Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Economics References Committee
24/09/2015
Third-party certification of food

KARLEN, Mr Wayne Scott, Private capacity

[11:41]

CHAIR: Thank you for participating in our inquiry. We have been given a written copy of your opening remarks. I understand that you are keen to read this into the Hansard record. However, as your written opening statement will be tabled with the committee, would it be possible for you in your opening oral statement to give us a slightly more summarised version of it as this will allow us more time for questions?

Mr Karlen : All right. Thank you for the invitation to appear before this committee. I am interested in the food certification process, and specifically the halal certification process, as it relates to the competitive free market processes that we follow in this country. Halal certification of food includes equipment, materials and processes used in the preparation and marketing of food and related supply lines. The primary markets for halal certified foods are domestic and foreign. Unfortunately, Islamic organizations here and overseas have deemed halal to be a certification process that is restricted to those of the Islamic faith.

In my opinion, restricting halal certification to Muslims creates an artificial monopoly restricting competition in certification activities, which has led to cartel behaviours and price fixing. I submit that this practice contravenes our existing legislation.

Restricting the certification and compliance auditing to Muslims also represents a discriminatory employment practice on religious grounds, in some cases. This discrimination has been extended to requiring workers involved in food preparation to be of Islamic faith in some industries. The requirement to utilize halal slaughtermen in halal certified abattoirs, for example, represents both religious and gender employment discrimination. The workers' faith does not appear to be an inherent requirement of the primary duties of this job or of halal certifying and compliance auditing, and therefore does not appear to represent a relevant exemption.

Halal certification requirements are cascading down the food supply lines, involving non-food items such as cleaning products, and have the potential to be extended further. The risk to our competition based free market principles and economic productivity is growing as a result of these monopolistic behaviours.

I support halal certification and its benefit to export markets and the domestic market. The challenge is to ensure halal certification processes conform to our Australian standards of behaviour, while preserving the value of the related export markets. Natural monopolies, as we know, are sometimes regulated in order to ensure fair access and reasonable service rates. One option is to regulate halal certification in Australia to ensure fair pricing. A more effective approach might be to institute internationally agreed halal standards and enforce competition in the certification process. Having government involved in the development of reasonable halal standards and compliance processes, and enabling industry to provide the compliance auditing in a competitive market, would be consistent with other certification processes, our free market philosophy and our drive to improve economic productivity.

Unfortunately, the participation of a critical mass of exporting countries would likely be needed for a standardized and competitive halal certification process to succeed without material disruption to our halal export markets.

In summary, a standardized and competitive halal certification solution respecting free market principles is unlikely to be resolved by Australia on its own without compromising our valuable export markets. Some form of regulation and enforcement of existing competition laws may be required in the near term to at least address the current practice of halal certification price fixing.

CHAIR: To summarise how I see what you have said, you are coming at it from an economic perspective and you concern is cartels and anti-competitive behaviour. Is that correct?

Mr Karlen: Primarily. Halal is something that should be supported. It is good for the economy. It is good for our exports. But at the same time it should work within our normal competitive and free-market processes.

CHAIR: There is one question I have not asked the ACCC, who were here this morning, and it is perhaps something we can put on notice to them. It is the question as to whether they have looked at cartel behaviour or have done any kind of investigation of it. We asked them specifically about false and misleading advertising. I do not believe, Senator Bernardi, that we asked them this morning a question about whether they have had a look at or are prepared to have a look at cartel behaviour. Perhaps the secretariat will put that question on notice to the ACCC to see what work they have done in this space.

It seems that what you are saying—and I am simplifying a more complex position—is that if there is going to be a recommendation from this committee that there needs to be a stronger regulatory approach towards this, for whatever reason, we should be looking at competition and making sure there is a robust competitive market within the certification space.

Mr Karlen: That is correct. It is similar to what Australian governments would do for any other industry practices that have the potential to exercise cartel or monopoly behaviours.

CHAIR: In your written statement you say—and I am not in a position to verify this statement:

The worker's faith does not appear to be an inherent requirement of the primary duties of this job or Halal certifying and compliance auditing …

Whether that is or is not the case is not something I am aware of. I note that the department said that the sheer number of export nations, each of them having different requirements, makes the whole thing more complex. It seems that a part of what you are saying is that you would like to see us work closer to try to drive an international agreement or framework in this space.

Mr Karlen: Similar to what has been done in other areas of food and other certifications, like ISO 14001, for environmental certifications. It is a fairly typical thing that governments can get involved in. I guess I mentioned that the halal slaughtermen have two sides to their work. I am not a butcher so I am not an expert in this—

CHAIR: None of us is an expert on it—

Mr Karlen: But there are certain ways of doing the butchering and you do not have to be a Muslim to be trained in that. Then there is the blessing side of it and obviously that would be a religious requirement. I have been involved in other activities where a blessing is required because of cultural issues, and normally you hire a person of that faith and you pay them a small remuneration to do the blessing, but the person that is doing the skilled work does not have to be of that faith. I am also not a lawyer, but when I read the exemptions it appears, in my opinion, that there is no requirement for a person to be a Muslim to be able to butcher in this fashion.

Senator BERNARDI: Which you could contrast with the evidence that was given on the kosher slaughter ritual, where there is a requirement that it be done by a religious figure that had to be Jewish. I think they flew them out from Israel in order to conduct the butchery. So you are saying there is a difference between the two—or you are not saying that; I am saying it.

Mr Karlen : Yes.

Senator BERNARDI: One is a matter of fact and the other one is a question.

Mr Karlen : I think I have some references to the actual requirements, where they do require that a halal slaughterman be a Muslim. They must be of the Islamic faith. But again—

CHAIR: But that is the same with kosher. The evidence that we were given was that in the kosher situation the slaughterman had to be Jewish.

Mr Karlen : That is right, so there is a parallel there, but there are two skills involved. One is a skill of doing the blessing, which is the faith part of it.

CHAIR: I only have one more question. Mr Karlen, I just want to park part of what you are saying. What you are saying is that the best-case scenario is an international agreement that gives more transparency over what is and is not the requirement for halal. We heard from the department that that is a view that they share, because it is a complex space and from an export perspective we want to get it right. Part of the challenge is that there are so many slightly various requirements by different countries. I think the example they used is that there is a slight variation if I want to export to Qatar from what it is if I want to export to Iran or Iraq. It varies slightly. The incoming agencies in those countries have slightly different requirements—Indonesia and Malaysia. That is part of the challenge.

Mr Karlen : That is right.

CHAIR: Let us say this committee in its inquiry perhaps makes a recommendation that there should be greater international cooperation—regardless of just the desire of the Australian government, because it is somewhat outside our control or the Australian government's control alone. Parking for a minute the idea that the best outcome is an international agreement and an international framework that we are working within, if that is unachievable, how do you believe you could improve the system here currently?

Mr Karlen : From my limited scope, it relates to the free market. It would be the regulation of the certification process and ensuring that everyone can compete in that certification process. I also do not see why that has to be a Muslim organisation to actually do the certification either. Even if it does, they should not all have a regulated price. There are some references that I have attached that refer to media articles saying that some of the Muslim organisations doing the certification have got in trouble with other organisations because they were undercutting their pricing. They were forcing a standardised price. That is cartel behaviour.

CHAIR: So what you are effectively saying is that a more transparent market will drive an outcome. If we have a more transparent market, there will be better outcomes for consumers?

Mr Karlen : Yes—more transparent.

CHAIR: You want a more open and transparent market because you believe that will provide the best outcome for consumers?

Mr Karlen : Yes, that should be the best outcome for consumers, but it is also enforcing competition.

CHAIR: The point of competition is the consumer outcome.

Mr Karlen : That is right.

Senator BERNARDI: You have talked about the cascading effect of halal certification, and you gave an example of cleaning products in your opening statement. You talked about certifying dynamite used for mining coal to make steel that is used to make food-processing equipment et cetera. So it is all this supply chain; it is not beyond expectations. What evidence do you have of that sort of slippery slope, if you will?

Mr Karlen : There is evidence—well, evidence is what I have read in the media, and I have attached to my opening remarks on the cleaning solution—and just what I have heard reported that there are concerns that, as this takes hold, it will be expanded further and further away from the actual product itself. It is not hard to understand if they are already doing it with cleaning products then what makes up those cleaning products? What chemicals go into those cleaning products? And then, okay, what about the plant that makes those chemicals? And it goes back and back. If it is something that has been exposed to a prohibited item, whether it be pork or whatever, what if a chemical that makes this cleaning product was exposed to pork way back at the original plant? That basically means that the cleaning product is not halal. So how far do you go back? That is something that would have to be addressed in the standards as to how far you go back.

Senator BERNARDI: According to one certifier's social media boasts, everything in the history of creation—and I am paraphrasing—will need to be halal certified by his company in order to authorise them all. We will deal with that when he comes to give evidence. The other aspect is if there is a requirement to have Muslim slaughtermen. Do you have any evidence of people being precluded from being employed in an abattoir because they are not Muslim?

Mr Karlen : I tried to find evidence of that and I could not find any—by googling the press, obviously. But there is evidence in some of the attachments where the standard actually says, 'For this product to be deemed halal, it must be processed by a halal slaughterman.' So by definition, if we are going to have a huge export market and if you start a company up and they are export market is primarily into the halal market, the slaughtermen are going to have to be of the Islamic faith.

Senator BERNARDI: It is fair to say we found it difficult to have any abattoir owners or operators come and give evidence. Perhaps that is why. Chair, I think we have covered everything.

CHAIR: That was a nice, clean submission and contribution, Mr Karlen. We thank you for the contribution you have made to this inquiry. It has been very worthwhile and you have raised an interesting perspective that we certainly want to capture on the record.

Mr Karlen : Thank you.

CHAIR: We are running ahead of time, which is very rare for this committee and this inquiry.