Industry Versus Government Control of Quality Standards in the South Australian Dried Fruit Industry

The dried fruits industry in South Australia is regulated under the Dried Fruits Act 1993 (SA). The principal effect of regulation is to impose a mandatory standards scheme on the processing and packaging of dried fruit produced in South Australia for sale in the Australian domestic market. The Act is currently under review in accordance with the requirements and principles of National Competition Policy. The economic analysis undertaken as part of the review addresses the question of who should be making decisions in respect of quality standards for dried fruit: individual industry participants, industry groups or the government. Economic theory of market failure, transactions costs and collective action suggests that the answer to such a question is an empirical one, dependent upon characteristics of the particular industry being examined. For the South Australian dried fruits industry, a small number of industry participants, existing precedents for a standards scheme and institutional support at a government level act to reduce the prospects of market failure in respect of product quality if decisions on product quality are left to either individual producers or industry collective associations. The characteristics of the dried fruits industry are such that mandatory quality standards imposed by legislation do not appear to be a necessary requirement for achieving desirable product-quality outcomes for the industry.