Speaking last week at a subcommittee hearing of the U.S. House of Representatives Committee on Small Business, Diane Austin of Perry's Ice Cream Company outlined the devastating effect that product recalls have on small businesses. Austin called on Congress to provide grants or loan guarantees to companies suffering economic losses as a result of a product recall where they are not at fault, like the recent recall by Peanut Corporation of America.

Austin, who is Perry's vice president of marketing, testified on behalf of her company and IDFA during the Subcommittee on Regulations and Healthcare hearing to determine the impact of food recalls on small businesses. More than half of IDFA's member companies fall into this size category, and IDFA staff worked with Austin to develop her testimony.

At the hearing, Austin explained the rigorous food safety and quality control protocols that are standard for dairy processors, such as a plant-wide Hazard Analysis and Critical Control Point plan and strict adherence to Good Manufacturing Practices that are based on requirements set by the Food and Drug Administration.

"In spite of the significant investment we have made to meet or exceed industry best practices in quality and food safety, we have incurred a considerable financial loss through no fault of our own," she told committee members. "Small businesses are dependent on cash flow to operate. Those affected by the PCA recall must make difficult and immediate choices about which bills will be paid, whether people can be hired and if new products will be produced."

Austin estimates that financial losses for her company alone will "likely be in the hundreds of thousands of dollars." While Perry's expects to weather the current credit crisis, Austin said many small businesses do not have the diversity of product lines or necessary management skill to get past the losses and cash-flow problems that the recall has created. At least 20 member of IDFA, both large and small businesses, have been affected by the PCA recall.

In her closing, Austin called attention to the growing list of food safety legislation currently under consideration on Capitol Hill. She asked committee members to strike a proper balance between corporate responsibility and federal regulation, instead of assuming that more regulations are the answer.

Written Statement to the U.S. House of Representatives Committee on Small Business Subcommittee on Regulations and Healthcare, March 11, 2009

For more information, contact Jerry Slominski, IDFA senior vice president of legislative affairs and economic policy, at jslominski@idfa.org.