Certification and its discontents

Jeanne Fromer asks, in the Stanford Law Review:

What do a trendy kosher restaurant in SoHo, an independent movie about a serial killer, and a Swiss watchmaker have in common? Each has been excluded by a certifier from employing its legally protected certification mark in ways that seem to run counter to the certification mark’s purposes of consumer protection and promotion of competition. Each of these businesses has either been disqualified by a certifier from getting a certification mark or been manipulated by a certifier into securing a certification mark: a kosher food certification withheld from the restaurant until it changed its name; an R movie rating withheld from the independent movie, whose producer claimed the rating was being given to far gorier—yet non-independent—movies; and a withheld geographical certification of SWISS MADE for the watchmaker located in Switzerland and much of whose watches’ value—but not all— originates in Switzerland. The inability of each of these businesses to be certified as is—without any clear certification standard or procedural regularity—can have adverse, and sometimes catastrophic, consequences for the businesses, their consumers, and competition writ large. This is no fringe issue. Not only are major certifiers, like those here, making many millions of dollars annually in certification fees, but revenues for the goods and services they certify can turn, often significantly, on these certifications.

This is the article I wanted to write when I was in law school but, for understandable reasons, was warned away from.  Now that Professor Fromer has written it, and I’ve grown into the gruff old lawyer that I am today, I’m glad she did it and not me, especially because of the wealth of fairly recent related scholarship from which she draws.  But I also appreciate now that I would have really blown it if I had tackled this topic as a law student, because there’s a lot of real-world perspective and learning behind consideration of these issues besides the academic stuff.

Fromer does not blow it.  But I think she has made serious mistakes in her inclusion of kosher supervision in her analysis, as I briefly address here.
Rabbinical dais, wedding, Brooklyn
My focus here is on Fromer’s first example, alluded to in the introductory paragraph above and explained at length in the article — a now-defunct “hip” kosher restaurant in Manhattan’s hip SoHo neighborhood. Originally called Jezebel, its owners chafed at the insistence of the Orthodox Union, the leading supervisor of kosher food in America, that it change its name and make other changes to  its atmosphere to obtain the valuable “OU” certification.  As Fromer explains (footnotes omitted here):

To get the OU’s valuable certification, the restaurant owners conceded to the demand and changed the restaurant’s name to JSoho. Less than a year later, the restaurant shut down. An expert on kosher restaurants opined that “JSoho got off to a rough start with the name and  supervision change and the bad press that came with it.” Of course, given the high rate of new-restaurant closings, this failure is perhaps unsurprising, especially because the restaurant had also switched chefs and received mixed reviews. Nonetheless, as trademark scholars or marketing experts can attest, changing the name of a business that had been attracting attention and building a reputation can be harmful.

This story raises questions about what exactly the OU mark certifies.

This is a fair question, but to be completely fair Fromer’s hedge of hedges suggests that the search for an explanation as to the outcome here (the restaurant’s closing) would involve a degree of speculation far beyond what any court would tolerate as amenable to proof of the effect of any of them.  “Trademark scholars” will, I venture, agree with Fromer’s conclusion that “changing the name of a business that had been attracting attention and building a reputation can be harmful,” but they would also agree that changing the name of a business can be helpful, too, as can changing to a more desirable certification mark.

I agree, however, that regardless of why the restaurant closed, “This story raises questions about what exactly the OU mark certifies.”  That’s about where our agreement ends, however.  Fromer continues:

A perusal of the Orthodox Union’s public online materials does not offer up a detailed guide of its standards for kosher certification. All signs nonetheless point in favor of a perception cultivated by the Orthodox Union that its kosher certification concerns only food and no other factors.

The problem with this formulation is that there is no reason to believe this “perception” is shared by even a significant minority of those who actually rely on the Orthodox Union’s certification.  Fromer acknowledges, in a substantial footnote, a number of cases where the OU and other agencies have withdrawn certification from institutions or products on a “moral” basis, and it is reasonable to assume that it does so to maximize the value of its certification by meeting the expectations of those who rely on it, virtually none of whom have any interest in what the OU website says about it.  Wrestling with this question, however, Fromer writes:

The conditioned certification of Jezebel raises questions about the propriety of the Orthodox Union’s actions. Was it ensuring that the goods and services it certifies are kosher in multiple rabbinic senses of the word, extending well beyond food to non-food-related behavior—a certification decision possibly intended to fall within the scope of its registered certification mark? Or was it seeking to exclude from its certification businesses of which it did not approve for other (likely religiously motivated) reasons falling outside the ambit of its kosher certification, which covers only food-related business aspects? If the latter, the Orthodox Union is likely using the power of its certification mark in troublesome ways that exceed the scope of its certification and might hurt both consumers and fair competition.

While giving the OU the benefit of the doubt as to motivation, Fromer’s concluding sentence is more loaded than a kosher deli counter. What is “troublesome” — stuff we don’t like?  What is “the scope of its certification” — stuff on their website which, as I mentioned above, is mostly neither here nor there?  And how do we measure the posited harm to consumers and competition?

Fromer is a thorough scholar and endeavors to address all these questions after setting out the dilemmas by way of two other examples of certification-mark adventures alluded to in the introductory paragraph above. She notes quite correctly that the anticompetitive aspects of “collective marks” have been recognized and to some extent restricted by courts:

[B]usinesses that comprise the collective organization controlling a collective mark will, [there is concern,] at the expense of competition, divide business among themselves using the mark, restrict or exclude new entrants as a way to entrench themselves, or take advantage of economies of scale—such as joint advertising—to gain an unfair advantage over competitors.

Every stage
This, of course, is exactly the case with respect to the SUPERHERO trademark, which bills itself as a “joint trademark,” not collective; and I have asked for years how goodwill can be so dispersed.  But we all agree on the problems. “In the face of these appreciated problems with collective marks,” Fromer writes, “scholars have advocated instead the use of certification marks—in which the mark owner cannot itself do business in the certified goods or services—as a solution to anticompetitive worries.”  She then goes on to cite scholarship that, not surprisingly from a microeconomic perspective, considers the dangers of certifying agencies being either a front for collusive business interests; eventually being “captured” by some or all of those interests (my word in quotes); or acting in its own commercial (‘non-profit” or otherwise) interests which, it is posited, may run counter to anticompetitive goals.  Fromer continues:

[A] certifier’s incentives will typically lead it to establish itself as a reliable certifier of a standard about which society cares. In doing so, it is rational to develop preferences for certain businesses as certification clients over others. . . . [T]o the extent that a certification standard is not fully fixed and allows for interpretation, certifiers might shape the standard to benefit their preferred businesses. For another, certifiers with certain kinds of market power might be able to redefine even clear standards to exclude disfavored businesses from certification.

In pursuing this question, Fromer acknowledges, and even relies on, the axiom that “communication of an intellectual property entitlement is never fully precise. The less precise the right’s delineation is, the more room a rightsholder has to equivocate on whether situations or goods that arise after the right’s delineation fall within the right’s scope” (a topic that is addressed in about a third to a half of this blog’s posts and probably summed up most succinctly in my thinking here.)  In particular, she notes,

Registrants of certification marks must provide the PTO with information about the certifying standard, but the degree of detail is not mandated. Standards tend to be articulated at the most general or abstract level, leaving room for their manipulation down the line. . . .

[A] certifier might reasonably want to ensure that its standards are kept flexible so that it can respond to requests to certify in light of the complete factual context based on its overarching certifying goals. This allows the certifier to maintain an intact reputation with its consumer and business base.

New Utrecht Avenue
The down-side to such vagueness is obvious: It gives agencies a free pass for manipulation for purposes not contemplated in the official mission of the certification.  Why would the market not correct for this effect by rewarding more reliable certifiers and punishing those whose manipulation undermines their reliability?  She posits a few  reasons:

  1. Opacity in specialized areas of supervision may make it hard to notice what we might call (again my term) “mission creep”
  2. At the individual level, value-added benefit to certification by a dominant agency may make it too costly for a certified provider to change certifications
  3. At the market level, both barriers to entry and certifier influence over a market distort the market’s ability to react to mission creep

I generally agree with this analysis, but argue here that Fromer’s application of factor (1) above to the kosher supervision field, which which I have some familiarity (I do not represent the OU) and regarding which I have few illusions, is flawed.

Much of the problem with Fromer’s analysis as applied to kosher supervision comes down to mistaken or unjustifiably oversimplified premises concerning what it signals to the relevant consumer.

As discussed above with regard to the goals of certification marks, if consumers have a wrong understanding of what a certification standard signifies, they will not benefit from the certification mark and might even be led astray in their purchases. The law seems to presume without more that consumers know the standard that a certification that matters to them represents. However, as the examples in the previous Part show, that is often far from the case. For example, consumers concerned about kosher certifications might reasonably think that those certifications are based on food source and production but not other issues about morality, like restaurant name choice. One reason for this consumer perception might be that the Orthodox Union seems to hold itself out as caring only about food ingredients and production for its OU kosher certification. When certifiers then deploy the standard in ways inconsistent with consumer perceptions, which is possible due to the standard’s flexibility, this mismatch becomes worrisome.

She adds in a footnote,

The Orthodox Union might be able to justify a different approach to restaurant certification than to food product certification on the ground that the experience at a restaurant includes its ambient features, whereas that is less true for food products standing alone. But without anything other than very general and high-level descriptions of its certification standard, the public cannot make
this assessment.

Orthodox wedding, Boro Park
Here Fromer seriously misapprehends what “the public” — here meaning the kosher consumer — understands about kosher certification. Her reliance on the OU website to explain what OU certification means to affected consumers is not justifiable here; that “document” is merely a marketing publication.  Without even digging into either the actual policy or operative publications promulgated by the OU concerning their standards or empirical research into what consumers expect from kosher regulation, it is worth examining what the OU trademark registration itself, which Fromer quotes in full, says:

The registration for the OU certification mark for kosher goods and services indicates that its certifying standard is “that the production of said goods and that the rendering of said services has been supervised by the rabbinical supervisors of the applicant, under the direction of . . . Rabbinica[l] Council of America, Inc.”

“Said goods and services.”  Fromer’s article addresses the goods — kosher food — and seems to subsume “services” in the concept of purveying those goods.  But in fact the application is quite a bit more specific about the services in question, describing them as “hotel, camp, restaurant and catering services; food services in hospitals and other institutions and for travelers on airlines.” If the kosher certification only speaks to quality control with respect to insuring that the food eaten is kosher, why is it necessary to refer, as the registration does, to not only “the production of said goods” but also “the rendering of said services” as being “supervised” rabbinically?

The answer, of course, is that the OU is saying more about its “supervision” than, “You won’t be transgressing religious law by eating food with an OU on it.”  What exactly it is saying may appear vague to a law professor, but is probably relatively clear to the vast majority of those who depend on the OU’s certification in terms of not only they put in their mouths but where they consumer food and the environment in which it is purveyed.

Indeed, Fromer’s recitation of the OU website’s formulation arguably proves far too much, because, as she acknowledges, vagueness and generality will always be baked into certification descriptions. The OU website itself alludes to the exceedingly complex nature of kosher supervision and certification, including separate web pages that include links with the following titles:

It is true that most of these focus on food preparation, but it is not true that consumers would be justified in coming to any particular conclusion about anything from reading through them.  Another link, entitled “The Kosher Primer,” at once focuses exclusively on food but includes the following statements:

The Hebrew word “kosher” means fit or proper as it relates to Jewish dietary law. Kosher foods are permitted to be eaten, and can be used as ingredients in the production of additional food items.

The basic laws are of Biblical origin (Leviticus 11 and Deuteronomy 17). For thousands of years, Rabbinic scholars have interpreted these laws and applied them to contemporary situations. In addition, Rabbinic bodies enacted protective legislation to safeguard the integrity of kosher laws.

The laws of kosher are complex and extensive. The intention of this guide is to acquaint the reader with some of the fundamentals of kashrut and provide insight into its practical application. Given the complex nature of the laws of kosher, one should consult an Orthodox Rabbi whenever an issue arises.

Though an ancillary hygienic benefit has been attributed to the observance of kashrut, the ultimate purpose and rationale is to conform to the Divine Will, as expressed in the Torah.

The Primer goes on to extensively detail the laws relating to kosher food preparation.  But after reading it, does the consumer have any idea how to determine what is kosher?  If the response is, “Well, I know it’s about food,” is the consumer aware of these facts about “kosher food,” which are set out in the Primer and which I elucidate briefly in brackets?

  • “Only a trained kosher slaughterer (shochet), whose piety and expertise have been attested to by rabbinic authorities, is qualified to slaughter an animal for kosher consumption.” (“Rabbinical authorities” means whoever the OU, as certifier, says it means.  “Piety” means that his — practically speaking, only men qualify — religious bona fides in terms of personal conduct and adherence to fundamental orthodox Jewish practice are presumptively established to the OU’s satisfaction)
  • To be employed as a kosher butcher, one “must be a person of integrity” (Essentially the same standard)
  • “Jewish law requires that a portion of batter or finished baked product be set aside for what is known as “challah”’. . . .This ritual is obligatory only when the owner of the dough at the time of its preparation is Jewish.” (Assessing who owns what and who is Jewish, of course, is within the purview of the OU as certifier)

These are just examples, and in fact far more is only alluded to vaguely on the OU’s site because it is very complex or involves sensitive issues about the involvement of non-Jews in kosher food preparation.  My point, however, is that it is hard to maintain that a consumer perusing the OU website would be entitled to simply conclude that “this is about food standards, not religious stuff” and then be surprised when religious stuff does not stay solely within the bounds of the kitchen.

Fromer acknowledges that government supervision of supervision is likely impractical, if not inimical to the idealized concept of certification marks, and, in the case of kosher supervision, constitutionally impossible.  She recommends, instead, what she describes as enhanced disclosure requirements, to wit:

These procedural possibilities include certifier disclosure of its detailed certification test; an opportunity for interested parties to have notice and comment on certification standards being set or revised; certifier disclosure of certification decisions and reasoning; procedural protections for businesses in certification decisionmaking, such as robust appeal processes for certification denials; and random audits by the government of certification decisions.

I am hard pressed to understand how Fromer’s conception of “procedural oversight” differs meaningfully from what she describes as “substantive regulation,” considering that certification is essentially about procedures.  The idea, of course, that the public or a regulator should have anything whatsoever to say to the Orthodox Union or any other kosher certifier about who qualifies as an “interested party” to be entitled to “notice and comment” on rabbinical supervision standards — whether their scope or otherwise — is ludicrous.  And Fromer’s exploration of the extent of bureaucracy and regulation implicated in such an endeavor is simply fantastic and, given not only the political state of the world but what we have all learned about regulation in general and the regulation of matters beyond the traditional purview of trademark examination, incomprehensible.  Certainly, as applied to kosher supervision, it would be drop-dead unconstitutional on its face.

Having said all this, I appreciate not only Fromer’s careful analysis of an important issue but also her suggestion to at least have certification marks subject to more active antitrust scrutiny than currently exists, which is approximately none:

One of the most important actions to undertake in this regard is to make these enforcement agencies aware that there are substantial antitrust concerns with regard to deployment of certification marks. Courts and scholars frequently underscore that the anticompetitive behavior that can be undertaken by those who hold patent and copyright rights is less of a possibility for those who hold trademark rights. In principal, they indicate that market power is unlikely to emerge from trademark rights per se, as opposed to the goods or services the rights signify. There are very few cases connecting antitrust violations to trademark protection, underscoring the need for awareness with regard to anticompetitive uses of certification marks. Moreover, even though antitrust enforcers, courts, and thinkers realize there can be concerns with standard-setting organizations for many of the reasons pointed out herein, they have not yet focused on how the principally unregulated certification mark(et) can exacerbate anticompetitive concerns.

That, for me, is good enough reason for this very useful and thoughtful article to have been written, even if, as I suspect, it was the kosher restaurant that closed — and who really knows why — that may have spurred it.  The misuse of trademark law is very unkosher business, and Fromer’s discussion and analysis of the potential for certification marks to do harm deserves attention.




Ron Coleman

I write this blog.

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