Chapter 14- Advertising

What types of laws are not subject to strict scrutiny and so are not likely to abridge the freedom of speech protected by the first amendment?
Content-Neutral Laws
Time, place, and/or manner restrictions
Laws regulating conduct with only an incidental effect on speech

Content-based laws that regulate unprotected speech
Speech that incites imminent unlawful conduct (e.g., fighting words)
Obscene speech
Misleading or deceptive speech (e.g., fraud)
Defamation
Speech integral to crime (proposing or conspiring to commit crime)

Commercial speech
“Commercial” Speech: Speech related to the economic interests of the speaker and the listener

First Amendment does not protect false, misleading, or deceptive speech

First Amendment protects commercial speech about legal activities that is not false, misleading, or deceptive
Free flow of information is “indispensable to the proper allocation of resources in a free enterprise system”

Central Hudson Commercial Speech Test
1.Does the speech qualify for protection under the First Amendment (i.e., is about legal activity and not false, misleading, or deceptive)?

2.Does the government have a “substantial interest” in regulating the speech?

3.Does the government regulation advance the government’s interest in “a direct and material way”?

4. Is the government regulation no more extensive than necessary to serve the government’s interest?
Is the regulation a “reasonable fit” that is “narrowly tailored” to the government’s interest?

False Advertising under the Lanham Act
False advertising is prohibited under federal and state laws regulating false advertising, deceptive trade practices, and unfair competition

The Lanham Act (federal statute) prohibits commercial advertising that contains false or misleading descriptions or representations of fact that misrepresent the nature, qualities, or characteristics of goods, services, or commercial activities

Federal Trade Commission (FTC)
Federal agency with authority to regulate unfair or deceptive trade practices and methods of competition
FTC focuses on national advertising, advertising that involves a pattern of deception, and advertising that could affect consumer safety or cause widespread injury

FTC defines false and misleading advertising as any
Representation, omission, or practice that is likely to mislead consumers and
is material (i.e., likely to affect the consumer’s decision)

“Puffery” (exaggerated sales talk that a reasonable person wouldn’t take seriously) is not false advertising

Federal Trade Commission (FTC)
FTC investigates complaints about advertising

FTC uses both preventive and corrective measures

Preventive measures
Opinion letters
Advisory opinions
Industry guides
Trade regulation rules
Voluntary compliance

Corrective Measures
Cease and desist orders
Consent orders
Substantiation
Litigated orders
Corrective advertising
Injunctions

CAN-SPAM Act
Controlling the Assault of Non-Solicited Pornography And Marketing Act
Permits marketers to send unsolicited commercial email if it adheres to three types of compliance:

1.Unsubscribe Compliance
Visible and operable “unsubscribe” mechanism present in email
Consumer opt-out requests honored within 10 days

2.Content Compliance
Accurate, non-deceptive “from” and “subject” lines
Legitimate physical address of the publisher and/or advertiser
“Sexually explicit” label if the content is adult

3.Sending Behavior Compliance
Message cannot be sent to a harvested email address and cannot contain false header information

CAN-SPAM Act
Exempt emails include:

1.emails to existing customers or persons who have inquired about the sender’s products or services;
2. religious and political messages;
3. content complying with marketing mechanisms specified by law;
4. and national security messages

Prohibits sending commercial emails 10 days after opt-out request, and selling or transferring an email address after an opt-out request
Requires unsubscribe mechanism to process opt-out requests for at least 30 days

CAN-SPAM act
Prohibits other spamming practices, such as using email harvesting and Trojan horses or worms
Requires FTC to promulgate rules to shield consumers from unwanted cell phone spam
Preempts state anti-spam laws that do not deal with fraud, and prevents states from enacting stronger anti-spam protections
Enforcement by FTC, state attorneys general, Internet Service Providers, and other federal agencies for special categories of spammers
Prohibits consumers from suing spammers
Telephone Consumer Protection Act
Prohibits telephone solicitations (including cell phones) using automatic dialing systems or pre-recorded voices
Prohibits transmitting ads by facsimile without first obtaining the recipient’s permission

Enforced by Federal Communications Commission (FCC)

Provides a private claim in state court to recover actual damages or $500/violation, whichever is greater, and trebled if the violation was willful or knowing

Do-Not-Call Implementation Act
Establishes National “Do Not Call” Registry

Allows consumers to register a phone number to prevent telemarketing calls for 5 years

Applies only to residential lines, not business
Exempts calls from:
charities;
political organizations;
survey takers;
Callers with an existing relationship to the person called (up to 18 months after last business contact);
companies the person has submitted an application or inquiry to (for up to three months); and
creditors and collection agencies

“Made in the USA” Labeling
“U.S.A” content must be disclosed on automobiles, textiles, wool products, and fur products
FTC regulations require products advertised as “made in the USA” to be “all or virtually all” made in the USA
Products with more than negligible foreign content, processing, or labeling must identify percent of US content or acknowledge foreign content
Other federal regulations requiring imported goods to be marked with their country of origin are enforced by the U.S. Customs Service
Environmental Marketing Claims
FTC regulates environmental claims in labeling, advertising, promotional materials, and other marketing

Prohibits marketers from using exaggerated or misleading claims about the environmental benefits of products, services, or packaging

Requires claims about the environmental benefits of products, services, or packaging to be specific and substantiated

Labeling and Packaging Regulation
Fair Packaging and Labeling Act

Requires consumer product labels to identify the product, net quantity and contents, and the manufacturer, packager, and distributor

Flammable Fabrics Act
Sets safety standards for flammable fabrics and clothing

Federal Cigarette Labeling and Advertising Act
Requires specific warnings on cigarette packaging and related advertising, and bans advertising on television and radio

Smokeless Tobacco Health Education Act of 1986
Requires specific health warnings on chewing tobacco packaging and related advertising, and bans advertising on television and radio

Wool Products Labeling Act
Requires most wool and textile products to be labeled as to fiber content, country of origin, and identity of manufacturer or other business responsible for marketing or handling the product

The Commercial Speech Doctrine
The government may regulate advertising that is false, misleading or deceptive

the government may regulate advertising for unlawful goods and services

Even truthful, honest advertising for legal goods and services may be regulated if the government:

shows a substantial state interest justifies the regulation

demonstrates that the regulation directly advances the claimed interest

attempts to achieve a reasonable fit between the claimed interest and the regulation

standing
the position of a plaintiff who has been injured or has been threatened with injury. No person is entitled to challenge the constitutionality of an ordinance or statue unless he or she has the required standing – that is, unless he or she had been affected by the ordinance or statute
Lanham Act
a federal law that regulate the trademark registration process but that also contains a section permitting business competitors to sue one another for false advertising
federal trade commission
a federal agency created in 1914. its purpose is to promote free and fair competition in interstate commerce; this includes preventing false and misleading advertising
Federal definition of false and misleading advertising
must be a representation, omission or practice that is likely to mislead the consumer

we examine the practice from the perspective of a consumer acting reasonably in the circumstances.

the representation, omission or practice must be a “material” one. the basic question is whether the act or practice is likely to affect the consumer’s conduct or decision with regard to a product or service

Central Hudson Gas and Electric Corp. v. Public Service Commission of New York
Brief Fact Summary. In the winter of 1973-74 there existed an electricity shortage in the State of New York. Accordingly the Appellee, the Public Service Commission (Appellee), imposed a ban on all advertising that promotes the use of electricity. By 1976 the electricity shortage subsided, causing the Appellee to determine whether or not to continue the ban. Upon further inquiry, the Appellee decided to continue the ban, causing the Appellant, Central Hudson Gas and Electric Corp. (Appellant), to file suit claiming that the regulation of the Appellee was infringing on their First and Fourteenth Amendment constitutional rights involving commercial speech.

Synopsis of Rule of Law. This case established a four-part analysis for commercial speech cases. (1) Whether the expression is protected by the First Amendment of the United States Constitution (Constitution). To be protected, it must concern lawful activity and not be misleading. (2) Whether the asserted governmental interest is substantial. If both part one and part two are satisfied then (3) A court must determine whether the regulation directly advances the governmental interest asserted. (4)Whether it is not more extensive than is necessary to serve that interest.

Facts. In December 1973, the Appellee ordered electric utilities in New York State to cease all advertising that promotes the use of electricity. The Appellee based this regulation on a finding that the interconnected utility system in New York State does not have sufficient fuel stocks to continue furnishing all customer demands for the 1973-74 winter. In 1976, the fuel shortage ended, causing the Appellee to request public comment on its proposal to continue the ban on advertising. The Appellant opposes the ban on First Amendment constitutional grounds and filed this suit after the Appellee decided to continue the ban. The 1976 order from the Appellee was that information advertising, used to encourage shifts of consumption of electricity from peak use times to periods of low electricity demand would be allowed because it does not increase aggregate consumption, but would promote the leveling of demand throughout the day. The Appellee also offered to review specific proposals by co
mpanies to determine if their advertisement meets this criterion. The Appellant challenged this order in state court, arguing that the Appellee restrained commercial speech in violation of the First and Fourteenth Amendments of the Constitution. The Appellee’s order was upheld in the trial court, by the appellate level and by the New York Court of Appeals.

Issue. Whether a regulation of the Appellee of the State of New York violates the First and Fourteenth Amendments of the Constitution because it completely bans promotional advertising by an electrical utility?

Held. Yes. The Appellee’s ban is unconstitutional even though the United States Constitution (Constitution) accords a lesser protection to commercial speech than to other constitutionally guaranteed expression. The protection available for particular commercial expression turns on the nature both of the expression and of the governmental interests served by the regulation. There is a four-part analysis for commercial speech cases. (1) Whether the expression is protected by the First Amendment of the Constitution. To determine if it is protected, the speech must concern lawful activity and not be misleading. (2) Whether the asserted governmental interest is substantial. If both parts one and part two are satisfied then (3) A court must determine whether the regulation directly advances the governmental interest asserted. (4)Whether it is not more extensive than is necessary to serve that interest.
Under this four-part analysis the Supreme Court of the United States (Supreme Court) found that the advertising is commercial speech protected by the First Amendment of the Constitution. The Supreme Court found that the state interest in suppressing the use of energy is substantial. The Supreme Court also found a direct link between the state interest in conservation and the Appellee’s order as there is a connection between advertising and demand for electricity. This lead the Supreme Court to consider whether the complete suppression is more extensive than what is necessary. The Supreme Court in this case determined that the Apellee has not shown that it could not protect its interest in energy conservation through a less restrictive means. For example, providing information in its advertisement about the relative efficiency and expense of its offered service. Therefore since there is a less restrictive means available, the restriction by the Appellant is an unconstitutional restri
ction of free speech.

Dissent. The Supreme Court’s decision fails to give due deference to the subordinate position of commercial speech. The dissenting judge feels the court has gone back to the days of Lochner, feeling that it can strike down regulations of a State through its own notions of what is the most appropriate means of regulation.
Concurrence.
Doubts whether suppression of information concerning the availability and price of a legally offered product is ever a permissible way for the State to dampen demand for or use of the product. But, agrees with the majority that even though commercial speech is involved, it is protected by the First Amendment of the Constitution. In fact, the Appellee’s ban is a covert attempt by the State to manipulate the choices of its citizens, not by persuasion or direct regulation, but by depriving the public of the information needed to make a free choices.
Another concurring judge argued that this is not a commercial speech case. Therefore, they see no need to decide whether the four-part analysis, adequately protects commercial speech – as properly defined – in the face of a blanket ban of speech of the sort involved in this case.

Discussion. This case is most significant because it clearly provides a four-part test to be used in cases involving commercial speech. The Supreme Court in this case also provides a clear use of this test through its analysis. This case builds on the definition of commercial speech provided in Virginia State Board of Pharmacy. That case defined commercial speech as expression related solely to the economic interests of the speaker and its audience, which is to be used to determine whether or not part one of the test in this case is satisfied. Part two of the test, looks at whether the State’s interest is substantial and is similar to all other First Amendment analysis, except as stated in this case and Virginia State Board of Pharmacy, the state possess an elevated standard of interest in regulating commercial speech, as does part three determining whether the regulation furthers the interest. This leads to part four of the test, where it seems most commercial speech cases will be decided. In part four once again, as is with most First Amendment expression cases, e.g. obscenity cases, the Supreme Court will on a case-by-case basis determine if there was a less restrictive means of regulation. If a less restrictive means is available to achieve the same goal, the answer will always necessarily strike down the regulation as unconstitutional.

Sorrell v. IMS health Inc.
was a case in which the Supreme Court of the United States held that a Vermont statute that restricted the sale, disclosure, and use of records that revealed the prescribing practices of individual doctors violated the First Amendment.

The Court held that the law violated the First Amendment and affirmed the judgment of the Court of Appeals.

The first finding of the Court was that the law placed content and speaker based restrictions on speech.[D] Citing Cincinnati v. Discovery Network, Inc., the Court noted that these restrictions warranted heightened judicial scrutiny.[E]

The Court rejected Vermont’s argument that the law was only a commercial regulation and not a regulation of speech on the grounds that the law imposed more than an incidental burden on speech.[F]

The second and final finding of the Court was that Vermont did not meet its burden to justify its content-based law as consistent with the First Amendment. According to Board of Trustees, State Univ. of N. Y. v. Fox, Vermont must demonstrate that the law directly advances a substantial government interest.[G] The Court rejected Vermont’s claims that the law was necessary to protect medical privacy and achieve improved public healthcare.[H]

Dissent

Justice Breyer, the author of the opinion for the dissent.
Associate Justice Stephen Breyer wrote a dissenting opinion, which Justice Ginsburg and Justice Kagan joined. Breyer argued that the law should be reviewed as an economic regulation, not under a heightened standard applied for First Amendment issues. Breyer found that the legitimate regulatory objectives outweighed the small harm done to First Amendment interests.[I] Breyer also noted that applying a strict First Amendment standard whenever a legislative program burdened speech would give judges the power to choose to undermine or support legislative efforts.[

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