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 lawis 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 commercialadvertising”

– Commercial speechdoctrine chipped awayover decades, but accepted until 1970s

Early cases: bad news!• Pittsburgh Press v. Pittsburgh

Commission on HumanRelations (1973): newspaper wantads in sections: “Jobs— MaleInterest,” “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 FirstAmendment protection to commercial speech for the firsttime!

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 andunlikely “chilled” by proper regs

– Upshot: If ads not deceptive andfor 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 amountof 1A protection based on “thenature both of the expressionand of the gov’t interest servedby its regulation”

– Four-part test to determine ifcommercial 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 4because of “exemptions andinconsistencies” in law—includedexemption for advertising casinogambling run by Native Americantribes, 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 ofcigarette ads are federallypreempted

– Cigars and smokelesstobacco NOT federallypreempted, but MA rulesviolated 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 irrationalityof gov’t’s regulatory scheme”—labels vs. ads—laws at odds

• 44 Liquormart v. Rhode Island (1996):Court struck down RI laws banningalcohol price ads except at point ofsale and publication/broadcast ofalcohol 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: CAfruit growers part ofassociation withregulatory marketingscheme—not so withmushroom 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 acceptcorporate ads, statescannot prohibit merelybecause speech comesfrom corporation ratherthan 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 hostcountries and sought toportray itself as responsiblecorporation with adequatelabor standards in overseasfacilities

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 ofcertiorari is dismissed asimprovidently granted,”meaning Court erred bygranting 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 unanimouslyreversed

– 1A simply does not permitgovernment to tell newspaperpublisher what to print or not print

– No guaranteed right of access toprint media! (Note differences toelectronic 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, orother 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 email

• 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 isconfusing

• All normal ad rules mustbe 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.