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S.Anders, D. M. S. Monteiro, E. Rouviere (2007) Objectiveness in the Market for Third-Party Certification: Does market structure matter?
Paper,
105th EAAE Seminar ‘International Marketing and International Trade of Quality Food Products’, Bologna, Italy, March 8–10, 2007
Document:
Abstract
The globalization of trade in high quality foods is stimulating the development of international food standards and certification systems. Third-party certification as evolved as a means of ensuring that product information and signals on quality and safety attributes are sound and reliable. Certification can only provide credible market signals if it operates objectively and independently.
This paper investigates the potential trade-off between certifiers’ objectivity and the level of competition in the rapidly expanding market for thirdparty certification of quality foods. Based on a theoretical supply chain framework a nested panel analysis is applied to a set of accredited certifiers for the Eurep GAP? fruits and vegetables standard. Our results indicate that increasing economies of scale and market
share in certification do matter.
The paper is organized as follows: Section two provides an overview of the economics of third-party certification with an emphasis on recent work and its implications on food markets. Section three proposes an analytical framework relating the structure of the TPC market to the objectivity of the certification process. The fourth section presents an
empirical case study using panel data on the Euro-Retailer Produce Working Group (EUREP) Good agricultural practices (GAP) quality assurance system in the international fruits and vegetables market. Finally conclusions are drawn.
Keywords: Third-party certification, objectiveness, market structure, nested panel analysis, Eurep GAP?
Relevance to our study:
This paper is relevant because it analyses objectiveness and credibility of the third party certifiers that have recently increased due to the proliferation of quality assurance standards required specially by retailers. The main goal is to analyse how the structure of the international market for third-party certification of high quality foods influences the objectiveness of third-party certifiers and thus the credibility of the certification process.
Due to the increasing of new quality assurance and labelling systems relying on control and certification schemes provided by independent and impartial agents, in recent years several new control and certification bodies compete to offer its services to firms seeking certification from good farming practices to processor specifications in various standards. Thus, new markets emerged where firms compete to provide food quality and safety certification services for different private or public food standards.
Third-party certifiers (TPC) have evolved as independent and credible institutions designed to ensure quality and safety standards across food markets. Product and/or process certification may reduce uncertainties and lower overall transaction costs that arise from information asymmetries between producers and retailers in vertical supply chains.
As the demand for private third-party certification of quality assurance schemes increases, so does the level of competition among accredited certifiers as additional TPCs enter the market. Busch et al. (2005) and Tanner (2000) point out that the credibility of third-party certification critically depends on the objectiveness and independence of the certifier. As the competitive structure in the TPC market is shifting there may be a trade-off between the objectiveness of third-party certifiers and market structure as shown by Lizzeri (1999). If this is the case, the role of third-party certifiers as an efficient and signalling institution has to be questioned.
The main argument is that to properly fulfil their role TPCs must be independent and objective. This paper maintains that the objectiveness of private third-party certifiers may be affected by the competitive structure of the certification market. Namely, with an increasing number of certifiers in a market, objectiveness may be hindered.
Relevancy on a scale from 1 to 5 = 5
Review status: Finished
Review started on 2009–01–21
Reviewed by Samanta Rosi Bellière?
Comments:
