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Checkoff Programs - excerpt from Meatonomics

The Brave New World of Government Marketing

In his 1932 novel Brave New World, Aldous Huxley imagined a future in which humans exist solely to support the economy and are conditioned from birth to buy things. Government bureaucrats manipulate the sheep-like citizens with drugs and slogans to make them consume as much as possible. In Huxley’s vision, 26th-century consumers learn that “ending is better than mending” and “the more stitches, the less riches”—that is, buying new things is better than fixing old ones. But for US consumers, this eerie futuristic fantasy—with government using marketing slogans and other undue influence to drive consumption—has arrived a few centuries early. This chapter explores government marketing as a feature of meatonomics and considers its consequences for consumers.

Checkoff Programs: Unseen and Unknown, But Felt Everywhere

In the Brave New World of the 21st century—where big box stores and mega markets dominate the landscape—our government uses innocuous-sounding “checkoff” programs to encourage us to buy more animal foods and other goods. The mechanism’s name persists from a time when the assessments were voluntary and producers willing to opt in participated by simply checking a box. Nowadays, the programs are tax-like and mandatory, even though the benign checkoff moniker remains.

The way they work is simple: Congress slaps a small assessment (less than 1 percent of wholesale price) on certain commodities, and the collected funds are used to pay for research and marketing programs that boost the goods’ sales. So when animal food producers collect $1 per head of cattle, $0.40 per $100 of pork, or $0.15 per 100 pounds of dairy, they pass those funds on to national marketing organizations. The proceeds are allocated among state and regional industry organizations throughout the country. There aren’t many Boston Tea Party–like protests when it comes to making the payments—probably because most consumers don’t know about checkoffs and most producers think their trade groups put the money to good use. These trade groups don’t equivocate much about what they do or why they exist. The Kentucky Cattlemen’s Association, for example, keeps it simple, saying its business purpose is “Promotion of the beef industry.”[i]

Although few Americans have heard of checkoff programs, we’ve all heard or seen the catchy, feel-good slogans they’ve generated:

Beef. It’s What’s for Dinner.

Milk. It Does a Body Good.

Pork. The Other White Meat.

Written, spoken, or sung—and flashed across every medium, including print, radio, TV, and the Internet—these statements have bombarded American consumers for decades. The echo of one particularly snappy jingle that went with a ubiquitous 1990s commercial—“The Incredible, Edible Egg”still rattles in my brain. And while that phrase and many others predate social networking, they persist because their sticky messaging fits in perfectly with today’s meme-saturated, web-dominated world. Like an ink stamp, these messages imprint themselves with authority on our subconscious and become part of our belief system. What’s for dinner? Without even knowing why, many think, Beef.

Across the board, animal food checkoff programs are remarkably effective at making us buy more than we would otherwise. According to the USDA, for each dollar of checkoff funds spent promoting animal foods, “the return on investment can range as high as $18.”[ii] The beef checkoff program raises sales by $5 per checkoff dollar spent.[iii] The pork checkoff program drives $14 in sales per dollar spent.[iv] While it may not boast a memorable motto, the lamb checkoff provides an unusually huge boost, driving additional sales of $38, or seven extra pounds of lamb, for each dollar spent on promotion.[v] But the biggest winner might be the dairy industry, which recently boasted that over a year and half, checkoff efforts contributed to more than 7 billion additional pounds of milk sold.[vi] That’s an extra forty-seven servings of dairy per person in the United States—above and beyond the hundreds of servings we would have consumed anyway during the period. Clearly, milk is up to more than just doing a body good.

All told, these programs provide funding of $557 million yearly for animal food producers to promote their goods.[vii] This massive, government-mandated marketing budget gives the meatonomic system something few other microeconomic systems have: an exceedingly deep marketing war chest, deployed to boost sales of all goods from all producers in the program. A few other commodities, like cotton and soybeans, have checkoff programs of their own. Yet in every other industry, except for those lucky enough to have a checkoff program, individual corporations must fork out their own funds to increase sales rather than rely on government programs to prop up their numbers. With meatonomics, on the other hand, the effect of checkoff programs is that we all buy more of nearly every conceivable animal food than we would otherwise. Like a diner with an insatiable appetite, the animal food industry relishes the higher sales that result. Dairy promoters brag that since their checkoff program started in 1983, annual per capita consumption of milk “has climbed 12 percent to 620 pounds.”[viii]

Some say checkoff programs have been unfairly linked to government and are actually just the tools of good old-fashioned capitalism. They argue these checkoff arrangements involve only private firms who pool advertising monies without government participation, and their mission and methods are no different from those of any private advertiser. However, the US Supreme Court decisively rejected this position in a 2005 case involving the beef checkoff. In Johanns v. Livestock Marketing Association, beef industry participants who disagreed with the message of the latest beef campaign claimed that being forced to fund it violated their right of free speech.[ix] The Supreme Court disagreed, holding the message was actually government speech (a form of speech the government can make others support). The court said:

The message set out in the beef promotions is from beginning to end the message established by the Federal Government. . . . Congress and the Secretary [of the USDA] have set out the overarching message and some of its elements, and they have left the development of the remaining details to an entity whose members are answerable to the Secretary (and in some cases appointed by him as well).

Moreover, the record demonstrates that the Secretary exercises final approval authority over every word used in every promotional campaign. All proposed promotional messages are reviewed by [USDA] Department officials both for substance and for wording, and some proposals are rejected or rewritten by the Department. . . . Nor is the Secretary’s role limited to final approval or rejection: Officials of the Department also attend and participate in the open meetings at which proposals are developed.[x]

This crystal-clear language from the highest court in the land leaves little doubt that the beef checkoff program, and the messages it generates, are the product of the federal government. Simple logic shows that other animal food checkoff programs, which were established by Congress in the same way and are similarly administered by the USDA, are equally the mouthpieces of the federal government. So when one of these organizations speaks—regardless of the product it’s hawking—it may say it’s the National Pork Board, but the background sounds you’re hearing are the imposing bass tones of the US government.

In fact, the government’s continued regulatory involvement is a necessary component for mandatory checkoffs to remain legally and operationally viable. If Congress simply created a checkoff program and then stepped aside to let industry run it, the First Amendment’s free speech protections would likely prevent the industry majority from bullying dissenters into participating in its message.[xi] Under those circumstances, forget the government speech exception: it wouldn’t apply and individual participants could opt out. The result would be a checkoff program that is in fact optional, not mandatory.

Why does that matter? Because such a scenario would likely undercut the force of the messaging. As research on optional checkoffs shows, economic free riders—those group members who opt out of paying for all the snazzy commercials but still enjoy their benefits—significantly lower the effectiveness of such programs.[xii] Ultimately, a lack of government involvement would likely lead to the decline—or maybe the end—of checkoffs.

Excerpt from Meatonomics: The Bizarre Economics of Meat and Dairy - see the VLV! interview here.

David_Simon_copyright_mike-gardner1David Robinson Simon is a lawyer, animal advocate, and proponent of sustainable consumption. He works as general counsel for a healthcare company and serves on the board of the APRL Fund, a non-profit dedicated to protecting animals. David received his B.A. from U.C. Berkeley and his J.D. from the University of Southern California.



References

[i] Kentucky Cattlemen’s Association, “US Federal Income Tax Return,” 2009, accessed April 25, 2012, http://www.guidestar.org.

[ii] David Shipman, “Industry Insight: Checkoff Programs Empower Business,” USDA Blog (2011), accessed December 31, 2011, http://blogs.usda.gov.

[iii] USDA Agricultural Marketing Service, “Benefits of Research & Promotion Boards (Checkoffs)” (2011), accessed October 27, 2012, http://www.ams.usda.gov.

[iv] Ibid.

[v] Ibid.

[vi] Dairy Management, Inc., “Dairy Checkoff Highlights” (2011), accessed January 3, 2012, http://www.dairycheckoff.com.

[vii] Dairy figure includes both “dairy products” and “fluid milk.” Geoffrey S. Becker, “Federal Farm Promotion (‘Check-Off’) Programs,” Congressional Research Service Report for Congress (2008), accessed November 5, 2011, http://www.nationalaglawcenter.org.

[viii] Ibid.

[ix] Johanns v. Livestock Mktg. Ass’n, (2005) 544 U.S. 550.

[x] Ibid., 560–61.

[xi] In 2001, the US Supreme Court refused to compel dissenting mushroom farmers to support the majority message of the mushroom checkoff program. The court held the mushroom checkoff violated the First Amendment because it merely imposed marketing requirements with little other regulation and hence was “not part of a comprehensive statutory agricultural marketing program.” United States v. United Foods, Inc. (2001) 533 U.S. 405.

[xii] Chanjin Chung and Emilio Tostao, “Will the Voluntary Checkoff Program Be the Answer? An Analysis of Optimal Advertising and Free-Rider Problem in the U.S. Beef Industry,” Southern Agricultural Economics Association (2004), accessed May 3, 2012, http://ageconsearch.umn.edu.

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