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Menu Labeling Requirements Would Raise Food Costs

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Menu Labeling Requirements Would Raise Food Costs

September 12, 2017

Tucked among the many regulations and provisions of the Affordable Care Act is a provision requiring chains with 20 or more locations that serve “restaurant-type food” to post calorie and other nutritional information. The provision initially had a December 2015 compliance date, but the Food and Drug Administration (FDA) has delayed it multiple times, most recently pushing it back from May 2017 to May 2018.

In a recent statement FDA Commissioner Scott Gottlieb indicated that there would be no further delays, and that the agency would “provide additional, practical guidance on the menu labeling requirements by the end of this year... [which] should allow covered establishments to implement the requirements by next year’s compliance date.”

The rationale for the menu labeling requirement is that making clear nutritional information available to consumers will allow them to choose lower-calorie meals and affect menu offerings. Ultimately proponents suggest that, armed with more complete information, people would reduce the amount of calories they consume, with positive effects on obesity and obesity-related health issues.

Unfortunately for proponents of the requirement, menu labeling does not seem to reduce the amount of calories people consume. A literature review in the Journal of Community Health by Brian Ebdel and other researchers at the New York University School of Medicine looked at 31 studies published between 2007 and 2013. They found that “overall the best designed studies (real world studies, with a comparison group) show that calorie labels do not have the desired effect in reducing total calories ordered at the population level.”

For some subgroups or select populations, the results in some cases were more impressive, but overall menu labeling has not proven to be effective in reducing caloric intake. Since the Nutrition Facts label was mandated in 1990, the American population has got fatter, rather than thinner.

While the potential benefits of the labeling requirement are uncertain, the provision would come with substantial costs that would be passed on to consumers through higher food prices. The FDA estimates that covered establishments will incur $562 million in costs through 2020.Much of the coverage focuses on restaurants, but other establishments such as bakeries, convenience stores, and coffee shops would also be subject to the regulation.

In some cases, the rules would be almost impossible to comply with, as would be the case for some pizza places. Due to different crusts, toppings, and sauces, Domino’s offers more than 34 million possible combinations for a single pizza. Requiring the company to include the nutritional information on menu boards in their physical store fronts makes little sense.

The requirements also fail to grapple with the way the experience of ordering food away from home has changed since the Affordable Care Act was passed. More people are ordering online or through other digital channels, and do not even enter the physical store or see the menu boards at all.

Taking Domino’s once more as an illustrative example, the company has focused on increasing the number of digital ordering platforms in recent years. The most recent annual report touted the launch of five new options (Apple Watch, Facebook Messenger, Zero-Click ordering via mobile, "Alexa" on Amazon Echo and the Google Home platform). By the end of 2016, sales through digital ordering channels accounted for 60 percent of U.S. sales, compared to 20 percent in 2009.

The share of sales through digital channels has increased at other places as well. Digital orders now account for 26 percent of total company sales of Panera Bread Co. Starbucks customers can order drinks online and stop in the store to pick them up, skipping the notoriously long lines.

This digital shift is also due to proliferation of technologies such as the smartphone, and increased access to the Internet. For most families, ordering dinner for the family is a few swipes away. 

As more people make use of convenient digital ordering options , requirements that physical stores display nutrition information make even less sense. It is possible that the FDA will now acknowledge some of the changes in the surrounding landscape in developing their forthcoming guidance, but this has not been the case in the past.

To some extent, the agency’s hands are tied, as the Affordable Care Act requires it to promulgate a rule, although it has used its discretion to delay the implementation multiple times before. Congress acting to dispense with this onerous, ineffective requirement would be the best way forward.

A more incremental step forward would allow affected businesses to post their calories online instead of in their physical stores, direct the Secretary of the FDA to establish reasonable rules for items with a substantial number of combinations such as pizza or ice cream, and limit the liability stores would be exposed to for noncompliance. 

Implementation of the menu labeling rules next year would raise the price of restaurant food, disproportionately affecting lower-income Americans. These policies have not proven to have a significant effect on the amount of calories people consume. Congress should explore amending or repealing this provision.  

Charles Hughes is a policy analyst at the Manhattan Institute. Follow him on twitter @CharlesHHughes

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