Controversy on Controversy: Developments in First Amendment Doctrine Respecting Compelled Commercial Disclosures

The First Amendment is well known as a limit on state power to restrain speech. Attempts to censor a newspaper, film, or video game, or to limit discussion in a public forum, are subject to the most exacting — and often insurmountable — constitutional scrutiny1. This concept is so embedded in culture that the Texas Supreme Court recently cited the exhortation by John Goodman’s character in The Big Lebowski that “the Supreme Court has roundly rejected prior restraint!”2

Freedom of speech has a less conspicuous corollary: the First Amendment also disfavors laws that compel speech. As the Supreme Court put it: “[t]he right to speak and the right to refrain from speaking ‘are complementary components of the concept of ‘individual freedom of mind.’”3

Recent caselaw, however, has left unclear what burden the government must meet if it seeks to force a professional or business to disclose state-mandated messages on its products or commercial expression.

The seminal compelled-speech cases struck down laws that coerced political messages. Holding that a state could not force students to salute the U.S. flag,  the Supreme Court emphasized that “[i]f there is any fixed star in our constitutional constellation, it is that no official…can prescribe what shall be orthodox in politics… religion, or other matters of opinion.”4 The Court applied this reasoning to enjoin enforcement of a law forcing drivers to display license plates bearing New Hampshire’s assertive motto “live free or die,”5 and to hold unconstitutional a law that forced Florida newspapers to provide a “right of access” giving political candidates printed space to reply to the newspaper’s criticism.6

Laws compelling speech in the commercial context can also implicate “freedom of mind”: the autonomy of a professional or businessperson over whether and how to express a message or belief. For instance, as Karen Henry addresses in this issue, the FBI’s attempt to force Apple to develop code to unlock an iPhone raised the (still unresolved) question of the extent to which professionals or businesses may be compelled to create expressive content to aid criminal investigations or national-security interests asserted by the government.7

This article provides a brief overview of First Amendment doctrine respecting compelled disclosures in commercial speech.8 Examples of disclosure requirements abound. For instance, state and federal law forbid deceptive advertising,9 and there are several disclosure guidelines that suggest best practices for disclosing information to prevent liability, including the Federal Trade Commission’s “[Dot]Com Disclosures”10 guide, its “Endorsement Guide,”11 and its guide to “Native Advertising”12 (which refers to advertisements and “sponsored” content that are formatted to mimic traditional editorial content). In California, Proposition 65 mandates that businesses disclose the presence of chemicals that the state knows to be toxic.13 And there are myriad disclosures required by local governments.14

Accordingly, business and media counsel frequently must determine whether a disclosure is required; and, if so, how to phrase it — or whether to challenge the law.15

“Commercial” speech — defined as speech that “does no more than propose a commercial transaction”16 — is constitutionally protected if it is lawful and not misleading; under the Supreme Court’s Central Hudson test, regulation of commercial speech is subject to intermediate scrutiny and, to survive such scrutiny, must 1) further a “substantial” government interest; 2) “directly advance” the interest; and 3) be no more extensive than necessary to serve the interest.17

Challenges to restrictions on commercial speech are generally evaluated under Central Hudson scrutiny; but disclosures in advertising may be subject to an even more lenient “reasonable relationship” review — despite the Supreme Court’s observation that both restrictions and compulsions trench on “freedom of mind.”

In Zauderer v. Office of Disciplinary Counsel, the Supreme Court confirmed that “compulsion to speak may be as violative of the First Amendment as prohibitions on speech,” but held that a commercial speaker has only a  “minimal” interest in withholding facts that might prevent deception.18 The court reasoned that commercial speech warrants protection chiefly because of its function to disseminate truthful information, and noted that disclosures are a less-restrictive alternative to an outright ban on potentially deceptive advertising.19 Accordingly, the Court held that commercial disclosure requirements are constitutionally permissible if they are “reasonably related to the State’s interest in preventing deception of consumers.”20 Under this standard, disclosures will generally be upheld if they compel only “purely factual and uncontroversial information.”21

But what is “factual” or “uncontroversial” is itself debatable, as “what is claimed as fact may owe more to faith than science and what is or is not controversial will lie in the eye of the beholder.”22 Cases from various circuits suggest that a disclosure may be too “controversial” to be compelled if, among other things: 1) its truth or pertinence is disputed, 2) it depends on ideology or subjective value judgments, or 3) if it appeals to emotions rather than reason. In Int’l Dairy Foods Assoc. v. Amestoy, for instance, the Second Circuit suggested that impertinent disclosures are too controversial to be compelled, striking down a Vermont law requiring dairy producers to disclose whether their products were treated with growth hormone because, absent evidence that growth hormone harmed public health, consumers did not have a substantial interest in the disclosure under the Central Hudson test.23 The Seventh Circuit enjoined an Illinois law requiring that an “18” sticker be placed on certain “sexually explicit” video games, reasoning that the sticker was “subjective and highly controversial” because it represented an “opinion-based” judgment by the state respecting sexual mores.24 And, in R.J. Reynolds Tobacco Co. v. FDA, the D.C. Circuit applied Central Hudson to strike down a law requiring that cigarette labels bear graphic images of smoking harm, holding the labels controversial as “inflammatory,” not “pure attempts to convey information to consumers.”25

Recent caselaw has left unclear what level of scrutiny should apply to compelled disclosures that are not “factual,” “uncontroversial,” or intended to prevent deception.26 The en banc D.C. Circuit recently held in American Meat Institute v. USDA (“AMI”), that Zauderer’s “reasonable relationship” test — not Central Hudson scrutiny— should apply to commercial disclosures even when the disclosure is not required to prevent deception: in AMI, for instance, disclosure was sustained to satisfy consumers’ interest in knowing the country of origin of their food.27 In AMI, the en banc D.C. Circuit thus overruled R.J. Reynolds’ application of Central Hudson intermediate scrutiny, reasoning that the Zauderer test can be thought of as “an application of Central Hudson” tailored to the unique context of compelled commercial disclosures.28

A subsequent panel of the D.C. Circuit, however, sought to cabin AMI and limit Zauderer’s application, holding in Nat’l Ass’n of Mfrs. v. S.E.C (“NAM”) that Zauderer’s reasonable relationship test only applies to disclosures in pure advertising, and that more exacting scrutiny should apply to compelled disclosures removed from direct sales, such as disclosures on websites or in reports.29 In NAM, the D.C. Circuit considered whether firms that use minerals can be forced to disclose, in annual reports sent to the SEC and posted on the firms’ websites, whether the minerals were “conflict free.”30 Given uncertainty regarding the proper level of scrutiny, the court applied Central Hudson to strike down the disclosure requirement, and also held that, even if Zauderer applied, the label “‘[not] conflict free’” was not “purely factual and uncontroversial” because it reflects an ideological determination that mineral firms bear “moral responsibility” for conflict in the Congo.31

On the bright side, the AMI court’s reasoning — along with the D.C. Circuit’s subsequent decision in NAM — imply that graphic emotional appeals and ideological messages (which failed to pass the Central Hudson test prior to AMI32) will still be too “controversial” to be compelled under the Zauderer test.33

On the other hand, it may be overly optimistic to expect that a “reasonable relationship” test can provide the same constitutional protection as Central Hudson’s intermediate scrutiny, which forces the government to rigorously justify laws that force a person to speak. After all, an interest in a food product’s country of origin seems weak compared to preventing deception; accordingly, the dissent in AMI warned that, if such a “flimsy interest” can justify compelled speech on a business’s product, there is “no limiting principle” preventing the government from “commandeer[ing] the speech of others,” meaning that, under the AMI majority’s reasoning, “a business owner no longer has a constitutionally protected right to refrain from speaking.”34 This prompts the question: should professionals and businesspeople be forced to surrender their “freedom of mind” as to what speech appears on products or expression related to commerce?

In the last few years, the Supreme Court has made clear that businesses and corporate entities have First Amendment rights to express and exercise political and religious principles.35 These authorities, along with Maynard, Barnette, Central Hudson, and Zauderer highlight that the Constitution should protect businesses and professionals from being compelled to express what might be called “opinions,” beliefs,” or “sentiments.” It remains to be seen, however, how far these constitutional protections can be extended to strike down regulations that require disclosure for ancillary purposes beyond providing facts to prevent deception. As this area of law develops, there will continue to be opportunities for principled businesses and professionals to challenge regulations that compel them to say what they do not believe.

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Brendan Charney is an associate at Davis Wright Tremaine LLP in Los Angeles. Brendan focuses his practice on media and intellectual property law and has litigated motions in state and federal courts; counseled documentary filmmakers and other creative clients on fair use and other legal issues.
For more info about Brendan, click here.

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