Private Inspection of Food Enterprises Poses Monopolization Risks
17 November, 2011

Governmental initiative to make mandatory inspection of food producing enterprises payable and assigning it to private, accredited inspection companies instead of the currently active free-of-charge state inspection, poses monopolization and price-hike risks.

To raise food security and quality as well as to solve corruption problem in food enterprises inspection, Georgian government plans to adopt private accredited inspection companies for implementing regular inspections of food producing enterprises that falls in the competence of the  National Service of Food Safety, Veterinary and Plant

Protection (NSFSVP) [of agriculture ministry] at the moment.

The novelty is built in the draft project for Code on Food Safety, Veterinary and Plant Protection that has already been approved by the first parliamentary hearing and is to be enacted staring 2012 it will be approved ultimately.  However non-governmental organizations and independent experts find the paper full of flaws and hail Georgia government to include the public sector in the project discussions before the second hearing.

Adoption of private accredited inspection companies is one of the key challenges that may lead to monopolization of inspection service and price hike on food as far as the private inspection will be payable unlike the currently active free state inspection.

Public sector experts claim they are not well-aware of this kind of private inspection mechanism that works only in two countries in fact - in the UK and Ireland and very likely authors of the idea have quite superficial knowledge of the questioned model either as the initiative is full of controversies and does not insure comprehensive  inspection regulation.

According to Shalva Melkadze, Consumer Rights Protection Program Coordinator with the Century 21st, the drafted initiative does not provide by inspection payment details or criteria based on which the price should be defined. Neither does it say how frequently the mandatory inspections will be held.

As Veriko Gulua, A Spokesperson of NSFSVP, explained to Georgian Journal, private inspection will be in charge of only regular mandatory inspections while casual inspections [that are implemented in case of grounded suspect] still remains within competence of the NSFSVP and is free of charge. Also execution of the findings of the private probes is up to the NSFSVP.

“Private accredited inspection companies will be making a protocol of the inspection that will be submitted to the NSFSVP and the latter will outline sanction measures if necessary and execute them.  Frequency of regular inspections is not fixed as such, only high risk group enterprises are on the regular inspection list, however as the enterprises adopt the Hazard Analysis and Critical Control Points (HACCP) the monitoring frequency may fall to once in 3 years,” Gulua said.

Private inspection companies have to get accreditations at Georgian National Accreditation Service however the accreditation-related costs are still uncertain as far as this kind of accreditations were not issues as yet.

“This mechanism is under vision as yet and costs are not outlined. What we know is that an entrepreneur can choose private inspection companies and invite any of them. Besides, if entrepreneurs will not be satisfied by inspection companies they can appeal to us and we will double-check the enterprise, or if we have a grounded suspect we can implement double-checking too,” Gulua elaborated.

Vakhtang Kobaladze, European Integration Program Manager at Eurasia Partnership Foundation, believes the business will have no option in fact and remains vulnerable to price hike and monopolization.

“The accreditation cost is supposed to be quite high and average to GEL 5-10 thousand as the accreditation includes many components including responsibility insurance that is quite expensive and quite few companies can afford this, besides there are few professionals to implement enterprise inspection that also increases my fear that  that very few private inspection companies will enter the market. It means there will be no healthy competition, I do not rule out trust-deals on price-making policy, and since business will be obliged to have a regular probe they will have no option in fact, will pay high inspection costs and increase prices on their product ultimately,” Kobaladze told GJ.

Melkadze believes that private inspection price-making criteria should be outlined in the Code to protect business from trust agreements. However he expects price hike at any rate since outlays to business will increase.

Non-governmental watchdogs fear that this here initiative is an attempt of the state to lay its responsibility burden on private companies rather than ease life to business.

“Food inspection falls within the state competence and should be free of charge,” Melkadze said.

“The state initiated private inspection to eliminate corrupted deals between the state inspection and entrepreneurs, their standpoint is that once the state body will be less responsible the corruption level will decrease and that is a good intention but it does not solve the corruption problem in fact, corruption deals may be stricken between private companies too. As a matter of fact the state lays its burden of responsibility on private companies,” Kobaladze elaborated.

If the initiative is approved Kobaladze recommends adoption of pilot project first to see how the tool works in reality and escape further problems.