American Beverage Association v. City & County of San Francisco, No. 15-cv-03415 (N.D. Cal. May 17, 2016)
The court denied plaintiffs’ attempt to enjoin a sugar-sweetened beverage warning imposed on certain soda ads by San Francisco. The warning is: “Drinking beverages with added sugar(s) contributes to obesity, diabetes, and tooth decay. This is a message from the City and County of San Francisco.” S.F. Health Code § 4203(a). The ordinance’s findings included that consumption of sugar-sweetened beverages (SSBs) was associated with numerous health problems; that obesity is a big problem in the US and SF specifically, particularly with low-income and nonwhite populations; that SSBs contribute way too much sugar and too many empty calories to the average American diet; that even moderate consumption of SSBs is associated with health risks; that children are particularly at risk (“On average, children consumed 11.96 teaspoons of added sugars from sodas and fruit drinks per day – 47% of their total intake of added sugars.”); that the results are costly for California; that food labels typically don’t show whether sugar has been added; and that young adults are targeted by SSB marketers.
Thus, the warning, which must occupy at least 20% of the area of each SSB ad. Some beverages are specifically excluded, such as milk and milk alternatives and 100% natural fruit or vegetable juice. Covered ads include “any logo, that identifies, promotes, or markets a [SSB] for sale or use that is any of the following: (a) on paper, poster, or a billboard; (b) in or on a stadium, arena, transit shelter, or any other structure; (c) in or on a bus, car, train, pedicab, or any other vehicle; or (d) on a wall, or any other surface or material.” Newspaper, internet, TV and similar ads are excluded, as are containers or packages for SSBs; vehicles used by businesses that make, distribute, or sell SSBs; standalone logos under 36 square inches; shelf tags/labels; and certain signs permitted before the law became effective.
Plaintiffs argued that the ordinance covered noncommercial speech, such as Coke ads proclaiming “Love Wins” after the Supreme Court’s marriage equality ruling, and publicity for the Pride Parade and the Chinese New Year’s Festival on signs depicting soda products and logos. The court thought it was debatable whether all of the examples involved inextricably intertwined commercial and noncommercial speech, citing Jordan v. Jewel Food Stores, Inc., 743 F.3d 509 (7th Cir. 2014). Even if those were examples of noncommercial speech, plaintiffs couldn’t succeed on a facial challenge because they didn’t show that a substantial amount of noncommercial speech would be affected in relation to the amount of commercial speech regulated.
Zauderer v. Office of Disciplinary Counsel of Supreme Court, 471 U.S. 626 (1985), not strict scrutiny, applied. In Retail Digital Network, LLC v. Appelsmith, 810 F.3d 638 (9th Cir. 2016), the Ninth Circuit held that Sorrell v. IMS Health, Inc., 131 S. Ct. 2653 (2011), required the application of strict scrutiny to content-or speaker-based restrictions on nonmisleading commercial speech regarding lawful goods or services. But Retail Digital involved a restriction on speech, not a disclosure requirement. And Zauderer applies to disclosure requirements whether or not the relevant government interest is preventing consumer deception.
Compelled disclosure doesn’t violate the First Amendment so long as the disclosure requirement is reasonably related to the state’s interest. Plaintiffs argued that some greater scrutiny was required because the warning was imposed only when they decided to speak in the first place, rather than being triggered by a transaction. But Zauderer was the same situation—the lawyer decided to advertise that there’d be no fees if the case failed, without disclosing that there’d be costs. In the court’s view, Zauderer was basically a rational basis standard; it wasn’t even clear that “factual and uncontroversial” was required, or whether that was just the Court’s description of the disclosure in Zauderer itself, as long as the disclosure was “reasonably related to the State’s interest.”
Nonetheless, the court continued to apply the “factual and uncontroversial” requirement, interpreting it to mean that the compelled disclosure “must convey a fact rather than an opinion and that, generally speaking, it must be accurate.” “Uncontroversial” didn’t require more than accuracy, because the requirement shouldn’t “be so easily manipulated that it would effectively bar any compelled disclosure by the government,” particularly “where public health and safety are at issue.” As the court had previously held, “[a] ‘controversy’ cannot automatically be deemed created any time there is a disagreement about the science behind a warning because science is almost always debatable at some level.” Here, the warning was accurate.
Plaintiffs argued that the warning was misleading because it suggests that “consuming beverages with added sugar is dangerous regardless of one’s diet or lifestyle” and that “consuming beverages with added sugar necessarily and inevitably contributes to . . . tooth decay at any level of consumption.” But the warning just said that SSBs “contribute” to tooth decay, which is true, not that they make tooth decay inevitable. No reasonable consumer would interpret the warning as suggested by the plaintiffs; the Zauderer-related case law doesn’t give an interpretive standard, but the court couldn’t see what other standard could apply; plus, claims are often evaluated from the perspective of a reasonable consumer, as in false advertising law. “Contribute” isn’t as strong as “causes,” and to hold otherwise would cast doubt on things like tobacco warnings that say “causes” even though lung cancer isn’t inevitable for smokers.
Nor does it matter that other things cause tooth decay; underinclusiveness is not a problem under Zauderer, because “governments are entitled to attack problems piecemeal, save where their policies implicate rights so fundamental that strict scrutiny must be applied. The right of a commercial speaker not to divulge accurate information regarding his services is not such a fundamental right.” The court concluded that it was ok to target a significant source of sugar per serving, particularly because it didn’t provide healthful nutrients as milk and juice do.
The same basic reasoning supported the obesity/diabetes warning. “[N]o reasonable consumer would likely construe the warning as specific to him or her and instead would understand the warning is directed to the general public.” Even if, as plaintiffs argued, SSBs represented only 5% of total caloric intake, each serving still offered a substantial number of calories: one serving size was more than 10% of a 2,000 calorie/day diet. Dietary guidelines recommend a daily limit of 10% of total calories for added sugars, but a single 20-ounce serving exceeds that limit, and it’s worse for kids.
Plaintiffs also challenged the size of the warning, but the City had a reasonable basis for making it be 20% of the advertisement. It had to be “of a sufficient size to be salient – i.e., noticed and attended to – and research on health warnings for tobacco products has led the World Health Organization, for instance, to recommend that tobacco product packaging and labeling bear a health warning of 50% or more, but no less than 30%, of the principal display areas. By comparison, 20% is relatively modest.” Even if a smaller warning would still be effective, Zauderer isn’t a least restrictive means test.
Plaintiffs argued that the ordinance still had an unconstitutional chilling effect because the large size of the warning would deter them from advertising at all or from engaging in counterspeech, because counterspeech would transform the ad from promotion into a scientific debate. However, under Zauderer, as long as the disclosure requirements were “reasonably” related to the State’s interest, the advertiser’s rights were “adequately protected,” meaning that the degree of any chilling effect was already accounted for.
Plus, the warning was not unduly large. Because it was text-only, “the force of the pictorial advertisement is not likely to be overcome by the text warning,” since ads with color and pictures are more salient. In addition, a paper in JAMA showed that ad messages are still effective in the presence of health warnings on ads: brand information recall remained very high. Though plaintiffs’ expert noted that recall of an ad’s specific message or heading was lower than in the presence of a warning message, the court pointed out that, “at least for the products at issue in this case – SSBs – the advertising message is, in effect, the brand, and brand recall is not particularly affected by a text warning message.”
Moreover, 20% wasn’t unprecedented, though it was substantial and raised serious questions. “Not only is 80% of the space available, Plaintiffs have shown that they have employed pithy advertising on how to achieve balanced diets and lifestyles.” Moreover, though plaintiffs submitted declarations from major beverage companies stating that they’d decline to run covered ads under the ordinance, the court wasn’t persuaded by these self-serving claims. Other industries, including cigarette and smokeless tobacco products, have successfully incorporated warnings into ads. If the medium was as valuable to sales as plaintiffs claimed, they wouldn’t completely abandon it. Pharmacos, too, still advertise despite having to disclose warnings. “[A]s anyone who has witnessed a television advertisement for pharmaceutical products will know, the scope of the information required about potential adverse side effects often makes the disclosure seemingly as long as the advertising message itself,” but they still advertise.
The court turned to irreparable harm: without showing likely success on the merits, they didn’t show a First Amendment irreparable harm. Plaintiffs also identified harm to their goodwill and reputation, but the court wasn’t convinced; many consumers were likely familiar with the high sugar content of SSBs and aware of calorie-induced weight gain. Plaintiffs could also “engage in counterspeech to combat the asserted harm, not only in the advertisement containing the warning itself but also through other means and media.”
The court did find that the size of the warning raised serious questions going to the merits, assuming that test survives eBay and Winter, but the balance of hardships didn’t tip sharply in their favor given the public health interests at stake.