The new Rules (for Vending Machines and Menus) are based on changes made as the result of the Affordable Care Act. These changes were made by adding two new sections to Section 403 of the Food, Drug and Cosmetics Act, which describes Mislabeled Foods. The new sections, found under FDCA §403(q)(5)(H), enables the FDA to regulate the labeling requirements for Restaurants, Retail Food Establishments and Vending Machines.
Late last year, the U.S. Food and Drug Administration finalized a new set of Rules pursuant to the new §403 governing how and where caloric content must be displayed. As a result, beginning on Dec. 1, 2015, and Dec. 1, 2016, certain restaurants and vending machine operators, respectively, will be forced to disclose the calorie content of their products to consumers. However, because of the way in which these categories are defined, a massive number of companies will be affected, and because of the vague nature of the regulation’s wording, some will be left wondering on which side of the line they fall. Further, though the final Rules are extensive and go to great lengths to describe the reasoning behind the Rules’ creation, due to the vague amendments to §403, this reasoning is often strained, and encompasses many businesses that Congress may have not intended to be covered, and omit business Congress intended to be regulated.
Nonetheless, the vast majority of the companies covered by these new rules, including grocery stores, drug stores, fast food restaurants, local small business restaurant chains, movie theaters and amusement parks, have never experienced any sort of FDA regulation. These companies are largely unaware of the nature of FDA regulation, enforcement, and the risks of failure to comply with Rules, Guidances and Statutory requirements.
The Final Rule was published in the Federal Register and interprets Section 403(q)(5)(H)(viii)-(xi) of the FDCA (the ACA) and states that the requirements are designed to “help make calorie information for vending machine foods available to prospective purchasers in a direct, accessible, and consistent manner to enable them to make informed and healthful dietary choices.” While the efficacy of these new requirements are still unknown (in fact, the Rule makes no effort at quantifying the benefit of this Rule), the new Rule nonetheless seeks to provide basic nutritional information to those who solicit vending machines.
“Vending Machine Operators” subject to the Rule are defined as “a person or entity that controls or directs the function of the bending machine, including deciding which articles of food are sold from the machine or the placement of the articles of food within the machine,” is compensated for those efforts and operates more than 20 vending machines. This definition is incredibly broad, and for a given vending machine, there may actually be more than one responsible party.
For example, a major university will operate more than 20 vending machines on its campus, and recently, have taken an interest in controlling or influencing the types of foods in those machines. Whether it be providing branded food products or offering healthier products, because the university also receives revenue from purchases made at these machines, it is likely they will be covered by the new Rule.
The Rule requires the calorie content of food products to be provided in one of several optional locations:
- Under or adjacent to the product itself within the vending machine
- On the front of the product label
- On the product’s Nutrition Facts panel, if it is visible while the product is inside the vending machine
- On a sign in, on or adjacent to the vending machine so long as the sign is in close proximity to the article of food or its selection button
- On a digital display, if the vending machine has one
While more information is good for the consumer, independent of whether that information will actually be used by said consumer, the bill for providing it will be paid by the vending machine operator. It is unlikely that manufacturers and distributers like Mars, Nestle, Frito-Lay and other companies will be willing to provide custom-labeled products solely for vending machines, bearing alternative, calorie-highlighting labels. Thus, it will likely fall upon the vending machine operators to either individually label the products, create alternative signage to be posted on the vending machine, or completely retrofit each machine with sufficient technology to provide the required information.
An additional cost will come at the point of re-stocking of each machine. If you go to any snack-bearing vending machine, you will likely see at least one shelf location containing more than one variety of products. Whether it be chips behind cheese snacks, or plain doughnuts behind chocolate, each shelf can be used to vend products that share a single price. That is, a shelf coded to vend product for $1 may be stocked with any product worth $1. This allows the employees responsible for restocking the machine to fill each shelf completely, decreasing the number of visits to restock a given machine. The new Rule, however, require that not only must products on a given shelf share a price point, but also a calorie count. This is likely impossible. No two chips, doughnuts, candy bar or cheese snack shares the same calorie count (but for the recent trend of 100-calories snack packs). As a result, it is likely that, given differing popularity of products within a machine, employees will have to visit vending machines to restock on a more frequent basis.
Furthermore, once there, employees whose job it is currently to simply fill the shelves of the machine will be required to monitor the caloric content of the products they are stocking, and ensure that any calorie disclosure signage is appropriately updated. This will require significant training and material support to these employees that was simply not part of these companies’ businesses in the past.
Finally, the FDA has not announced any new or unique enforcement efforts targeting vending machines. There has been no mention of sending FDA inspectors to monitor the calorie disclosures on vending machines, and the FDA, during the creation of the new Rule, declined to create a consumer hotline for the purposes of reporting violations. Instead, the FDA has decided to rest on its existing powers under the FDCA and treat any inaccuracies or violations of the calorie display requirements as rendering the products mislabeled under § 304(a) of the Act, and respond accordingly.
Calorie Disclosure Requirements in Restaurants
Looming even sooner, Dec. 1, 2015, and having even wider-ranging impact is the requirement for restaurants to similarly disclose the calorie contents of their foods on menus. Because, as the FDA claims, consumers do not know or underestimate the number of calories in their food while dining out, the new Rule seeks to educate consumers regarding the nutritional content of the food so they can make better nutritional decisions while away from home. Again, whether these efforts will make any difference to the average American consumer, whether it be at a sit-down restaurant, a fast food chain location, a walk-up counter at a mall, or a kiosk at an amusement park, is unknown, but pursuant to the ACA, the FDA has finalized a Rule to enact Section 403(q)(5)(H)(i)-(vii) of the Act. Of course, the Rule does so with the normal handful of sometimes confusing or counterintuitive exceptions.
First and foremost this Rule applies to:
- Restaurants and “similar retail establishments” that offer restaurant–type food
- Which have 20 or more locations
- Operating under a single brand name
- Offering substantially the same menus
Such locations include standard sit-down style restaurants, bakeries, coffee shops, convenience stores, facilities within other facilities (for example, within amusement parks, movie theaters and bowling alleys), take-out restaurants, drive-throughs, and grocery stores, among other examples provided by the FDA. These locations are only covered if they offer “restaurant-style” food, which is defined as either (1) those food products normally served at restaurants, meant for immediate human consumption; and (2) food sold at a retail establishment that is ready for human consumption, but is not generally consumed in those establishments such as a sandwich or other meal item bought prepared at a grocery store, gas station or drug store.
Locations that fall under the new Rule are required to provide calorie information for each item on the menu, as well as display a statement regarding the suggested daily caloric intake, similar to the statements found on the nutrition fact panel of packaged food. These disclosures will include the calorie values of “combo meals” at fast food restaurants. In addition, a statement must be displayed alerting customers that “additional information,” including total calories, calories from fat, total fat, saturated fat, trans fat, cholesterol, sodium, total carbohydrates, fiber, sugars, and protein, are available upon request.
These definitions raise confusing possibilities for entities in food service. For example, university cafeterias fall under an exception to the Rule, but if that cafeteria is part of a larger food court, those restaurants that also occupy the food court are not within the exception. The FDA does not comment as to why a school’s food products provided in a cafeteria do not require calorie disclosure, while a similar sandwich sold a few feet away by a major food chain is required to make such a disclosure. Instead, the FDA elected to allow such cafeterias to fall back on their existing USDA oversight.
Furthermore, the FDA defined the term “location” as a fixed point, not an address. This results in two curious conditions. First, food trucks and similar mobile food service models (such as hot dog carts or mobile kiosks) are exempted from the requirements of the Rule. Because they are capable of being moved, and thus bear no permanent location, it does not matter if a food truck operator has five trucks or 50, his business does not have to provide calorie information. Similarly, at amusement parks, mobile kiosks with no fixed location are exempted from the Rule, even if they sell restaurant-style foods. Second, because “location” is defined independently from address, a coffee shop with multiple locations within a mall or airport must count each of these locations as a separate “location” under the Rule. As a result, many specialty or niche locations will fall under the new requirements, even though there might be fewer than 20 addresses for each of its locations.
Finally, the FDA was, at best, cryptic in regards to enforcement. Generally, any food with inaccurate or unavailable nutrition information will be held mislabeled, and the restaurant at issue liable. However, since much of the industry works on a franchise-basis, rooted in complicated franchising agreements, and during the comment period for the proposed Rule, many such franchise owners expressed concern that they would be held liable for the actions of their franchisees. The FDA’s response was to simply state that anyone with authority or supervisory responsibility could be held liable, and that enforcement would be determined “on a case by case basis.”
These requirements are, for the most part, novel regulation for the vast majority of covered restaurants and companies. Never before have vending machine companies, who act as nothing more than middlemen and distributors for prepackaged snacks, had to deal with any meaningful FDA (or many other federal agency) regulation or oversight. The same could be said for operators of smaller regional chains of restaurants or food-court style kiosks. For such entities, reasonably calculating the caloric values (or any of the other required nutritional values) will be a daunting, and possibly financially prohibitive, task.
Responsibility is an issue left up in the air by the FDA. Who will be responsible for labelling a vending machine product? The manufacturer? The distributer? The vending machine owner and operator? Similarly, within restaurants within a franchise, will the franchisee or the franchisor be responsible? Who will be responsible if the FDA calls with a violation complaint from a consumer? Clearly, any agreements between such parties must be revisited and amended to reflect the assignment of this responsibility, and any resulting liability.
Finally, the very nature of these new Rules means that the effected industry members are largely completely inexperienced with FDA regulation, its costs and complications. Previously, they were either explicitly exempted from labeling regulations, or were never addressed. Now, these entities will not only be the focus of a new FDA regulatory scheme, but will need to become familiar with the ramifications of failure to comply.
As a result, and in addition due to the complicated nature of, and extensive list of exemptions provided in, the Rules as finalized, it is important for covered entities (or for companies trying to determine if they are covered by the Rules) to contact experienced regulatory counsel as early as possible, as some of the requirements under the Rules will take a significant amount of time to complete. With looming deadlines, the sooner such entities seek legal advice, the better.