Monday, April 21, 2008

NYC calorie disclosure regulation upheld

New York State Restaurant Ass’n v. New York City Board of Health, 2008 WL 1752455 (S.D.N.Y.)

NYC passed a regulation requiring chain restaurants selling standardized meals to post calorie information in menus and on menu boards. The court had struck down a previous version as preempted by the Nutrition Labeling and Education Act (NLEA) because it only applied to restaurants that already voluntarily disclosed nutrition information; NYC responded by making the regulation mandatory for all restaurants of a defined size (15 or more locations nationally) and type. The court sustained the new version against preemption.

Background: Obesity is a big problem, nationally and in NYC, where over 56% of adults are obese or overweight. Seventy percent of NYC deaths come from conditions whose incidence increases with obesity and overweight. One-third of Americans’ calories come from food bought outside the home. Many fast food restaurants already provide nutritional information on their menu items on posters or online, but NYC’s survey demonstrated that few customers actually saw that information. So the new regulation requires calories to be posted on menus and menu boards in a font and format comparable to that used to display name or price.

The NLEA has two components: (1) specific, uniform disclosures for food labels—the “Nutrition Facts” panel with its list of calories, etc.; and (2) regulations of when and how a seller may make voluntary claims about nutrients or health benefits. The NLEA expressly preempts state regulations with respect (2), but does not preempt regulations regarding (1). Restaurants are exempt from mandatory federal nutrition labeling, but subject to NLEA provision (2) insofar as they voluntarily make nutrient content claims—at which point federal preemption kicks in. The court reasoned that a mandatory calorie disclosure falls under (1) and not (2). Among other things, the court believed that a mandatory disclosure is not a “claim,” which is a voluntary assertion by a speaker. FDA regulations also distinguish between (federally mandated) nutrition labeling and “claims” regulable under (2).

And Congress wanted to preserve state power in this area—in fact, the NLEA by its terms bars implied preemption. The preemption provisions bar any non-identical state requirements for nutrition labeling, except for requirements that apply to food exempt from (1). Since restaurant food is exempt from (1), “state authority to impose mandatory nutrition labeling on restaurants is necessarily preserved.” The restaurant association argued, however, that restaurants making voluntary nutrient content claims get the benefit of preemption, because NLEA preempts states from regulating nutrient content claims subject to federal regulation under (2). The court found this position internally consistent, but wrong given the voluntary/mandatory architecture of the law and Congress’s intent to preserve state authority. The association’s interpretation would “create a regulatory vacuum in which neither federal nor state authorities have the power to require restaurants to disclose nutrition information to consumers. A far more persuasive reading is that Congress chose not to exercise this power and explicitly left it to the states to do so.”

The court also rejected the association’s claim that the regulation violated members’ rights against compelled commercial speech. The court began with language indicating the association’s uphill climb: the reason the First Amendment protects commercial speech is to further the public interest in good information about economic decisions. Regulations that require disclosure of “factual and uncontroversial” information are subject to “more lenient review,” and need only be reasonably related to an interest in preventing consumer deception. In commercial speech, disclosure requirements are more readily tolerated than suppression. Zauderer v. Office of Disc. Counsel, 471 U.S. 626 (1985); National Electrical Manufacturers Ass’n v. Sorrell, 272 F.3d 104 (2d Cir. 2001) (upholding a Vermont law that required manufacturers of certain products containing mercury to label them with an indication that the products contained mercury and should be disposed of as hazardous waste).

In Sorrell, the court found that the state’s purpose of protecting the environment from mercury was “inextricably intertwined” with the goal of increasing consumer awareness of the presence of mercury in various products. Thus, though the statute was not directed at consumer confusion or deception “per se,” it was still consistent with the rationale for First Amendment protection for commercial speech—the robust and free flow of accurate information. There was a reasonable relationship between the disclosure requirement and the state’s goal because it was probable that some buyers would use the information to dispose of the products properly, thereby limiting mercury pollution.

Like the laws upheld by these previous disclosure cases, NYC’s regulation compels only the disclosure of pure facts, addressing the state’s policy interest by making information more available to consumers. The necessary “rational connection” between the mandate and the city’s purpose was present.

The association argued that the government isn’t allowed to require an entity to subsidize a message with which it disagrees (US v. United Foods, Inc.), and that its members don’t want to promote the government’s messages that customers “must consider the caloric content of food when ordering in a restaurant, and that calories are the only nutritional criterion that patrons need to consider.”

The court disagreed. The regulation doesn’t force any restaurant to “take a position in any ongoing debate.” It doesn’t require any statement, express or implied, about the relative nutritional importance of calories or appropriate decision metrics for consumers. “Of course, it would be possible to recast any disclosure requirement as a compelled ‘message’ in support of the policy views that motivated the enactment of that requirement.” But that would be inconsistent with the case law, which supports disclosure requirements in commercial speech contexts. A case striking down a requirement that game retailers use a “sexually explicit” label was not to the contrary, since “sexually explicit” isn’t a purely factual disclosure. (My read of the ruling: of course it’s true that every mandatory disclosure also enacts a policy preference about consumer choices, since statements of facts are also statements about what consumers ought to value, which is why explicit factual claims are generally presumed to be material in advertising regulation. But, for First Amendment purposes, factual claims trump whatever value statement is expressed.)

The association then claimed that at least the law had to be analyzed under Central Hudson’s four-part test, a more demanding standard than the “reasonable relationship” test used in Zauderer and Sorrell. Though the Supreme Court is trending towards more protection for commercial speech, the association had no direct precedent superseding those cases. The Second Circuit’s use of Central Hudson in an earlier disclosure case,

International Dairy Foods Association v. Amestoy, 92 F.3d 67 (2d Cir. 1996) (comment: wrongly decided!), was based on the fact that the state’s disclosure requirement was only based on “consumer curiosity,” not any other interest.

The association argued that Zauderer is limited to laws necessary to prevent deception. United Foods distinguished Zauderer on the grounds that mandatory assessments to promote mushroom sales were unnecessary to make voluntary ads nonmisleading. But the assessments in United Foods were used not for factual disclosures, but to create persuasive ads touting mushrooms generally. Whether Zauderer is interpreted broadly as being about accurate commercial information, or narrowly as being about correcting deception, it’s inapplicable to United Foods, where the ads “were presumably intended to benefit mushroom producers, not consumers.” (Comment: interesting thought there—surely regulators thought that mushroom consumption would at least not be bad for consumers, as well as good for producers.) Anyway, United Foods didn’t limit Zauderer.

Moreover, Sorrell specifically rejected a narrow reading of Zauderer. The state’s interest isn’t “limited to an interest in correcting affirmatively misleading statements and may include an interest in remedying consumers’ ignorance or misinformation.” NYC submitted evidence that consumers underestimate the calories in restaurant meals, sometimes significantly. (The association’s expert conceded that this is true for large meals/items, but suggested that surveys were unreliable because consumers may intentionally misrepresent their beliefs about calories in order to preserve their own illusions of being “reasonable” eaters. Though the expert needn’t concern himself with this, that argument actually cuts out the heart of the justification for enhanced First Amendment protection for commercial speech, which presumes a rational consumer capable of acting in her/his own best interest.)

Anyway, NYC is fighting obesity by addressing the “information gap,” which is consistent with First Amendment interests in the area of commercial speech—the discovery of truth, the efficiency of the marketplace of ideas, and the protection of accurate information.

The association further argued that the regulation didn’t directly advance the government interest of reducing obesity, because “more research is needed on the relationship between calorie information and consumer behavior and that there is no evidence that [the regulation] will be effective in lowering obesity rates.” NYC’s evidence included “that the recent rise in obesity is in some part attributable to excess calorie intake, that even modest changes in calorie intake can affect weight, that record-keeping and self-monitoring of food and calorie intake are important components of weight-management programs, and that people tend to underestimate the calorie content of restaurant foods” (citations omitted). Moreover, many people self-report responding to calorie information on packaged foods, and the packaged food market responded to mandatory labeling by adding “nutritionally improved” products, suggesting that labeling increases consumer demand for such products. (Again, notice the impossibility of distinguishing between shaping preferences and inducing the revelation of preferences.)

Even the association’s expert, while playing the uncertainty card, admitted that it’s reasonable to predict that providing calorie information at the point of purchase would affect obesity. To his credit, though he argued that NYC’s move was not supported by randomized controlled trials or observational epidemiologic studies, he acknowledged that the former are essentially impossible and the latter hamstrung by the fact that most restaurants won’t voluntarily disclose calories. It’s not a great argument to contend that the First Amendment requires, before action, studies that the First Amendment precludes.

The court agreed that there was no “scientific certainty” that NYC’s regulation will succeed in combating obesity. But conclusive proof isn’t the standard. The evidence, along with common sense, supported a reasonable relationship between the city’s interest in decreasing obesity and the disclosure requirement. In Zauderer, by comparison, the Court didn’t require any survey to establish the “self-evident” proposition that nonlawyers are often unaware of the technical meaning of “fees” and “costs.”

The association also noted that the regulation only affects 1/10 of the restaurants and 1/3 of the restaurant meals in the city—which translates to at least 145 million meals per year. A regulation can be reasonably related to its goal even if it doesn’t address the entire problem; governments are generally entitled to attack problems piecemeal.

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