Tuesday, March 27, 2012

Sixth Circuit upholds many tobacco regulations, strikes down ban on color

Discount Tobacco City & Lottery, Inc. v. United States (6th Cir. March 19, 2012)
This is a rich case, likely headed to the Supreme Court, with relevance for trademark and for the general legal treatment of images as well as the obvious commercial speech issues. I will discuss it in several parts given its length. Judge Clay delivered the lead opinion, but dissented from the majority in a few key respects (notably on the proper treatment of images as warnings), and Judge Stranch, joined by Judge Barrett, delivered a separate opinion that constitutes the majority opinion where Judge Clay dissented.
I’m going to split my discussion into a few parts. 
Judge Clay began: the plaintiffs challenged a number of provisions of the Family Smoking Prevention and Tobacco Control Act, Pub. L. No. 111-31, 123 Stat. 1776 (2009) (FSPTCA/the Act), and the district court struck down some and upheld others. The court of appeals affirmed some and reversed some of the district court’s rulings. Upheld: restrictions on marketing “modified risk” tobacco products; bans on event sponsorship, branding non-tobacco merchandise, and free sampling; big warnings on packages; color graphic and non-graphic warning labels (as against a facial challenge to requiring the use of images); restrictions on statements regarding the relative safety of tobacco products based on FDA regulation. Struck down: restrictions on tobacco ads to black and white and a ban on “continuity” programs that reward repeat purchasers.
After the Supreme Court found that the FDA exceeded its authority in attempting to increase regulation of tobacco, Congress increased the stringency of its regulation, adopting many of the FDA’s findings.  At that time, the FDA found that about 3 million American teens smoked, and 1 million more (nearly all male) used smokeless tobacco. Of adults who ever smoked, 82% had their first cigarette before age 18, and more than half became regular smokers by then. Starting smoking as a teen increases multiple health risks; the FDA found that 1/3 of young people who become smokers die prematurely from smoking-related illnesses, “becoming part of the approximately “440,000 people [who] die of diseases caused by smoking or other form of tobacco use[, constituting] . . . about 20 percent of all deaths in our nation.” The President’s Cancer Panel reported that “[e]very day, approximately 4,000 children under age 18 experiment with cigarettes for the first time; another 1,500 become regular smokers. Of those who become regular smokers, about half eventually will die from a disease caused by tobacco use.”
Of course, this is just the summit of the mountain of evidence that youth smoking is a big problem, threatening lives and imposing enormous costs on the government. There is an additional mountain of evidence that the industry exacerbated this problem by targeting teens as well as by marketing more broadly in ways that reached them. The government interest in preventing underage smoking is substantial and even compelling: if you don’t start smoking as an adolescent, you probably won’t ever start.
Still, adult tobacco use is legal, which means that there is still an interest in conveying truthful information about tobacco products to adults, and a corresponding interest in the audience in receiving that information. (Side note: Of course, a tobacco company is never going to convey “truthful” information to its customers/potential customers. It may convey nonfalsifiable information—images of pretty people smoking or lovely vistas—but “truthful,” not so much. This should be of relevance to things like the ban on color advertising.)
In 2009, the Act became law, accompanied by several relevant legislative findings. Among them: past efforts to restrict tobacco advertising and marketing have failed to curb adolescent use; virtually all new users are underage; advertising, marketing and promotion have been especially directed to attract young people, and have succeeded; “[c]hildren are exposed to substantial and unavoidable tobacco advertising that leads to favorable beliefs about tobacco use, plays a role in leading young people to overestimate the prevalence of tobacco use, and increases the number of young people who begin to use tobacco”; and “[c]hildren are more influenced by tobacco marketing than adults: more than 80 percent of youth smoke three heavily marketed brands, while only 54 percent of adults, 26 and older, smoke these same brands.”
Plaintiffs sued the US for violation of the First Amendment, unlawful taking under the Fifth Amendment, and violation of their Fifth Amendment due process rights, as well as a violation of nondelegation principles because the Act authorized further restrictions by federal agencies, states and Indian tribes. They lost summary judgment on everything but some of their First Amendment claims.
On appeal, plaintiffs argued that strict scrutiny should apply, though they conceded that the precedents were against them. The court of appeals stuck with Central Hudson, which allows nonmisleading commercial speech about lawful activity to be regulated if the regulation serves a substantial government interest and is no more extensive than is necessary to serve that interest—a question of “fit.” The government has the burden of showing that the regulation advances the government interest in a direct and material way, with more than speculation or conjecture. That is, the government must show that the harms targeted are real and that the regulation will “in fact alleviate them to a material degree.” Though the court must assess the “fit,” there is room for legislative judgment. Moreover, the means chosen need not be the least restrictive possible. Still, if there are obvious less burdensome alternatives, that’s relevant to the inquiry on “fit.”
But there’s another crucial part to Central Hudson: if commercial speech is false, deceptive, or misleading, another test is appropriate. According to Judge Clay, Zauderer applies where a disclosure requirement targets speech that is either inherently misleading or potentially misleading. An advertiser’s rights are adequately protected as long as disclosure requirements are reasonably related to the state’s interest in preventing consumer deception and are not unjustified or unduly burdensome. Also, the government may not absolutely ban potentially misleading information if it can be presented in a nondeceptive way.

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