The other NRA sets up $1B stick up of gas stations, convenience stores
Americans are spun up on scary stories about the National Rifle Association.
But, there is another NRA to worry about if you appreciate lower prices for gasoline or popcorn at the movies: the National Restaurant Association.
The other NRA represents large and small restaurants, but by hijacking the Food and Drug Administration’s regulation writing process for implementing President Barack Obama’s Patient Protection and Affordable Care Act.
The Food Marketing Institute, a supermarket trade group, estimates that cost of the new rules as more than $1 billion in new menu reporting and labeling burdens.
The restaurant industry had two problems it wanted to solve at the federal level. First, the restaurants wanted to use federal preemption to create national menu-labeling standards, which would free them from the hassle and expense of satisfying the horse blanket of state and local rules for an industry that thrives on uniformity. Already New York City and the state of California had created irksome menu and labeling ordinances.
In its Sept. 7, 2010 letter to the Food and Drug Administration (FDA), the NRA specifically called for the agency to pressure the states into “national uniformity.” Armed with its national standards codified in PPACA, the restaurants did not want any delays.
Second, the NRA wanted to beat back encroachment from the gas stations, convenience stores and supermarkets, which were selling compelling alternates to their fare.
Under the proposed FDA rules, grocery stores and supermarkets, never mentioned in the PPACA, would have to provide precise nutritional information for sheet cakes, by the slice and by the sheet.
This second step would force non-restaurant competitors to compete on a field the NRA designed with more home court advantages than the old Boston Garden’s warped parquet floor.
Consider a supermarket’s soup kettle next to the salad bar. Every day the soup changes depending on what vegetables and meats are going to expire. Even the “same” chicken noodle soup is different every time it’s made because of the same factors.
Yet, the FDA wants the same level of detail as one would get from a Big Mac that has been sold trillions of times, but figured out once and just posted.
The gas stations were a particular target because a business with more than 50 percent of its revenues from motor fuels, the tax definition of a gas station, could deduct capital investments, such as pumps and fuel tanks, over 15 years. But, the doughnut shop across the street was stuck with a 32-year schedule.
An advocate working for the supermarkets and convenience stores told me that early in the development of the PPACA, he met with restaurant industry lobbyists and at the time there was no hint that the stores were going to be part of the law.
One of the ways the NRA pulled it off was to submit comments to the FDA – the entity charged with implementing the law – recommending that the regulations include gas stations and stores, as if they belonged under the new regime, he said.
“NRA absolutely submitted photographs of convenience stores and supermarkets in their packets with rationale for why they should be included in these regulations,” said Lyle Beckwith, a senior vice-president for government relations with the National Association of Convenience Stores. In fact, in one of its comments to the FDA, the NRA included photos of Sheetz, a gas and convenience chain, just to bring the point home.
A fair metric of whether a business is a restaurant would be similar to the one used to decide the definition of a gas station, the insider said. If an establishment, like a Wawa or a Sheetz, generates more than 50 percent of its sales from the sale of ready-to-eat food, then they will comply as a restaurant.
“They know that if you walk like a restaurant and quack like a restaurant, you will be treated like a restaurant,” Beckwith said. “But, the rest of the industry doesn’t.”
Not good enough for the NRA.
In its July 5, 2011 letter to the FDA, the NRA made the case for its preferred standard: 50 percent of the gross floor sales, a ridiculous standard. Then, in the next section of the letter, the NRA complained that the FDA unjustifiably excluded movie theaters.
Next time you drop $15 on popcorn and two sodas, ask your date how they enjoyed the fine dining of a true NRA-approved restaurant experience.
Section 4205 of the PPACA indicates that the menu-labeling rules will apply to restaurants and “similar retail food establishments” with 20 or more locations. To make sure none of the restaurant competitors could escape the reach of the new NRA-inspired rules, the NRA argued in its July 5, 2011 letter that the phrase should include gas stations, convenience stores and food courts or other food service inside an ordinary retail store. FDA accepted and adopted this suggestion.
Piling on, in the letter the NRA cautioned the FDA that any attempt to narrowly define what businesses were actually restaurants or not would “run afoul of the plain language” in the healthcare law.
The chain requirement seems sensible enough on its face, until you consider that the FDA has ruled that all of the nearly 5,000 supermarket members of the Independent Grocer Alliance are members of a chain because they share a logo. Many of the IGA supermarkets are really one-unit operators.
The same rule pulls in thousands of independent gas stations and convenience store franchises, which in every way are separate and distinct businesses, not set up to take on new Obamacare burdens with the ease of a real 20-unit chain.
This rule alone will hurt thousands of the mom-and-pop businesses politicians always promise to protect.
NACS’ Beckwith said the reality of the rule is that gas stations and convenience stores will have to bring in real chain restaurants, such as NRA members: Subways or Dunkin Donuts, to mitigate the burden of the new FDA regulations.
Not only will the FDA rules punish NRA competitors, but they will force gas stations and stores to bring NRA members inside to take over the ready-to-eat business for themselves, he said.
One of the difficulties facing the stores and stations is that the FDA withdrew its “Draft Guidance for Industry: Questions and Answers Regarding Implementation of the Menu Labeling Provisions of Section 4205 of the Patient Protection and Affordable Care Act of 2010,” in January 2011 after the consistent uproar that resulted when it was released in August 2010.
The non-restarants are forced to wait for the FDA to publish its next attempt, but the months drag on and there is no sign that the agency is close.
In the House, there is a bill sponsored by Rep. Cathy McMorris-Rodgers (R.-Wash.), the fourth-ranking leader in the GOP conference, which will straighten out how the FDA implements the PPACA. The bill, H.R. 1249, would clarify that, among other things, restaurants are restaurants and sandwiches packed in a gas station refrigerator are not.
Whether McMorris-Rodgers’ bill becomes law or not may hinge on whether it is viewed as relief for businesses caught flat-footed as the NRA hooked them up or if it looks like a healthcare reform cutout.
There is still a split on Capitol Hill among opponents of PPACA. While some look for every chance to pick away at the president’s landmark law, others are afraid to fix the most hated parts of the law, lest these fixes release so much of the built-up pressure for complete repeal that the bulk of the legislation remains—forever.
Supporters of the bill would be better off framing this as a case of the government picking winners and losers, which should be the magic words.