A reputed food product company based in India developed a food product for the international market and started exporting the same after getting necessary approvals. The company announced this achievement and also indicated that soon the product will be made available for the domestic consumers with almost the same quality and health benefits. Accordingly, the company got its product approved by the domestic competent authority and launched the product in Indian market. The company could increase its market share over a period of time and earn substantial profit both domestically and internationally. However, the random sample test conducted by inspecting team found the product being sold domestically in variance with the approval obtained from the competent authority. On further investigation, it was also discovered that the food company was not only selling products which were not meeting the health standard of the country but also selling the rejected export products in the domestic market. This episode adversely affected the reputation and profitability of the food company.
(a) What action do you visualise should be taken by the competent authority against the food company for violating the laid down domestic food standard and selling rejected export products in the domestic market?
(b) What course of action is available with the food company to resolve the crisis and bring back its lost reputation?
(c) Examine the ethical dilemma involved in the case.15 Apr, 2022 GS Paper 4 Case Studies
a) Following actions should be taken by the competent authority against the food company for violating food standards:
- It should be directed to take back all substandard products already launched in the market and should be made to pay adequate compensation to consumers.
- Proportionate punitive action should be taken as per the provisions of Food Safety and Standards Act.
- Additionally, the company should also be asked to contribute a significant amount of money in campaigns for raising public awareness on FSSAI norms.
b) Course of action available with the food company to resolve the crisis and bring back its lost reputation:
- Fully cooperate in investigation and serve punishments prescribed by the law for selling substandard food products.
- Order an external audit by a reputed organisation to pinpoint the fault and fix accountability within the organisation.
- The top management of the company should tender a public apology and come clean on what went wrong and what remedial actions are being taken. This will assure the public that management is serious about the issue.
- Ensure that the planned course of action is adhered to and periodically monitor the progress.
c) Ethical dilemmas involved in the case:
- Shareholder’s Profit vs Heath of Consumer: This dilemma would have been faced by the food product company. It might have prioritised profit of the shareholders over the health of the consumer. This was a bad decision as ultimately both were affected.
- Long vs Short Term Gain of Shareholders: Selling substandard food might have increased profit for the company and hence shareholders in the short term, however because of tarnished reputation, shareholders will be facing a long-term loss in revenue term.
- Standard for Domestic vs International Consumers: The company would have arrived at the conclusion that rejected products do not meet domestic standards because standards were too high. In their opinion, food products were still safe. However, if this was the case, the company should have raised this technical point with the regulator and tried to get the standard rationalised instead of breaching the law.
- Law vs Public Trust: Cases like this might create trust deficit between the whole food product industry and the consumers. This may hurt the economy and lead to employment loss for many.
However, the regulator did well to take a long-term view and followed the law. Eventually the public will trust the system if only it knows that the regulator is keeping an eye on the quality of the product.
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