That Silly Obamacare Rule that Forces Restaurants to Change Their Menus Is about to Go into Effect

Not only will it be expensive, both in dollars and man-hours, but it probably won't change consumer behavior for the better.

Within days, chain restaurants and grocery stores nationwide will have to comply with a high-cost, low-value Obamacare menu-labeling mandate. Failure to comply with the law could land shop owners in prison for a year with a fine of up to $100,000.

A Huge Burden

The controversial provision within the Affordable Care Act goes into effect on May 7 and requires food service businesses with 20 or more locations to list nutritional information for food items on all signs and printed menus. Congress had many chances to amend the rule, to make it more flexible, and reduce the 14.5 million hours the Office of Management and Budget estimated it would take to comply with the mandate. But, despite bipartisan support, lawmakers failed.

Pizza shops, for example, estimate that the rule would cost up to $5,000 annually per shop.

Proponents of the rule say it’s a simple way to give consumers information to make healthier food choices, possibly aiding the effort to reduce obesity. The problem with this do-gooder notion is that forcing businesses to list exact calorie contents on all food items on physical menus will be impractical and hugely costly.

Pizza shops, for example, estimate that the rule would cost up to $5,000 annually per shop and that most of their consumers—who order online or over the phone—would never even see these physical menus. Even for those rare pizza eaters who walk into shops, the long list of options and nutrition data may not help reveal the total nutritional content of their order, since it’d be up to the consumer to do the math: calculating how each topping or customization (e.g. extra cheese or sauce) adds up.

Many restaurants have already found tech-forward ways to give consumers nutrition data in ways they can actually use. For example, Domino Pizza created the “Cal-o-meter,” an online tool which tallies the nutritional content of an individual order of pizza, based on size and toppings. Easy, right? But online tools don’t satisfy the new rule: shops still have to list nutrition content for all menu items. This includes grocery store buffets with regularly rotating choices—a requirement the Food Marketing Institute, a trade organization, estimates will cost grocery stores up to $1 billion in the first year.

It Could Have Been Changed, but Wasn't

Congress considered numerous proposals to add some flexibility to the rule, like the Common Sense Nutrition Disclosure Act (H.R. 2017) introduced by Reps. Cathy McMorris-Rodgers (R-WA) and Loretta Sanchez (D-CA), which was approved by the House in 2017. But none made it to the president’s desk.

Congress’s inability to enact sensible laws is concerning enough, but more worrisome is that nobody who voted for Obamacare considered how the rule might work in the real world when they buried it in the Affordable Care Act. Research into similar efforts indicates that instead of helping people eat fewer calories, it could actually have the opposite effect.

If Congress wants to enact laws aimed at improving public health, they should consider whether their actions won’t backfire in terms of consumer behavior.

Overall, studies conducted in cities that already instituted similar menu requirements (like New York City and Philadelphia) find that nutritional disclosure has no appreciable changes on consumer behavior. One study commissioned by New York City found that the effect varied by chain: in some shops, consumers did order lower-calorie meals. However, in some shops—like the Subway restaurant chain—the labeling actually correlated with consumers increasing the calorie content in their meals, perhaps in an effort to maximize their dollar-to-calorie spending.

The inclination to provide consumers with nutritional information is laudable. After all, for health-conscious consumers, this data is essential in their decision-making process. However, if Congress or any other government agency wants to enact laws or institute regulations aimed at improving public health, they should consider whether their actions won’t backfire either in terms of consumer behavior or by hampering innovations that might prove more beneficial in the long term. At the very least, Congress should monitor the effects of new regulations, like this menu labeling law, and amend or repeal them if (and more likely when) they prove to be ineffective, burdensome, and harmful to the well-being of our nation.

Reprinted from the Competitive Enterprise Institute.

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