Dutch anti-trust regulator bans pro-animal welfare chicken cartel

post by Dale · 2021-02-24T15:44:47.768Z · EA · GW · 13 comments

This is a link post for https://www.lexology.com/library/detail.aspx?g=a2349cc9-3edd-4d29-94b4-02e49983d87b#:~:text=The%20Netherlands%20Authority%20for%20Consumers,Dutch%20Competition%20Act%2C%20and%20are

I thought this was an interesting case: the Dutch anti-trust regulator decided that an attempt by Dutch chicken companies to raise animal welfare was illegal, because it raised prices for consumers. The benefits to the chickens was apparently quite small, but as far as I can see they would have reached the same decision regardless of the size of the welfare improvement:

Sustainably produced poultry meat has enjoyed vastly increased sales in the Netherlands during the last five years due to schemes introduced by the Dutch Society for the Protection of Animals. The Chicken of Tomorrow is a recent initiative by a group of poultry producers and processors providing for higher animal welfare standards including additional space for the chickens and additional poultry litter as well as a longer lifetime of one to two days.

...

Market participants at varying levels of the poultry meat supply chain – including supermarkets, farmers, and meat processors – entered into agreements providing that only chicken meat that achieves certain animal-welfare requirements, such as those put in place as a part of the Chicken of Tomorrow initiative, should be available to consumers. These agreements led to Dutch supermarkets de-listing regular chicken meat and removing it from their shelves.

...

Following its review of the agreements and the requirements of Chicken of Tomorrow, the ACM found that the improvements offered by Chicken of Tomorrow were  only limited: the birds only benefited from slightly more space and  generally only lived a couple of days longer than conventional chickens.  The ACM’s consumer research also found that these improvements came at a cost higher than consumers were generally willing to pay.

Therefore, the ACM concluded that agreements to remove regular chicken meat from supermarket shelves went too far and did not satisfy the efficiency arguments necessary for exemption.

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comment by Paul_Christiano · 2021-02-24T16:37:48.881Z · EA(p) · GW(p)

These cases are also interesting for alignment agreements between AI labs, and it's interesting to see it playing out in practice. Cullen wrote about this here much better than I will.

Roughly speaking, if individual consumers would prefer use a riskier AI (because costs are externalized) then it seems like an agreement to make AI safer-but-more-expensive would run afoul of the same principles as this chicken-welfare agreement.

On paper, there are some reasons that the AI alignment case should be easier than the chicken-welfare case: (i) using unsafe AI hurts non-customer humans, and AI customers care more about other humans than they do about chickens, (ii) deploying unaligned AI actually likely hurts other AI customers in particular (since they will be the main ones competing with the unaligned but more sophisticated AI). So it's likely that every individual AI customer would  benefit.

Unfortunately, it seems like the same thing could be true in the chicken case---every individual customer could prefer the world with the welfare agreement---and it wouldn't change the regulator's decision.

For example, suppose that Dutch consumers eat 100 million chickens a year, 10/year for each of 10 million customers. Customer surveys discover that customers would only be willing to pay $0.01 for a chicken to have more space and a slightly longer life, but that these reforms increase chicken prices by $1. So they strike down the reform.

But with welfare standards in place, each customer pays an extra $10/year for chicken and 100 million chickens have improved lives, with a cost per chicken of less than $0.0000001/chicken, thousands of times lower than their WTP. (This is the same dynamic described here [LW · GW].) So every chicken consumer prefers the world where the standards are in place, despite not being willing to pay money to improve the lives of the tiny number of chickens they eat personally. This seems to be a very common reaction to discussions of animal welfare ("what difference does my consumption make? I can't change the way most chickens are treated...")

Because the number of chicken-eaters is so large, the relevant question in the survey should be "Would you prefer that someone else pay $X in order to improve chicken welfare?", making a tradeoff between two strangers. That's the relevant question for them, since the welfare standards mostly affect other people.

Analogously, if you ask AI consumers "Would you prefer have an aligned AI, or a slightly more sophisticated unaligned AI?" they could easily all say "I want the more sophisticated one," even if every single human would be better off if there were an agreement to make only aligned AI. If an anti-trust regulator used the same standard as in this case, it seems like they would throw out an alignment agreement because of that, even knowing that it would make every single human worse off.

I still think in practice AI alignment agreements would be fine for a variety of reasons. For example, I think if you ran a customer survey it's likely people would say they prefer use aligned AI even if it would disadvantage them personally because public sentiment towards AI is very different and the regulatory impulse is stronger. (Though I find it hard to believe that anything would end up hinging on such a survey, and even more strongly I think it would never come to this because there would be much less political pressure to enforce anti-trust.)

Replies from: Tsunayoshi
comment by Tsunayoshi · 2021-02-24T22:32:42.788Z · EA(p) · GW(p)

I think you might have an incorrect impression of the ruling. The agreement was not just struck down because consumers seemed to not be willing to pay for it, but also because the ACM (on top (!) of the missing willingness to pay) decided that the agreement  did not benefit consumers by the nature of the improvements (clearly, most of the benefit goes to the chickens). 

From the link: "In order to qualify for an exemption from the prohibition on cartels under the Dutch competition regime it is necessary that the benefits passed on to the consumers exceed the harm inflicted upon them under agreements."

Replies from: Paul_Christiano
comment by Paul_Christiano · 2021-02-25T17:41:26.548Z · EA(p) · GW(p)

Is your impression that if customers were willing to pay for it, then that wouldn't be sufficient cause to say that it benefited customers? (Does that mean that e.g. a standard ensuring that children's food doesn't cause discomfort also can't be protected, since it benefits customers' kids rather than customers themselves?)

Replies from: Tsunayoshi
comment by Tsunayoshi · 2021-02-25T19:39:06.369Z · EA(p) · GW(p)

No, my impression is that willingness to pay is a sufficient but not necessary condition to conclude that an industry standard benefits customers. A different sufficient condition would be an assessment of the effects of the standard by the regulators in terms of welfare. I assume that is the reason why the regulators in this case carried out an analysis of the welfare benefits, because why even do so if willingness-to-pay is the only factor? 

More speculatively, I would guess that Dutch regulators also take account welfare improvements to other  humans , and would not strike down an industry standard for safe food (if the standard actually contributed to safety). 

Replies from: Cullen_OKeefe, Cullen_OKeefe
comment by Cullen_OKeefe · 2021-02-28T00:23:27.467Z · EA(p) · GW(p)

I haven't read the case, but under US antitrust law this case would have the same result. The reasoning would be that individual consumers WTP for animal welfare improvements is a benefit to them, but that benefit can be realized without anticompetitive harms of raised costs and reduced variety: namely, welfare-conscious consumers can pay more for chicken raised in better conditions, and welfare-indifferent consumers still have the option to buy cheaper chickens. The discussion of "welfare" as such would therefore be a bit misleading in the US context—it's a shorthand for the maximal consumer surplus in competitive market conditions, not the type of felicific calculus EAs often do.

Replies from: Ramiro
comment by Ramiro · 2021-03-16T16:10:30.552Z · EA(p) · GW(p)

True, this resonates with arguments presented in the In Re Processed Eggs... case: https://law.justia.com/cases/federal/appellate-courts/ca3/19-1088/19-1088-2020-06-22.html

comment by Cullen_OKeefe · 2021-02-28T00:16:52.615Z · EA(p) · GW(p)

I would guess that Dutch regulators also take account welfare improvements to other humans , and would not strike down an industry standard for safe food (if the standard actually contributed to safety).

I wouldn't be so sure. US antitrust authorities have repeatedly struck down pro-safety anticompetitive agreements on the justification that consumers should generally be allowed to make their own price-safety tradeoffs. See my paper that Paul linked. Of course, Dutch antitrust authorities may see it differently, but European and US antitrust analysis are usually pretty harmonized.

Replies from: Ramiro
comment by Ramiro · 2021-03-19T22:02:31.438Z · EA(p) · GW(p)

Sorry if this is a lame question, but do you think that regulations and standards on ESG that explicitly mentioned animal welfare - something more like soft law, or "comply or explain", e.g., "companies must disclose animal welfare policies", or "social and environmental risks include losses due to... animal cruelty" - could be enough to start a change in US antitrust law interpretation on blacklisting products out of animal welfare concerns?

comment by saulius · 2021-02-25T15:34:10.889Z · EA(p) · GW(p)

It’s interesting that this article was from 2015, so it preceded all the broiler welfare campaigns that are happening now. I think it’s good for animal activists to learn from successes and failures of those who tried to achieve similar goals before us, like the one in the linked article.

Speaking of which, this paper called Market barriers for welfare product innovations describes some other previous efforts to improve chicken welfare in the Netherlands that also failed in interesting ways. Here is one interesting excerpt:

Consumers may find it difficult to interpret welfare attributes. Animal welfare is a so-called credence attribute, i.e., it cannot be verified by the consumer - not even after consumption. Consumers will use certain cues (such as labels and package) and associations (Keller, 1993). Such associations may not always be correct: wrong links could be activated in the consumer's mind, and incorrect information could become associated with a product. An example of this is the failure of the introduction of slow-growing chicken meat in the Netherlands in the 1980s: consumers were not aware that regular chickens only live 42 days, and thought the 56-day grown chickens were slaughtered too young.

Finally, product image may inhibit the growth of welfare initiatives. The Dutch word for barn eggs, 'scharrel' eggs, may evoke an idyllic image of happy animals that live in small couples with a cock and roam around freely on the farmyard pecking about a bit (as suggested by Van Leeuwen, 2005). This perception is actually incorrect as hens are kept indoors. Yet, there is little knowledge amongst Dutch consumers about welfare labels on eggs (Burrel & Vrieze, 2003). Whereas 40% of the Dutch consumers state that they buy outdoor eggs (Anon., 2005c), the actual market share of outdoor systems is less than 4% (Anon., 2005a).

Consider the situation in Germany, where barn eggs are called 'Bodenhaltung' eggs (literally translated: floor-produced eggs) and free-range eggs are called 'Freiland' eggs (literally translated: freeland, 'open-air' eggs). One could argue that the positive and better fitting associations of the Freiland eggs in Germany translated into a better market share: 18.0% in 1999, compared with 2.5% for the free-range outdoor eggs in the Netherlands (Tacken & Van Horne, 2002). This illustrates the potentially powerful role of a positive and fitting image.

(sorry, this is a bit off topic. I wanted to share this stuff anyway but didn’t think it deserved its own post and thought that posting it here would be better than nothing as it might reach the same kind of people I wanted to reach).

comment by saulius · 2021-02-25T15:07:16.629Z · EA(p) · GW(p)

Interesting. The text is not very clear about this, but my understanding is that the anti-competitive aspect of this was an agreement between different retailers and producers to stop selling and producing cheaper low-welfare chicken on the condition that everyone else will do the same. When companies commit to the Better Chicken Commitment or a cage-free commitment, these commitments are not conditional on anyone else doing the same thing. So at least anti-competitive laws are not relevant in these situations, right?

Replies from: Cullen_OKeefe
comment by Cullen_OKeefe · 2021-02-28T00:17:29.770Z · EA(p) · GW(p)

Yes, unilateral commitments of that sort would generally not raise antitrust issues.

comment by Ramiro · 2021-03-03T12:19:00.309Z · EA(p) · GW(p)

Thanks for the post. 
It reminds O'Keefe mentioning that a Windfall Clause for AI might incur antitrust problems [EA(p) · GW(p)].

Couldn't supermarkets invoke CSR arguments for exemption?

comment by FlorianH · 2021-03-04T10:19:28.541Z · EA(p) · GW(p)

Thanks, interesting case!

1. We might have loved to see the cartel here succeed, but we should probably still be thankful for the more general principle underlying the ruling:

As background, it should be mentioned that it is a common thing to use so-called green policies/standards for disguised protectionist measures, aka green protectionism: protecting local/domestic industry by imposing certain rules, often with minor environmental benefits (as here at least according to the ruling), but helping to keep out (international) competition.

So for the 'average' citizen, say those for whom animal welfare may be relevant but not nearly as central as for many EAs, the principles underlying the ruling seem very sensible. Potentially even crucial for well-functioning international trade without an infinitude of arbitrary rules just to rip off local consumers.

Governmental policy (minimal welfare standards) is the place for addressing the public goods problem that Paul and other commentators describe: here that would mean binding animal welfare standards, agreed in the democratic process.

2. An potentially much larger issue w.r.t. trading laws preventing higher welfare standards, is related to WTO/GATT rules, making it (seemingly) ambiguous whether a country is even allowed to politically raise welfare standards and apply these to imports (which is necessary for the effectiveness of the domestic rule):

Free trade rules are regularly used by industry lobbies to delegitimize proposals for higher domestic animal welfare standards, with the claim that imposing welfare restrictions on imported foods would be impossible as it violated free trade rules. In reality, it is not trivial to interpret the relevant paragraphs of the trade agreements & case rulings, although I would imagine it to be difficult for anyone to attack a country for imposing high-welfare standards in a reasonably transparent way; nevertheless, the uncertainty around the issue is being successfully abused in the political discourse.