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Friday, March 31, 2023

Entrepreneur Sues USDA, FDA for Banning Verifiably Factual Labels on His Food Products

Everyone agrees these labels are factual. So why are they still banned?

Image Credit: Institute for Justice

In 2019, Michelle Przybocki nearly died. She became ill from digestive complications, and later learned she had a severe case of irritable bowel syndrome (IBS). Michelle, a speech therapist from Las Vegas, managed to push through the illness, but her life would never be the same. From then on, she experienced debilitating pain every time she ate, sometimes immobilizing her for hours.

To reduce the pain to a manageable level, Michelle decided to adopt a special “low-FODMAP” diet. FODMAP is an acronym that stands for “fermentable oligosaccharides, disaccharides, monosaccharides, and polyols.” Essentially, FODMAPs are certain carbohydrates that are difficult to digest. Doctors often recommend low-FODMAP diets to people with IBS and other digestive disorders, and studies show most patients with IBS report significant improvement in their symptoms when they eliminate FODMAPs from their diet.

Michelle went looking for low-FODMAP foods, but found the search incredibly difficult because she couldn’t find any labels that mentioned whether a food was low in FODMAPs. She tried checking ingredient lists, but this also proved challenging, because different parts of the same ingredient can be high-FODMAP or low-FODMAP, and labels don’t normally specify which part was used. As a result, she would often spend hours in the grocery store scouring the shelves, desperate to find food she could digest more easily.

Michelle barely ate in the first few months because of this challenge, and experienced significant weight loss as a result. She was eventually able to piece together a low-FODMAP diet, but she and countless other people with IBS continue to face difficulty because of the lack of low-FODMAP labeling.

With 10-15 percent of the American population suffering from IBS, why are these labels practically non-existent?

Because they’re illegal.

Michelle Przybocki | Image Credit: Institute for Justice

Filling the Label Lacuna

Ketan Vakil found this out the hard way. Ketan is an entrepreneur in New York City, and he holds an MBA from New York University. Like Michelle, Ketan has a digestive disorder and follows a low-FODMAP diet to manage his symptoms.

Noticing the dearth of explicitly low-FODMAP foods in grocery stores, Ketan started his own business in 2018 to cater to this unmet demand. He called the business Gourmend Foods. When he started the business, Ketan had no idea about the ban, so he put labels on his products advertising the raison d’être of the whole product line, namely, the fact that the products were “digestible” and “gut loving.”

By the summer of 2022, Ketan was selling four low-FODMAP spice blends and a low-FODMAP chicken broth, mostly over the internet but also in a few retail stores. His products have all been certified by Monash University in Australia—a world leader in low-FODMAP foods—and he had no complaints or legal problems prior to last summer.

What changed last summer? Ketan wanted to expand his product line by introducing a low-FODMAP beef broth. Though the product and labeling would be very similar to his chicken broth, there was one key difference: his chicken broth and spice mixes were regulated by the Food and Drug Administration (FDA), but the beef broth falls under the US Department of Agriculture (USDA).

The reason this difference matters is not because there are different rules between the agencies, just different enforcement mechanisms. Whereas the FDA’s approach is to let businesses do their thing and then hand out warnings and fines if non-compliance is discovered, the USDA’s approach is to require pre-approval for things like product labels. Thus, when Ketan went to the USDA to get his low-FODMAP beef broth label approved, he was told he had to remove the low-FODMAP language. It was then that he learned about the ban.

When Ketan pushed back, officials at the USDA contacted their colleagues in the FDA to confirm the rule. On September 20, the USDA officials got back to Ketan. The FDA had agreed with the USDA and confirmed that these kinds of statements were categorically banned.

Seeing as the FDA is now aware of Ketan’s business—and all his other products violate the same rule—Ketan expects it’s only a matter of time before he receives a warning letter from the FDA. He faces up to a year in prison and a $1,000 fine if he doesn’t change his labels.

Gourmend Foods’ Chicken Broth label | Image Credit: Institute for Justice

Banning the Truth

The law in question is a federal regulation that limits what kinds of nutrient content claims are allowed on food labels. Under the regulation, “implied” or “undefined” nutrient content claims are prohibited. “Defined” in this context means “defined in the federal regulations.” Essentially, the government has a list of pre-approved nutrient content claims that are allowed on food labels. Any claims not on the list are illegal, even if they are entirely, verifiably factual.

There is a process for updating this list to allow new claims on labels, but that process takes years, hundreds of thousands of dollars, and quite a few attorneys. Unsurprisingly, the list often fails to keep up with innovations in the food sector.

The terms Ketan is not allowed to use on his labels include “Low FODMAP,” “1 serving low in FODMAP,” “Low FODMAP certified,” “Digestible,” and “Gut-loving.” Notably, no one has suggested these claims are false or misleading. The only reason for prohibiting them is that they do not appear on the government’s list.

Exasperated with this censorious policy, Michelle and Ketan have teamed up with the Institute for Justice (IJ) to file a federal lawsuit challenging the ban on the ground that it violates their First Amendment rights.

“The government does not get to decide which facts consumers are allowed to learn,” said IJ Senior Attorney Justin Pearson. “Businesses have the right to tell the truth, and customers have a right to hear that truthful information. Banning factual information isn’t just harmful, it’s unconstitutional.”

“The federal government is trying to make it even harder for people like me to find the foods that improve my quality of life,” said Michelle. “I just want businesses like Ketan’s to be able to provide me with accurate, important information so that I can make my own informed decisions regarding my health and these essential dietary choices.”

“Ketan and Gourmend attempted to do everything the right way and now they’re being punished for it,” said IJ Litigation Fellow Betsy Sanz. “It should not be against the law to tell the truth.”

The Case against Consumer Protection Laws

The reason this law exists comes down to concerns about fraud. Apprehension about false and misleading labels has prompted the government to not just ban false advertising, but to ban any labeling that doesn’t align with its carefully constructed white list of approved claims. The fear is that if producers can say whatever they want without government oversight they will make inaccurate and unreasonable claims about their products in an attempt to drive sales. Customers can sue for fraud, of course, but this threat may not be sufficient to deter producers from making misleading claims.

The broader issue underlying this regulation is the idea of consumer protection laws. These laws regulate not only labeling, but also product quality, standardization, size, and many other aspects of goods and services. Food items are a frequent target of these laws because they often come with more serious safety risks.

The argument in favor of consumer protection laws more generally is that there is often an imbalance in knowledge between buyers and sellers, known as asymmetric information. The seller usually knows a lot more about the product than the buyer, so the buyer is immediately at a disadvantage. If the seller claims a product has certain characteristics or benefits, how can the buyer know they are telling the truth? What if they are exaggerating?

The buyer, the argument goes, is simply helpless in these situations. As a result, sellers in a free market will take advantage of the buyer’s ignorance and rip them off. To protect consumers from these practices, the government needs to step in and regulate the quality and marketing of these products.

The above reasoning has proven persuasive to many, as evidenced by the ubiquity of these laws. But there are also arguments against these laws, and they are just as important to consider.

For one, detractors argue consumer protection laws are unnecessary. While information asymmetries exist, consumers have many ways to avoid being taken advantage of. One thing they can do is consult consumer reviews online to see what other customers are saying about the product. Another thing they can do is check to see if a product has been certified by a third party. In fact, many sellers seek out third-party certification precisely so they can increase trust with potential customers, just like Ketan did with Monash University. His buyers don’t have to take his word that his products are low-FODMAP. They can check to see if he’s telling the truth.

A second argument against consumer protection laws is simply that they are intrusive. It should go without saying, but these laws are an unjust infringement on the rights of buyers and sellers. It’s none of the government’s business how two people choose to make transactions, nor does the government have any place regulating oral or written speech. Threatening fines and jail time for peaceful interactions like these is hardly ethical behavior.

A third argument against consumer protection laws is that they take options away from consumers, including options that are desperately needed. As Michelle’s story illustrates, these laws prohibit perfectly harmless marketing that would be tremendously helpful if only it were allowed. In other cases, these laws hold back product differentiation and innovation because the standards are so strict. In both cases, the government is actively hurting consumers in the name of protecting them. It is harming the very people it set out to help.

Caveat Emptor

For these reasons and more, free-market proponents reject all such “protection” laws. Instead, we champion the principle of Caveat emptor: let the buyer beware. In short, it is the buyer’s responsibility to investigate what they buy before agreeing to a trade. It is not the government’s job to dictate the terms of trade to the seller on the buyer’s behalf.

“The expression caveat emptor is merely an effort to describe the broader doctrine of freedom of contract as it applies to the vendor-purchaser relationship,” wrote Bertel Sparks for FEE in 1975.

“The interventionist is opposed to letting the consumer examine the article and act on his own judgment. The consumer must not be allowed a freedom of choice. For if he is allowed such freedom, he might hurt himself. And to allow him to hurt himself, that is, to allow the doctrine of caveat emptor to operate, would be immoral. Unwittingly, the interventionist is striving toward a rather drab society where the introduction of new products will be delayed or prevented, and the variety of articles being offered will tend to decline.”

Sparks stresses that the ultimate impact of these laws is to undermine the wishes of consumers and instead have the market follow the wishes of bureaucrats.

“The choice between a caveat emptor, free market system and a consumer protection system is a matter of deciding whether the productive processes should be under consumer control or political control,” he writes. With regulations, “the consumer’s power of choice, and therefore his power to control, has been taken from him.”

Should consumers be allowed to choose what they buy, or should the government restrict their choices for their own good? This is the question we are forced to wrestle with.

The government restricted choices for Michelle and Ketan regarding food labeling, and this restriction has made both of their lives extremely difficult. Countless others have no doubt encountered similar frustrations, trying to find products only to learn that helpful labels are banned, or trying to sell those products only to run into the same stubborn rule.

The government may have meant well, but its attempt at benevolence has caused tremendous hardship.

Perhaps Ronald Reagan was on to something when he quipped, “The nine most terrifying words in the English language are ‘I’m from the government and I’m here to help.’”

This article was adapted from an issue of the FEE Daily email newsletter. Click here to sign up and get free-market news and analysis like this in your inbox every weekday.

  • Patrick Carroll is the Managing Editor at the Foundation for Economic Education.