Calories Are Now Criminal

Over the past two years small business owners spent considerable time implementing procedures to comply with the health care requirements under the Affordable Care Act, also known as Obamacare.  Just when these business owners thought they could turn their attention back to doing what they do best, running their business, regulators issue new compliance requirements, this time targeting the food and beverage industry.

The Food and Drug Administration (“FDA”) recently issued a final rule on food labeling, as required under the Affordable Care Act, which provides for nutrition labeling of "standard" menu items for chain restaurants with 20 or more locations and "similar retail food establishments."  If you are a restaurant owner the menu labeling rule will most certainly impact on your bottom line.  The rule is expected to cost the food industry some $315 million to implement and about $44 million per year after that, according to the FDA’s original cost-benefit analysis.  In addition to restaurants, the rule applies to food facilities in entertainment venues, such as movie theaters and amusement parks, take-out food establishments, bakeries, convenience stores, grocery stores and supermarkets.

So what’s required?  Calories must be displayed clearly and conspicuously on menus and menu boards next to the name or price of the item.  Menus and menu boards must also display "2,000 calories a day is used for general nutrition advice, but calorie needs vary." Businesses must provide, upon consumer request, written nutritional information for each menu item.  The rule applies to "standard menu items", including food on display and self-service food, but not daily specials, temporary menu items and condiments for general use typically available on a counter or table.  It is important to note that certain alcoholic beverages listed on menus or menu boards are also included under the rule.

While the cost of compliance will vary for each establishment, non-compliance is criminal.  Criminal you say?  How?  Well, businesses that fail to comply, or don't get it right, will have affected menu items deemed "misbranded" which is a misdemeanor under the Food Drug and Cosmetic Act.  The FDA retains the discretion to hold those with supervisory responsibility, including those who are "responsible individuals" who certify the menu labeling, criminally liable for a misbranding violation.

While the menu labeling rule will most certainly face legal challenges, it’s important for businesses to start planning for the implementation as rule goes into effect on December 1, 2015.  If you need assistance in determining if the menu labeling rule affects your business, please contact our attorneys at Morsel Law.

Nature Valley Isn't Natural Anymore

General Mills Inc., the maker of Nature Valley, agreed to keep the phrase "100% natural" off of its food products as part of legal settlement with several consumers and advocacy groups.  In doing so, General Mills follows a string of other food companies, including Trader Joe's, Kashi and PepsiCo, that have agreed to settle similar cases without admitting liability to avoid further litigation costs. The real issue here is whether General Mills violated the law?  Well, under the current FDA regulations it appears they didn't.

Up to this point the FDA has refused to define the term "natural", but has noted on an informal statement support for the policy that "nothing artificial or synthetic is included in, or has been added to, the product that would not be expected to be there."  58 Fed. Reg. 2302, 2407 (Jan. 6, 1993).  The USDA, however, has defined "natural" (when applied to meat, poultry or eggs) as a product containing no artificial ingredient or added color and is only minimally processed.  "Minimally processed" means that the product was processed in a manner that does not fundamentally alter the product.

The Food Labeling Modernization Act would prohibit the use of the word "natural" on a food that includes any synthesized ingredient, or any ingredient that has undergone chemical changes such as corn syrup, high-fructose corn syrup, high-maltose corn syrup, maltodextrin, chemically modified food starch, or alkalized cocoa.  The bill also calls on the FDA to develop a more encompassing definition of natural.

Here, the plaintiffs accused General Mills of making misleading statements by marketing Nature Valley products as natural when they contained genetically modified and processed ingredients. Under the terms of the settlement, General Mills agreed not to use the "100% natural" claim for products that include processed ingredients, including corn syrup and the food additive maltodextrin. The settlement also prohibits the company from using the phrase on products that contain more than a trace amount of genetically modified ingredients.  Interesting to note, new packages for Nature Valley granola bars now have a stamp that claims "made with 100% natural oats".

Labeling and marketing your food product to comply with state and federal regulations is a difficult and time consuming process.  If you need assistance in either of these regulatory areas please contact our attorneys at Morsel Law.

Calories...Ready or Not, Here They Are!

On Tuesday, the FDA announced sweeping rules that will require chain restaurants, movies theaters, pizza parlors, vending machines, amusement parks, convenience stores, bakeries and the prepared foods sold inside many grocery stores across the country to post calorie counts on their menus. The menu labeling final rules go into effect one year from now and applies to restaurants and retail food establishments if they are part of a chain of 20 or more locations, doing business under the same name and offering for sale substantially the same menu items.

If you are a small business owner these new rules will have a significant impact on your operations. What it means is that calorie counts will have to be displayed for popcorn at a theater, food from a salad bar, hot dogs from a convenience store and takeout pizza. In addition, vending-machine operators with at least 20 locations also will be required to post calorie counts.

Calorie information also will be required for some alcoholic beverages served in bars and restaurants. This would apply to beverages listed on menus and menu boards, however, this would not apply to mixed drinks ordered at the bar. Craft brewers should take notice. Even if the rules may not directly affect beer manufacturers, those that sell their brews to chain retailers may be forced to supply calorie counts or take their products elsewhere.

While the purpose behind these rules are to combat obesity in America, where over one-third of meals are consumed outside the home, the effect is to burden retailers with significant compliance costs. Retailers are now faced with the choice of passing this additional cost onto the consumer or eliminating certain products from their menus. While not an easy decision for businesses to make, non-compliance can lead to legal action by the FDA.

If you need assistance to determine the affect of the FDA rules on your business, please feel free to contact our attorneys at Morsel Law.

Avoiding Costly Mistakes For Your Food Business

Unilever PLC, the maker of Hellman's mayonnaise, has sued California startup Hampton Creek Inc. accusing the company of false advertising for calling its eggless spread "mayo".  The consumer products giant is demanding that the maker of Just Mayo change its label and is also seeking compensation for unspecified damages.  The question for food companies is could this costly lawsuit have been avoided?

The FDA regulations state that "mayonnaise" must contain at least 65% oil by weight, vinegar, and egg or egg yolks.  However, Just Mayo doesn’t include eggs, instead it gets its emulsification from vegan pea protein.  Hampton Creek states that it calls its spread "mayo", not "mayonnaise", and therefore argues that it doesn't need to comply with the "mayonnaise" definition.

Unilever also claims that Just Mayo misleads customers who think they are buying actual mayonnaise, not an egg-free spread.  Whether this is true or not will be determined by the courts, however, under Federal law products are “misbranded” if their “labeling is false or misleading in any particular”. See 21 U.S.C. 343.  So how is Just Mayo misleading?  Well, for one, the label for Just Mayo features an egg with a plant growing over it and it refers to its product as "mayo" and mayonnaise" in its marketing materials.  We aren't saying that Just Mayo is "misbranded", again that is for the courts to decide, but food manufacturers should watch this case closely as it may have an impact their business going forward.

Food manufacturers should ensure they thoroughly understand FDA regulations before labeling their products.  This is not only to avoid a false advertising lawsuit, but also to avoid misbranding.  It’s a prohibited act to distribute misbranded products and manufacturers can be subject to FDA enforcement and/or private party lawsuits.  So to address the initial question posed above, whether the lawsuit could have been avoided, would be difficult to determine.  However, food companies may minimize the chances of their products facing a legal challenge by consulting with an attorney familiar with FDA regulations.  

If you need assistance navigating or complying with the laws affecting your food or beverage businesses, please feel free to contact our attorneys at Morsel Law.

"Gluten-Free" Must Now Be Gluten-Free

After a year of phasing in compliance, the Food and Drug Administration now requires any food labeled “gluten-free,” to contain no more than 20-parts per million of gluten, which is the lowest level detectable in food and one that would generally be acceptable even for those who suffer extreme gluten-intolerance health problems. The rule also holds foods labeled “without gluten,” “free of gluten,” and “no gluten” to the same standard.  The rule also brings the United States in line with international labeling standards that are employed across Europe and other parts of the world.

Products must not contain any wheat, barley or hybrids, or be derived from a gluten-containing grain that has not been processed to remove gluten.  However, some products that are labeled "gluten-free" that have levels above the defined levels of acceptability for gluten-free products may still be allowed to remain on shelves for the next six months to a year as the ban isn’t retroactive.  While the FDA has insisted that companies phase out above-acceptable levels of gluten in their gluten-free products, those with long shelf-lives, like pasta, may remain on shelves.

The FDA will engage in additional rulemaking to establish how it will determine compliance for hydrolyzed and fermented foods (e.g., yogurt, sauerkraut, hydrolyzed protein) because the current methods cannot quantify gluten in these foods.  In the meantime, hydrolyzed and fermented foods that meet the definition of "gluten-free" may bear a gluten free claim.  The FDA will exercise enforcement discretion to beer that currently makes a “gluten-free” claim and that are (a) made from a non-gluten-containing grain or (b) made from a gluten-containing grain, where the beer has been subject to processing that the manufacturer has determined will remove gluten.  This enforcement discretion pertains only to beers subject to FDA’s jurisdiction and that were making a "gluten-free" claim as of August 5, 2013. Please note that the FDA regulates non-malt beers (beers made without malted barley or hops).

The effective compliance date of the rule is August 5, 2014.  Products labeled prior to the compliance date that bear the claim “gluten-free” will not be subject to regulatory action by FDA.  However, any product labeled by the manufacturer on or after August 5, 2014, bearing a “gluten-free” labeling claim that does not comply with the definition will be subject to regulatory action.  The "gluten-free" final rule applies only to packaged foods, the FDA expects restaurants that use “gluten-free” on their menus are consistent with the federal definition; however, the final rule does obligate restaurants to be in compliance.  

If you need assistance to determine whether your food product is in compliance with the FDA labeling requirements, please contact the attorneys at Morsel Law.

Is My Product Organic or Natural?

As the natural and organic market continues to gain strength, with sales topping $81 billion in 2012, businesses are striving to meet consumer demand.  However, for businesses that are entering this sector in hopes of capturing some of the market share, understanding the difference between labeling your product as "organic" and "natural" is essential to ensure you don't run afoul of federal regulators.

All agriculture products sold, labeled or represented as organic need to be in compliance with the Organic Foods Production Act of 1990 (the "Act").  Pursuant to the regulations promulgated by the Act, organic growers and handlers (including food processors and distributors) must be certified by state or private agencies/organizations under the uniform standards developed by the USDA; however, farmers and handlers who sell less than $5,000 of organic products per year, and retail food establishments that sell organic products but do not process them, are exempt from certification.  In order to label your product as "organic" at least 95% of the contents need to be certified organic.  Products labeled as "made with organic" ingredients must contain at least 70% organically produced ingredients.  Obviously, if you label your product "100% organic" it must be true.  The USDA organic seal may be used only on products that are "100% organic" or "organic".  Fines of up to $11,000 per violation can be levied against any person who knowingly sells or labels a product as organic that is not produced in accordance with the regulations.

Now labeling your product as"natural" is a whole different story.  Up to this point the FDA has refused to define the term "natural", but has noted on an informal statement support for the policy that "nothing artificial or synthetic is included in, or has been added to, the product that would not be expected to be there."  58 Fed. Reg. 2302, 2407 (Jan. 6, 1993).  The USDA, however, has defined "natural" (when applied to meat, poultry or eggs) as a product containing no artificial ingredient or added color and is only minimally processed.  "Minimally processed" means that the product was processed in a manner that does not fundamentally alter the product.  Although there has been much litigation concerning natural labeling, there is no clear standard under the FDA regulations.

If you need assistance navigating or complying with the laws affecting your food or beverage businesses, please feel free to contact our attorneys at Morsel Law.