In Soda-Ban Battle, Starbucks Beats Mayor Bloomberg

Susan Berfield, Bloomberg Business Week, March 11, 2013

New York Mayor Michael Bloomberg seemed confident that limiting the sale of sugary drinks larger than 16 ounces would be good for city residents'  health and that such a ban could be adopted nationwide. That was on Sunday. On Monday, a state judge blocked the rule, just a day before it was supposed to go into effect. The challenge was brought by the American Beverage Association (otherwise known as Big Soda) and others. The judge called the rule arbitrary and capricious. "The loopholes in this rule effectively defeat the stated purpose," New York Supreme Court Justice Milton Tingling wrote.

Many smaller businesses, as well as McDonald's (MCD) and Dunkin' Donuts (DNKN), had been prepared to follow the new restrictions. Not Starbucks (SBUX), though.

The company, which was not part of the lawsuit, made it clear last week that amid confusion and uncertainty surrounding the new rule, it wasn't making any immediate menu changes. A spokeswoman said that many of Starbucks's milky and custom-made drinks might be exempt. The lawsuit was already underway. There would be a three-month grace period before the city would impose fines. Why rush?

When Bloomberg (who is founder and majority owner of Bloomberg Businessweek parent Bloomberg LP) was asked about this on Sunday's Face the Nation, he said: "No. 1, that's ridiculous. They can figure out—Starbucks knows how to market things, knows how to package things. They can change instantly when it's in their interest to do so. This is in the country's interest."

The most recent official word comes from Michael Cardozo, corporation counsel of New York City's law department: "We plan to appeal the decision as soon as possible, and we are confident the Board of Health's decision will ultimately be upheld." Starbucks didn't immediately respond with a comment.

Berfield is an associate editor for Bloomberg Businessweek. Follow her on Twitter: @susanberfield

New York City Cannot Ban Sales of Large Sodas: Judge

Joseph Ax, Reuters, March 11, 2013

NEW YORK (Reuters) - A judge on Monday invalidated New York City's plan to ban large sugary drinks from restaurants, movie theaters and other establishments, one day before the new law was to take effect.

State Supreme Court Justice Milton Tingling in Manhattan ruled the new regulation was "arbitrary and capricious" and declared it invalid, after the American Beverage Association and other business groups had sued the city challenging the ban.

The decision was a blow to Mayor Michael Bloomberg, who had touted the ban as a way to address what he has termed an obesity "epidemic." But beverage manufacturers and business groups had called the law an illegal overreach that would infringe upon consumers' personal liberty.

A spokesman for Bloomberg's office was not immediately available for comment.

The ban had prohibited the city's food-service businesses from selling sugary drinks larger than 16 ounces, though city officials had said they would not begin imposing $200 fines on offending businesses until June.
Bloomberg has made improving the health of New Yorkers part of his legacy. The soda ban had followed similar crackdowns on fat, sugar and salt and a smoking ban that has been replicated around the world.

In anticipation of the soda ban, Bloomberg on Monday released new data tying sugary drinks to the city's fattest neighborhoods. The new city study that showed nine of the neighborhoods with the 10 highest obesity rates were also the highest in sugary drink consumption. At the other end, the three least obese neighborhoods were also the lowest in sugary drink consumption.

Companies like Coca-Cola, PepsiCo and McDonald's Corp had argued that the ban was inconsistent in its application, since it would still permit grocery and convenience stores to sell the drinks in any size.