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Small change will cost billions | Brunell
By Don C. Brunell
President, Association of Washington Business
We're seeing a lot of news stories these days about the projected costs of the new federal health care law known as Obamacare. Employers of all sizes, from small companies to warehouse stores and restaurant chains, are warning that compliance costs will force layoffs and price hikes.
Even some of the lesser-known provisions will cost employers billions of dollars.
For example, tucked away in the 2,000-plus pages of the legislation is a requirement that restaurants and "similar" food retailers display calorie counts on their menus. Sounds reasonable in this health-conscious age, but according to the Office of Management and Budget, the calorie display requirement was the third most burdensome statutory requirement passed in 2010. OMB estimates it will take more than 14.5 million work hours every year to comply and $69.8 million for record-keeping alone.
A big part of the problem is how regulators interpreted the new requirement.
The Food and Drug Administration decided that, in addition to restaurants, the requirement would apply to coffee shops, delicatessens, take-out food, grocery stores, convenience stores, movie theaters, airplanes, cafeterias, bakeries and vending machines.
Even the White House was apparently caught off guard by the sweeping scope of the FDA regulation.
The New York Times reports that Nancy-Ann Deparle, President Obama's chief health adviser, personally complained to the FDA Commissioner, after which the agency relented — slightly. The federal government will no longer require published calorie counts for movie snacks or airline food.
But the agency's concession is of little comfort to all the other businesses caught in the crosshairs of this new regulation.
Take grocery stores, for example, an industry with average profit margins of just 1 to 2 percent. The Food Marketing Institute estimates that initial compliance costs for grocery stores will top $1 billion. Supermarket chains will be required to post calorie information on thousands of items, from chicken cooked in the store to potato salad sold in the deli, says Erik Lieberman, FMI's regulatory counsel.
"If we sell an individual blueberry muffin, that has to be labeled," he said. "If we sell a pack of six, that's got to have a separate label."
But pizza chains could face the biggest hurdles if companies like Domino's Pizza are required to display calorie counts for each of the 34 million possible topping combinations the chain offers.
"If they want to put in new products or change pricing or add new toppings, they have to buy new menu boards," said Jenny Fouracre-Petko, director of legislative affairs for Domino's Pizza. "That's where it gets expensive."
The problem is that, too often, bureaucrats don't understand what it takes to comply with government regulations.
A recent editorial in The Washington Times pointed out that suppliers, ingredients and recipes constantly change. If a store wants to offer something different, it will have to pay around $500 to ship the product to a lab for testing and certification.
The major questions are, will this regulation make people eat less when they dine out and at what cost to our struggling economy?
The Center for Science in the Public Interest strongly supports the requirement and touts the effectiveness of similar rules. CSPI reports that, "A study conducted by the New York City Department of Health and Mental Hygiene found that 1 in 6 customers used the calorie information at chain restaurants...."
That means 16 percent of people used the information, while 84 percent did not.
Congressional opponents led by Rep. John Carter, R-Texas, have introduced the Common Sense Nutrition Act to limit the scope of the labeling requirement largely to restaurants.
That makes sense.
Don Brunell is the president of the Association of Washington Business. For more about AWB, visit www.awb.org.