Whole Foods fined $800,000 for cheating customers

A story broke recently about a fine levied against Whole Foods for cheating customers.  A year long government investigation found that there were instances where Whole Foods did not properly account for the container for items purchased from the salad bar, priced some items by unit instead of by weight as dictated by the overlords of California, and some items weighed less than stated on the packaging.

Proponents of government regulation, such as these folks, use this as an example of the necessity of government regulation and mock the silly libertarian idea that the market can regulate itself.
Little information is available from the government investigation as to the extent of fraud conducted by Whole Foods. A representative from Whole Foods stated that company prices are accurate 98% of the time which acknowledges that errors were made when pricing items.

So is government regulation necessary for cases like these? How else would this dastardly practice be exposed?

Certification of accurate scales, weights, and measures is something easily done by a third party company. Couldn't the third party company be bribed by the companies that hire them? Yes, but there would be multiple companies, each measured in the marketplace by their customer’s recognition of the firm’s integrity and accuracy. Besides, are government inspection agencies immune to bribery? A quick Google search unearthed the following two examples. There are many others and these are only the ones that were caught. In a free market customers would quickly discover which inspection company’s approval process was the most stringent.

Also, it is interesting to note the recipient of the $800,000 in fines when the government regulates. If fraud is discovered in the market, attempts are usually made at reimbursing the victims of the fraud. Did the customers of Whole Foods receive some of the $800,000? Nope, not a dime. Instead various government agencies received the money. Specifically: $630,000 went to government attorneys, $100,000 to a government weights and measures fund, and $68,394 to cover the cost of the investigation. The government attorneys and agencies investigate a business, find some wrongdoing, and then receive money from those being investigated. This is a very perverse structure: those investigating reap rewards, instead of the victims, when they discover fraud. A third party company would be paid to perform periodic audits and report the results. If issues were found the third party company would not receive extra money since that was the purpose of the audit. Instead, the company would need to attempt reimburse its customers, instead of the auditors, in order to keep its existing customer base.

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