Who’s behind Oakland’s mysterious sugar tax sign?

A wrinkled orange sign sticks to the glass door of a supermarket fridge in East Oakland. Fixed in front of rows of red, green and yellow sodas it reads: “NEW, Sugar-Sweetened Beverage Tax … is now in effect and, as intended by law, is being directly passed through to the shoppers.”

The message on the sign is clear: Your soda may be more expensive because of a new tax. But who put the sign there and what they’re hoping to accomplish—well, that’s something of a corner store mystery.

Since the Sugar-Sweetened Beverage Tax took effect July 1, 2017, raising the price of sodas sold in Oakland, the sign has appeared in supermarkets and convenience stores—both independent and chains—across the city. No company or political group’s logo is listed on the sign, and owners of several stores displaying the signs say they didn’t put them up. But people have their theories. Maybe it was city officials? Maybe it was a soda lobbying group? Perhaps it was one of the soda delivery guys?

Whoever it was, Nori Grossman, a nutritionist with the Alameda County Public Health Department, is sure of one thing: “It’s misleading,” she said.

“The part that was misleading was when they said ‘as intended by law being directly passed through to the shoppers’—that’s not true,” she continued.

According to the language of the ordinance, the tax, approved by voters in 2016, charges one cent per ounce “on the privilege of Distributing Sugar-Sweetened Beverage products in the City.” In other words, the company that brings soda into Oakland—the distributor—pays the tax.

But soda tax opponents had argued in 2016 that eventually, soda buyers would eat—or in this case, drink—the new charge. Distributors would pass the cost of the tax to the retailer, who would eventually pass it on the consumer, they predicted. “If you have a new cost, you have to make up that cost,” Joe Arellano, the spokesperson for the campaign against the tax, told Oakland North in 2016.

The mystery surrounding the sign started in 2017 when Grossman spotted the orange display at several stores: a chain store near Lake Merritt and a couple of corner stores in East Oakland. Frustrated by what she calls “devious” language, Grossman called the leaders of the Sugar Freedom Project, a group that’s been going door to door to educate people about the tax and how the revenue from it is being used for community projects, like new drinking fountains in Oakland public schools.

Members of the project immediately started investigating. “We wanted to make sure there was data to show this was a concerted effort,” said Francis Calpotura, the founder of the Sugar Freedom Project. According to Calpotura, there are an estimated 450 soda retailers in Oakland. Members visited 30 stores, and 15 of them had the signs. According to the results of their informal survey, 14 of those stores were located in the “flats,” the section of Oakland below MacArthur Boulevard.

As for who put the signs up, that’s still a head-scratcher. Calpotura’s group found no “smoking gun,” he said.

But there is one key lead in this case, and that has to do with Save Mart Companies, which operates stores under the name of Save Mart, S-Mart Foods, FoodMaxx and Lucky. Last year, Grossman spotted one of the signs at Lucky on 18th Street, one of the company’s four stores in Oakland.

Speaking by phone on October 5, Save Mart Companies spokesperson Stacia Hill Levenfeld said her company’s art department made the signs. She said that Save Mart staff put up the posters last summer when the tax first took effect to educate the public about the tax and to explain why customers are paying more for soda. “In practice, when a tax is charged to a distributor, it is passed to the retailer and passed on again to the consumer,” said Levenfeld.

But this is where the lead grows cold: According to Levenfeld, Save Mart staff took down the posters in their stores around September 2017. Yet signs displaying the same text and artwork are still on display in independent grocery stores—which are not part of the Save Mart chain—all across Oakland.

Levenfeld said her company has no idea how the signs ended up in other stores. In fact, she said staff at her company were “completely unaware of these other signs” until Oakland North brought them to their attention.

But if you look around Oakland, you’ll see them. They’ve been spotted at Lafranchi Liquor in Laurel. They’re still up at Super Discount in Fruitvale. And at Royal Foods Super Market in Eastmont, the store owner, Yunes Musaed, said the signs were put up not once but twice. Musaed, unlike other store owners, has a pretty good idea of who did it: “the 7UP man.”

“The first time he put the sign, the 7UP man, he said we have to stick this right here: one by the register, one by the door,” said Musaed, referring to the man who drops off his soda orders from Dr. Pepper Snapple Group, which owns 7UP.

Musaed does not know the man’s name, and he doesn’t recall exactly when the man dropped off the sign. He only remembers that he was told to keep the sign up to answer customers’ questions. “If the customers say, ‘Why you charge $1.35 when it say $.99?’—the pre-printed price on certain soft drinks—The 7UP man said ‘Just show them the sign,’” he recalled.

A spokesperson from the national Dr. Pepper Snapple Group denies that the company is involved in putting up the sign. When told about the store owner’s account, Vicki Draughn, vice president of corporate affairs, wrote via email: “I’m not aware of that being the case.”

Oakland North contacted three local offices associated with the Dr. Pepper Snapple Group to see if the flyers might have been posted by regional delivery drivers without the knowledge of the parent company. People at two didn’t return our calls. A staff person at the third, a facility in San Leandro, said the only person who would know is on vacation.

Musaed said he displayed the sign until Grossman, who as part of her job promoting the sale of healthy foods routinely visits corner stores like Royal Foods, warned him against it. “I told him to take it down,” said Grossman, adding that she told Musaed that what the sign said was untrue because distributors pay the tax.

But Musaed feels like he’s the one who pays the tax. He said distributors charge him for the cost of the soda tax. It’s a line item on his bill when they drop off the products, so he must pay for it before the soda is sold.

“When they come the first time, the first bill I bought $2,000 worth of stuff, of 7UP product,” said Musaed. “Like about $650 to $700 was added for sugar tax. They say we have to pass it on to the customers. We have to charge it to the customers.”

That’s not always something Musaed feels he can do. Sometimes suggested soda prices are printed on the bottle label, and customers get confused and angry if he charges them a higher price, so he doesn’t charge the tax on those items. He also doesn’t charge people using Electronic Benefit Transfer (EBT), used in California to distribute public assistance to help low-income residents buy food under the program CalFresh. Musaed said EBT benefits cannot be used to pay the soda tax, so for those customers—which include many of his regulars—he does not charge the tax, absorbing the cost.

Musead noted that the new charge on his bill is the same for all distributors of sweetened drinks, not just Dr. Pepper Snapple Group—other companies like PepsiCo have the same line item. Now, he said, he feels like he’s just working for the distributors. “I have to pay for the sugar tax. We’re not making any profit. It’s like we’re working for them,” he said. But refusing to buy from the distributors is not an option for Musead, who said that without those products, people wouldn’t come to his store and purchase the other items that do allow him to make a profit.

Other nearby store owners feel the same as Musead about the tax, but they’re not all certain about who put up the sign. Mohammed Alharvi, who co-owns Super Discount in Fruitvale with his brother, believes it came from a delivery person, but he’s not sure which one. “One of those companies: Pepsi, 7UP. They put it there,” he said, adding that it’s been up for “a while.”

Alex Almahen, who owns Rancho Market in Fruitvale, thinks he got the sign in the mail, but he’s not sure. When it first arrived, he thought it was a sign from Oakland city staff and that he may be required to post it. “It looks official,” said Almahen.

But it didn’t come from Alameda County, according to Grossman. Oakland city staff also deny making the sign.

Many have speculated that the soda industry’s lobbying group, the American Beverage Association, is behind the sign. But a spokesperson for that group has also refuted any involvement. Speaking by phone on Tuesday, William Dermody Jr., vice president of media and public affairs, said that as far as he knows his company did not create these signs or provide language to be used in the poster.

Representatives from the Coca-Cola Company and PepsiCo did not return Oakland North’s request for comment.

A few months ago, Grossman and members of the Sugar Freedom Project met with Erin Bernstein, an attorney in the Oakland City Attorney’s Office, about what could be done to stop whoever it is from putting up the sign. While representatives from the City Attorney’s Office did not return requests for comment on that meeting, Grossman recalls that Bernstein told the group that filing a lawsuit or sending a cease and desist order to the soda industry is not realistic. Grossman said she suggested the group counter the misleading information with correct information from Alameda County Public Health Department.

But those involved still want to explore legal options. Members of the Sugar Freedom Project presented their findings of the sign to the Sugar-Sweetened Beverage Community Advisory Board on Monday. Members of the board—whose role is to advise city council how to spend sugar tax revenue—said they were disturbed by the findings. They directed city staff to ask Oakland’s Finance Department, which collects the tax from soda distributors, to reach out to the companies about the sign. The board also directed staff to explore legal avenues.

But in this mysterious case, it’s not exactly clear what legal actions anyone could take, partly because the First Amendment right to free speech protects a person’s right to say something, both verbally and in writing. Karl Olson, a longtime First Amendment attorney at Cannata, O’Toole, Fickes & Olson, based in San Francisco, said he thought “it would be kind of hard to prohibit those signs.”

“Education is kind of protected by the First Amendment,” Olsen continued. “Just as people on the left are entitled to resist, maybe the soda companies have a right to resist taxes they think are unfair, too.” And even if the information on the posters is wrong, he said, the government can’t prohibit speech based on its message, even if the message is false.

But according to Aaron Field, an associate attorney at Olson’s firm, there are exceptions to First Amendment protections, including threats, fraud and commercial speech. While Field said it’s unclear if any exceptions would apply in this case, if one did, “then suddenly the falsehood of the speech begins to matter.” In other words, if the signs are considered fraud or commercial speech, there could be a legal challenge because the content of the posters’ message—and whether or not it is misleading—would matter in court.

What about whether the sign-maker should be required to put their name on the sign? Olson said he personally believes the signs should have attribution—but pointed out that under the First Amendment there is no requirement for the creator of this sign to take ownership. Field agreed, saying that the courts recognize a person’s right to speak anonymously, barring that free speech does not fall under one of the exemptions.

Then there’s the question about whether it’s legal to put up a poster in a store without the owner’s permission. Field said he could not answer this question, noting that there are too many unknowns—from who owns the fridges, to who owns the store and, of course, the big question of who put up the sign. If a distributor put up these stickers, Field said, the placement of the poster in a private store might be legal, because there may be a contract between a distributor and a store owner that permits the installation of signs. But it could be illegal for someone who doesn’t have a contract with the store owner to put up a sign without their permission.

Grossman and members of the Sugar Freedom Project aren’t too worried about this legal kink—they say that store owners can just take the signs down if they want. The real issue, for them, is the posters’ inaccuracy.

William F. Shughart II, an economist who campaigned against Oakland’s sugar tax when it was on the ballot in 2016, agrees with them. Shughart is research director at the Independent Institute, a libertarian think tank based in Oakland. From an economic perspective, he is wholly against the sugar tax and thinks voters should repeal it, but finds the language of the sign misleading.

“That’s not true,” said Shughart, referring to the portion of the sign that says that by law, the tax is passed onto customers. “The only way distributors and retailers could pass the whole tax onto customers would be if the customers were unresponsive to an increase in price in soft drinks.” In other words, customers would only pay a higher price if they went along with it by not complaining, allowing store owners to raise prices.

But store owners Musead and Almahen argue that’s not the case. They say that since the tax took effect, their soda sales are down.

Almahen has owned his corner market since 2006, but recently changed his whole business model. Instead of packs of soda and carts of candy, at the front of his store, he now sells cartons of coconut water and varieties of fruit. He still carries soda in the back, but Almahen said distributors charge him for the soda tax before he sells the product and he passes that cost along to the customers. “Customers are angry all the time,” said Almahen, noting that his soda sales have declined 20 to 25 percent since the tax took effect in 2017.

Shugart wonders if the signs are an effort to influence the votes of annoyed customers. He speculates that “the sign could be a way to get people to remember about this tax and to think about repealing it or taking other action.”

That’s precisely what Grossman fears—that the signs will confuse the public and lead to a future repeal. “No one is dumb. If you are a shopper and you live in East Oakland and you see this tax, and you see ‘intended by law directly passed through to the shoppers,’ they’re going to go, ‘I’m not going to vote for that,’” said Grossman.

As for the shopkeepers, Alharvis said he’s leaving his sign up. It answers customer complaints—and he says there are a lot. Almahen, who’s already taken his sign down, said he’d keep an eye out for the mystery poster, but he’s not sure he’ll notice, because his shop is always getting marketing papers to post. Musead, who’s already removed two signs, said he’ll keep peeling these orange posters off his fridges. But the signs aren’t what keeps him up at night—it’s the money he’s paying soda distributors for the tax.

Musead, an immigrant from Yemen, bought his market four years ago to “make a better life for my family”—his wife, young son, and daughter. He said business is good, but this tax makes him feel trapped. “I have to keep my customers. I have to keep buying stuff from them,” he said, referring to the soda distributors. “Because customers does what they want. And if I don’t get it, they’re not going to come here no more.”