Thursday, July 31, 2014

COOL story, part 1: DC Circuit upholds country of origin labeling rule

American Meat Institute v. U.S. Dep’t of Agriculture, No. 13-5281 (D.C. Cir. July 29, 2014)

The D.C. Circuit here, en banc, upholds country of origin labeling (COOL) requirements for meat, and in the process holds that Zauderer’s standard for compelled commercial disclosures does not require the government interest at issue to be the prevention of deception. This holding, however, reveals deep divides among the judges about compelled commercial disclosures, with both concurrences and dissents that try to frame the issue differently—looking ahead to the inevitable cert petition.

Congress required COOL on many foods, including some meat products, and passed a law defining “country of origin” for meat to be based on where the animal had been born, raised, and slaughtered—the three major production steps. After a WTO panel found the first implementing regulations to violate our international obligations (they allowed multiple countries to be listed, and further allowed commingling of meat from animals of different origins as long as the label listed all the countries from which the animals might have come), the Secretary promulgated a rule requiring more precise information on the location of each production step.  The new rule also eliminated the flexibility allowed in labeling commingled animals, which promises increased costs for certain operators.  (Here’s another variant of the First Amendment as Lochner: it’s a labeling rule, but it will demand changes in production practices so that producers can actually identify the thing that needs to be labeled; this is an economic regulation, but its output is information, so now it’s a First Amendment problem.  But the producers’ objection isn’t really to the compelled speech; it’s to the expense of implementing the new production practices required of them.)

AMI argued that Zauderer didn’t apply to government interests other than preventing consumer protection, and that this regulation flunked Central Hudson. The parties agreed that Zauderer applied to mandatory disclosure of “purely factual and uncontroversial information” appropriate to prevent deception in the regulated party’s commercial speech. What of purely factual and uncontroversial disclosures serving other government interests?  AMI argued that even if Zauderer did extend that far, the government had no substantial interest in COOL.

Zauderer itself isn’t clear; the government’s interest in that case, and the subsequent Milavetz case was in preventing deception, and thus the language could simply have conformed to that.  However, the language Zauderer used to justify its approach was far broader.  Zauderer rejected Central Hudson analysis as unnecessary in light of the “material differences between disclosure requirements and outright prohibitions on speech.” The Court continued: “the First Amendment interests implicated by disclosure requirements are substantially weaker than those at stake when speech is actually suppressed.” The speaker’s interest was “minimal”: “Because the extension of First Amendment protection to commercial speech is justified principally by the value to consumers of the information such speech provides, appellant’s constitutionally protected interest in not providing any particular factual information in his advertising is minimal.” These reasons seem “inherently applicable beyond the problem of deception,” and the en banc majority noted that other circuits have so found.

Okay then.  Is the government’s interest in COOL adequate?  AMI disparaged the interest at stake as merely satisfying consumers’ “idle curiosity.”  The Supreme Court hasn’t told us whether a Zauderer-passing interest has to qualify as “substantial” under Central Hudson, and anyway what counts as a substantial interest “itself seems elusive.”  However, several aspects of COOL for food combined to make a substantial interest: “the context and long history of country-of-origin disclosures to enable consumers to choose American-made products; the demonstrated consumer interest in extending country-of-origin labeling to food products; and the individual health concerns and market impacts that can arise in the event of a food-borne illness outbreak.”

COOL has “an historical pedigree that lifts it well above ‘idle curiosity,’” dating to 1890.  “[T]he ‘time-tested consensus’ that consumers want to know the geographical origin of potential purchases has material weight in and of itself.”  The value of this information is a matter of common sense.  Congresspeople identified the statute’s purpose as “enabling customers to make informed choices based on characteristics of the products they wished to purchase, including United States supervision of the entire production process for health and hygiene.”  Some believed that COOL would lead to consumers choosing to buy American.  “Even though the production steps abroad for food imported into the United States are to a degree subject to U.S. government monitoring, it seems reasonable for Congress to anticipate that many consumers may prefer food that had been continuously under a particular government’s direct scrutiny.” 

Congresspeople also indicated that people “would have a special concern about the geographical origins of what they eat.”  The legislative history refers to “the collapse of the cantaloupe market when some imported cantaloupes proved to be contaminated and consumers were unable to determine whether the melons on the shelves had come from that country.” This anecdote “more broadly suggests the utility of these disclosures in the event of any disease outbreak known to have a specific country of origin, foreign or domestic.”  (This discussion is conducted in a weird vacuum, with no mention of just how few USDA inspectors there are and just how little food gets inspected—here and elsewhere.  Is it ironic that many of the people who might buy American based on assumptions about superiority may well have voted for representatives who have made American origin less and less a guarantee of safe and hygenic production?)

Surveys in the record indicated that 71-73% of consumers would be willing to pay for COOL.  Though consumers tend to overstate their willingness to pay, these studies, plus the many favorable comments received during rulemaking, reinforced the historical basis for treating such information as valuable.  

This will be important later: The interests served by the rule were those advanced by Congress when it adopted the statute, even if the agency didn’t discuss those interests.  In defense of this position, the en banc majority stated that it didn’t want to allow “perfectly adequate legislative interests properly stated by congressional proponents” to be “doomed by agency fumbling (whether deliberate or accidental),” because that rule would “allow the executive to torpedo otherwise valid legislation simply by failing to cite to the court the interests on which Congress relied,” and allow the next President to reinstate a regulation by citing the right interests. “We do not think the constitutionality of a statute should bobble up and down at an administration’s discretion.” 

Anyway, the agency sufficiently invoked the relevant interests. Agency statements from prior rulemakings claiming that COOL serves no food safety interest weren’t inconsistent with the government’s litigation position.  “Simply because the agency believes it has other, superior means to protect food safety doesn’t delegitimize a congressional decision to empower consumers to take possible country-specific differences in safety practices into account.”  (Compare this idea to the Pom Wonderful statement that the FDA isn’t as expert about consumer understanding as market participants are.  When regulators fail to protect us, who can take up the slack, and how?)

Given an adequate interest, the remaining Zauderer question is whether the regulation fits the interest.  The en banc majority comments that the Zauderer test “differs in wording, though perhaps not significantly in substance,” from the Central Hudson test, at least on these facts.  Central Hudson would require the court to determine whether “the regulatory technique [is] in proportion to [the] interest,” an inquiry comprised of assessing whether the chosen means “directly advance[s] the state interest involved” and whether it is narrowly tailored to serve that end.  A Central Hudson analysis commonly requires evidence of a regulation’s effectiveness, but “such evidentiary parsing is hardly necessary when the government uses a disclosure mandate to achieve a goal of informing consumers about a particular product trait.”  Zauderer is like res ipsa loquitur: “by acting only through a reasonably crafted disclosure mandate, the government meets its burden of showing that the mandate advances its interest in making the ‘purely factual and uncontroversial information’ accessible to the recipients.”  The disclosure must however relate to the good or service offered by the regulated party.

The majority also commented that “[t[he self-evident tendency of a disclosure mandate to assure that recipients get the mandated information may in part explain why, where that is the goal, many such mandates have persisted for decades without anyone questioning their constitutionality.”  COOL isn’t the only required disclosure about product attributes—others include fiber content, care instructions for clothing items, and listing of ingredients. 

“Notwithstanding the reference to ‘narrow tailoring,’ the Court has made clear that the government’s burden on the final Central Hudson factor is to show a ‘reasonable fit,’ or a ‘reasonable proportion,’ between means and ends.”  When the government’s interest is to ensure that consumers receive particular information, this means-ends fit is “self-evidently satisfied when the government acts only through a reasonably crafted mandate to disclose ‘purely factual and uncontroversial information’ about attributes of the product or service being offered.”  Mandatory disclosures will therefore almost always have a reasonable means-ends relationship, unless disclosure is unduly burdensome in a way that chills protected speech.

Applying Zauderer here, the disclosures were “purely factual and uncontroversial information” about the good or service being offered.  AMI objected to the word “slaughter,” but the court didn’t need to address its objections because the rule allows retailers to use “harvested” instead, and AMI didn’t object to that.  AMI also didn’t disagree with the truth of the facts to be disclosed, so they weren’t controversial “in that sense.”  Nor was COOL controversial “in the sense that it communicates a message that is controversial for some reason other than dispute about simple factual accuracy.”  Some required factual disclosures could be so one-sided or incomplete that they wouldn’t qualify as “factual and uncontroversial” (note: but not abortion disclosures; never those), but not these.  (Note the tension with the idea that consumers could believe that foreign countries might provide dangerous food.)  COOL doesn’t require corporations to carry messages biased against or expressly contrary to the corporation’s views. Nor is it so detailed that it effectively rules out ordinary advertising methods.  As a result, the government’s interests here were sufficient to sustain COOL under Zauderer.


Anonymous said...

I'm betting that if it gets to SCOTUS, they uphold. And I say this in a purely cynical sense - they personally will be able to identify countries of origin they personally want to avoid. So they'll understand the need for labeling.


RT said...

That thought occurred to me too.