Tribute to Steve Shiffrin: Panel on Practice

First Amendment Principles in Practice, Moderator: Patrick Lynch, O'Melveny & Myers LLP

David Vladeck, Georgetown University Law Center: Why has there been so little post-Nike development in caselaw, despite predictions? Nike may have been an aberration, unlikely to recur. Most early commercial speech cases were brought against anticompetitive restraints on professionals and others that were unassailable under antitrust laws because of the state action bar. Virtually all commercial speech cases at the Court involve (1) regulation of professionals or (2) regulation of activities that were at one time thought to be sinful. Nike was the first private litigant case to reach the Court – the first without a specific government regulation.

One reason we haven’t seen more Nikes was that there was something aberrational about the commercial speech doctrine providing the rule in a private party v. private party case.

Also, commercial speech cases came in waves. Lawyers; then drugs and dietary supplements (a wave down in the DC Circuit). The FDA/FTC aren’t the pitbulls Shiffrin hopes they are; in response to evolving commercial speech doctrine – which is hardly “lite” – the regulatory agencies have retreated a lot. Sellers of food products can now make health claims that aren’t provably true, because the FDA doesn’t believe it could sustain those regulations.

Second reason for decline: the government is not trying all that hard to regulate commercial speech, Vladeck argues to our collective detriment. Also, the drug companies suffered enormous setbacks in what happened with their actual advertising – e.g., Celebrex. Now the drug industry asks the FDA to prescreen all direct to consumer ads, and is asking Congress to expand and accelerate FDA review, funded by the industry. (This is designed to get liability protection through preemption.)

There will be other waves. But the pace won’t be substantial.

Bruce Johnson, Davis Wright Tremaine LLP: Nike was odd; other reasons included (1) California’s consumer protection statute, since amended, allowing any consumer to sue without a purchase and without any damages, (2) Nike was subject to strict liability, (3) Kasky alleged misleadingness rather than falsity, and (4) Kasky’s allegations were largely based on press releases. This made Kasky’s claim very difficult to litigate for the defendant. ((2) and (3) are not at all unique to California law – state and federal advertising law, as well as the FTC/FDA regimes, have these features, which I think is often overlooked in discussions of Nike.)

The transactional test, requiring a connection to a proposed transaction before there's commercial speech, will force some discipline on these causes of action, as opposed to lawsuits based on feel-good corporate claims of being a “nice guy.”

Hon. Robert Lasnik, U.S. District Court for the Western District of Washington: These are difficult concepts to explain to a judge or a jury. Yet – when Bill Gates speaks about Microsoft, Lasnik has some skepticism about truth and motive, whereas when he speaks as the head of his foundation, Lasnik gives him more leeway. This is a commonsense rule, and judges and juries are always analyzing motives in this way. So when Amazon tells investment advisors that the company is doing really well, and the advisors talk to newspaper reporters, and the newspapers report it – where on that chain does the First Amendment kick in? Is there a kickback? What is really going on? That is the judge’s perspective.

Vladeck: Lasnik has laid out the underlying theory of commercial speech: commercial entities have a special incentive not to tell the truth. The doctrine is a sensible way to accommodate the enormous information value of advertising with the falsehoods and half-truths that permeate the market. The government alone can’t police the market; competitors and consumers also need to be able to enforce public norms, which is what drove the enactment of California’s consumer protection law.

Even with amendment, a new Kasky could sue if he actually bought the shoes and alleged that he acted in reliance. So the legal change isn’t a complete explanation for the lack of new cases.

Johnson: Six years into the Bush Administration, it’s odd to hear Vladeck speaking of commercial speakers’ peculiar incentives to lie. He also thinks there are problems with the indeterminacy of the test – did neo-Kasky really buy shoes in reliance on representations about labor practices? (Well, I do. I may be unusual but I’m not unique.) Commercial actors want to sell, not to further self-governance, so they will move on to the next sale rather than defend the last set of advertisements.

Lasnik: Companies want to get rid of bad publicity more than anything else. Likewise, the Nike plaintiffs were more concerned with making a political statement. Any company worth its salt is going to try to get this off the front page, regardless of the legal regime.

Johnson: There are two models of the First Amendment – marketplace and regulatory. (The marketplace doesn’t have regulators? Even the nightwatchman state has a nightwatchman.) They give different answers on how to control the market. Johnson sees the regulatory model as growing out of the guild system, and then the New Deal attempts to carve up the economy and allow corporations to regulate themselves. Deregulation coincided with the creep of the marketplace model into the First Amendment as well.

Lynch: But is the commercial speech doctrine keeping (good) information from the public that the public would otherwise get? Or is regulation too toothless now?

Johnson: Commercial speech surfaces in private cases in odd ways. That’s what’s next – copyright, trademark, false advertising all consider commercial use, which courts are now conflating with commercial speech. The Dustin Hoffman case, for example – Dustin Hoffman’s image altered to show off a dress in a magazine. If it was a regular feature, it was protected by the First Amendment and his right of publicity claim would fail; if an ad, he’d win. He lost. Book covers for the Beardstown Ladies Investment Guide promising investment returns that were, in fact, false – a New York court threw out a consumer lawsuit on First Amendment grounds, but a California court allowed an identical claim to succeed. The Tony Twist case, Doe v. TCI: the Missouri Supreme Court ruled that a comic book was commercial speech and Twist had a valid right of publicity claim. Either a comic book character is entitled to First Amendment protection or not, but there’s incoherence in the lower courts now.

Something is wrong when the First Amendment gives more protection to a comic book featuring half-worm creatures based on albino singers than to a letter to the editor debating working conditions in Southeast Asia.

We are now premising private causes of action on the commercial/noncommercial distinction, and commercial speech doctrine doesn’t match up well with the concerns of typical private cases.

Lasnik: Agrees. When even the judge seems to be floundering, litigants feel pressure to settle.

Vladeck: Let’s answer the question about the regulatory impact of commercial speech doctrine. Most of the statutes being enforced were written well before the doctrine existed, with no eye towards First Amendment review. This forces agencies to be gunshy. Also, those of us who worked on the early cases thought we were empowering consumers, not hamstringing government. There are problems in private cases, but more serious is the inability of the federal government to take regulatory measures to keep half-truths from taking over the marketplace. The pendulum has swung too far.

It’s true that Lanham Act cases have generated lots of confusion about commercial speech doctrine and its applicability in private cases. The Lanham Act simply federalizes common-law claims for product disparagement, and these problems predated it. That’s not a product of the commercial speech doctrine, but a longstanding problem that exists any time courts are asked to intervene and punish speech.

Panel on First Amendment principles: discussion

Responses: Robert Post, Yale Law School: Redish shares two widely held views: First, we start with the notion that the First Amendment protects speech, and any derogation needs justification. Second, any derogation is likely to be viewpoint discrimination and bad.

Post’s brief responses: First, those notions are wrong. We need to distinguish between First Amendment protection and coverage. Does the First Amendment extend to all speech acts? The answer is unequivocally “no.” All of contract; informed consent requirements; dozens of other speech acts. Whatever value you have for speech, it will single out some speech and not others – some speech is relevant to democratic self-government and some isn’t; etc. It makes a good deal of sense not to cover all speech acts because basically everything we do as human beings is done through speech. The First Amendment only covers those forms of speech dictated by the values we hold that justify protecting speech.

Second, on viewpoint discrimination as the original sin. We have viewpoint discrimination as the rule. If Condoleeza Rice said Bush’s foreign policy was a disaster, she’d be fired. If a student writes on an exam at a state school that the First Amendment doesn’t apply to the states, the student gets a bad grade. The government funds certain studies and not others. The doctor tells you you have cancer and really you have an ulcer; you can sue. Mostly, the state has to regulate or not based on truth, which is something we determine regularly in trials – epistemological humility is not the rule because the state needs to regulate on a regular basis. Only where we want to exercise epistemological humility, and treasure differences of opinion – mostly in politics – do we want the free speech principle to apply. The question is where to draw the line.

Every town meeting has an agenda. If an issue is not on the agenda, you can’t talk about the issue – is that viewpoint discrimination? It turns out to depend on your notions of baseline.

Post’s account of commercial speech: Start with the value of democratic self-governance. The ability to participate in the formation of public opinion, so I can view the government as responsive to me. There are speech acts that aren’t participating, and the normative question is which speech acts I attribute that value. When Chrysler sells cars, it isn’t participating in the relevant way. The First Amendment-lite protection for commercial speech is that the information communicated is valuable to public opinion – it’s not protected as participatory or autonomous, but only secondarily as an aid to others who are participating/autonomous. This has numerous doctrinal consequences, including protecting truthful communications and allowing required disclosures.

Redish says that Chrysler has personal autonomy; Post denies that this is true or that it is relevant to democratic self-governance. Post doesn’t need to reach the Consumer Reports question because he distinguishes selling cars from supporting Bush. Consumer Reports’ categorization is open for debate, but no matter how you come out on that, you can still reject equalizing Bush and cars. Thinking is about making distinctions; Redish’s slippery slope fears are implausible, and Post is convinced that treating everything the same will make even more of a mess.

Steven Shiffrin, Cornell University Law School: The question is whether commercial speech is different because of all of the reasons people offer taken together, not whether you can pick off one at a time. The deep structure of multifaceted principles can be difficult to articulate, and are often understood before they are defined.

The FTC says we will determine for you what statements are false and true. If Redish is right, the FTC and the SEC should be closed down, and that’s a pretty radical view – you don’t have to be anticapitalist to support these institutions. They make decisions for us because consumers don’t have the time to determine everything about products, and also because sellers and corporations cannot be trusted. We don’t engage in viewpoint discrimination in the sense that Consumer Reports both endorses some products and condemns others, but we do treat sellers differently.

Redish’s paper says his argument is confined to truthful advertising. Why? We impinge on autonomy by paternalistically taxing cigarettes to deter smoking. Why is speech special? Self-government can be impinged upon in various ways, not just-speech based.

Corporations don’t have a self-realization or self-government interest, only listeners. In that case, we already know that an individual’s interest is greater, so that corporate speech is of lower value than other forms of speech. That has nothing to do with an ideology about the message. (But this is vulnerable to the NYT Co. problem.)

All the other speakers believe in self-government. Shiffrin thinks this is one of the great fictions of the US. He doesn’t find himself in the government. It might be for the people, but it’s not of the people or by the people. A 1/300 million share isn’t the self. We think the perceived opportunity to participate is important, but self-government is an unnecessary and confusing term – it allows Redish to argue that self-government is even more implicated when a single person has 100% of a relevant “vote.” Information for consumers is important, but democracy is about justice and protecting dissenters, not self-government. Commercial speech is part of the problem, not the solution. When $30 billion is spent telling children to buy products, and 40% of children have already decided what car to buy when they grow up, and many children’s favorite ad is Budweiser, we are hardly promoting the sort of active citizenry of self-governers that we should want. Of course this is an ideological position, but we can still take it into account in our theory of the First Amendment.

Viewpoint discrimination is often bad. But sometimes it’s good, like special protection for parody under fair use, or educational uses. In the public figure/issue context, a public issue is something you’re supposed to be interested in, and a private issue is something you’re not supposed to be interested in. In intentional infliction of emotional distress, figuring out how a reasonable person would react involves viewpoint discrimination. Shiffrin would take into account the goals of democratic citizenship in setting the level of protection for different types of speech.

James Weinstein, Arizona State University College of Law: Redish takes the position that people who disagree with him are either fools or knaves, anticapitalist knaves at that. Do you have to be hostile to capitalism, as Redish says, to say that (truthful) commercial speech deserves less First Amendment protection than political speech? Rehnquist was an implacable foe of commercial speech protection. Was he an anticapitalist?

Even Redish is prepared to allow regulation of false commercial speech, but we don’t have enough jail space for politicians who speak falsely or misleadingly – is he engaged in viewpoint discrimination?

Weinstein is troubled by the California Supreme Court decision in Nike; if we keep the definition of commercial speech limited, the viewpoint discrimination problem is minimized. He is also interested in the Consumer Reports question: why does CR get NYT v. Sullivan-type protection, if it does? There is a difference in the social practice of selling something and evaluating a product (criticizing or praising). Weinstein might not give it political-level protection, but he wouldn’t reduce it to commercial speech.

Weinstein finds it a hard question whether you can have ascriptive autonomy for political/democratic self-governance questions and then also regulate, for example, doctor-patient relations with the premise that patients are vulnerable (or, likewise, working conditions with the premise that employers have structural power over employees). He thinks there are reasons we have to ascribe autonomy to people as voters, but those reasons don’t always apply to individuals who are in particular private relations, or even to aspects of decisionmaking like whether to smoke cigarettes. Weinstein would like a little more Lochnerism to protect against paternalism using substantive due process, but that doesn’t commit him to protecting commercial speech as strongly as criticism of government policy.

Redish responds: Shiffrin is the poster child for the views he opposes – Shiffrin doesn’t want kids deciding what types of cars to buy. This is discrimination! Why is the promotion of sale by the commercial seller less worthy of protection than CR’s evaluation of the sale? (I am now reminded of Catharine MacKinnon’s discussion of Aristotelean equality – what does it mean to treat likes alike and unlikes unalike? What does it mean under conditions of subordination, in particular?)

Moderator: how do we identify the proper underlying values?

Redish: Reverse engineering, reasoning from the premises of our democratic system.

Post: A Rawlsian reflective equilibrium, trying to make sense of our tradition through dialogue.

Shiffrin: Doesn’t believe in general theory; to have a system is to lack integrity, as Nietzsche said. The premises of the system are themselves contested, as with descriptions of democracy.

Weinstein: Are we being descriptive or normative? Redish is trying to give a descriptive account. What possible value/s account for most cases? With a rich tradition like the First Amendment’s, we can’t be completely descriptive.

Question: Contracts are speech, performative speech used to create a legal relation. If the law takes you at your word and imposes an obligation, e.g. marital obligations after you say “I do,” there’s no viewpoint discrimination. If so, “I am selling you this shirt along with a warranty” can also be enforced without a problem. We are taking the seller at its word, and the buyer and seller ex ante would both want that. Much of the speech regulated by the FTC/SEC etc. has to do with explicit or implied in law warranties.

Redish: Speech does transform into action, but not always. Blackmail and threats are coercive, not protected speech. Words part of a contract are performative, and not the same as other speech.

Shiffrin: The issue is what speech counts as a warranty. The SEC counts the same statements at issue in Nike. The SEC refutes Redish’s thesis because it’s clearly making decisions on what speech is appropriate for consumers here.

Post: If a political candidate promises to go into Iraq and doesn’t, has he violated a warranty? Can law enforce a remedy? Clearly not. We have to distinguish classes of speech.

Redish: What about NYT v. Sullivan? Intentional/reckless falsehoods get no First Amendment protection.

Post: There’s a fact/opinion divide; also, punishing falsehood is viewpoint discrimination on Redish’s terms.

Redish: No, ideas v. facts is something different. Viewpoint regulation is regulation of “ought” claims. Statements of fact are a different ballgame.

Post: “Clinton is immoral”: Fact or opinion?

Redish: Opinion, but if knowingly based on false facts it wouldn’t be protected.

Post: “The eggrolls at the restaurant were cold.”

Redish: This is Bose v. Consumer Reports – the question is whether you’re lying, which is also an issue of burden of proof.

Post: That goes to intent, not fact v. opinion. The question is what propositions can be regulated for validity. The answer is context-specific and differs in commercial versus political speech.

Shiffrin: Sullivan involves balancing reputation against press rights. Gertz strikes a different balance. Applying Sullivan to truthful commercial speech or other contexts where the opposing interest is something other than reputation isn’t the obvious solution. In copyright, for example, property rights outweigh truthful speech; also the tort of public disclosure of private facts.

Seana Shiffrin: Getting back to the difference between Chrysler and Consumer Reports, she wants to expand on Chemerinsky’s argument – it’s not just that Nike has market power, but it’s also better positioned with respect to information about Nike. We legally protect that position: ordinary people can’t go on tours of Nike factories. Trade secret, property law, employment law, confidentiality agreements, etc. all give companies special control over their information. We give these rights for instrumental reasons, not to protect companies’ intrinsic privacy rights. As a result, we can reasonably expect higher standards of accuracy from the company than from those external to the process.

Redish: Plausible, but we never apply that analysis anywhere else. Judith Miller had more access and protection for her confidentiality than almost anyone else. In other areas of the law, information disparities don’t justify these distinctions.

Also, CR has special access to information – who has more information than Consumer Reports? (Nike does, as does Chrysler. Testing ten cars or pairs of shoes isn’t the same as having special access to information.)

Tribute to Steve Shiffrin: Panel on First Amendment principles

Panel on First Amendment Principles

Moderator: Kurt Lash, Loyola Law School Los Angeles

Keynote Address: Martin Redish, Northwestern University School of Law

Opposing commercial speech protection is wrong and indeed pathological in regulating viewpoints. Government finds the viewpoint offensive, wrong, or dangerous – we consider regulation on that basis categorically unconstitutional because it violates democratic notions of epistemological humility. In a constitutional democracy, the electorate gets to make the choice of what positions to take. (Here I presume he means individual members of the electorate, since the viewpoint-based regulation comes from the elected representatives.) It’s a Rawlsian veil of ignorance: we make a rule without knowing who’ll be in power.

The Supreme Court may have mistakenly viewed some regulations as not viewpoint-based, but it’s never upheld a regulation as viewpoint-based. You can’t recognize one exception without recognizing all exceptions – if one thing can be regulated because it’s offensive, so can the next thing that’s offensive to someone else. (“Offensive” is a key word here, as opposed to “harmful” or some other word.) There are some hidden viewpoint regulations, such as bans on flagburning justified because flagburning is a fire hazard. When a regulation isn’t justified on the rational ground asserted, it’s furtive viewpoint discrimination. There are also judicially imposed viewpoint distinctions, some of which are exceptions to general rules. There are speaker-based viewpoint restrictions, e.g., no Democrat can speak. (Another key move, it seems to me.)

Commercial speech deals with the private political process, the process of making choices and decisions that affect the individual. Imagine a society where every decision – what mouthwash to use, what restaurant to patronize, etc. – is made by the entire collective. In those cases, speech trying to persuade the collective to choose a particular restaurant would be political. We need that speech for self-government. If we cede to the individual those decisions, the individual now has 100% of the vote instead of a tiny fraction, and it’s still a self-governing choice.

The Court defined commercial speech as proposing a commercial transaction. Ralph Nader’s criticism of cars isn’t commercial speech, but the manufacturer’s defense is. Once this is the definition, a type of viewpoint regulation is going on – a new kind. “Twilight zone” viewpoint regulation, not based on dislike for the speech or the speaker’s ideology, but the ideological ether surrounding the speech. The speech isn’t controversial, but the process from which it springs is ideologically offensive to those who want to regulation. In that way it’s like obscenity. Obscenity isn’t directly a political statement, but the regulation is based on opposition to the mores and sexual values contained in obscenity.

Three justifications for regulating: (1) Rationalist arguments purporting to ground regulation in neutral First Amendment values. E.g., commercial speech isn’t part of the political process: But Consumer Reports deals with the political process. Others argue that corporations aren’t speakers because they’re economic entities. But the recipients are the ones who are making self-governing choices, and they’re who matter. Also, the NYT Co. is an enormous corporation. Baker says the difference is the product – speech v. nonspeech. Redish says, so what? Speech has often been designed to persuade others to take nonspeech acts, and that’s a commonly understood First Amendment value. Also, if the corporation is a robotic profit-maximizer, its product shouldn’t matter in whether it has a speech interest.

(2) Intuitionist arguments that commercial speech is just different. Anti-intellectualism combined with intellectual arrogance, immune from any rational response. Redish’s intuitions differ!

(3) Ideological arguments: Commercial speech promotes materialism. But the people get to decide what they need. By not protecting commercial speech, we risk reverse dilution. When we regulate speech because we think people will be fooled into buying things, why doesn’t the same thing apply in the political area? The people might believe antiwar demonstrators and make silly decisions. Either people are capable of making rational decisions through open debate or they’re not. (Okay – so I’m just as capable of making a rational decision about which drugs are effective as I am about which color looks good on me? I’m just as capable of making a rational decision about whether my child is cute as I am about whether I should buy a new car? There’s absolutism of principle, and then there’s obliteration of distinctions.)

Commercial speech: Tribute to Steve Shiffrin

Commercial Speech: Past, Present & Future: A Tribute to Steven Shiffrin, sponsored by the Loyola Law School Los Angeles and the Loyola Law Review

Opening roundtable discussion, Ronald Collins, First Amendment Center, moderator.

Collins: Three questions to structure our discussion. Does the identity of a speaker as a corporation matter? Can lines be drawn between political and commercial speech? Can progressives endorse freedom of commercial speech?

Steven Shiffrin: Commercial speech should be lower in our hierarchy than other forms of speech because dissent should be higher. Other First Amendment theories also produce this result. In some circumstances, particularly informational advertising, there should be a measure of protection.

Erwin Chemerinsky: Disagrees with it all. Dissent is not the central/only purpose of the First Amendment; speech is also protected if it supports government or consists of art/music that is not about dissent. Even hate speech and sexually degrading speech are protected. Also disagrees with the idea of having a hierarchy or distinguishing speakers. The only relevant question: is there a compelling reason to ban speech? One can find such interests in many situations, and indeed in Nike v. Kasky. But we must remain focused on that question. (Isn’t that a hierarchy without the name? I suppose its benefit is that if your reason for a ban isn’t the usual reason for disfavoring a category of speech – e.g., Discovery Networks – then the regulation gets stricter-than-usual scrutiny.)

Kathleen Sullivan: She is closer to Chemerinsky than Shiffrin. Fear of government is an extra reason to protect commercial speech. We fear government more than markets, for antipaternalistic reasons specific to speech. We fear thought control more than wage and hour laws. (Why don’t we fear Enron’s paternalism and attempts to control our thoughts?) There may be good reasons to regulate, such as information asymmetries, but the solution is disclosure rather than leveling down through silencing.

Shiffrin: The SEC engages in paternalism – it doesn’t trust consumers in the absence of a policed market. The FTC engages in paternalism, and the FDA. When we talk about false statements, paternalism is at the center of what we do, not the margin. Why do we need a compelling state interest? NYT v. Sullivan involved balancing the interests in reputation with the needs of the press, which is a good strategy. It would radically change First Amendment doctrine to say there’s no hierarchy. He agrees with Chemerinsky that multiple values underlie the First Amendment that can’t be reduced to one. Protecting the practice of dissent is extremely significant, though, and commercial speech doesn’t maximize that.

Sullivan: The Sistine Chapel wasn’t created by a single artist, it came only from sponsorship. NYT v. Sullivan arose from an advertisement. Advertising is a late 20^th-century art form. Commercial speech is continuous with and perhaps indispensible to the rest of speech. Virginia Pharmacy recognizes that commercial speech is useful to people – economic decisions are important and commercial speech has a role in providing relevant information. It’s not for government to decide what matters. (Though she agrees on the potential for harm, so it apparently is for government to decide what harms, if not what helps.)

Liptak: Define commercial speech.

Chemerinsky: Bolger tried three factors – not exhaustive, but it’s a good starting point and shows that speech isn’t commercial just because it comes from a corporation.

Sullivan: Commercial speech is an offer of goods for a price. It’s not anything said with a motive of commercial gain.

Shiffrin: Media speech is not, with narrow exceptions, commercial speech. Ed Baker has it right: for media, the product is the speech, unlike Virginia Pharmacy where the product is drugs. Also, the press has a checking function that makes it special. He distinguishes informational advertising that’s true from false advertising – commercial speech encompasses many different kinds of problems, and is broader than just proposing a commercial transaction. The bigger question (which is not entirely overlapping because non-corporate entities run ads) is how to deal with corporate speech in general. Corporate participation in political campaigns is limited, even though that’s core political speech.

He also notes that Virginia Pharmacy is atypical of cases – you have an aged person who needs cheap drugs, versus an alcoholic looking for the cheapest high in a case like 44 Liquormart. John Stuart Mill, invoked by many (including Sullivan), didin’t think commercial speech should be protected.

Chemerinsky: He’s skeptical of distinguishing media from nonmedia corporations. Which is Time Warner? Media companies advertise to get you to consume more of their programs. Separately, he wants to emphasize that he might find a compelling interest in banning corporate campaign contributions, and definitely does in banning false advertising. Finally, cheap alcohol may be a valuable choice. It’s paternalistic to say it’s not valuable.

Shiffrin: On the compelling interest question – look at tobacco ads. Tobacco kills 400,000/year; ads reach children and create preferences in them. Do we have a compelling interest? As for distinguishing media/nonmedia: of course there are linedrawing problems. That doesn’t mean you give up.

Sullivan: The government shouldn’t be allowed to regulate truthful ads about lawful products. More speech drives out bad speech. Right of reply requirements on TV drove cigarette ads off TV. (Isn’t that silencing? Even intentionally discriminatory silencing, if the requirements are targeted at smoking? She quickly added that equal time requirements were compulsion.) Where government can provide contrary messages, it shouldn’t regulate. Also, we should regulate the product directly through bans and taxes. That’s always an alternative, so the state shouldn’t be able to prohibit truthful advertising.

Shiffrin: When 400,000 people die every year, efforts to prevent that are good even if you call them paternalistic. The alternatives have costs, such as black markets. It would be more effective to have counterspeech and ban ads.

Chemerinsky: Banning ads isn’t necessary to serve a compelling interest. The evidence doesn’t show that ad bans work. Also, he’s concerned about a slippery slope. What about liquor ads? Fast food/potato chip ads? If this were necessary, maybe he’d go along, but the evidence isn’t there.

Shiffrin: $265 billion is spent on ads in a year, contibuting to the creation of an apathetic, hedonistic citizenry. It’s problematic to find value in that. Would a ban on cigarette ads stop smoking by all kids? No. Would it help? Well, why do cigarette companies advertise? They think it works. As for the slippery slope: Many of these ads are targeted to kids, and Shiffrin sees no right to advertise to kids. Beyond that, corporate power will take care of itself. If bans did spread, he doesn’t see the harm.

Liptak: Another consideration: Corporate speech is powerful and can overwhelm counterspeech by repetition, according to the pro-regulation story.

Sullivan: She doesn’t start from the individualistic/dissent notion of speech. The First Amendment protects other values, including a system of free flow of information determined through private interactions. Markets are regulated but ideas aren’t. Regulation and taxation should be lexically prior to advertising bans and we haven’t exhausted the non-speech regulatory possibilities with respect to tobacco. We should protect advertising unless and until particular harms manifest. (The reverse precautionary principle! A couple of side notes: This discussion makes crystal clear why lots of people see the First Amendment as the new substantive due process. Also, I just read Shiffrin’s The First Amendment, Democracy, and Romance on the way out, and one of its many strengths is that it emphasizes that “dissenting” and “individualistic” are not synonyms. Dissent is often participatory, communal, and engaged – a point I’ve tried to make, though less well than Shiffrin, when discussing how free speech principles have been translated into fair use doctrine.)

Liptak: Given what Chemerinsky has said so far, why was he on Kasky’s side?

Chemerinsky: Nike was engaged in selling a particular product and was allegedly speaking falsely. Analogies: “dolphin-safe tuna,” “organic lettuce,” “not tested on animals.” These are important claims to consumers. California has other relevant laws, like those governing false “union-made” claims.

Sullivan: Nike went far beyond simple branding – its communications covered labor conditions and sweatshops and used long infomercials. It made broader claims about corporate behavior as part of a debate about exporting US labor standards. (So is “organic” part of a broader debate over agricultural policy. Kasky wasn’t alleging that any of Nike’s normative claims were false.) Nike deserved a chance to fight back against the anti-sweatshop campaign. There are other ways to stop a company’s false claims than suing – run a counter-ad or do an investigative report.

(This is one of the most unpersuasive parts of the Nike-side argument. You can run a counter-ad if you can afford to, and if a media outlet will run it, which they often won’t. Nike reaches a heck of a lot more people than a NYT investigative report. It’s often noted that lies can get around the world while the truth is still putting on its shoes (no pun intended), and that’s without considering resource disparities. Note also that Sullivan appears to be saying here that “not tested on animals” is also a claim that must be free from government regulation. That’s getting pretty extreme.)

Chemerinsky: Nike ran an ad; you can embed a claim about animal testing in a long paragraph too. How are people to evaluate this claim? The company has information competitors and consumers lack.

Shiffrin: He agrees that the existence of alternatives to speech regulation aren’t dispositive. If the SEC were regulating, Nike’s statements would be subject to strict liability despite the fact that the statements were part of a “dialogue” with political aspects. Nike was describing what it was doing. That’s relevant to a debate, but it’s put forward to sell products.

A new question: Should Kasky have had to show that Nike acted negligently to win his case when the SEC could use strict liability to govern the same statements? There’s a legitimate concern that private plaintiffs could bring actions against Nike that could chill its speech, but it’s not in the record. The California statute was on the books for more than 70 years. Strict liability is appropriate in the absence of contrary evidence.

Sullivan: This relegates misleading speech to oblivion. Ordinary fraud statutes can cover falsity, at least with intent (big caveat!), but misleadingness is more. In politics, false statements like “I won’t draw a salary if elected” are protected against liability. (Why is this a relevant example if you’re trying to distinguish between false and misleading speech and argue that only the former can be banned for commercial speech?) Shiffrin and Chemerinsky are presuming the Nike statement was false. The misleadingness standard chills speech about, say, how a company performed in its last quarter. The statements here are different than saying “I’ll sell you X product for Y price.”

(Really? What does “X product” mean? What happens when we replace that with “a product that will kill cold germs”? Also, Sullivan’s example of a truly regulable ad is, perhaps ironically, one where government regulation might seem least necessary. It’s often relatively easy to confirm price, though there are bait and switch laws regulating misrepresentations regarding price. If we trust consumers so much, why not trust them to figure out price as well?)

Shiffrin: The FTC can go after misleading speech, not just false speech.

Sullivan: Yes, but that applies to speech that’s not presumptively protected – advertising. You’re broadening that speech beyond consumer sales to anything designed to increase sales, which is everything a corporation says because it’s always designed to create goodwill.

Shiffrin: Note that the statements Sullivan worries about have to be included in SEC filings, and strict liability applies. (Sullivan is no longer worried about democratically/demagogically imposed government thought control, but government enforcement of a private party’s false advertising claim as well.)

Chemerinsky: Factual statements made to increase sales are commercial speech. Not all corporate statements are like this. That’s what makes Nike an easy case. Nike took out ads saying it didn’t use sweatshops. We aren’t presuming that Nike was speaking falsely: There was never a trial, but basic civil procedure is that you take the statements in the complaint as true for evaluating a demurrer. As for the SEC, it has a compelling interest in protecting investors.

Liptak: Isn’t the Shiffrin/Chemerinsky position viewpoint discrimination? And should we care?

Shiffrin: It’s often said that viewpoint discrimination is never allowed, and yet obscenity can be banned. Appeals to healthy sexual interest are ok, but not appeals to prurient and depraved interest. Judges are licensed to determine literary, artistic, political and scientific value. Copyright’s fair use test distinguishes viewpoints. (This is a debatable claim– there’s a good argument that even the transformativeness evaluation is more content- than viewpoint- based – but I’m with him on the bigger point.) The free speech exceptions are riddled with viewpoint discrimination.

Chemerinsky: Viewpoint aside, there’s a compelling interest: consumers can’t find out for themselves that Listerine doesn’t kill cold germs. Competitors may have no incentive to correct the falsehood (e.g., tobacco companies’ shared interests in ignoring health harms).

Liptak: But Consumer Reports could do a study on Listerine and get actual malice protection.

Chemerinsky: Yes, because the speaker – not the viewpoint – has different interests and incentives.

Audience questions: Bruce Johnson: Kasky and Nike’s representative both give interviews to the NYT. Commercial speech?

Chemerinsky: No.

Johnson: But under the California Supreme Court’s test?

Chemerinsky: Nike took out ads – start there. Statements to intermediaries are arguably commercial speech, but we need not get there.

Martin Redish: Should we adhere to Bolger? If Nike wanted to sue Bob Herbert, who works for a powerful corporation, Herbert gets NYT v. Sullivan protection. But Nike doesn’t get the same protection. This is viewpoint discrimination and manipulation. Nobody is on the other side of obscenity in the same way. (Really? What about producers of R-rated movies, who get to put out their view of proper social mores without regulation?) Judith Miller’s false reporting on Iraq did more harm than Listerine ever did.

Chemerinsky: Nike wasn’t engaged in a debate when it made false factual statements. Also, the most your argument can prove is that NYT v. Sullivan applies, and Kasky’s allegations included actual malice.

Charles Fried: The two leading cases, Virginia Pharmacy and 44 Liquormart, are not as they’re represented here. They didn’t serve interests in protecting professionalism or temperance. In both cases, they were protecting mom & pop stores who had state legislatures in their pockets. The regulations were corrupt. When we do theory, remember that.

Sullivan: Virginia Pharmacy also destabilized attorney fee schedules set by the bar. Lochner with respect to this type of corruption is entirely appropriate. (Here, I think, is a key source of my disagreement with Sullivan. I do think that regulating truthful advertising is different than regulating false and misleading advertising. But I include “misleading” in the regulable category, which leaves room for arguments about what is misleading – none of which were particularly persuasive, or even seriously offered, in the two named cases.)

James Weinstein: Equalizing protection for commercial and political speech would be dangerous, because then we’ll start to use Chemerinsky’s “soft” compelling interest test – allowing punishment of speech when it causes harm, which political speech often does.

Chemerinsky: We all agree the First Amendment involves value choices. Even false statements about the Iraq war are protected, and some advertising claims aren’t. How will we define the lines? He wants to do it openly, whereas predefined categories of speech seem to him to be a bad solution. Let’s have the value discussion and say that political speech is more important than the harm it causes even if the harm is big. The categories just hide that analysis.

Shiffrin: All of us on the panel think that truthful advertising should get some First Amendment protection. For Shiffrin, it’s because it furthers some but not all relevant First Amendment values. Commercial speech has importance in people’s lives and that’s what gives us reason to protect it, not because it’s the same as political speech.

Sullivan: She wouldn’t assimilate commercial to political speech, but would protect it all strongly, distinguishing content-based from content-neutral regulation. Copyright’s fair use doctrine, by the way, isn’t about viewpoint discrimination, it’s about transaction costs. (Even Wendy Gordon’s strong account doesn’t easily admit of this interpretation, because she counts certain noneconomically-based refusals to license as transaction failures, which is a viewpoint-based aspect of the analysis.) Sullivan is willing to tolerate more compulsion with commercial speech, not leveling down but leveling up through disclosure. Compelled disclosure is the greatest regulatory success of the 20^th century. (My lungs might vote for the Clean Air Act.) She would allow compelled disclosure as speech-enhancing as long as it doesn’t chill speech. (Another big caveat!)

Question: Is there any way to distinguish Nike’s defense from an attack? If I attack Nike because I have an economic interest in another shoe company, that’s not commercial speech. (The questioner seems not to know about the Lanham Act. Cases have applied the Act to statements by individuals within a corporation, at least, and the standard would be strict liability, not actual malice.)

Chemerinsky: Maybe we should use the same scienter standard. Nike, however, wanted absolute protection for its speech; at most it should get NYT v. Sullivan.

An amazing start to what promises to be a challenging conference.

A picture I didn't show in class

ConWest Resources, Inc. v. Playtime Novelties, 2006 WL 3346226 (N.D. Cal.)

Not a newly decided case, but we talked about it in my copyright class and I'm going to talk about it at the ABA IP meeting, so I figured I'd get my thoughts in order.

Plaintiff makes adult novelty items, including 12 sculptures of male genitalia, for which it was issued copyright registrations. After a licensing dispute, plaintiff sued defendant for copyright and trademark infringement based on its continued sale of the adult toys. This discussion considers only the validity of plaintiff’s copyright, not the first sale issues or plaintiff’s trademark claims, which the court also rejected.

Though the registrations were prima facie evidence of the validity of the copyrights, the court was skeptical of plaintiff’s likelihood of success. First, were the sculptures “useful articles”? Yes, because they had an intrinsic utilitarian function – they were designed to be used as sexual aids, as the advertising made clear when it touted them as dishwasher-safe and compatible with various types of lubricants. Like the mannequins in the influential Carol Barnhart case, these replicas of body parts are functional even though nonfunctional sculptures also exist.

Only features of useful articles that are separable from utilitarian functions can be copyrightable, and there are various confusing tests for separability. Plaintiff argued that there were conceptually separable features in these sculptures, which could “stimulate in the mind of the beholder an appreciation of the inherent beauty and power of male sexuality.” The sculptures’ price was well above the price of ordinary sex toys, and plaintiff argued that some collectors purchase them for display. Nonetheless, the court found that the sculptures were likely unprotectable – their design seemed inextricably intertwined with their utilitarian purpose. “[G]iven that the function is to arouse, design features that are intended to stimulate in the mind of the beholder the concept of sexuality are not truly independent from the utilitarian purpose of the object.”

This seems like the right result for the wrong reason. Causing “arousal” is no different than triggering any other emotional response, from pity to terror; evoking emotional responses is the classic function of expressive works. If the court believed that the sculptures stimulated the mind of the beholder, then conceptual separability was a possibility. Relatedly, if these sculptures weren’t copyrightable because they were so obviously sex toys, are there any sex toys that are copyrightable? The catalog of Good Vibrations contains many exotically configured devices that have sculptural elements, but are also clearly sex toys. Is this type of product simply excluded from the realm of copyrightability? That would seem like unjustifiable content discrimination.

I have more sympathy for defendants’ alternate argument that there is no copyrightable expression in the simple castings of the genitalia of actual men. As such, they portray facts, not expression, regardless of the skill that was required to copy them. The copyright examiner believed that the works contained some copyrightable sculptural authorship, and plaintiff alleged that its art department made “numerous artistic changes and refinements in both the size and the aesthetic look of the initial casts,” though defendants replied that the only differences were size and color, which are insufficient to establish originality. The court found unresolved factual questions and did not base its decision on this argument.

Copyright in architectural works: confusion piled on (lack of) confusion

Groff Construction, Inc. v. American Pride Building Co., 2007 WL 495316 (M.D. Fla.)

Plaintiff sought the dismissal of defendants’ copyright counterclaims/third party claims. Defendants (who include a builder) own a model home. Plaintiff (also a builder) sold defendants the model home, never told them it was covered by a copyright, and didn’t object to them using the model home as a model. Plaintiff is now claiming copyright infringement by defendants based on a 1996 registration for the house plans. Plaintiff advertises its business using photos of defendants’ model home, without defendants’ permission and without acknowledging defendants’ ownership. Defendants counterclaimed for, among other things, false designation of origin and false advertising.

Groff argued that the counterclaims failed to state a cause of action because, as the copyright owner, it has exclusive rights in the work, which include the rights to display the work and create derivative works. The defendants replied that ownership of a copyright is distinct from ownership of the physical object in which the copy is embodied, which is true but irrelevant. As the court pointed out, architectural plans don’t create any exclusive rights in the physical home, and it also noted that a copyright owner can’t prevent other people from taking pictures of an architectural work in a public place (also, by the way, irrelevant, because the copyrighted work here is the plans, not the architectural work, which if copyrighted would allow the owner to prevent construction of a substantially similar house). Because Groff’s copyright didn’t give it the exclusive right to take pictures, the court denied his motion to dismiss.

The copyright claim isn’t why the counterclaims should fail. The counterclaims should fail, on the facts as described, because it’s not false advertising or false designation of origin to advertise your construction business with pictures of a house you built, regardless of who owns the physical house now. The representation a picture makes in such a context has nothing to do with ownership and everything to do with construction. Indeed, were defendants to advertise their own construction business with these same photos, they’d be engaged in reverse passing off.

The federal government, false advertiser?

Americans for Safe Access has filed suit against the government under the Data Quality Act, arguing that the FDA has made false and misleading statements about marijuana's safety and efficacy. I don't know anything about the Data Quality Act, but perhaps I will learn from this suit.

Pitbulls dueling in court: so what else is new?

Slip-N-Slide Records, Inc. v. TVT Records, LLC, 2007 WL 473273 (S.D. Fla.)

Plaintiff SNS sued TVT for tortious interference and other claims based on the sale, marketing, and distribution of the album Welcome to the 305, which contained recordings by a rap artist, Armando Perez, who performs as “Pitbull.” Perez is currently signed to TVT, but made earlier recordings under another contract, to which SNS claims rights; its tortious inteference claims are based with TVT’s efforts to suppress the distribution of the 305 album. TVT counterclaimed for trademark infringement and Lanham Act violations based on TVT’s Pitbull mark and logo.

The court denied cross-motions for summary judgment on all counts. Among other things, there were factual disputes over whether TVT had protectable rights in its stylized Pitbull logo and over whether SNS’s use of the term (in lettering very similar to the Old English-style lettering TVT uses) was likely to cause confusion. (It seems like there’s a nominative fair use defense in there at least with respect to the name, but the court didn’t discuss it, perhaps because the use of similar lettering obviously goes beyond the ordinary bounds of nominative fair use.)

TVT counterclaimed for false advertising, arguing that SNS unlawully promoted the 305 Album as a “new” Pitbull album, when in fact it contained older recordings. SNS used recent photos of Pitbull in promoting the songs; the album cover didn’t have a disclaimer indicating that these were older, unreleased recordings; and ads stressed “new music from Pitbull.” At the preliminary injunction hearing, the magistrate judge rejected TVT’s claim, finding no evidence that SNS advertised the album as “new” or a “follow-up” to Pitbull’s album with TVT. He further determined that the photos weren’t false advertising because TVT had no rights in those photos and because there was no evidence that Pitbull’s look or style was related to any particular period in his career. Even if the public would be confused, the magistrate found insufficient evidence that TVT had been harmed. The court agreed, but considered it more appropriate for a jury to resolve the issue.

Commercial speech: political economy and public data

Dr. Karen Markin, Director of Research Development, University of Rhode Island, It’s Not the Thought that Counts: A Political Economy of Obscenity. She’s interested in obscenity as product – a book, a video, etc. When restrictions are commerce-based and not content-based, government can argue for greater control. There are many modalities of regulating obscenity, from zoning to banning the use of the postal service for sending obscenity. The spending power also enters the picture: US v. American Library Ass’n, requiring public libraries to use filters on internet access.

When obscenity is commodified, it’s easier for the state to control it, for example by making sure it’s limited on television. Commercial media are highly vulnerable to government control.

Reza Dibadj, University of San Francisco, The Political Economy of Commercial Speech. The First Amendment can be a way around Chevron deference – a way to assert institutional authority. Another question: why are we so eager to attack some regulatory regimes and not others? (My answer: I’m not sure a lot of the folks who want full protection for commercial speech like other kinds of regulation either.)

The general trend: increased protection for commercial interests, pushed by corporations portraying themselves as underdogs, e.g. Nike. Also, various front groups and think tanks with predictable political positions. Perhaps more important, some prominent and distinguished intellectuals support increased protection for commercial speech – the influence of the Chicago school, which is generally anti-regulation. They perceive similarity between the market for expression and the market for goods and services, and thus want laissez-faire for both. Likewise, the public choice school sees regulations of both speech and nonspeech as similarly troublesome because government is likely to be bad at whatever it does.

Yet commercial speech remains different from core First Amendment speech. The urge to increase commercial speech protection is a new form of attack on economic regulation. Kozinski equates speech with economic regulation in his criticism of the commercial speech doctrine; it’s also no coincidence that Virginia Pharmacy comes out of a deregulatory era. But the First Amendment is an odd source for a ban on types of economic regulation.

If corporate speakers are so concerned about government regulation, why don’t we see as many attacks on IP from the proponents of full protection for commercial speech? Because IP helps the big corporations. As Prof. Piety has written, Nike’s commitment to free circulation of information doesn’t extend to free circulation of the swoosh.

Returning again to corporate speakers as rights-bearers: when a corporation speaks, who is speaking? The managers? The shareholders? There are competing interests, and it’s not obvious where the “opinion” of the company comes from – it’s the managers in practice, but that might not be optimal.

Dr. Genelle Belmas, Cal. St. Fullerton Department of Communications, & Brian Larson, attorney, Second Class for the Second Time: How the Commercial Speech Doctrine Stigmatizes Use of Aggregated Public Records. New York prohibited the sale or release of lists of names and addresses if such lists would be used for commercial or fund-raising purposes. A property tax reduction service wanted access to the lists; a straightforward application of the law banned it. But it could have provided consumers with useful information. This is the core problem Belmas & Larson address: access to public records by commercial users.

State and federal access to information laws discriminate against commercial providers, either banning them or charging them more. Yet in some cases, commercial entities are in a better position to make beneficial uses of information than nonprofits or government.

Concerns: identity theft and general privacy concerns about inappropriate use of information. There’s also a more general concern over the “Big Brother” effect – so much information is available about us that it might be used against us. Also a desire for “contextual identity” – we share information for particular purposes, and passing it on for use in a different context might be wrongful.

Responses: identity theft is overblown by commentators and others. Most of the sensitive information isn’t in public records – most of it is credit card fraud. There were problems in Florida with people being erroneously kicked off the voter rolls because of a mistaken analysis by Checkpoint of who was a felon – but that was done on the government’s behalf, and the only reason we know about it was because of public access to the same records. Maybe in theory contextual identity makes sense, but in practice we have no idea how to manage that – we don’t know how to make case-by-case disclosure decisions. However, government should always redact certain information (SSN, bank accounts), and should abstract identifying information when specific identification isn’t required for the user’s purpose.

The authors aren’t interested in equalizing commercial/political speech. But the flow of information to commercial aggregators shouldn’t be limited based on commerciality; limits should be based on what the information is and how it’s used. Equal access should be the rule.

Examples: a reporter investigating accidents on the highway requests data. That’s a high-value use. A political party requests voter registration records to solicit political contributions. A great number of states limit access to voter registrations to ban solicitations, which the authors think doesn’t make much sense. Soliciting people arrested for drunken driving should also be considered a valuable activity.

At this point, I had to leave for the airport, so I missed the final discussion. Congratulations to the organizers for a wonderful conference.

Commercial speech conference: Tamara Piety on obscured-source speech

Tamara Piety, Florida State (visiting)/Tulsa, Flogging, Fronting and Fakery: Corporate Public Relations Advocacy, Research Groups & Commercial Speech. Corporations are using the First Amendment as a method of resurrecting substantive due process. We can make them citizens for certain purposes – jurisdiction – without letting them vote; we can deem them entitled to certain rights but not full First Amendment rights. This is consistent with the Framers’ suspicion of large accumulations of power. Unlike human beings, corporations are not ends in themselves. They are not appropriate holders of speech interests.

As a matter of corporate governance, anything a corporation says is directed at the bottom line, which is why Milton Friedman says that the only time corporate social responsibility is legitimate is when it’s insincere and the corporation is only doing it to boost its image. But she is not saying that corporations shouldn’t speak, just that avoiding false statements is enough reason to regulate.

Public relations speech is among the most problematic speech in this arena. There’s an ethos in PR that sometimes leads to slippage – thinking that curing perceptions is the same thing as curing problems. We have the tools to determine truth in many circumstances; courts decide questions of fact all the time.

Piety was solicited to represent the Sierra Club on behalf of Marc Kasky, and she’s published on this, but she invites you to look at the pleadings and the California decision. Nike was making representations about its labor practices; arguably the reason Nike didn’t bring a SLAPP suit is that then Nike would have borne the burden of proof on the truth of its representations. Kasky also claimed for fraud and deceit. The court of appeals accepted Nike’s demurrer – that even if Kasky’s claims were true, there was no cause of action. The California Supreme Court said that there was a factual issue and that discovery would be required. That’s far from nuts. The form – letter to the editor – should not dictate the result. Every time Nike’s representatives open their mouths on behalf of Nike, as opposed to on their own behalf, they are trying to serve Nike’s best financial interests.

Piety thinks there is a real problem with “front groups.” The Wal-Mart Across America blog is actually connected to a PR firm, but didn’t disclose it. It is hard to identify harm to any particular consumer, but there is something troubling. Likewise, for over 40 years, the tobacco industry created groups to speak for it and to generate doubt in the information environment over whether smoking harmed health, even when the industry knew internally that it did so. The technique of creating a “research council” is a valuable PR tool, because marketers understand that ads have less credibility and they rarely know when a particular ad works. Thus, getting someone else to carry your message, and keeping it from being identified with you, is really useful.

The tobacco industry had more information on smoking than anyone else, and suppressed it. This is typical of industries – they know more than we do and can manipulate the information we get. This dynamic is at work now with global warming.

Even so, not all these groups are created equal. Some are completely funded by PR firms. Others are composed of actual professionals. Austin suggests that we can create rules distinguishing between non-profits and profit-seeking or mixed groups, just as In re Primus distinguished between ACLU lawyers and lawyers seeking private payouts.

It can’t be the case that we’re powerless before the onslaught of large amounts of money used to create uncertainty and doubt about the safety of our food, our environment, our drugs. If what Nike initially proposed had been taken up by the Supreme Court, it would have been hard to prosecute the tobacco companies for conspiracy, because the entities speaking were somewhat removed from the companies itself. Yet we should be able to respond to grave public health problems and avoid unfettered misleading speech. To the extent that credibility comes from obscuring the source, that’s not a legitimate interest for a corporate speaker.

She always is surprised by paternalism critiques of advertising regulation. The advertising argument is always “tough love.” We said it, we intended for you to rely on it, and you did and were harmed, but you shouldn’t have listened to it. It will be good for you to stop relying on ads! That’s just paternalism of a different sort. She’s not sanguine about Exxon-Mobil deciding her fate; at least she has a vote and a stake in the government. (And as others have pointed out, if advertising really is misleading, it’s autonomy-enhancing, not to mention efficient, to ban it.)

Commercial speech conference: the basic debate over equalizing protection

Here, maybe less of a debate, since the speakers were largely critical of Central Hudson.

Conrad Shumadine, member, Wilcox & Savage, Commercial Speech: The Illusory Search for Absolutes. Shumadine argued for greater parity between commercial and political speech; if we trust our citizens to make political decisions based on free, robust and wide-open dissemination of information, we should trust them to make commercial decisions. (Or maybe there are situations in which we trust the government and others in which we don’t.)

Shumadine argued Edge Broadcasting -- lottery broadcasting across state lines -- and believes that the rules the Court applies are standardless and certainly not empirically based, a proposition with which I’d have to agree.

Question: what is useful information? Answer: information is inherently useful. Ignorance is never better than knowledge. (Does image advertising decrease ignorance, or just rearrange it? Is “Coke is it” informational? Is a statement by an actor that “playing the lottery is fun” informational?) The marketplace will take care of things like offensive lawyer advertising.

Bruce Johnson, partner, Davis, Wright, Tremaine, Amendment XXVIII? Defending Corporate Speech Rights. He’s a victim of commercial speech overregulation, from New York’s new attorney advertising rules – all lawyer websites must say “advertisement; results may vary.” From now on, his website biography says: results may vary. What does that mean? It’s characteristic of commercial speech regulation in being overzealous and somewhat useless.

This standardless system is ripe for abuse by ideologues. As Kozinski and Banner wrote, liberals mistrust commercial speech because it’s commercial; conservatives mistrust speech because it’s speech. This political valence is the enemy of consistent decisions.

Nike v. Kasky highlights all the doctrine’s problems, especially the dangers of moving speech beyond a transaction-oriented definition. (My own opinion is that the California Supreme Court applied current doctrine correctly in Kasky, and that the letters to athletic directors were uncomplicatedly commercial speech, even “transaction-oriented” speech.) California’s former consumer protection law allowed lawsuits without any harm, and business groups accused lawyers of creating shakedown systems. Marc Kasky wasn’t one of those, but he didn’t like corporations or free trade much. He’d never bought a Nike shoe and never would. The First Amendment bar ignored the case at the state level; the regular press ignored the case until the California Supreme Court decided it.

Notably, the four judges in the majority were the ones who regularly vote for the press in typical First Amendment cases, and the three dissenters were the ones who are least likely to accept average First Amendment arguments. Politics was very important here.

Johnson finds the California Supreme Court’s test for commercial speech to be a significant expansion of previous tests. He was surprised that SCOTUS dismissed the case as improvidently granted, because that leaves this test in place. There were more than 30 amicus briefs submitted, including one from reclaimdemocracy.org, which typifies the ideological problems in every non-transactional commercial speech regulation these days. This group believes in a constitutional amendment that would protect only living human beings, so corporations would have no constitutional rights. The state Democratic party in Washington has adopted this as part of its platform, as have some California municipalities.

But corporations include entities like Harvard College and the Washington Post. Also, speech by corporations comes from some human. Corporations don’t speak; people speak. Just like guns. If we use the Nike “commercial purpose” test, then any corporation can be found to be engaged in commercial speech at any time and its speech can be suppressed. (Caveat: under Kasky, this is only true if the speech is false or misleading. There’s no First Amendment interest in speaking falsely, though of course issues of burden of proof and chilling speech loom quite large.) Government should not be in the business of deciding that a business is too large to have a voice in public debates. And the public has an interest in receiving businesses’ ideas.

(I remember reading Kasky’s brief in opposition to cert and thinking that (a) the arguments about the vehicle defects that made this a poor cert candidate were entirely correct and (b) the arguments about the vehicle defects were unlikely to prevent the Court from taking such a sexy First Amendment case. As it turns out, I was right on both counts – not something that’s so common that I can afford to keep silent!)

Commercial speech: securities regulation

Trey Drury, Loyola-New Orleans, Disclosure Is Speech: Imposing Meaningful 1st Amendment Restraints on SEC Regulatory Authority. SEC disclosures should be recognized as commercial speech, which would invalidate some but not core regulations. The big hurdle is that the Supreme Court doesn’t agree with Drury, having assumed that it’s ok to regulate securities.

But the Court is wary of suppressing truthful speech and fears paternalism. (I view this as a normative claim – as he notes, the Court has no wariness in suppressing truthful speech when it doesn’t consider it within the bounds of the First Amendment at all.) The Court is willing to take on heavily regulated commercial fields like lawyer advertising and FDA regulations, so the Court should also analyze securities regulation as commercial speech regulation.

The theory of SEC regulation was required disclosure: You’ve got to register unless an exemption applies, e.g. one for small businesses and stock sales.

The type of speech involved is like commercial speech. It’s a corporation proposing a transaction to potential buyers. The SEC is concerned that if a corporation says things inconsistent with its prospectus, that will be misleading and drive up the stock price – which means that the regulations are intimately involved with proposing transactions. Also, the SEC recognizes that markets absorb information. At a first offering you must disclose everything, but later you don’t have to start from scratch – you can point people to prior SEC filings. Moreover, courts have imposed liability for making disclosures that third parties use to trade – they know third parties will make decisions in reliance on disclosures. (I am interested that this explanation of why SEC-regulated speech is commercial speech seems to concede everything the California Supreme Court majority said in Kasky. If you are trying to get your speech considered within the realm of First Amendment-governed speech at all, it makes sense to make this argument; but once within First Amendment-land, I would expect corporate speakers to start arguing for the noncommercial and thus fully protected nature of some if not most of this speech.)

Implications: Investors don’t need the same types of protection normal consumers do. Lacking information, you’re stuck with limited options, like buying prescription drugs from the nearest pharmacy, but in securities you get the benefit of others’ knowledge, through market signals and the consensus price.

There are numerous SEC regulations prohibiting truthful speech, requiring disclosure, and otherwise imposing on speech – the trifecta. Regulations that should be struck down: during the preregistration quiet period, when you’ve determined you’ll offer securities but haven’t yet done it, you can’t make any non-prospectus public disclosures, which means not offering ordinary information. The Google IPO was held up by a Playboy interview with the founders, in which they said innocuous things. Also, the Sarbanes-Oxley regulations banning non-GAAP financial reporting information on things like non-recurring charges, even though investors might want to see what the financial information looks like without the non-recurring charges; the SEC did not evaluate whether providing such information is misleading. Still, the vast majority of securities regulations would be left intact. Mandated positive disclosures are completely fine, like warning labels.

Antony Page, Indiana U., Taking Stock of the First Amendment’s Application to Securities Regulation. Other restrictions on speech in securities: the ban on selective disclosures in private. That’s content based, because it’s determined by its impact on listeners (I’m not sure this is a proper description of the test for content-based restrictions), and it’s not designed to further an antifraud goal. As a result, fewer companies now provide certain kinds of revenue guidance. Likewise, restrictions on general disclosure in private placements are problematic – the restrictions apply even if you don’t allow people to buy and thus don’t cause harm. There are flat bans on certain disclosures. For example, with oil reserves, there are proven (90% chance of recovery) and probable (50-90% chance of recovery) reserves. All else being equal, probable reserves would affect the value of an oil company, but the SEC doesn’t allow disclosure of probable reserves.

There is also compelled speech: certain minority shareholder proposals have to be included in proxy materials. (This sparked a discussion during the comments period – part of the issue of corporate speech is the question of who is speaking. If the managers can suppress shareholder speech, then the company’s resources are speaking for some but not others.) Also, tender offer filing requirements: you have to file any comments made to more than ten people, which can cost $50,000 – this has practical consequences, e.g. a website by an employee opposing a tender offer which gets taken down.

Page, following Fred Schauer, distinguishes between coverage and protection. All normative theories fail to explain the First Amendment’s coverage – nonlegal factors are more important – whereas they often do an ok job explaining what gets protected within the scope of coverage.

What are the coverage arguments about the SEC? An impending SEC/First Amendment collision was predicted 25 years ago, but Page is optimistic that things will change soon. The doctrinal justifications for excluding securities regulation are poor, based in dicta from the infancy of commercial speech doctrine. Other extensively regulated areas of economic activity are not exempt from First Amendment scrutiny – see cases on drugs, gambling and tobacco.

Some argue that securities are different – their value depends on firm-specific information which is hard to verify, making stocks a credence good. With a car, you can inspect and discover fraud much more easily. There are other credence goods, however, without this regulation and presumably covered by the First Amendment (comment: really? Why?). News is a credence good. Education is also a credence good – you have to believe that a law degree is worthwhile. Also, information intermediaries exist in securities as well – auditors and underwriters. Companies can make credible commitments through things like bank monitoring, which adds shareholder value.

If securities are different, why does the SEC allow purchases without information for exempt things like pink sheet stocks, foreign companies, and small offerings?

Some argue that the capital markets would collapse without regulation. But First Amendment coverage doesn’t mean that all regulation would be struck down. Anyway, the empirical evidence about the need for regulation is mixed.

Questions: Is corporate speech different because a corporation is not a person?

Drury and Page agreed that the best foundation for First Amendment protection for corporate speech was the listeners’ interests in receiving truthful information. My reaction: that justification allows more regulation than a speaker-focused theory of First Amendment rights, because the listener’s interests are not aligned with the speaker’s in many cases. Hearer-based claims are used instrumentally by corporate speakers to get within the scope of the First Amendment; once that happens, they start making claims to have independent rights as speakers.

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.