Soda lobby, others sue to block Philadelphia's soda tax

NEW YORK – The U.S. soda lobby and small businesses are suing to block Philadelphia's soft drinks tax, marking the latest clash between the industry and public officials seeking to boost revenue and combat health epidemics like obesity and diabetes.

The American Beverage Association (ABA), which represents Coca-Cola Co and PepsiCo Inc, kicked off a broadly-anticipated legal challenge on Wednesday, asking a Pennsylvania judge to enjoin and declare invalid a new soda tax due to take effect in January, according to documents filed in Philadelphia County Court.

In June, Philadelphia became the largest U.S. city to approve a volume-based tax of 1.5-cent-per-ounce on sugar sweetened beverages, including sodas and juice drinks with less than 50-percent juice.

Voters in San Francisco and at least three other places will vote in November on whether to impose similar levies.

ABA and others say the tax violates state law, will "meaningfully diminish the everyday purchasing power of Philadelphia residents," and disadvantage small businesses, according to court documents.

The tax also violates the terms of a federal nutrition assistance program that sends funds to states, said plaintiff counsel Shanin Specter of Kline and Specter.

"They end up getting a large chunk of this revenue from the people who can afford it the least," Specter said in a phone interview.

Health advocates are increasingly focused on sugar, which they said is linked to obesity and diabetes.

City officials defended their authority to institute the tax, which is expected to add about $1 to the cost of a 2-liter bottle of soda and generate over $90 million a year which they plan to spend on pre-kindergarten programs, community schools and reinvestment in parks and recreation centers.

"While it is repugnant that the multi-billion-dollar soda industry would try to take away these educational and community programs from the hundreds of thousands of Philadelphians who need them, we were not surprised by their lawsuit given the ten million dollars they have already spent opposing the tax," said Mayor Jim Kenney in a statement.

"I have no doubt we'll be successful in defeating the lawsuit."

This is not the ABA's first attempt to stop such a measure. In 2013, the group won a lawsuit blocking a New York City plan to keep large sugary drinks out of restaurants. It is in the midst of a legal battle with San Francisco, where lawmakers want to require warning labels on advertisements like billboards.

ABA has said soda is being unfairly singled out.

Other plaintiffs include City View Pizza, the Pennsylvania Beverage Association and John's Roast Pork. (Reporting by Chris Prentice; Editing by Simon Webb and Andrew Hay)