Takeout Menus and the Specter of Red Tape
Republicans and Democrats are engaged in serious discussions about the policy reforms needed to achieve sustained economic growth, job creation and deficit reduction. As these debates unfold, a number of important opportunities exist for Congress to provide regulatory relief to the U.S. economy. Menu labeling represents one example of a regulation that threatens to impose significant costs on consumers and small businesses without delivering meaningful value to the public.
The Food and Drug Administration is completing new regulations for adding calorie labeling on restaurant menus, mandated by the Patient Protection and Affordable Care Act. Although we support providing consumers with increased access to nutritional information, the agency’s proposed regulations are expensive and ineffective. Fixing this could benefit tens of thousands of restaurants, grocery stores and convenience stores that otherwise would be burdened with regulations that will be costly and stymie job creation.
The FDA’s menu-labeling proposal would require, for example, pizza-delivery restaurants to label in-store menu boards with calorie information, even though the vast majority of orders are placed by phone or over the Internet. This would force small businesses to spend thousands of dollars for on-premise menu boards that roughly 90 percent of customers would never use in making an ordering decision.
Moreover, customizable offerings -- salads and sandwiches, for instance -- can be configured in innumerable variations, complicating the task of labeling menu boards in stores. To address this, the FDA has proposed the use of calorie ranges setting lower and upper bounds for all possible variations of a particular order. The problem: The ranges can be so wide -- conceivably as much as 2,000 calories in the case of a pizza -- that they are useless in providing consumers with helpful information.
Smart alternatives exist, but aren’t permitted by the FDA’s proposed regulations. Websites and smartphone apps, which customers can access anytime and anywhere, wouldn’t meet the FDA’s planned standards. Rather than promoting innovation, the agency will require restaurants to maintain calorie labeling of in-store menu boards, even if the menu boards are rarely consulted by most customers, and in-store nutrition brochures are available. Given the rapid growth in Internet access and smartphones, the FDA should develop guidelines to permit online compliance.
The FDA’s approach also represents regulatory overreach. As part of its rule-making process, the agency has proposed that grocery and convenience stores be subject to menu labeling, even though those businesses aren’t mentioned in the underlying law approved by Congress. Furthermore, they already label more than 95 percent of the food items they sell. These businesses, which operate on narrow margins in a highly competitive industry, will have two choices: either spend on keeping in-store signs up to date or limit the variety of foods they offer, replacing fresh-cut fruit or salads with prepackaged items that can be easily labeled. Despite efforts to find workable alternatives, the FDA seems intent on entangling this sector of the economy in a bureaucratic solution in search of a real-world problem.
Carrying out the FDA’s regulations will entail considerable costs. The Food Marketing Institute, whose members operate 37,000 supermarkets, estimates the first-year cost of compliance at more than $1 billion. For each restaurant, the maintenance of in-store menu boards could cost thousands of dollars a year. In many cases, these burdens will be shouldered by small-business owners who operate a handful of locations. The Obama administration’s Office of Management and Budget estimates the menu-labeling regulation to be the third-most-onerous regulation proposed in 2010, requiring more than 14.5 million hours of compliance.
To ensure that the labeling regulations don’t impose an undue burden on business, members of Congress from both parties have introduced the Common Sense Nutrition Disclosure Act of 2013. This legislation would permit innovation and flexibility and limit labeling mainly to restaurants, exempting supermarkets and convenience stores that mostly packaged or unprepared food. Among a number of important provisions, establishments that primarily serve customers through remote ordering would be able to comply by posting calorie information online. This would ensure that consumers get the necessary nutritional information at lower costs to businesses.
Aside from proving that bipartisanship isn’t dead, the legislation would limit unnecessary bureaucratic intervention in the private sector. Through such cooperation, Congress can advance crucial regulatory relief as the economy continues to struggle.
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