The proposal would have gone into effect in two years, requiring shoppers to use paper bags, reusable bags, or bio-degradable plastic.
But, in a 10-6 vote Thursday afternoon, the measure was defeated.
Coucilmembers Jim Kenney and Frank Dicicco thought they had the votes for the plastic bag ban.
However retailers and the plastic bag industry lobbied hard against the bill, saying it would burden consumers.
"I changed my mind because of the fact there is a recycling probram for these bags. The supermarket industry does have a program," said Council member Frank Rizzo Jr.
Kenney questioned the industry recycling plan, then blasted the operator of several Shop-Rite stores, blaming the New Jersey-based stores for the bill's defeat.
"People in this city and region who care about the environment, who care about the condition of our environment, should not spend money at Shop-Rite. They should look for someplace else to go," said Kenney.
In a statement, Shop Rite says its supporting bag recycling programs, saying 20 million bags have been recycled at Shop-Rite stores alone.
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