Food Labeling; Nutrition Labeling of Standard Menu Items in Restaurants and Similar Retail Food Establishments

Federal food-labeling laws enacted in the early 1990s exempted restaurants from nutrition-labeling requirements, but required the Food and Drug Administration (FDA) to define the term “restaurants or other establishments” in implementing the exemption.¹ In the Patient Protection and Affordable Care Act² (ACA), Congress expanded nutrition-labeling requirements to certain “restaurant[s] or similar retail food establishment[s] . . . with 20 or more locations,”³ again without defining “similar retail food establishment” or “locations.” Recently, the FDA finalized a menu-labeling rule that settles on a broad definition of “similar retail food establishment” to cover any establishment that sells “restaurant-type food.”⁴ Although the final rule’s broad definition of “similar retail food establishment,” which also expressly exempts schools,⁵ is legally permissible, the FDA acted on legally uncertain ground in exempting airplanes, trains, and food trucks through a surprising definition of “location.”⁶

On March 23, 2010, the ACA was signed into law, bringing federal nutrition-labeling requirements to restaurants for the first time.⁷ Section 4205 of the ACA⁸ requires certain “restaurants and similar retail food establishments . . . with 20 or more locations” to provide specified nutrition information for “standard menu item[s].”⁹ The ACA requires covered establishments to disclose the calorie content “in a clear and conspicuous manner” directly on the menu along with “a succinct statement concerning suggested daily caloric intake.”¹⁰ The law also requires that covered establishments make additional nutrition information — such as sodium content — available in written form, and the menu must include a notice that this additional nutrition information is available upon request.¹¹ The ACA set a deadline of March 23, 2011, for the FDA to issue implementing regulations.¹²

On July 7, 2010, the FDA solicited comments on how to implement the menu-labeling requirements.¹³ Although still receiving comments, the FDA published draft guidance to the industry in August 2010.¹⁴ In the draft guidance, the FDA interpreted the relevant portions of section 4205 to have gone into effect immediately upon enactment, but elected not to initiate any enforcement action until after a final rule had been promulgated.¹⁵ The draft guidance broadly interpreted “similar retail food establishments” to include entertainment venues like movie theaters, cafes and food courts in grocery stores, and “transportation carriers (e.g., airlines and trains).”¹⁶ It did not mention schools or define “locations.”

The FDA withdrew the draft guidance on January 25, 2011,¹⁷ and issued its proposed menu-labeling rule for comments on April 6, 2011.¹⁸ The proposed rule identified the statutory term “similar retail food establishments” as ambiguous and proposed to define an establishment as similar to a restaurant (and therefore covered by the rule) “if it offers for sale restaurant or restaurant-type food and its primary business activity is the sale of food to consumers.”¹⁹ The proposed rule considered the sale of food to be an establishment’s “primary business activity” if the establishment either presented itself to the public as a restaurant or used greater than fifty percent of its gross floor area for the “preparation, purchase, service, consumption, or storage of food.”²⁰ Under the primary-business test, grocery stores that sold restaurant-type food would “generally” be covered by the rule, but movie theaters, trains, planes, schools, and hospitals would “generally” be exempted.²¹

On December 1, 2014, the FDA issued a final menu-labeling rule.²² Abandoning the primary-business test, the final rule applies to any establishment (including movie theaters) with 20 or more locations that “sell[s] restaurant-type food.”²³ The rule exempts schools from the definition of “similar retail food establishment.”²⁴ Where the statute applies to establishments with “20 or more locations,”²⁵ the final rule defines “location” as “a fixed position or site,” thus exempting trains, airplanes, and food trucks from the menu-labeling requirements.²⁶ Establishments must comply with the new rules by December 1, 2015.²⁷

While the menu-labeling rule’s expansive reach has drawn popular criticism,²⁸ the agency’s broad definition of “similar retail food establishment” is a permissible interpretation of the ACA, even though it includes movie theaters and excludes schools. However, excluding airplanes, trains, and food trucks — under a definition of “location” that was introduced for the first time in the final rule — may be legally unsound as an impermissible interpretation and as a violation of notice-and-comment rulemaking procedures.

The FDA’s interpretations of the statutory terms “similar retail food establishment” and “location” are governed by the two-step analysis laid out in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc.²⁹ First, a reviewing court determines whether a statutory term is ambiguous, and therefore open to agency interpretation, by looking to “whether Congress has directly spoken to the precise question at issue.”³⁰ “Similar retail food establishment” is ambiguous under Chevron step one. Congress did not define the term in the statute. In a comment, the National Association of Theatre Owners argued that the language of the ACA indicates that Congress “clearly” intended to reach only “chain retail food establishments,” which “no one would associate with movie theaters and other establishments where the sale of food is incidental to or quite separate from the establishment’s primary purpose.”³¹ However, Congress’s choice to include the phrase “or other similar retail food establishment” indicates an intention to reach more broadly than just “restaurants,” delegating to the FDA the task of defining criteria by which an establishment can be judged to be “similar” to a restaurant. The ACA’s language is in fact more vague than the legislation in California and New York City on which it was modeled. Those jurisdictions were more explicit about defining establishments that are covered (New York City) or exempted (California) under their calorie-labeling requirements.³²

If a court determines that “the statute is silent or ambiguous with respect to the specific issue,” it proceeds to Chevron step two and asks “whether the agency’s answer is based on a permissible construction of the statute.”³³ Here, the FDA has developed criteria to define “similar retail food establishment” that are permissible under Chevron step two. The FDA’s construction has precedent: the Nutrition Labeling and Education Act of 1990³⁴ (NLEA), in defining what establishments were exempt from nutrition-labeling requirements, had included among restaurants “other establishments in which food is served for immediate human consumption or which is sold for sale or use in such establishments.”³⁵ The ACA explicitly amended the NLEA to remove this exemption. The menu-labeling rule defines “similar retail food establishments” to include establishments, like movie theaters, that are like restaurants in that they offer prepared food that is “ready for human consumption”³⁶ and eaten on the premises or very soon after leaving.³⁷ The menu-labeling rule thus covers establishments for the same reasons that they were included in the NLEA’s exemption.

Additionally, the FDA’s decision to exclude schools is permissible. The FDA responded to a comment advocating including “a school food service contractor that uses a central kitchen or cooks the same food for 20 schools” as a covered establishment under the rule.³⁸ Although the FDA’s previous regulations implementing the 1990 NLEA included schools in the category of restaurants and other similar establishments that were then exempt from labeling requirements, the FDA can also choose to treat schools separately from restaurants now that restaurants must label their menus.³⁹ In interpreting the ambiguous ACA term “similar retail food establishments” to exclude schools, the FDA found that “the traditional and long-standing role” of the Department of Agriculture (USDA) in regulating school meals was a sufficiently reasonable basis on which to decide to exclude food vendors in schools.⁴⁰ The determination is the same even though the ACA requires the FDA to promulgate regulations to define covered establishments.⁴¹ While in Massachusetts v. EPA⁴² the Court precluded an agency from relying on statutorily irrelevant factors — like the USDA’s authority over school meals — in refusing to exercise rulemaking authority under an unambiguous statute,⁴³ the ambiguity of “similar retail food establishments” gives the FDA the authority to look to factors outside of the statute and decide to exclude schools from the menu-labeling rule.⁴⁴

The FDA’s decision to exclude airplanes, trains, and food trucks, however, is legally questionable. The final rule suggested for the first time that the statute’s application to establishments with “20 or more locations” is ambiguous and defines “location” as “a fixed position or site,”⁴⁵ thereby exempting airplanes, trains, and food trucks. The FDA introduced its definition of “location” in response to a comment asking for clarification about whether multiple locations of the same establishment in the same mall would count toward the “20 or more locations” that make a chain subject to the rule.⁴⁶ The definition is also in response to a comment seeking clarification that “mobile facilities (such as food trucks),” which were not mentioned in the proposed rule, would be covered if they had twenty or more locations.⁴⁷ With no legislative history relevant to the question of how to understand “location” in these examples, the FDA concluded that “location” required further definition, suggesting that it is an ambiguous statutory term under Chevron step one. The FDA consulted dictionaries to conclude that “the common meaning of the word ‘location’ involves a specific or fixed position on land or portion of land.”⁴⁸ Thus, the rule counts two storefronts in the same mall as two locations, but does not cover “food facilities that do not have a fixed position or site,” including trains, airplanes, and food trucks.⁴⁹

Even if uncertainty about how to count multiple storefronts within the same mall supports the FDA’s Chevron step one conclusion that “location” is ambiguous, the FDA’s construction to exclude mobile sites is likely impermissible under Chevron step two. When a court evaluates the reasonableness of an agency’s interpretation under Chevron step two, it examines the interpretation’s “‘fit’ with the statutory language as well as its conformity to statutory purposes.”⁵⁰ While “location” may be ambiguous at the margins where two stores are operating on opposite ends of a mall, the FDA’s construction of “location” as tied to a tract of land is inconsistent with the statutory purpose of section 4205 of the ACA, which is to define a unit by which to count the number of franchises in a chain. Although airplanes, trains, and food trucks move their locations, they have unique, countable locations at any given moment in time.⁵¹ The result of the FDA’s construction is that a chain that operates nineteen storefronts and one food truck, or serves food on hundreds of airplanes, would not be covered by the rule, but a chain that operates twenty storefronts in the same mall would be. This construction focuses on a statutorily irrelevant fac-tor — whether a location can move — to undermine the statute’s purpose, which is to provide consumers with nutrition information when they order restaurant-type food.

Not only is the FDA’s definition of “location” vulnerable under Chevron, but it is also procedurally vulnerable. The Administrative Procedure Act (APA), which governs notice-and-comment rulemaking,⁵² requires that the final rule an agency adopts be the “logical outgrowth” of the rule proposed.⁵³ The logical outgrowth requirement is an interpretation of the APA requirement that agencies provide in a notice of proposed rulemaking “either the terms or substance of the proposed rule or a description of the subjects and issues involved.”⁵⁴ This requirement serves the principle of providing “fair notice.”⁵⁵ Public comments are likely insufficient to provide fair notice,⁵⁶ especially here, where the two comments about “location” raised questions for clarification and did not propose definitions of “location.”⁵⁷ The FDA’s decision to define “location” for the first time in a final rule fails the logical outgrowth test. Neither the draft guidance nor the proposed rule mentioned food trucks specifically, and the public could not have been on notice that the agency would treat food trucks separately from restaurants (under the primary-business test, food trucks would presumably be covered). Similarly, while the public was on general notice that whether airplanes and trains would be included within the definition of “similar retail food establishment” was at least up for debate, the public had no fair notice of, and thus no meaningful opportunity to comment on, the wisdom of using the definition of “location” to exclude those businesses. By contrast, the public had fair notice that the agency was considering whether “similar retail food establishments” should include movie theaters and exclude schools because both of those establishments were discussed in the proposed definition of “similar retail food establishment.”⁵⁸ The public was therefore on notice that movie theaters could be included or excluded from the definition of “similar retail food establishment,” and their inclusion is a “logical outgrowth” of the proposed rule.

A large buttered popcorn can pack up to 1,200 calories,⁵⁹ which is 60% of the total daily suggested calorie intake for an adult.⁶⁰ The FDA acted legally in bringing this information to consumers at the concession stand — and in choosing to leave school meals to the USDA. But for vendors in airplanes, trains, and food trucks, the FDA should open up its definition of “location” to public comment to vet the legality and wisdom of failing to disclose nutrition information to their customers.