Monday, February 19, 2007

Commercial speech conference: my comments

The thing that has always puzzled me about Central Hudson is that the first prong of the four-prong test means that false or misleading speech flunks the test at the outset and may simply be banned; the rest of the test is designed to evaluate the regulation at issue. The Supreme Court has haphazardly recognized that this makes falsity and especially misleadingess a crucial determination, even more so as the Court has raised the burden of proof on the remaining three prongs of the Central Hudson test.

The lawyer regulation cases represent the Court’s most significant attempts to deal with the false/true line. Potentially misleading speech can’t just be banned. Actually or inherently misleading speech, however, can just be banned. Ok, so what’s actually versus potentially misleading? The only real possibility from the case law is that speech that can be clarified with a disclosure is potentially misleading.

The justices are confident they understand lawyer advertising sufficiently to draw the line. But: (1) they’re not exactly ordinary clients, and it’s the client’s perspective that should matter. (2) The research on disclosures and disclaimers is that they don’t work. People miss “no” or “not.” They misread the disclaimers to reinforce the main claim. The Court wants to have its cake (significant freedom to make claims) and eat it too (no deception), but the choice is starker than that, because people are often bad at processing information, for perfectly good reasons. In a busy word, it’s rational to devote limited time to evaluating most claims.

Profesor LaFrance analogized trademark and false advertising to defamation laws, which is an interesting comparison given the level of scrutiny the Court imposes on the substantive and procedural aspects of those actions. There are some older cases about trademark – for my purposes, the key ones are Friedman v. Rogers, in which Texas was allowed to ban the use of trade names by optometrists, and the Gay Olympics case, in which the US Olympic Committee got to suppress the use of “Gay Olympics” by a San Francisco group because of a special law passed protecting the word “Olympics.”

In Friedman, the Court ruled that trade names lack inherent/intrinsic meaning and can be used to deceive about consistency of price and quality; therefore their use can be banned. This is pretty unpersuasive, given its conflict with the economic theory behind trademarks – that trademarks minimize search costs and encourage consistent quality, and that consumers can punish inconsistency on their own. Thus, the existence of the mark “McDonald’s” for fast food makes it easier and cheaper for consumers to understand their choices. By denying Texas residents the information that consistent optometric services were available, the Texas law interfered with truthful commercial speech. Friedman is a pre-Central Hudson case, and I consider it unlikely to be good law.

The Gay Olympics case suggests that Congress can determine that any unauthorized use of Olympic is misleading. It also relied on the theory that trademarks are property and thus their allocation to private entities doesn’t violate the First Amendment. The second rationale is a mistake – the label “property” for intangibles can’t solve First Amendment problems; see, e.g., the repeated introduction of bills making the US government the owner of intangible property rights in every American flag, such that “disrespectful” treatment would be illegal.

Current problems: partially useful information. Many uses of words and marks help some people while confusing others, which creates big issues for trademark and false advertising law. Examples: Park ‘n Fly is a trademark. Can an airport parking lot advertise “Park and Fly!”? Some consumers will understand that this is a description of services and their decisions will be improved; others will be confused. Likewise, studies have shown that many consumers misinterpret “low calorie” to also mean that a food is low in other negative qualities, like fat. But some correctly understand the limited claim. Which consumers will regulation favor?

The courts have been largely indifferent to First Amendment isues in private law cases, even though New York Times v. Sullivan is supposed to stand for the proposition that state authorization and enforcement of lawsuits against speech implicates the First Amendment. Perhaps unsurprisingly, courts are mostly willing to examine direct government regulations for First Amendment violations.

Recent cases: Piazza’s Seafood World v. Odom, dealing with Louisiana’s Cajun Statute, which required products labeled “Cajun” to be from Louisiana. Plaintiff’s catfish were Chinese, and the court struck down the law because it believed (without any evidence) that sophisticated wholesale consumers could understand the true origin; “Cajun” was just potentially misleading as applied to Chinese catfish. But this overlooks the potential government role (as in the Gay Olympics case) of establishing the meaning of a word, which can improve the efficiency of a market. When the government sets standards for defining the miles per gallon a car gets, or the amount of “tar” in tobacco, consumers have a standard that they can use to compare various products, without having to invest in figuring out which of many competing definitions a particular producer is using. If we really care about listeners’ interests, then we should give government significant leeway to stabilize meaning.

Another case involved the Indian Arts & Crafts Act, which bans the false suggestion that a product was made by an Indian. The Seventh Circuit upheld it against a First Amendment challenge as a trademark statute. But the court also held that the Department of the Interior regulation holding that unqualified use of the term “Indian” or the name of an Indian tribe was deceptive wouldn’t be enforced. Rather, plaintiffs (and the government, if the government ever prosecutes someone under the law) would have to prove misleadingness to the jury in every case. The court described the regulation as making “Indian” the trademark for Indian-produced products, like Roquefort is the name of a particular cheese.

Two points: First, this view of the IACA disregards other functions the law might serve than trademark purposes, for example cultural preservation or commercial morality, which might lead to a different view of permitted and prohibited acts. (See this student note for more.) Second, it is not clear why the jury is better at deciding what’s deceptive than the legislature or an administrative agency; on balance, a blanket rule might be right more often than case-by-case verdicts, especially if it’s really likely that the unqualified use of the term “Indian” is in fact deceptive. Who decides who’s fooled? Even defamation law recognizes certain terms as defamatory per se, without requiring an individual jury verdict on the point.

Finally, a looming issue if we continue expanding commercial speech doctrine to false advertising and trademark law: intent. It’s easy to use the word fraud in this context, but consumer protection law long ago left the common law requirements of fraud behind. Intentional deception is no longer a requirement; one can infringe or engage in false advertising merely by being wrong about the implications of one’s mark or claim. If we did treat advertising law like defamation, we’d have to rethink that – but there were good reasons to move away from the common law rule. We shouldn’t assume that the balance struck in defamation law is appropriate for advertising law.

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