RPC Reg Spotlight June 26, 2012

 

Regulatory Action in the Spotlight:

 

Food and Drug Administration Regulation Regarding Nutrition Labeling of Standard Menu Items in Restaurants and Similar Retail Food Establishments

 

Adverse Effects:

 

  • Places new financial burden on restaurants
  • Individual franchise owners will be responsible for most of the costs
  • Cost will be passed along to consumers

 

Response of the Obama Administration:

 

Section 4205 of the Patient Protection and Affordable Care Act, entitled “Nutrition labeling of standard menu items at chain restaurants”, mandated that

 

Food that is a standard menu item that is offered for sale in a restaurant or similar retail food establishment that is part of a chain with 20 or more locations doing business under the same name… shall disclose in a clear and conspicuous manner… nutrient content disclosure statement adjacent to the name of the standard menu item, so as to be clearly associated with the standard menu item.

 

The nutrient content information that must be available is varied and include: the number of calories in each standard menu item, a statement on the menu placing the calorie information in context of a recommended total daily caloric intake, “written nutrition information” to be made available to customers upon request, a “prominent, clear, and conspicuous” declaration on the menu concerning the availability of the written nutrition information, and the number of calories (per item, per serving) adjacent to self-service food and food on display. 

 

Section 4205 of PPACA requires the Secretary of Health and Human Services to delegate to the FDA the establishment of regulatory requirements for nutrition labeling of standard menu items for covered restaurants and similar retail food establishments.   The FDA is scheduled to finalize its rule (RIN: 0910-AG57) by November 2012. 

 

 

Impact on the United States:

 

According to the American Action Forum, the regulation stands to cost restaurants and small businesses an estimated $822 million to implement, and would result in 1.4 million annual paperwork burden hours.  This rule will be difficult and cumbersome to put into practice.  For instance, according to the American Pizza Community, there are 34 million ways you can order a pizza, when taking in consideration the size, crust, sauce, cheese and topping options. 

 

In a January 4 letter from the Office of Advocacy, an independent agency of the Small Business Administration established to represent the views of small businesses before Federal agencies and Congress, the views of small businesses expressed their concern regarding this new regulation, and their belief that the FDA has significantly underestimated the impact the rule will have on small businesses.  For instance, in the letter, the National Restaurant Association (RA):

 

Believes that most medium to large chains expect to spend several million dollars to conform their systems (including nutritional analysis, menu/menu board design, replacement, and training costs) to the FDA’s labeling regulations. As many franchised restaurant models the costs associated with menu, menu board and drive thru replacement are the responsibility of the franchisee, a significant proportion of these costs will fall on small business owners. As a result, RA suggests that the FDA may have underestimated that cost of labeling changes necessary to comply with the regulation.

 

 

In Closing:

 

This is yet another example of the new burdens the Affordable Care Act has placed on American citizens and businesses.  In many circumstances, individual franchise owners will be encumbered with the cost of this rule.  The hundreds of millions of dollars this regulation will impose on restaurants and small businesses will undoubtedly be passed along to consumers. 

 

 

Relevant Legislation:

 

The House of Representatives, on January 19, 2011, passed H.R. 2, “Repealing the Job-Killing Health Care Law Act”, by a bipartisan vote of 245-189.  This bill would have repealed the Patient Protection and Affordable Care Act. Rep. Randy Hultgren, in remarks delivered on the House floor, stated, “The act has also created paralyzing uncertainty and new layers of bureaucracy, putting new demands on businesses in the form of mandates and new taxes, forcing them to comply with yet-to-be- written regulations that prevent them from hiring and stalls the economic recovery that we need so dearly.”