect the ease of use of a label. For example the colour of the print contrast with the background and the type face/font. These should not be forgotten in relation to considering changes to the current legislation.

Policy Issue 2 – Lack of information on allergenic ingredients on non-prepacked food

Summary

Consumers that have allergies or intolerances to certain food ingredients are well served by the current legislation in relation to the provision of information on pre-packed foods. However, these foods make up only part of the diet of such consumers and increasingly there are demands to extend the pre-packed requirements to non-prepacked food. Especially as there are potential health implications if the wrong information is provided or is implied.

Background

Non prepacked food covers a range of products produce by a range of businesses, as summarised in the table below. In relation to information on allergenic ingredients, it is clear that this will only be relevant to certain parts of this table and if action in this area is to be considered, it should be targeted to those products which are seen to be of the greatest risk. There is information available that can be used in this regard, for example studies from medical research show that 74% of allergen related food incidents can be linked to foods sold loose (in shops and in restaurants)[11].

Table 1:

Example of products include: | Examples of outlets include: |

Products available at delicatessen counters | Multiple and independent food retailers |

Home meal replacements | Delicatessens |

Bakery and cakes | Butchers |

Fruit and vegetables | Fishmongers |

Confectionery | Greengrocers |

Fish and meat | Bakers |

Source: BNF (2004) |

In view of the potential health concerns with non-prepacked food it is perhaps valid to question why this was not dealt with when the legislation was first proposed. In fact, non-pre-packaged food is not excluded from the General Food Labelling legislation, this leaving it to the Member States to adopt detailed rules concerning the manner in which the mandatory requirements are to be shown for non-repacked food. The reason for this situation lies in the roots of the current EU legislation, which was designed to ensure the functioning of the internal market. Selling non-prepacked food or packaging food on the sales premises at the consumers’ request has therefore been considered to be a matter for national authorities to legislate. (i.e. of minimal relevance to the internal market). However, with the adoption of specific rules on allergen labelling for pre-packed food in 2003, there is now a potential inconsistency with non-prepacked food. Consequently Member States' abstention from introducing national labelling requirements for allergenic ingredients on such products is, potentially, depriving consumers from having important information related to health and safety.

There are, of course, practical issues which must be considered if there is any extension of the labelling rules to certain non-prepacked foods. Industry, quite rightly, points out that there are difficulties in providing information at point of sale. This is very different to providing information on-pack and will vary depending on the product and the type of business. In addition, it is perhaps inaccurate to assume that those businesses which might be affected will have ready access to information on the presence of allergens in the non-prepacked foods. So there might be additional costs in obtaining the information as well as passing it on to the consumer.

Policy issue 3 – Clarification of the use of origin labelling on foods

Summary

Details about the origin of products are often found on food labels, either because legislation requires that this is present or a company voluntarily decides to provide such information. Although detailed data is unavailable, it would seem that more and more products contain some indication of origin. This leads to expectations from consumers to both more origin labelling and assurances that when it is provided they can be certain that the information is not false or misleading . The latter issue is also of interest to the industry, not least as the use of origin labelling can give a competitive advantage , i.e. will influence consumer choice. Consequently they would wish to have a level playing field across the EU, with clear 'rules' on origin labelling. However, at the horizontal level of legislation such rules are not in place.

Background

For certain products, legislative requirements relating to origin labelling are set out in vertical legislation (which falls under DG AGRI responsibility). These texts contain provisions about the mandatory indication of origin/provenance, where this is likely to be related to certain qualities of the product (e.g. wine, fruits and vegetables, fish, eggs, honey). The texts also cover quality schemes, i.e. "Protected Designation of Origin"(PDO) and "Protected Geographical Indication (PGI), where again some indication of origin would be expected on the labelling. Beef labelling is a particular case where origin labelling is required. The intention being to improve the transparency of the beef market, and to restore consumer confidence, following the BSE crisis.

In relation to the General Food Labelling Directive, origin and provenance are mentioned twice. First, labelling must not be such as to mislead the consumer 'as to the characteristics of the foodstuff and, in particular, as to its … origin or provenance' Second, 'particulars of the place of origin or provenance [shall be compulsory] where failure to give such particulars might mislead the consumer to a material degree as to the true origin or provenance of the foodstuff'. However, the legislation provides no definition of origin or provenance – leading to uncertainty and ambiguity for both consumers, industry and Member States .

A related, but perhaps separate, issue is that of consumers' demands for more origin labelling . There is no doubt that the literature indicates strong support for such labelling (see box below). Indeed, demand for the origin of foodstuffs to be indicated more frequently is a recurrent theme of the Commission's consultations, being confirmed in the 2003 evaluation and in the focus groups surveys of April 2005 (OPTEM study). However, it is important to note that in research where the consumers are unprompted, i.e. asked simply to indicate what influences their purchasing decisions, origin labelling is generally not mentioned as a major factor.

Consumer studies on origin labelling Across the European Union consumers like to see country of origin information on food products as various studies show. A consumer study conducted in the Nordic countries in 2006[12] found strong support for country of origin information on foodstuffs. 78 percent of the consumers considered country of origin an important information to be found on foodstuffs. This replicates results from earlier Nordic studies, in which 86 percent respondents wanted country of origin labelling to be mandatory.[13] Research conducted in the UK provides a similar preference for mandatory country of origin labelling for all foodstuffs, with 80 percent of respondents considering it important to always label country of origin on foodstuffs.[14] Interesting in this research however is, that country of origin is not a major factor taken into account by the consumers in their purchasing decision. Indeed only 2 percent of consumers mentioned it spontaneously, that is unprompted as an area of concern for them. A study conducted for Food Standards Australia / New Zealand reports a similar behaviour; consumers reported country of origin information as being very important for them only after being prompted by the facilitators of focus groups.[15]

It should also be noted that the preference of consumers for origin labelling is not evenly spread across different food categories or different countries (see box below). Generally the origin of beef, other meat and fresh and raw products seem to be the prime concern of consumers . A further problem, which was seen during the consultations and relates mainly to meat and meat products, is that of linking origin with safety. In fact, in considering any action on origin labelling the reasons for consumer demand for such labelling have to be taken into account. Whilst there are "justified" reasons for wanting to know the origin of a product (e.g. support for local produce, characteristics of the product, ethical and environmental concerns), other reasons that have been quoted are not justified. This is the case specifically with the linking of origin and safety as products produced or imported into the EU are, by definition, "safe". This last point is of particular importance in relation to world trade, where origin labelling is often considered as a barrier to trade.

The evaluation of food labelling conducted in 2003 on behalf of DG SANCO found that consumers in France, UK and Italy value origin information in particular for meat and primary products. The OPTEM study found an interest in labelling for meat but on other products such as soft drinks the consumers were however indifferent, as they primarily rely on the brand for their purchase decision . In the Nordic countries this picture is similar. 92 percent of consumers consider the origin of meat important or very important, and this even holds for meat products (smoked ham 88%, sausage 86%, pizza 79%) and for fruit and vegetables (79 %). The meat content of ready meals was also the most important ingredient the consumers wished to be labelled in an UK study.[16]

Policy issue 4 – Consistent application of ingredients listing rules

Summary

Currently, alcoholic beverages (i.e. those with more than 1.2% by volume of alcohol) are not required to bear full listing of ingredients. This situation is not the result of an explicit derogation granted by Directive 2000/13/EC to these products but of a legal limbo rooted in the acknowledgement that specific rules are needed for ingredient listing of alcoholic beverages because of their particular characteristics and production methods. So, whilst there is in the current legislation a theoretical obligation for alcoholic beverages to label their ingredients, in reality this requirement never became operational due to the lack of specific rules. The level of consumer interest in ingredient labelling of alcoholic beverages is unclear and contradictory; this is not surprising especially since, in relation to health and safety aspects and in particular allergenic ingredients, alcoholic beverages are treated the same as all other food products. So consumers are informed about the presence of an allergenic ingredient in alcoholic beverages.

The revision of the current legislation offers the opportunity to correct the legal inconsistency described above. In addition, the continued presence on the market of the so-called 'alcopops', which tend to be pre-mixed alcoholic/non-alcoholic products is an issue to consider . The inconsistency in the ingredients of a soft-drink not having to be declared on the label if they are mixed with alcohol, where they would have to do so without the alcohol, is indeed considered by many to be quite unjustified.

Background

Whilst there has been an obligation on the Commission to present a proposal on ingredients listing, it has proved difficult to get agreement on a way forward. The issue goes back to Directive 79/112/EC (the first 'horizontal' labelling legislation) where Article 6 (3) states that 'In the case of beverages containing more than 1,2% by volume of alcohol, the Council, acting on a proposal from the Commission, shall, before 22 nd December 1982, determine the rules for labelling ingredients'.

The Commission presented proposals to fill this gap in 1982 and 1992 but the Council could not agree on any of those proposals. The Commission then presented a new proposal in February 1997, which was finally put on the agenda of a Working Group in December 2002 (under the Danish Presidency). At this meeting, the majority of delegations agreed that:

- alcoholic beverages had been unregulated for too long;

- the labelling of ingredients of alcoholic beverages should be more in line with the general labelling rules in Directive 2000/13/EC than in the proposal put forward by the Commission.

Subsequent to these discussions, specific requirements have been introduced by Directive 2003/89/EC for labelling ingredients which may cause allergies or intolerance. As these provisions apply also to alcoholic beverages, substances such as sulphites for example have to be mandatorily labelled where they are present. In view of the failure of EU harmonisation to materialise, some Member States have adopted national rules requesting partial indication of ingredients for certain alcoholic drinks. Obviously this causes potential problems for the free circulation of products within the internal market.

There have been consumer studies on attitudes to ingredients listing in alcoholic beverages, indicating some degree of consumer demand for this issue. However, the studies in question are inconsistent (see box below).

Consumer studies about ingredient listing on alcoholic beverages

The focus group based study by OPTEM found little consumer demand for ingredient listing on wine and beer. Most of the consumers point out the pleasure product characteristics of beer and wine and see no additional value in disclosing composition.[17] In contrast, a study conducted by the Food Standard Agency U.K. reports on a majority of consumers (64 percent) to support ingredient labelling for alcoholic beverages and half of the respondents answered they would make use of such information.[18] In the 2003 evaluation conducted on behalf of DG SANCO, consumer representatives identified “extending basic labelling to all food and drink” as one of the four most important issues not sufficiently met by the current legislation[19].

Regulatory Approach

Certain basic approaches considered as a means of finding solutions to the main problems, as well as the option of no intervention are considered below.

No intervention - No EU action

The baseline of doing nothing would maintain the current situation with scattered legislation perpetuating the following negative effects:

( Piecemeal and confusing rules undermining the effective implementation;

( Unjustified burdens on food business because of outdated, redundant or unclear requirements;

( Inconsistent consumer use of labels;

( Ineffectiveness of labelling as a communication tool;

( Failure of the legislation to adapt to changing markets and consumers' legitimate demands.

Intervention was considered in the context of deregulation, national legislation, non-statutory approach or updating Community legislation.

Deregulation

The option of deregulation would entail the abolition of the basic policy instruments concerning horizontal food labelling rules with a direct impact on vertical labelling rules that make reference to the general horizontal labelling legislation.

Although food manufacturers would continue to apply the current rules for a short period of time, given the costs of changing labels, they would progressively tend to remove information considered as imposing burdens. Non harmonised rules would impair the functioning of internal market, lead to poor information and reduce the level of consumer protection. Existing rules have proven their merits in allowing free circulation of goods and the protection of consumers. Dismantling them would meet strong resistance from the majority of Member States and consumers given that consumers and enforcement authorities have been used to the current requirements and any change to the present status could be seen as an abandonment and removal of a valuable "acquis". Therefore, de-regulation would be a "regulatory failure" and as such it cannot be considered as a viable approach.

National legislation

The repeal of the harmonised rules would certainly result in creation of national rules for all areas of general food labelling legislation which would have the following consequences:

- different national rules would impede the internal market;

- distortion of fair competition;

- increased administrative burden for industry;

- inconsistent approach in content and availability of information creating confusion for consumers;

- different level of protection for EU citizens.

Alternative non-statutory approach (self-regulation, co-regulation, guidance)

The different features of consumer information and food labelling on the one hand and the current trends towards the development of a "new legislative culture" call for the assessment of a new approach that could strike the balance between flexibility and prescription and between action at the national and action at the EU level.

The manner in which information is presented on labels is a good example of a rapidly changing feature of modern commercial practices. Similarly, consumers' needs and attitudes constantly evolve. Therefore labelling rules should be able to keep pace with technological innovation and change in consumer's behaviour.

Having recourse to a multi-level bottom-up governance (local/national/ community) based on the principle of formal commitment to measurable best practice and data sharing between involved stakeholders could be a relevant and viable alternative in the area of food labelling.

Moving the already harmonised detailed requirements to such a flexible approach would present no added value given that such requirements have proven their merits in allowing free circulation of goods and the protection of consumers. The use of an alternative mechanism as far as the regulatory labelling "acquis" is concerned would unnecessarily complicate current understanding among stakeholders and could be perceived as a deregulation. On the contrary, as far as any new policy issues are concerned, the introduction of a more elaborate and sustainable approach to consumer information emerging from best practices and from a constant dialogue with stakeholders has the potential to achieve beneficial results both for industry and consumers. Therefore, this new governance model would be included in the new proposal as a stand-alone system with the vocation to be developed and used further. In the context of each of the main issues it is appropriate to consider the effectiveness of this alternative approaches in achieving the objectives pursued.

Statutory EU Action

Given that uniform rules and legal certainty have proven their value at the EU level, the statutory approach is considered the most appropriate means to address the current problems in the area of food labelling. A level of prescription is frequently asked even by economic operators because detailed rules save industry from the trouble of developing its own policy under its own responsibility and ensure a level playing field for all.

Besides, the new governance system (as described above) would need to have a framework of operation established in the legislation so that it has legitimacy for all the stakeholders.

Form of act: Regulation

The preferred option on the form of the EU measure would be to change the legal act from a Directive to a Regulation. The reason being that, in their majority, the existing rules are prescriptive with little flexibility for Member States in how the rules should be applied.

A Regulation would give a more consistent approach for the industry to follow, it would reduce the administrative burden on the industry as they would not need to familiarise themselves with the individual regulations in the Member States.

In addition, a Regulation would ensure that the rules became applicable at the same time across the EU avoiding problems with delayed transpositions by Member States and consequent infringement procedures by the Commission to assure the free circulation of goods.

According to the Simplification Communication COM(2005)535 (part d) modification of the regulatory approach), the use of Regulations supports generally the objective of simplification because it guarantees that all actors have to follow at the same time the same rules. Considering the fact of the complexity, missing clarity and rationality of the current situation combined with the need to ensure free trade within EU and fair competition a vast majority of stakeholders pleaded for choosing as a legal act one single Regulation.

A Regulation would also eliminate administrative burden of transposition into national law for Member States.

In terms of simplification of the structure of the legislation ,

(a) in order to address the problems resulting from the piecemeal legislation the new proposal will amend, recast and replace provisions already in place under the current horizontal food labelling legislation, meaning the following texts:

( Directive 2000/13/EC as amended by Directives 2001/101/EC (category name “meat”) and 2003/89/EC (allergenic ingredients);

( Directive 87/250/EEC (indication of alcoholic strength);

( Directive 89/396/EC (lot);

( Directive 94/54/EEC (additional indications on labelling provided for in cases where certain ingredients are present) as last amended by Directive 2004/77/EC (glycyrrhizinic acid);

( Directive 1999/10/EC (indication of the quantity of volatile ingredients);

( Directive 2002/67/EC (foods containing caffeine or quinine).

(b) an option that is being considered is the combination of the Directive 2000/13/EC of the European Parliament and of the Council on the general food labelling and nutrition labelling legislation into one measure which would also simplify the regulatory framework.

On the contrary, bringing together all horizontal and vertical legislation (over 100 measures) would not be a helpful approach since this would create an even more complex document difficult to use and potentially difficult both to agree and to amend, especially since vertical legislation includes composition or marketing standards to which the labelling requirements relate.

The right of the Union to act – Subsidiarity test

The proposal is to revise existing legislation so the problem at issue and the objectives pursued by the Union have been already defined. Article 95 of the Treaty, functioning of the internal market, provided the legal basis for the EU legislative measures on general food labelling. Although the internal market is a central aspect of legislative harmonisation in the field of food labelling, there are several aspects in the new proposal related to consumers' right to information (Article 153) and protection of human health (Article 152).

Food labelling protects consumers and informs their decision making. It is considered that action at the EU level would deliver better results than a series of individual actions by Member States because i) a harmonised approach across Member States may simplify administrative burden on any food companies operating either trans-nationally or Community wide, and ii) uniform action will ensure Community wide minimum standards for consumers and thereby reduce inequity for citizens across the EU. A proliferation of different labelling requirements could undermine the current single market opportunities for the food chain which could have a major impact on trade given the high volume of intra-Community trade which in 2003 accounted for over 75% of all trade with flows of around € 120 billion [20]. The SME Panel survey indicates that 65% of companies exported their products to other Member States and in this survey over 60% of the respondents favoured harmonisation of general food labelling through European legislation.

Community competence is used taking full account of the principles of subsidiarity and proportionality acknowledging that total uniformity of labels throughout the EU is not necessarily the only and desired way to reach the objectives sought . It would, on the contrary, dismantle the potential for rapid adjustment to changing needs and circumstances of the applicable rules.

The core of the Community action is setting the conditions for the labelling of food within the EU which can not be appropriately addressed by Member States alone if the common internal market is to function smoothly. As to the details of the regulation applicable, a more participative and flexible way of designing and enforcing it will be offered by a new multi-level governance model intended to introduce a more elaborate and sustainable approach to consumer information emerging from best practices and from a constant dialogue with stakeholders.

In the light of the different elements outlined EU action is justified as experience shows that Member States cannot achieve a harmonised common market satisfactorily and that the EU can do better and more efficiently for the provision of information to help consumers make informed choices. EU action in the new proposal provides also space for softer intervention mechanism at national and/or EU level.

OBJECTIVES

The project is included in the rolling programme of simplification. Thus, the general objectives are linked to the Commission's strategic objectives and the initiative Better Regulation, improving the implementation of regulations, facilitating innovation, social equity, environmental protection and international responsibilities while maintaining high level of public health protection. The simplification needs that emerged from the consultation of Member States and stakeholders in relation to general food labelling was to make the labelling easier and clearer for operators and consumers.

The main objectives of the legislation on food labelling are:

( to enable consumers to make informed, safe, healthy and sustainable choices;

( to provide consumers with relevant, useful and legitimately expected information;

( to ensure the smooth functioning of the internal market;

( to foster a pro-competitive market environment.

Taking this objective into account, the broad scope of the revision should meet the needs of consumers and industry, and reflect the following specific objectives:

( ensure consistency and clarity in the provision of information;

( protect consumers' health and address specific consumer demands for information;

( avoid misleading indications and eliminate existing inconsistencies;

( enable and reward industry innovation on food labelling allowing them to make full use of the power of labelling to sell their products;

A schematic illustrating the hierarchy of the objectives for the general food labelling revision is presented in Annex 2 .

MAJOR POLICY ISSUES

With a view to achieving the objectives and in line with the simplification process a number of measures have been considered. Taking full account of the simplification needs that emerged from the consultation of Member States and stakeholders those measures have been divided into two categories:

(1) General simplification tools to bring the legal text into line with other EU policies (including Better Regulation) and legislation and to modernise, simplify and clarify the current food labelling scene. As they mostly relate to legal updating and clarification these simplification elements do not require detailed analysis:

( Setting-up of a flexible bottom-up mechanism (new labelling governance) that would enable the industry to innovate on food labelling, and the labelling rules to adapt to different and continuously changing markets and consumer demands. The approach of the labelling provisions that have existed for decades has been carefully questioned as required by the Commission Simplification Communication and the Impact Assessment Guidelines;

( Recasting of the different horizontal provisions on labelling. The merging of the horizontal texts will maximize synergies, minimize overlaps and redundancies and increase the clarity, and consistency of Community rules. This is a powerful simplification method that should provide economic operators and enforcement authorities with a clearer and more streamlined regulatory framework. Consideration was given to bring all labelling legislation, including requirements from vertical legislation, into one text but this would have been complicated and resulted in an even more complex approach;

( Introduction of clear principles to draw a clearer borderline between mandatory and voluntary information;

( Elimination of inconsistencies between horizontal and vertical rules, where possible;

( Rationalisation (update, clarification, removal of redundancies) of the compulsory information required by Article 3.1 of Directive 2000/13 / EC.

(2) Measures that during the consultations were identified as having more important impacts, e.g. major policy actions with potential economic, social or environmental impact and for which a more detailed analysis has been carried out. Addressing the following issues would contribute towards simplification in terms of easier compliance and greater clarity for stakeholders:

( How to improve legibility of the labels – the objective is to simplify the way information is made available to the consumers, improve the legibility of information for the average consumer and make it easier for operators to comply with the general requirement for readable and clear labels;

( How to deal with the lack of information on allergenic ingredients on non-pre-packaged food – the objective is to protect consumers' health and to ensure consistency in the provision of information;

( Origin labelling – the objective is to simplify the current situation where due to uncertainty there is a proliferation of misleading voluntary indications of origin and a non ending debate on how to address recurrent consumer demand for information on food origin. Addressing this issue would provide clarity in the legislation, facilitate compliance for operators and improve consumer understanding of origin indications;

( Inconsistent information on ingredients and in particular ingredient listing for alcoholic beverages – the objective is to rationalise the current situation by clarifying the existing legal limbo.

Most recent developments have shown that there is an increasing demand to make use of labelling schemes in order to inform consumers about issues of public interest in relation to the production methods concerned. The discussion on animal welfare labelling as tool to improve the farming methods applied is an example of a trend which could also extent to other elements of sustainability, such as environmental protection and climate change ("carbon foot print") or social questions as decent working conditions and child labour.

Following the conference “Animal Welfare – Improving by labelling?”[21] jointly organised by the German Presidency, the EESC and the Commission, the Council adopted in May 2007 “Council Conclusions on Animal Welfare Labelling"[22]. In these conclusions, the Council recognises that animal welfare is of concern and that labelling could be one important element in the provision of information to consumers and could allow producers to capitalise on high animal welfare standards[23]. The Council invites the Commission to conduct an in-depth study into the effects of introducing animal welfare labelling.

However, while the issue of animal welfare has been recognized as important for the consumers, it cannot form part of this impact assessment, as the discussion is at a too early stage to produce specific policy options which could be assessed. But the revision should already now provide for flexible tools to respond to future emerging, justifiable demands to use food labelling as communication tool on issues of public concern.

Baseline projection

If the legislation is not changed then it is anticipated that there would be a continual confusion among stakeholders concerning food labelling rules and that the labels would loose progressively their added value as the food business operators would continue to increase voluntary commercial information to the detriment of mandatory information that is important to enable safe, healthy informed and sustainable choices.

Policy Issue 1 - Legibility of the information

Options

Option 1: No EU action

No change to the present legislation would mean leaving the interpretation of the provisions of the legislation to the enforcement competent authorities in Member States possibly through case-law.

Option 2: Non statutory approach

- Sub-option 2a): New food labelling governance for all aspects of labelling presentation

Stakeholders and public authorities at national and community level could set a common framework for the development and exchange of best practices covering all aspects of labelling presentation to guarantee a certain level of clarity of labels.

- Sub-option 2b): New food labelling governance for all aspects of labelling presentation apart minimum font size

Stakeholders and public authorities at national and community level could set a common framework for the development and exchange of best practices covering all aspects of labelling presentation to guarantee a certain level of clarity of labels apart minimum font size.

Option 3: Statutory approach

- Sub-option 3a): standardise the presentation of all aspects of labelling

To set up in detail the way mandatory information should be presented: its place on the label, as well as the minimum character size, the spacing of words, the type-face and colour.

- Sub-option 3b): establish a minimum font size

Whilst only directly addressing one issue of presentation (text size) this would provide a basis for control of this aspect).

Policy Issue 2 - Lack of information on allergenic ingredients on non-prepacked food

Options

Option 1: No EU action

No change to the present legislation would mean leaving it to the Member States to adopt detailed rules concerning which pieces of information should be given to the consumer for unpacked food and in which manner. More precisely, although unpacked food would not be excluded from the legislation, Member States may decide not to require the provision of all those requirements or some of these, provided that the purchaser receives sufficient information.

Option 2: Non statutory approach

- New food labelling governance

Stakeholders and public authorities at national and community level could set a common framework for the adoption of standards related to the provision of information concerning non-pre-packed food and the details of these standards would be addressed in codes of best practice or national Guidance to encourage and help industry to provide information concerning non-prepacked.

Option 3: Statutory approach

- To extend mandatory allergens labelling to non-pre-packaged food

Allergens labelling would be mandatory for non-pre-packaged food and Member States would have to adopt detailed rules concerning the manner in which this information should be provided .

Policy issue 3 - Clarification of the use of origin labelling on foods

Options

Option 1: No EU action

This would mean that origin or provenance of foodstuffs is not mandatory information, unless its omission could mislead the purchaser and that the rules for the use of origin labelling would remain unclear.

Option 2: Non statutory approach

- New food labelling governance to encourage non misleading origin labelling

Stakeholders and public authorities at national and community level could set a common framework for the adoption of standards related to the provision of information on origin and the details of these standards would be addressed in codes of best practice or national guidance to encourage and help industry to provide information on origin.

Option 3: Statutory approach

- Sub-option 3a): To require mandatory origin labelling for all unprocessed food

All unprocessed food, meaning raw products would have to provide information on origin. Origin information of such products would have to be provided even when they are included in a processed food.

- Sub-option 3b): To address specific justified demands of origin labelling

This option would imply setting out a procedure whereby requests for mandatory origin labelling were looked at on the basis of a clearer requirement for proof that final consumers really want such labelling. If such proof were provided, there would still be a need for detailed technical rules for implementation.

- Sub-option 3c): To lay down criteria to frame the voluntary use of origin labelling

This option can be combined with any of the previous sub-options (3a and 3b) or stand alone. It would provide for criteria to be taken into account when origin labelling appears voluntarily. These criteria would then need to be further detailed in implementing measures or guidance.

Policy Issue 4 - Consistent application of ingredients listing rules

Options

Option 1: No EU action

This option would maintain the current legal limbo whereby although there is in the legislation a theoretical obligation for labelling of ingredients of alcoholic beverages, it is not operational due to the lack of specific rules. .

Option 2: Non statutory approach

- New food labelling governance

Stakeholders and public authorities at national and community level could set a common framework for the adoption of standards related to the provision of information on the ingredients of alcoholic beverages and the details of these standards would be addressed in codes of best practice or national guidance to encourage and help industry to provide this information.

Option 3: Statutory approach

- Sub-option 3a): exempting all alcoholic beverages from compulsory ingredient listing

This option would put an end to the current legal inconsistency by changing the legislation to bring it in line with the current reality that has existed, without apparent problems, for nearly 30 years, where alcoholic drinks do not list their ingredients.

- Sub-option 3b): exempting alcoholic beverages in general from compulsory ingredient listing but creating and making operational a labelling requirement for beverages resulting from a mixture of alcoholic beverages with non alcoholic beverages.

This option would mean that only ready to drink pre-mixed alcoholic beverages (commonly called alcopops), would be required to label their ingredients.

- Sub-option 3c): creating and making operational a labelling requirement of ingredient listing for alcoholic beverages on basis of specific characteristics of the products and consumers' expectations.

This option would imply that alcoholic beverages would have to label substances or ingredients that are likely to influence the consumer's choice, such as sweeteners, flavourings, colouring agents .

ANALYSIS OF IMPACTS

This Impact Assessment combines quantitative and qualitative approaches so that adequate consideration is given to a broad range of direct and indirect as well as social, environmental and economic impacts. The impact analysis is based on the evidence obtained through a review of the literature (published in peer reviewed journals and non-peer reviewed publications), reports prepared by Member States, semi-structured interviews with relevant public and private actors, the SME Panel on Food Labelling in 2006 and the online questionnaire organised in 2007 by the external consultant RAND Europe. In addition, the impact assessment results were scrutinised by the experts from different Commission Directorate-Generals' represented in the Inter-Service Steering Group on Impact Assessment.

Data limitations : There is not sufficient cost information available on the impact of general food labelling which makes it difficult to apply the Standard Cost Model. The online survey conducted by the RAND EUROPE included questions on the costs associated with specific aspects of the food labelling process (see Annex 3), however, it was not possible to derive reliable estimates of time spent or costs associated with labelling of products that could be applied in a Standard Cost Model.

Based on these data limitations and according to the proportionality principle, the assessment of the options has not been undertaken using the Standard Cost Model. Consequently in order to quantify the impacts, calculations for concrete options have been based on assumptions where appropriate.

Probable reasons for non delivery of information : Given that there was proper advance notice and adequate time for the stakeholders to reply, the poor delivery could be attributed to some methodological limitations of the survey and other attributes linked to the nature of a web-base survey as well as to lack of responses from the part of the industry.

Approach taken in assessing the impacts

The current legislation covers prepacked foods i.e. foods that are not packed at the request of the consumer or that are packed on the same premises of manufacture for immediate sale. The approach in assessing the impacts has been to consider the proportion of labels on prepacked products that might need to change. Although this is potentially a crude measure, it is practically impossible to examine in detail the impacts because of the sheer range of products and labels that exist. Therefore this section starts by providing general information about the labelling process so that the potential impacts can be more readily understood.

Food Labelling Process

In considering the economic impacts that might occur due to changes to the food labelling legislation it is important and useful to understand the food labelling process. Including recognition that even in the absence of labelling legislation, prepacked food would still be labelled. Therefore, whilst changes in food labelling legislation may mean some additional costs associated with including the information required, companies producing prepacked foods will always have costs of labelling that are not due to legislative requirements .

The costs of labelling legislation, and changes to labelling legislation, fall primarily at company level. Generally on the food manufacturer (for branded products), but increasingly on the retailer as well with the increase of ‘own brand’ products in many EU markets. To be able to understand the potential impact of changes to the legislation of specific aspects of food labelling on the industry, it is useful to try to consider the various steps that comprise the food labelling process. These are set out in the table below with information on costs also provided. Further information on the origin of these costs is then provided in the main text.

Figure 1: overview of the food labelling process

[pic]

There is a wide variety of means of labelling pre-packaged foods such as labelling information printed directly on the packaging material or labels stuck on to the package. For example, tins can have paper labels stuck onto the tin or can have the labelling information printed directly on the tin (as is often the case for soft drinks). In surveys of producers of pre-packaged foods when asked about costs of implementing changes the responses range from a negligible impact to a substantial cost if there is a need to invest in new equipment. The different packaging materials and methods of labelling have an impact on the labelling costs making it difficult to give a representative cost of labelling.

Drivers for labelling changes

A label change can be triggered by various reasons: the most common ones are changes in regulation, marketing reasons, product reformulation and recipe changes and adding additional information to the label. Food manufacturers have indicated that changes in regulation is the most common reason for labelling changes but changes in the recipe or updating the label are also considered important reasons [24]. Labels are usually changed by producers at regular intervals. These life cycles of a label may range from a few months for branded products with a high turnover such as cereals or soft drinks, or they might be a few years for niche products and commodity products such as sugar, salt or flour. According to the results of the surveys of the industry most manufacturers change the product labels at least every 3 years with around 20% of manufacturers changing their labels less frequently [25] [26].

[pic]

SOURCE: EICN (2006); Question 11

Figure 2: Reasons for modification of labels: “What is the main reason for changing a product label?”

Familiarisation with the regulations and information to be provided

After the need for changing a label has been established, the company has to become familiar with the legislation to establish the legal requirements for the new label. A UK administrative burden exercise estimated the costs attributed to familiarisation and understanding the General Food Labelling regulations as 13% of all administrative costs across all the regulation[27]. An administrative measurement exercise conducted in Denmark estimates the costs associated with familiarisation with food labelling legislation to account for 5% of the total administrative burden.

If the information to be provided on the label is not readily available within the company, additional costs are associated with the collection of this data.

Design and printing costs

After the food-business has collected all the necessary information to be presented the design of the label is the next step. The design costs vary with the extent of the overhaul of the label, with a complete overhaul being the most expensive option. The report from RAND shows that a small change would cost € 2000-4000 whilst full resign of a label would cost an additional € 7000-9000.

Labels are printed by various methods the costs of which vary. There are US estimates of costs associated with preparing the printing plates ranging from $ 380 for a minor change up to $ 16,600 for a full redesign. Another cost impacts of labelling changes is the write off of existing stocks of labels. Data on the typical stock of labels available for the UK indicates that 69% of companies use their labels within 12 months, and only 11% need more than 24 months to use their labels [28].

Table 2: Frequency of labelling changes

Percentage of labels changed |

Once a year | Once every 2 years | Once every 3 years | other |

RAND Survey | 37% | 26% | 20% | 18% |

SME Panel Survey | 29% | 26% | 25% | 19% |

The potential impact of labelling changes on businesses can be reduced if the changes are incorporated into the usual lifecycle of a label that is through adequate transitional periods.

On the basis of the available information it is estimated that over a 3 year period 80% of companies would introduce labelling changes as a normal part of their business operation. In fact on average 35% of labels would be changed within one year with a further 25% within 2 years. Normally the implementation of new labelling requirements are not imposed immediately and generally there is a period of transposition included in the legislation with some flexibility with products that had been labelled and placed on the market before a certain date being able to continue to be sold. Therefore, an extended period during which products that does not comply with the requirements can continue to be placed on the market would have an impact on the ability of companies to adapt to the new requirements by minimising costs. Therefore in the assessment of the impacts the effect of different transition times on food business operators is estimated.

Administrative burden

Standard Cost Modelling measures the administrative burden to industry of complying with regulations. The burden refers to the provision of information to third parties, the regulator and the public. In the case of food labelling, the administrative burden of providing information to regulators will be minimal as the regulator does not require the provision of information from those regulated. In the case of the cost of providing information to the public, the cost of compliance is part of the overall cost of labelling and difficult to disaggregate. The calculations presented in Annex 4 do not apply Standard Cost Model as required by Impact Assessment Guidelines. It draws from the SCM analysis of Member States, and then combines these data with data collected by the external consultants. It enabled only a rough estimation of overall costs, but this is already useful for the analysis of options.

The administrative burden exercises in the different Member States have tried to establish the current costs of compliance to industry and show that it is not possible to anticipate what the costs to industry related to revisions in labelling regulations might be and in which type of industry specifically these costs will be incurred.

Is should be borne in mind that a food manufacturer would label his food product to be able to distinguish it from his competitors products. Therefore, there is an ongoing underlying costs associated with producing and labelling products even in absence of mandatory labelling legal provisions. Where regulation can have an impact is in the requirements on the information that must be included on the label and the costs associated with providing the specified information. There is an ongoing project to assess the administrative burden associated with the food labelling legislation. The Directorate Generals Enterprise and Industry, and Health and Consumer Protection are working closely together on this project.

Other impacts

Impact on innovation and research

It is considered that innovation and research will not be affected by the revision of the legislation so these aspects are not considered separately during the analysis of each of the policy issues.

Employment, equality, private life and access to social welfare systems

It is considered that social aspects relating to employment, equal opportunities, private life and access to social welfare systems will not be affected by the revision of the legislation so these aspects are not considered separately during the analysis of each of the policy issues.

Environmental impacts

The potential environmental impacts could be that the requirements for the provision of certain information on food labels would mean that the manufacturer would have to increase the size of the packaging to provide the information in a legible format.

This would lead to increased use of material resources and energy, and of waste. Under the existing General Food Labelling legislation small packages may be exempt from certain requirements. No significant environmental impacts would be expected from the new proposal on general food labelling.

Policy Issue 1 - Legibility of the information

Option 1: No EU action

Option 2: Non-statutory approach

- Sub-option 2a): a new governance system for all aspects of labelling presentation

- Sub-option 2b): a new governance system for all aspects of labelling presentation apart minimum font size

Option 3: Statutory approach

- Sub-option 3a): standardize the presentation of all aspects of labelling

- Sub-option 3b): establish a minimum font size

Economic Impacts

Impact on competitiveness, markets, trade

No significant impacts are foreseen. Under option 2, it is more likely that the large firms would have the resources to participate in voluntary collaborative approaches and the competitiveness of SMEs might be affected.

Operating costs and conduct of business

Option 1 would oppose no additional costs on food producers and retailers. Under option 2 the total costs for the industry depend on the degree of uptake of the voluntary agreements and commitments. For individual companies applying voluntarily the standards, the cost would be identical to those resulted from a statutory approach (option 3). However, these costs might be reduced if the mechanism framing the voluntary agreements produced input savings, i.e.: enhancing reputation of companies that comply voluntarily with standards. In addition, option 2 might produce regulatory gains -- that is, savings through the avoidance of public regulations: in the form of reduced compliance costs given that a voluntary approach may set the same target as option (3) but may allow companies greater flexibility in achieving those targets. This would allow industry to find more cost-effective solutions adapted to its specific situation.

There is little evidence about the impact of options 3a) and 3b). The three options reduce the producers’ and retailers’ flexibility in the design of the label and have the potential to increase costs.

Respondents to the survey conducted by RAND reported that increasing font sizes (option 3b)) could lead both to the need for larger packages, and to an increase in costs for redesigning labels. The problem aggravates if the products have multiple ingredients and have multi lingual labels. Depending on the degree of pre-compliance, labels might have to be slightly re-designed and potentially some adjustments to printing equipment would have to be made. To identify the range of potential costs, the model described in detail in Annex 5 was used. Assuming that familiarisation with the legislation that would concern only a limited number of requirements should be inexpensive, the main burden of costs lies with potential need for labels' re-designing.

Based on the findings of a UK survey on the uptake of voluntary guidance on clear food labelling in the UK[29] it is expected that introduction of a minimum font size of 10pt or (8pt the absolute minimum) would require label changes for 87% of products given that only 13% of products use 8pt as a minimum font size. Hence, assuming average illegibility of 87% of labels, and one-off cost of € 225 per label for small re-design, the costs of these modifications in the option without transition period reach € 5.2 billion. The actual incurred or marginal costs of providing a minimum font size, or meeting other requirement, will be however much lower if they can be integrated into the labelling cycle. With application of transition period they reduce to € 1.7 billions with 2-year grace period being granted, and to only € 250 million with 3-year grace period. Costs will however increase if multi lingual space limitations lead to major adjustments of the food labels and if the number of Stock keeping units (SKUs) to be produced increases due to less multilingual labelling.

Option 3a) has prospectively the highest potential of increasing cost of food producers across the policy options discussed here. In some cases it can even require an extensive redesign, and as a consequence the cost could be situated at the upper margin of the cost estimates described above (on average €2,000 - €13,000 per label). Standardised mandatory information is the most space consuming of the discussed policy options. This might also have an impact for companies which market their products in several countries if this had knock-on effects on the number of stock-keeping units (i.e. basic label design for products within a range of products), warehousing, and distribution operations[30](from the survey of SMEs around 65% of companies exported their products[31]). In this context the use of multilingual labelling may be affected. One study shows that 74% of companies with a turnover in excess of € 50 million use multilingual labelling. This figure drops to 14% for companies with a turnover below €50 million[32]. Data from the survey conducted by RAND Europe suggests that large firms are more likely to produce multilingual labels with 40% of large, 25% of medium, 25% of small and 9% of micro businesses producing multilingual labels[33] varying from maximum 2 languages (35%) to 9 languages (10%). (In some Member States due to the language requirements companies may be obliged to label their products with more than one language).

To illustrate the impact of a label's legibility on the overall benefits of labelling, we have used the example of nutrition labelling. Graph below depicts the potential impacts – in case of front-of-pack labelling it is assumed label is read by 80% of the customers (if not every time, at least during first purchase), in case of easily legible back-of-pack label the ratio goes down to 40%, while in case of illegible back-of-pack label it further decreases to 10%, as only the most tenacious customers will read them. The way reading a label then transforms into action, and changing behaviour was assumed equal in all 3 cases.

[pic]

Figure 3: Estimated potential costs and benefits of labelling of 5 nutritional elements either on front or back of pack being associated with a 1% reduction in salt intake and placement of information

Impact on SMEs

No impacts are expected with option 1 on SMEs. As with other policy issues it is expected that the impact of the different options under Option 3a) and 3b) would be greater on SMEs than on large companies as cost for implementing changes are generally proportionally greater for SMEs but there would not be any special costs for SMEs.

Impact on administrative burden

Depending on the different elements of the system supporting the voluntary agreements and best practices, option 2 would create some burdens to industry and enforcement authorities related to the monitoring of the voluntary schemes, reporting, publicity of the scheme. Options 3a) and 3b) might be considered as increasing the administrative burdens for the companies to familiarise with the regulation. This should be small for option 3b) because only the font size is concerned. Standardisation of information (option 3a) requires a considerable number of single prescriptions which have to be understood and followed by the food companies, which imposes information costs on the food producer and increase the risk of accidental non-compliance due to more complicated regulation.

Third countries and international relations

No negative impacts are expected with option 1. Options 3a) and 3b) could have impacts although some companies that might be affected by changes in the EU legislation would have to already take account of legislation in third countries that include specification of minimum font size or other aspects of presentation. As far as international standards are concerned, the CODEX standard for the labelling of pre-packaged foods does not provide any details concerning the presentation of labelling. The current standard is very much similar to the present EU legislation (broad requirement for the label to be understandable).

Social Impacts

Impact on public health, safety and consumers' right to information

Option 1 would mean that consumers continue to be clearly dissatisfied with the legibility of food labels.

Option 1 is not expected to have any impact on public health. Options 3a) and 3b) should make it easier for consumers to read the information, especially information which is related to the safety of the product, such as durability date or to health aspects, such as allergens. Avoidance of products that can cause anaphylactic shock is expected to be helped by the quality and legibility of the allergen risk labelling.

Option 2 may lead to a certain harmonisation of approach of the voluntary agreements, if exchange of practices was effective. The social benefits of this approach may vary from zero to the total benefits achieved by a prescriptive statutory option (3). However, on the basis of evidence from the UK that in one survey that on 87% of packages the minimum font size was not in line with the best practise guidance, it is considered that option 2 would not address the basic legibility problem frequently raised by consumers. A minimum font size as proposed under Option 3b) is likely to have a positive impact in helping consumers read labelling information. This is fundamental to help consumers make better informed food choices, which is the central aim of food labelling. These positive impacts could reasonably be expected to be even greater if all aspects of legibility were provided for in the legislation as proposed under option 3a).

Impacts on Member States

No significant negative impacts are expected. Options 3a) and 3b) might make it easier for Member States to implement legislation.

Policy issue 2 – Lack of information on allergenic ingredients on non-prepacked food

Option 1: No EU action

Option 2: Non-regulatory approach

- a new food labelling governance to encourage allergens labelling non-prepacked food

Option 3: Regulatory approach

- To extend mandatory allergens labelling to non-pr-packed food

Economic Impacts

Impact on competitiveness, markets, trade

No impacts are foreseen, given the local characteristics of selling non-prepacked food.

Operating Costs and conduct of business

"Non-pre-packaged’ foods are foods which are sold loose i.e. non-wrapped. In a retail environment, this would apply to any foods that are sold loose from a delicatessen counter, as well as to nuts and vegetables sold loose. In a catering environment this would apply to foods which are sold non-wrapped, for example, from a canteen or meals served in a restaurant/takeaway. Foods sold ‘pre-packaged for direct sale’ generally means those foods that have been packed on the same premises as that from which they are being sold. Consequently, the business sectors affected will be all those selling foods not prepacked i.e. ‘non-prepacked’ and ‘pre-packaged for direct sale’ via catering establishments or through retail outlets . In terms of number of businesses affected the overall cost is likely to be significant. According to EUROSTAT data there are currently in the European Union about 500.000 retail companies, employing some 4.7 million staff and around 1.4 million restaurants, caterers and canteens employing some 6.4 million staff.[34]

Typical retailers of food sold loose range from the butcher’s shop and bakeries to medium and large retailers offering fresh products and unpacked food at deli counters.

Option 1 would lead to no additional costs. However, there would continue to be costs in terms of the health effects for a consumer with food allergies or food intolerances in respect of ill health, and, in extreme cases, death occurring as a result of eating allergenic foods . Food businesses will not be sufficiently well informed about food allergy in order for them to know how to respond to food allergic consumers, when asked about the ingredient content of their foods, which may also enable them to be less efficient. There could also be costs to businesses if they knowingly provide inaccurate information about the allergen content of their foods.

Under option 2 the total costs for the industry depend on the degree of uptake of the voluntary agreements and commitments. For individual companies applying voluntarily the standards, the cost would be identical to those resulted from a statutory approach (option 3). In addition, option 2 might produce regulatory gains -- that is, savings through the avoidance of public regulations: in the form of reduced compliance costs given that a voluntary approach may set the same target as option 3 but may allow companies greater flexibility in achieving those targets