Many consumers and meat and poultry experts assert that, left on their own, red meat and poultry slaughter and processing plants would reduce operating costs by relaxing sanitation and process control standards, thereby increasing the chance of including pathogens, harmful bacteria, rodent hairs, and other contaminants in their production output. In response to these concerns, the Food Safety Inspection Service (FSIS) has traditionally visually inspected animals for obvious defects, such as body sores, and monitored plant sanitation and process controls. Recently, under the Hazard Analysis Critical Control Program (HACCP) regulatory program, FSIS has added pathogen testing and enforcement of HACCP compliance to its regulatory responsibilities.

Many economists assert that food safety regulation is not necessary. They argue that market mechanisms compel plants to improve sanitation and process control management practices. For example, if there were one beef products producer, then consumers would punish only that firm by switching to other food products if they ate beef containing contaminants. However, identification of the source of production becomes obscured when there are numerous production plants producing homogeneous products, lending credibility to the need for regulation as a second-best alternative.

This paper examines the impact of market mechanisms on sanitation and process control deficiencies, i.e. plant quality control. Results suggest that market mechanisms encourage management practices likely to result in fewer contaminants in meat and poultry production. In particular, results indicate that the share of output from further processed products and plant and firm size discourage sanitation and process control deficiencies.

Results have implications for Food Safety Regulation. Contrary to that which is believed by some experts, private market mechanisms do encourage adherence to better food safety management practices. In terms of public policy, results suggest that improvements in the ability to trace meat and poultry to the supplier could improve food safety. More generally, since additional publicly available information can encourage actions to reduce contaminants, product labeling and the public availability of pathogen count and deficiency rating data could encourage better food safety management practices.

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