2. The role of law in food marketing systems

The role of law in relation to food marketing systems is multi-faceted, but for the purposes of this discussion, law can be regarded as having the following three main functions.

(a) Enabling functions which provide the essential legal framework for the marketing system. Enabling functions are performed by laws which establish:

• property rights and rules to protect it (such as the prohibition on theft), and therefore define what can be sold and who is entitled to sell it;
• mechanisms for constituting a group of individuals as a legal entity (such as a company or cooperative) which is entitled to assume rights and obligations in its own name;
• laws of contract which clarify the consequences of certain transactions and allow commitments agreed between the parties to be enforced in court and so permits the evolution of more complex commercial transactions which go beyond direct barter exchanges;
• laws of exchange, (e.g. recognising warehouse receipt as negotiable documents of title so that ownership of stored grain can be transferred by transferring the document); and
• security laws (e.g. rules allowing movable goods such as grain to be pledged as security for a loan).

(b) Economic regulatory functions which seek to promote, guide and discipline the operation of markets. This function would be performed by a wide range of laws, including laws dealing with competition, uniform weights and measures, food quality standards and tax. (Other mechanisms such as unwritten market rules and standard contracts adopted by market authorities or trading associations, may also serve to regulate the economic functioning of markets.)

(c) Constraining functions designed to restrict the operation of the market in some way in order to avoid socially undesirable consequences. Typical examples of this are found in laws dealing with environmental and consumer protection (e.g. laws establishing maximum residue limits for pesticides in foods).

• establish a structure for market interactions but rely on the market to determine preferences (e.g. allowing ownership of stored grain to be transferred by transferring warehouse receipts enables a new type of transaction to occur but the price is still determined by the market);
• regulate conduct and so do not rely solely on the market to determine preferences; and those which
• directly specify the result or outcome (e.g. setting official prices for grain).

This classification gives a general indication of the extent to which a legal mechanism substitutes political decision making for the decisions of the market and will often also be an indicator of the likely enforcement costs. Generally, legal rules which serve an enabling function would relate to structure and would have low enforcement and compliance costs. Rules with an economic regulatory function would mainly prescribe conduct but may also seek to prescribe results.