Chapter Thirteen

Objectives To understand the evolution of advertising as free expression under the First Amendment To explain commercial speech law. To explain noncommercial speech law. To explain advertising and access to the media. To understand forms of advertising regulation.

Advertising and the First Amendment For years: Commercial speech (advertising) had NO 1A protection! “Commercial speech doctrine” gives limited protection to persuasive speech –Court has waffled over the years, and case law is erratic and patchy

Early case law: bad news! Valentine v. Chrestensen (1942): Valentine passed out handbills that advertised sub rides on one side and had political protest speech on other; held to violate NY sanitation law –Court upheld and said 1A does not apply to “purely commercial advertising” –Commercial speech doctrine chipped away over decades, but accepted until 1970s

Early cases: bad news! Pittsburgh Press v. Pittsburgh Commission on Human Relations (1973): newspaper want ads in sections: “Jobs— Male Interest,” “Jobs—Female Interest” –Held to violate anti-discrimination ordinance; ordinance challenged –Court upheld; likened sections to illegal advertising

Early cases: good news! Bigelow v. Virginia (1975): ad for NY abortion clinic in VA newspaper where abortion illegal –Conviction overturned: ad contained “factual info” that was “newsworthy” and “of clear public interest”—thus protected speech –Supreme Court extends First Amendment protection to commercial speech for the first time!

High-water mark Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council (1976): VA statute said licensed pharmacists could not advertise prescription drug prices—overturned –1A did apply; speech does not lose protection simply because money is spent to purchase it –Footnote: advertising may be more “durable” than other speech and unlikely “chilled” by proper regs –Upshot: If ads not deceptive and for legal products—protected!

THE major case Central Hudson Gas & Electric Corp v. Public Service Commission (1980): Court invalidated NY regulation prohibiting advertising that promoted use of electricity –Inserts in power bills touted nuclear energy; nuclear opposition group wanted space to rebut claims and were denied space –Court expressly limited amount of 1A protection based on “the nature both of the expression and of the gov’t interest served by its regulation” –Four-part test to determine if commercial speech gets protection

Central Hudson’s four-part test 1) Ad must concern lawful activity and not be misleading; 2) State must prove substantial state interest to be served by regulation; 3) Regulation must advance interest; and 4) Regulation must be no more extensive than necessary to advance interest –“Fit” between regulation and interest

Advertising Regulations and the Supreme Court Advertising by lawyers Unsolicited mail advertising Tobacco industry advertising Alcohol industry advertising

Lawyers’ advertising Most states had bans on advertising by attorneys Bates v. Arizona State Bar (1977): Legal clinic advertised prices, far below “going rate;” fined by AZ state bar –Court ruled against bar: 1A right of consumers to receive commercial info, but ads cannot be misleading –Ad bans overturned

Unsolicited mail advertising Bolger v. Youngs Drug Products Corp. (1983): Post Office federal statute that prohibited unsolicited mailings regarding birth control products; Youngs wanted to send “infomercial” flyers on condoms and VD –Court said such a ban denies consumers access to important information that public has right to receive

Tobacco Advertising and the weirdness of Posadas Posadas de Puerto Rico Assoc. v. Tourism Co. of Puerto Rico (1986): hard to reconcile –Supreme Court upheld a Puerto Rican act that allowed casino gambling but did not allow casino advertising locally. –Posadas, which owned and operated a casino and hotel on the island, protested the act, and were fined several times for violating the advertising law. --Court applied CH, found law OK

The weirdness of Posadas Posadas de Puerto Rico Assoc. v. Tourism Co. of Puerto Rico (1986): hard to reconcile –Court said that advertising that is considered “harmful” has less First Amendment protection than other advertising and is therefore subject to greater regulation. –The Supreme Court’s opinion affirmed the Puerto Rican law but also mentioned alcoholic beverages and cigarettes as products whose advertising could be further restricted without violating the 1A.

Posada revisited? Greater New Orleans Broadcasting Association, Inc. v. United States (1999): Court struck down a ban against New Orleans broadcasters who wanted to carry advertising for local casinos. --Court applied CH: failed 3 and 4 because of “exemptions and inconsistencies” in law—included exemption for advertising casino gambling run by Native American tribes, allowing ads promising “Vegas-style excitement” so long as gambling-specific info not mentioned

Applying CH to tobacco ads Lorillard Tobacco Co. v. Reilly (2001): MA had regulations forbidding tobacco ads within 1,000 ft. of schools, parks, playgrounds, and ads must be 5'+ off floor –Court overturned cigarette rules: regulations of cigarette ads are federally preempted –Cigars and smokeless tobacco NOT federally preempted, but MA rules violated 1A

Applying CH to alcohol ads Rubin v. Coors Brewing (1995): Court unanimously struck down law barring advertising of alcoholic content of beer—“strength wars” –Court applied CH and said it failed parts 3 and 4: “overall irrationality of gov’t’s regulatory scheme”— labels vs. ads—laws at odds 44 Liquormart v. Rhode Island (1996): Court struck down RI laws banning alcohol price ads except at point of sale and publication/broadcast of alcohol prices—CH 3 and 4 failed –Some justices uncomfortable with CH

The upshot of post-CH cases Central Hudson becoming stricter and stricter –Some justices still unhappy with test, but Court refuses so far to abandon altogether And: Court failed to expressly overrule Posadas, despite that Posadas upheld restrictions on gambling ads indistinguishable from those struck down in Greater New Orleans Broadcasting! No exemptions for “vice” advertising: tobacco, gambling, alcohol

Compelled advertising Glickman v. Wileman Bros. & Elliott (1997): CA fruit tree growers challenged CA program forcing them to pay for generic advertising for peaches, plums and nectarines –Court said law OK: no prior restraint (growers could put out other messages); no forcing symbolic or actual speech; no forcing to support political or ideological views of any kind (no CH) –Also, growers stand to benefit economically from “forced” speech with which they agree—ads intended to stimulate interest in their products

Compelled advertising redux! U.S. v. United Foods (2001): Federal program required all mushroom growers to pay for generic advertising –Court overturned; “compelled speech” –Kennedy distinguished from Glickman: CA fruit growers part of association with regulatory marketing scheme—not so with mushroom growers

Corporate free speech First National Bank v. Bellotti (1978): MA law forbade corporate advertising for or against ballot measures except when measure may “materially affect” business –Court overturned: no 1A guarantee of special right of access for corporations, but when media agrees to accept corporate ads, states cannot prohibit merely because speech comes from corporation rather than individual

Corporate speech test Consolidated Edison v. Public Service Comm. of NY (1980): Supreme Court ruled that the commission could not prohibit utilities from sending inserts with their bills that dealt with political or controversial matters Court set conditions that would justify government regulation of noncommercial speech.

Corporate speech test Consolidated Edison v. Public Service Comm. of NY (1980): Court set out test for non- commercial corporate speech (vs. advertising products); gov’t must meet only one: –(1) restriction is “precisely drawn means of serving compelling state interest” –(2) restriction fulfills “significant government interest” and merely regulates time, place and manner –(3) narrowly drawn restriction on speech under specialized circumstances where disruption of gov’t activities must be avoided (e.g., military base)

Nike v. Kasky…fizzle! Nike v. Kasky (2003): April 2002 California SC ruling rejected claim that 1A immunized Nike from being sued under state consumer protection laws (for allegedly misrepresenting facts in public relations campaign) –Nike had defended benefits of its Asian factories to host countries and sought to portray itself as responsible corporation with adequate labor standards in overseas facilities

Nike’s major unanswered question When Nike issued press releases responding to criticism of labor practices in their foreign factories, was it noncommercial speech, entitled to full 1A protection, or commercial speech, entitled to limited protection? –Court’s one-sentence ruling on June 26, 2003: “The writ of certiorari is dismissed as improvidently granted,” meaning Court erred by granting appeal prematurely –So we don’t know! Case now goes to trial on merits in California, but Supreme Court still could choose to review if Nike found guilty

Access to media Miami Herald v. Tornillo (1974): Miami Herald attacked Pat Tornillo in print over his run for state legislature; FL had right of reply law; Herald refused, Tornillo sued –FL Supreme Court upheld law; US Supreme Court unanimously reversed –1A simply does not permit government to tell newspaper publisher what to print or not print –No guaranteed right of access to print media! (Note differences to electronic media!)

Federal Trade Commission (FTC) Created in 1914 by Federal Trade Commission Act; responsible for managing ad issues; no longer caveat emptor! Wheeler-Lea Amendments of 1938: FTC may ban “unfair or deceptive acts or practices in commerce” –Will find practice deceptive if misrepresentation, omission, or other practice misleads consumers, acting reasonably, to their detriment Magnuson-Moss Act of 1975: FTC may act against fraudulent ads down to local level and can issue enforceable “Trade Regulation Rules”

Tools of the FTC “Cease and desist” order: legally enforceable order issued once FTC investigations reveal unfair or deceptive practices Assurance of voluntary compliance: painless way of resolving—company promises to stop questionable practices in return for FTC dropping investigation (when no harm done) Consent decree: most cases resolved this way; FTC investigates and tells company that formal proceedings will ensue unless company signs decree (most do—it’s legally enforceable) –No admission of guilt by company; just stop ads

“Unfairness Doctrine” FTC now looks beyond simply fraudulent or false advertising to “fairness” Ads are unfair if: –(1) causes or likely to cause substantial consumer injury… –(2) …which is not reasonably avoided by consumers themselves, and… –(3) …is not outweighed by countervailing benefits

CA advertising law CA “Printer’s Ink” statute: modeled after 1911 Printer’s Ink magazine article that proposed model statute –Forbids many forms of false or misleading ads –Cannot advertise product that is not available or will not be sold for advertised price –Must disclose multiple-unit price-cut requirements –Comparative ads must be documented

Spam? Spam! Unsolicited commercial At least 24 states have anti-spam laws –CA: must have ADV: in subject line and give some way to be removed from list Federal law being pushed; multitude of state laws is confusing All normal ad rules must be followed online as well

Self-regulation National Advertising Review Council set up in 1971: created Nat’l Advertising Division (NAD), Children’s Advertising Review Unit (CARU) and Nat’l Advertising Review Board (NARB) NAD monitors nat’l ads to see if false, misleading or deceptive and takes complaints from competitors— if finds problem, asks advertiser to take action to correct –Can appeal to NARB, which often but not always upholds NAD decisions –Powerful organizations! Compliance with NAD/NARB is nearly 100% and usually faster than FTC actions

Lanham Act A person who generates “any false designation of origin, false or misleading description of fact, or false or misleading representation of fact which…in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographical origin of his or another person’s goods or services, or commercial activities” is liable for civil damages.

Lanham Act False Advertising Test What message the ad conveys, either explicitly or implicitly. Whether the message is false or misleading. Whether that message is likely to injure the plaintiff.

Conclusion: commercial and corporate speech First Amendment protects commercial speech—an expression promoting a commercial transaction--but to a lesser degree than it protects political expression. Under the four-part test, truthful commercial speech may be restricted if the government asserts a substantial interest that will be advanced by regulation. That regulation also must be narrowly tailored to serve government objectives.

Conclusion: federal regulations The Federal Trade Commission has power to keep the flow of commercial information clean. FTC can halt deceptive ads through consent decrees, cease-and-desist orders and injunctions. Companies may seek injunctions under the Lanham Act to halt false or misleading ads and promotions by competitors

Conclusion: other regulations Advertisers themselves and the media monitor advertisements to ensure that the government and public will not find them deceptive. Leading self-regulatory body is the National Advertising Division of the National Advertising Review Board.