Food & Beverage

A Victory for Drinks Industry as NY City Halts Soda Ban?

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Just hours after a New York State Supreme Court Justice invalidated New York City's regulation to ban the city's food services businesses from serving sugary drinks larger than 16 ounces, the American Beverage Association (ABA) and other business groups opposing the ban declared victory.

"The court ruling provides a sigh of relief to New Yorkers and thousands of small businesses in New York City that would have been harmed by this unpopular ban," the ABA said in a statement. "With this ruling behind us, we look forward to collaborating with city leaders on solutions that will have a meaningful and lasting impact on the people of New York City."

The ABA was just one of several organizations that opposed New York City Mayor Michael Bloomberg's proposal, teaming up with the $61 billion dollar a year soft drink industry to challenge the ban for being inconsistent in its application and claiming that the city's health board had sidestepped the city council's legislative authority in approving the ban.

"This is a great victory, particularly for thousands of restaurant operators and industry suppliers serving New York City who would have experienced financial hardships had the ban been enacted," said Dawn Sweeney, President and CEO of the National Restaurant Association. "We are extremely pleased that the judge recognized that the Board of Health exceeded its authority when it initially passed the ban."

Judge Halts NYC Soda Ban
Judge Halts NYC Soda Ban

In a press conference Mayor Bloomberg fired back.

"Limiting the size of sugary beverages is consistent with the Board of Health's tradition and its mission. And we believe that ultimately, the courts will find it consistent with the law," the Mayor told reporters as he vowed to appeal the decision. "We're confident that today's decision will ultimately be reversed, too."

One of several issues that opponents to the regulation raised was which businesses were impacted and the cost of compliance. Restaurants, fast-food chains, movie theaters, and delis would have had to change their practices tomorrow, while convenience stores, drug stores, and super markets would not.

Those within the ban's scope would have had to not only change the size of their cups and glasses, but train employees and educate customers on the new rules. Businesses that were not planning to comply could expect the imposition of $200 fines as early as June.

(Read More: Is New York Going Too Far in Banning Big Sugary Drinks?)

While some that would have been impacted are larger, national chains, many are also small mom and pop shops that claim procedural compliance would hurt the bottom line. These smaller shops also expressed concern that regular customers might have started flocking to places where larger serving sizes were available, which would ultimately have impacted overall sales.

Dunkin Donuts had been preparing to comply with the new regulation, printing up flyers explaining how the ban would impact the menu and change the customer's experience. While 7-11 told CNBC that it had not ordered extra cups in anticipation of the ban on other retailers.

With respect to the financial burden the regulation would place on business, Bloomberg said: "I don't think it'll hurt your bottom line, but even if we did, we're talking about lives versus profits, and a diminimist change in profits. Nobody can make the case that serving 16 ounce cups versus 32 ounce cups would cost anybody any appreciable amount of money. I would argue that it doesn't have to cost you anything, but regardless we all have an obligation to try and do what we can to help each other."

In his ruling on Monday State Supreme Court Justice Milton Tingling ruled that the new regulation was "arbitrary and capricious" and declared it invalid.

While Tingling's ruling will keep the ban from being implemented tomorrow, the fight is far from over."We plan to appeal the decision as soon as possible, and we are confident the Board of Health's decision will ultimately be upheld," said Michael A. Cardozo, Corporate Counsel for the New York City Law Department.