FDA Serves Up Unappetizing Menu Labeling

This article originally appeared in Economics 21 and is republished with permission.

May 7, 2018

After delays, uncertainty, and the hope that Congress would repeal or alter the rule, the Affordable Care Act’s mandatory menu labeling for chains with 20 or more locations goes into effect on May 7. Commissioner Scott Gottlieb said that with the rule in place “consumers will be able to walk into any large chain restaurant and other chain establishments in the country and know, at a glance, how many calories are in the foods a restaurant offers.”

It is unfortunate that implementation of the provision is moving forward:  the evidence regarding the effectiveness of these rules in changing food choices, or reducing obesity in the long-term, is limited and unconvincing. Even proponents of other public policy measures suggest that menu labeling requirements are not a good policy lever to reduce obesity.

At the same time, the rule has high compliance costs, and would be a significant burden for some businesses.

In a previous column I have written about research questioning the effectiveness of menu labeling in reducing caloric intake and obesity. This is not new information, and has been acknowledged in multiple reports and reviews from the government. For example, in 2015 the federal government’s Dietary Guidelines Advisory Committee undertook a systematic review of the effect of labeling on food selection and dietary intake. The report concluded that “limited and inconsistent evidence exists to support an association between menu calorie labels and food selection or consumption.”

Furthermore, even if there is an initial effect of people changing their choices and eating habits due to menu labeling, those effects are likely to diminish in the following years. One study looking at the experience in New York City found that the percentage of respondents seeing and noticing the labeling information in 2013 to 2014 was lower than when the mandate took effect in 2008.  Another study by Aaron Yelowitz for the Cato Institute found that, while there was an initial reduction in obesity in response to the implementation of menu labeling requirements, the entire effect on obesity “disappears within four years.”

The prevailing trends in the way people are ordering could make the focus on physical menu labeling requirements in restaurants even less important in the years to come. As Commissioner Gottlieb noted, people who walk into stores will see the information, but digital ordering has been increasing rapidly, and is likely to do so in the future. More major chains are rolling out their own apps, and visits paid by mobile app increased by 50 percent over the preceding year. Some aspects of the rule are outdated even before it is ever in effect.

Most of the associated compliance costs would be front-loaded, with the FDA estimating that affected businesses will have incurred related costs of $446 million by the end of 2018. For the years after that the agency projects annual costs of about $58 million through 2035. In almost two decades, when the vast majority of people may order digitally and menu labels have just become more white noise to be ignored, companies will still be facing substantial compliance costs.

One of the more vociferous complaints regarding the rule was how stores with a high number of different combinations, such as pizza restaurants, would be able to comply. In response, the FDA has said it will allow them to provide a calorie ranges. While this will reduce the burden on these places to some extent, it would add more imprecision to the calorie information being imparted to customers, which would seem to undercut the case for the rule’s effectiveness.

Commissioner Gottlieb cited evidence that customers might reduce their average number of calories by 30 to 50 calories per visit. If the menus only give a range, and factoring the inherent inexactitude regarding portions sizes in the cooking process, it is difficult to see how the provision can be successful.  At the same time, not allowing for the calorie ranges would make compliance practically impossible for many places, and give customers an overwhelming amount of information.

More research is needed to better understand the effects and limitations of menu labeling on food choices, caloric intake, and obesity. In particular, studies in settings more closely mirroring the real world and over longer time periods would give a better understanding of what could be expected from nationwide implementation of a rule such as this.

So far the evidence regarding the effectiveness of these efforts appears to be limited and mixed at best, while compliance costs will be substantial even with the new wrinkles of flexibility being touted by the FDA. Congress should review whether menu labeling requirements are an effective or appropriate policy lever to try to reduce obesity, and their review of the evidence will likely lead them to determine it is not. Then, Congress should pass legislation that would increase flexibility and reduce compliance costs, in part by recognizing the increasing prevalence of online information.

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