People nationwide who are against genetic modification of foods are watching the battle underway in California to require that all GM products be labeled. One of the main contentions against the California Right to Know ballot initiative, which will be voted on in November, is that GM labeling would substantially boost food costs for cash-strapped consumers. But a new study shows that the average household’s annual grocery bill would increase by less than $2 if the California initiative passes.

Proposition 37, the Right to Know labeling act, would require that any GM food sold in California after July 1, 2014 have “genetically engineered” conspicuously printed on the package. These foods also couldn’t be labeled as “natural.” In addition, grocery stores would need to display placards next to fruits and vegetables that are genetically modified.  

This would raise expenses for food manufacturers and retailers, which would in turn be passed onto shoppers, according to a coalition of farmers, businesses, grocers and others that have formed the website NoProp37.com. “Economic studies show this would increase food costs for the average family by hundreds of dollars per year—a hidden food tax that would especially hurt seniors and low-income families who can least afford it,” the website asserts.

But a recently released report by Joanna Shepherd-Bailey, PhD, of the Emory University School of Law, proves that’s not true. Shepherd-Bailey, who previously worked on the Economic Research Team at the Atlanta Federal Reserve Bank, analyzed data from eight economic studies, the U.S. Food and Drug Administration, the U.S. Attorney General’s Office, the California Department of Finance and other government agencies to reach her conclusions.

“Consumers will likely see no increases in prices as a result of the relabeling required by the Right to Know Act,” Shepherd-Bailey writes in her Economic Assessment. “At most, the average California household will see annual food expenditures increase by a one-time cost of $1.27 to offset these labeling expenses.”

Shepherd-Bailey says that based on FDA estimates of relabeling expenses associated with other regulations, the average cost for a manufacturer to redesign a label to include the words “genetically engineered” would be $1,104 per product. This represents 0.03 percent of average annual per-product sales, and it’s unlikely that manufacturers will pass such a small cost on to retailers, she says.

For retailers, Shepherd-Bailey says FDA estimates show that the average per-store expense to make GM placards for their produce sections is $2,820, which represents 0.01 percent of an average supermarket’s annual sales. 

Shepherd-Bailey argues that stores are not going to try to recoup the cost of the placards because “empirical studies show that many sellers will not be willing to incur the costs of repricing to offset a trivial, one-time expense.” Even for stores that are tempted to boost prices to pass on the relabeling expense, “empirical studies show that the fear of losing customers in the competitive food industry will be a deterrent to changing prices,” she says.

Proponents of the California Right to Know Act also argue that the legislation will result in more lawsuits, which will cost the state money to defend. Shepherd-Bailey says the annual cost for these lawsuits should be less than $50,000, which translates into about 1 cent for each California resident. In addition, she says state costs to administer the Right to Know Act will likely be less than $1 million, which equals about 3 cents per resident.