September 7, 2010

Nutrition Labeling of Single-Ingredient Products

Proposed Rule
Summary

Score: 38 / 60

Additional details
Agency
Department of Agriculture
Regulatory Identification Number
0583-AC60
Agency Name
Department of Agriculture
Rule Publication Date
12/18/2009
Comment Closing Date
03/10/2010

RULE SUMMARY

The Food Safety and Inspection Service (FSIS) is issuing this supplemental proposed rule that, if finalized, will amend the federal meat and poultry products inspection regulations to require nutrition labeling of the major cuts of single-ingredient, raw meat and poultry products, unless an exemption applies.

 

METHODOLOGY

There are twelve criteria within our evaluation within three broad categories: Openness, Analysis and Use. For each criterion, the evaluators assign a score ranging from 0 (no useful content) to 5 (comprehensive analysis with potential best practices). Thus, each analysis has the opportunity to earn between 0 and 60 points.

Criterion Score

Openness

1. How easily were the RIA , the proposed rule, and any supplementary materials found online?
A RIN and keyword search on regulations.gov return the Federal Register notice for this regulation at the top of the list. The RIA is a section in the preamble. The proposed rule, appendices to the RIA, and peer reviews of the RIA are available five clicks from the USDA home page. The RIA section of the preamble includes a link to this location as well.
5/5
2. How verifiable are the data used in the analysis?
Many data discussed in the RIA section of the Federal Register notice are sourced to consultant reports or databases (eg, "IRI scanner data" or the RTI International report) that may be difficult for the non-specialist reader to obtain, since no links are provided. Meat/poultry consumption data in appendix are sourced, though not always linked.
2/5
3. How verifiable are the models and assumptions used in the analysis?
An extensive list of references includes many major peer-reviewed articles. Sources are cited but not linked.The RIA itself was peer reviewed by two economists from other federal agencies; reviewers' comments and the agency's responses are on the agency website. Some key assumptions about diet and use of labeling being directly proportional to prevalence of labeling are not supported.
4/5
4. Was the analysis comprehensible to an informed layperson?
Not too much jargon, and not too many acronyms. However, horrible exposition hides analysis that is often very good. The analysis is very tedious to follow because it verbally takes the reader through step-by-step calculations from the very beginning, culminating in results for that section. It would have been much easier to follow if it presented results first, then explained how they were derived, or if it had included a good executive summary that presented all results in one place and explained what is important and why. Many of the "readability" criticisms offered by the second peer reviewer still apply to this version. As written, the analysis requires some background in economics to understand fully.
3/5

Analysis

5. How well does the analysis identify the desired outcomes and demonstrate that the regulation will achieve them?
4/5
Does the analysis clearly identify ultimate outcomes that affect citizens’ quality of life?
Reduction in deaths from cancer and heart disease that result from consumption of fat, saturated fat, and cholesterol.
5/5
Does the analysis identify how these outcomes are to be measured?
Reduction in premature deaths are measured and also monetized. The RIA claims that this underestimates benefits because some consumers may use the information to choose more enjoyable meals while keeping their level of health risk constant; this makes these consumers better off even though their health risks have not changed. This effect is not measured, even though it may be a significant source of overall benefits to consumers.
3/5
Does the analysis provide a coherent and testable theory showing how the regulation will produce the desired outcomes?
Better information leads to better choices. The provision of nutritional information allows consumers to make healthier food choices, and many choose to do so because they care about their health.
5/5
Does the analysis present credible empirical support for the theory?
The RIA cites extensive research showing that consumers make healthier food choices when they have access to nutritional information; it also cites research on the effectiveness of providing that information on labels.
5/5
Does the analysis adequately assess uncertainty about the outcomes?
The RIA notes that it is not possible to distinguish benefits from labeling vs. making informational materials available at the point of sale. Timing of lives saved is a key uncertainty; the RIA calculates benefits under three different scenarios that assume lives are saved sooner or later. "FSIS estimates that for the supplemental proposed rule, the discounted average present value of benefits over a 20-year period using a 7 percent discount rate will be $2.2 billion and using a 3 percent discount rate will be $3.7 billion, using a composite of three scenarios for the effectiveness of nutrition labels and three values for reducing a premature death."
4/5
6. How well does the analysis identify and demonstrate the existence of a market failure or other systemic problem the regulation is supposed to solve?
4/5
Does the analysis identify a market failure or other systemic problem?
The basic market failure is information asymmetry. The agency claims that consumers have a sub-optimal amount of nutritional information about the affected products: "FSIS believes that less than the optimal amount of nutrition information is being provided because consumers cannot independently determine the nutritional qualities of the meat and poultry products affected by the rule, thus leading to insufficient incentives for processors and retailers to reveal the nutrient content of these products."
5/5
Does the analysis outline a coherent and testable theory that explains why the problem (associated with the outcome above) is systemic rather than anecdotal?
Producers may not have an incentive to provide nutritional information when it is a negative attribute. The discussion cites a paper that reaches this conclusion but does not explain the logic in any depth.
3/5
Does the analysis present credible empirical support for the theory?
The RIA cites statistics showing less than 60 percent of stores currently use voluntary nutrition labeling for ground/chopped products and major cuts. This is clearly evidence that the information is not supplied in many cases, but by itself it does not prove that USDA's theory about why the information is not supplied is true. There is no empirical information demonstrating systematic bias in favor of less healthy cuts.
3/5
Does the analysis adequately assess uncertainty about the existence or size of the problem?
The problem is presented as a certainty. The size of the problem depends on current level of voluntary compliance, and the analysis adjusts for that. No other uncertainties about existence or size of the problem are discussed. Uncertainty about whether consumers would simply choose tastier cuts is acknowledged but not analyzed in any depth.
3/5
7. How well does the analysis assess the effectiveness of alternative approaches?
4/5
Does the analysis enumerate other alternatives to address the problem?
The RIA considers continuing the current voluntary program; mandated nutrition information for ground/chopped products, major cuts, and nonmajor cuts; and various combinations of mandatory and voluntary alternatives for ground, major, and nonmajor cuts. The chosen alternative requires labeling for ground/chopped products and point of sale information for major cuts, but not nonmajor cuts.
5/5
Is the range of alternatives considered narrow (e.g., some exemptions to a regulation) or broad (e.g., performance-based regulation vs. command and control, market mechanisms, nonbinding guidance, information disclosure, addressing any government failures that caused the original problem)?
This is a moderate range of alternatives; most are variations on what should be mandated and how. Other alternatives, such as consumer education, are not analyzed.
3/5
Does the analysis evaluate how alternative approaches would affect the amount of the outcome achieved?
Ultimate outcomes (lives saved) are estimated for each alternative.
5/5
Does the analysis adequately address the baseline? That is, what the state of the world is likely to be in the absence of federal intervention not just now but in the future?
Voluntary nutrition labeling already occurs on 68 percent of ground or chopped products and 54.8 percent of major cuts. The main cost and benefit estimates do not adjust for this, but adjusted figures are presented in appendices and a table in the final section "scales down" the cost and benefit estimates to account for these percentages. The baseline assumes information provision will not improve in the absence of this rule.
4/5
8. How well does the analysis assess costs and benefits?
4/5
Does the analysis identify and quantify incremental costs of all alternatives considered?
It includes extensive and detailed descriptions of additional costs to be incurred by meat/poultry processors and retailers for each option considered.
5/5
Does the analysis identify all expenditures likely to arise as a result of the regulation?
The estimates appear to be pretty thorough, and they are presented in enough detail that anyone with better or more recent data could see how different expenditure estimates would affect the results.
5/5
Does the analysis identify how the regulation would likely affect the prices of goods and services?
Increased costs of labeling average out to one half of one cent per pound, compared to meat prices that can easily exceed $2/pound. The cost will likely be passed through to consumers because demand for meat is inelastic. So the costs create a price effect, but it's small. Large consumer switching to healthier cuts may increase these prices, but this is not addressed.
3/5
Does the analysis examine costs that stem from changes in human behavior as consumers and producers respond to the regulation?
The analysis assumes total meat and poultry consumption would not change, because there is no research showing that nutrition labeling reduces consumption. Consumers are assumed to substitute healthier for less healthier meat and poultry.
3/5
If costs are uncertain, does the analysis present a range of estimates and/or perform a sensitivity analysis?
The appendix presents a formal uncertainty analysis and estimates cost distributions for each alternative. All values used in the RIA section, however, are single point values, and there is no discussion of the uncertainty analysis in the main text beyond a statement that it was done.
3/5
Does the analysis identify the alternative that maximizes net benefits?
Net benefits are calculated for each alternative. The text of the RIA does not explicitly say which alternative maximizes net benefits, but the reader can pick it out from the table.
4/5
Does the analysis identify the cost-effectiveness of each alternative considered?
A cost-effectiveness analysis of the different alternatives is included. The RIA also performs a break-even analysis of the chosen alternative.
5/5
Does the analysis identify all parties who would bear costs and assess the incidence of costs?
Costs to businesses are calculated, but the analysis cites research showing the demand for meat is inelastic and concludes that most of the costs will be passed on to consumers. Distributional issues arise because all consumers will bear costs, but 25 percent of women and almost half of men will not use the information; this is ignored. Costs are somewhat lower because of small business exemptions.
4/5
Does the analysis identify all parties who would receive benefits and assess the incidence of benefits?
The analysis correctly ascribes benefits only to those consumers who are expected to use nutritional information; there is no other discussion of incidence of benefits.
3/5

Use

9. Does the proposed rule or the RIA present evidence that the agency used the analysis?
The decision to require labels for ground or chopped products vs. point of sale info for major cuts seems to reflect differential consumer benefit. It is based on perception that nutrients in each type of major cut are similar, but fat content of ground or chopped meat can vary widely and is more difficult for consumers to ascertain. The results of the RIA, however, do not seem to back up this logic. The RIA seems to play little role in USDA's decision, beyond providing evidence that there are benefits to consumers.
2/5
10. Did the agency maximize net benefits or explain why it chose another alternative?
Net benefits of the different alternatives are calculated. The chosen alternative does not maximize net benefits, maximize benefits, minimize cost per life saved, or minimize costs. Thus, it is not clear how, or whether, the detailed calculations for each alternative had any effect on the selection of the alternative. The description of the rationale for the regulation has a strong tone of "Consumers must be given this information, regardless of cost." Legal standards that define "misbranding" and a prior decision to consider making labeling mandatory if a significant number of stores do not comply voluntarily seemed to drive the decision more than the results of the regulatory analysis. Preamble notes that the RIA estimates the rule will produce net benefits, but it does not claim to maximize net benefits. The preamble explains the USDA's reasons but does not explicitly explain why USDA chose not to maximize net benefits.
4/5
11. Does the proposed rule establish measures and goals that can be used to track the regulation's results in the future?
No explicit measures or goals were established. FSIS will sample and test ground meat and poultry to see if fat content matches claims on label. Presumably USDA would like to see 100% compliance, which could be verified via surveys similar to past ones mentioned in the preamble. Actual effects of the rule on diet could be estimated ex post to track outcomes.
1/5
12. Did the agency indicate what data it will use to assess the regulation's performance in the future and establish provisions for doing so?
The is no explicit discussion of data USDA would collect to assess outcomes. USDA has already done compliance surveys in the past. The scholarly research cited suggests that it would be possible to gather data to test effects of this regulation on diet.
1/5
 
Total 38 / 60