Thursday, September 21, 2017

9th Circuit is sour on sugar-sweetened beverage disclosure

American Beverage Association v. City and County of San Francisco, No. 16-16072 (9th Cir. Sept. 19, 2017)

Plaintiffs challenged a SF ordinance requiring warnings about the health effects of certain sugar-sweetened beverages (SSBs) on certain fixed advertising (e.g., billboards) in the city. The court of appeals reversed the district court’s refusal to preliminarily enjoin the ordinance, on the grounds that the required disclosure was controversial/misleading and unduly burdensome.

The ordinance required ads to contain this warning: “WARNING: 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.”  Covered ads excluded, inter alia, ads in periodicals, television, electronic media, SSB containers or packaging, menus, shelf tags, vehicles, or logos that occupied an area less than thirty-six square inches.  SSBs were defined to include soda and other non-alcoholic beverages that contain one or more added sweeteners and more than twenty-five calories per twelve fluid ounces of beverage, but not milk, milk alternatives primarily consisting of plant-based ingredients, 100% natural fruit juice, natural vegetable juice, infant formula, medical food, supplements, and certain other products.  The warning had to occupy 20 percent of a covered ad and be set off with a rectangular border. San Francisco’s purposes included the desire to “inform the public of the presence of added sugars and thus promote informed consumer choice that may result in reduced caloric intake and improved diet and health, thereby reducing illnesses to which [sugar-sweetened beverages] contribute and associated economic burdens.”

Zauderer applies to mandatory disclosures, whether or not they are designed to remedy deception.  A “purely factual and uncontroversial disclosure that is not unduly burdensome will withstand First Amendment scrutiny so long as it is reasonably related to a substantial government interest.” The government has the burden of showing that a disclosure is purely factual and uncontroversial, not unduly burdensome, and reasonably related to a substantial government interest.  “[U]ncontroversial” here “refers to the factual accuracy of the compelled disclosure, not to its subjective impact on the audience,” and a “literally true but nonetheless misleading and, in that sense, untrue” disclosure is not purely factual under Zauderer.

The majority concluded that “the factual accuracy of the warning is, at a minimum, controversial.” he unqualified statement that “[d]rinking beverages with added sugar(s) contributes to obesity, diabetes, and tooth decay” “conveys the message that sugar-sweetened beverages contribute to these health conditions regardless of the quantity consumed or other lifestyle choices.” This message contradicted FDA statements that added sugars are “generally recognized as safe,” and “can be a part of a healthy dietary pattern when not consumed in excess amounts.” SF’s experts concluded that “there is a clear scientific consensus” that sugar-sweetened beverages contribute to obesity and diabetes through “excessive caloric intake” and “by adding extra calories to the diet,” but didn’t directly challenge the conclusion of the plaintiffs’ expert that “when consumed as part of a diet that balances caloric intake with energy output, consuming beverages with added sugar does not contribute to obesity or diabetes.” Because SF’s warning wasn’t about overconsumption, and it said “contributes” instead of “may contribute,” “the accuracy of the warning is in reasonable dispute.”

Furhtermore, the warning was “misleading and, in that sense, untrue.” By focusing on a single product and not on others with an equal or greater amount of added sugars and calories, “the warning conveys the message that sugar-sweetened beverages are less healthy than other sources of added sugars and calories and are more likely to contribute to obesity, diabetes, and tooth decay than other foods.”  Borrowing an example from plaintiffs, the court reasoned that “If car dealers were required to post a warning only on Toyota vehicles that said: ‘WARNING: Toyotas contribute to roll-over crashes,’ the common-sense conclusion would be that Toyotas are more likely to cause rollovers than other vehicles.”

[Note: not all courts will apply this interpretive standard, which relies on the ordinary rules of implicature, to false advertising cases. They should.  Second note: under false advertising precedents, misleadingness is a matter of extrinsic evidence, not simple reading.  If the government’s burden is to show that the disclosure is nonmisleading, should it have to provide expert or survey evidence of this?  If the government does provide such evidence of nonmisleadingness, can it rebut the court’s conclusions about the meaning of the disclosure?  I have my own conclusions about this, but more overarchingly I believe that judicial reasoning about how consumers react to information should be consistent across cases, adjusting appropriately for who has the burden of proof.]

The current state of research on this issue indicated that this message was deceptive. According to the FDA, “added sugars, including sugar-sweetened beverages, are no more likely to cause weight gain in adults than any other source of energy.” The American Dental Association likewise cautioned against the “growing popularity of singling-out sugar-sweetened beverages” because “ the evidence is not yet sufficient to single out any one food or beverage product as a key driver of dental caries.” SF argued that an underinclusive warning is okay because it was entitled “to attack problems piecemeal.” But the problem was that the warning was potentially misleading, not because it “does not get at all facets of the problem it is designed to ameliorate.”

SF argued that people were more likely to over-consume sugar-sweetened beverages than other foods. “But even if it were undisputed that consumption of sugar-sweetened beverages gives rise to unique behavioral risks, the warning does not communicate that information”—it didn’t mention behavioral risks, “and thus clearly implies that there is something inherent about sugar-sweetened beverages that contributes to these health risks in a way that other sugar-sweetened products do not, regardless of consumer behavior.”  [This is an example of how “inherent” is usually an unhelpful concept when people are involved.]   The district court erred in finding that it would be unreasonable to interpret the warning to mean that sugar-sweetened beverages are uniquely or inherently unhealthy.

Separately, the warning imposed an undue burden because it required a black box, bold warning covering 20 percent of the ads, making it impractical to advertise on covered media.  The court of appeals agreed that “the black box warning overwhelms other visual elements in the advertisement,” thus imposing an undue burden.  Although the district court reasoned that a commercial speaker could use the remaining 80 percent of its advertising space to engage in counter-speech, that wasn’t enough—the speaker was being forced “to tailor its speech to an opponent’s agenda,” and to respond to a one-sided and misleading message when it would “prefer to be silent” (which sounds like it’s going back to point one).  “[C]ountering San Francisco’s misleading message would leave them little room to communicate their intended message. This would defeat the purpose of the advertisement, turning it into a vehicle for a debate about the health effects of sugar-sweetened beverages.”
sample ad submitted by plaintiffs
Plaintiffs submitted unrefuted declarations from major companies manufacturing sugar-sweetened beverages stating that they’d remove advertising from covered media if San Francisco’s ordinance went into effect. Effectively ruling out advertising in a particular medium was evidence of undue burden (consider the effect of this holding on FTC/FDA disclosure rules and Twitter ads).   The district court erred in rejecting this evidence because the declarations were “self-serving,” which alone isn’t enough reason to disregard an affidavit.  The district court also reasoned that tobacco and pharmaceutical companies continued to advertise despite being compelled to provide similar warnings. But SSBs don’t have “the same physiologically addictive qualities as tobacco, nor are they prescribed by doctors to treat health conditions like pharmaceutical products. There is no evidence in the record that advertisers have continued advertising products analogous to sugar-sweetened beverages in the face of compelled disclosures of the sort required here.”  

[While I understand why the payoff from addiction might be enough to get tobacco companies to continue to advertise despite the warnings, I don’t get the second distinction.  If anything, the availability of an alternate means to get to the consumer—advertising to doctors who prescribe drugs—makes it even clearer that the benefits of advertising directly to consumers induce pharmacos to continue to advertise despite onerous disclosure requirements, thus not chilling their speech.  Is the distinction one of care exercised by consumers in choosing?  The profit margin on drugs/payoff per ad dollar, on which no factual findings have been made?  That’s all I can come up with at the moment.]

Though SF had a substantial government interest in the health of its citizens, it failed to meet its burden for these reasons, though the court commented in a footnote that SF might not even be able to establish that providing misleading information through an unduly burdensome disclosure was reasonably related to its substantial interest in the health of its citizens. Indeed, San Francisco “has no legitimate reason to force retailers to affix false information on their products.”

Judge Nelson concurred in the judgment because of the warning’s size.  “[T]he City has not carried its burden in demonstrating that the twenty percent requirement at issue here would not deter certain entities from advertising in their medium of choice.” She wouldn’t have ruled on the “tenuous” ground that the disclosure was misleading.

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