ADVERTISING AND THE LAW CHAPTER 13

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ADVERTISING AND THE LAWCHAPTER 13

• Communications Law. COMM 407, CSU Fullerton

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What is commercial speech?

• Commercial Speech is an expression, economic in
  nature, by a person or business entity persuading
  the audience to take certain action (e.g.,
  purchase a product) with the intent of making
  profit.
• speech that does no more than propose a
  commercial transaction
• expression related solely to the economic
  interests of the speaker and its audience

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Means of regulations

• Place (ads in certain places, media type, etc.)
• Type of advertisement (tobacco products, law
  firms, etc.)
• Content (indecent, false, etc.)

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Historical development

• Before 1976, courts classified commercial speech
  as speech unprotected by the First Amendment.
• Unprotected does not mean prohibited.
• It means that before 1976 government had to use a
  simple rational justification for its regulations
  (such justifications are very difficult to
  challenge).
• However, such regulations were not common.

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Valentine v. Chrestensen (1942)

• Facts of the Case
• F.J. Chrestensen violated a New York City
  municipal ordinance which prohibited distributing
  printed handbills in the streets bearing
  "commercial advertising matter."
• After being told by the Police that he could not
  distribute the handbills bearing the advertising
  matter, Chrestensen remade his handbill, by
  adding on the reverse side a protest against the
  City (presumably making it political speech)

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Valentine v. Chrestensen (1942)

• Conclusion
• A municipal ordinance forbidding distribution in
  the streets of printed handbills bearing
  commercial advertising matter, held
  constitutional.
• A constitutional right to distribute commercial
  advertising cannot be acquired by adding to the
  ads matter of possible public interest which, by
  itself, might be privileged but which is added
  with the purpose of evading the prohibition of
  the ordinance with respect to the advertising
  matter

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Virginia State Board of Pharmacy v. Virginia
Citizens Consumer Council (1976)

• Facts of the Case 
• Acting on behalf of prescription drug consumers,
  the Virginia Citizens Consumer Council challenged
  a Virginia statute that declared it
  unprofessional conduct for licensed pharmacists
  to advertise their prescription drug prices.
  Question 
• Is a statutory ban on advertising prescription
  drug prices by licensed pharmacists a violation
  of "commercial speech" under the First Amendment?

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Virginia State Board of Pharmacy v. Virginia
Citizens Consumer Council (1976)

• Conclusion
• Yes. The Court held that the First Amendment
  protects willing speakers and willing listeners
  equally. The Court noted that in cases of
  commercial speech freedom of speech protections
  apply just as they would to noncommercial speech.
  
• The Court concluded that although the Virginia
  State Board of Pharmacy has a legitimate interest
  in preserving professionalism among its members,
  it may not do so at the expense of public
  knowledge about lawful business

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Virginia State Board of Pharmacy v. Virginia
Citizens Consumer Council (1976)

• The Supreme Court ruled that commercial speech is
  generally protected by the First Amendment.
• Advertising, however tasteless and excessive it
  sometimes may seen, is nonetheless dissemination
  of information as to who is producing and selling
  product for what reason, and at what price.

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Lawyers AdvertisingBates v. Arizona State Bar
(1977)

• Facts of the Case 
• Arizona restricted advertising by attorneys.
• Bates was a partner in a law firm which sought to
  provide low-cost legal services to people of
  moderate income who did not qualify for public
  legal aid.
• Bates's firm decided that it would be necessary
  to advertise its availability and low fees.
• Question 
• Did the Arizona rule, which restricted legal
  advertising, violate the freedom of speech of
  Bates and his firm?

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Lawyers AdvertisingBates v. Arizona State Bar
(1977)

• Conclusion  Decision for Bates. The Court
  found that the Arizona law violated the First and
  Fourteenth Amendments.
• Commercial speech does merit First Amendment
  protection given the important functions it
  serves in society.
• Allowing attorneys to advertise would not harm
  the legal profession or the administration of
  justice, and, in fact, would supply consumers
  with valuable information about the availability
  and cost of legal services.

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Lawyers AdvertisingBates v. Arizona State Bar
(1977)

• LEFT FOR ANOTHER TIME (from the opinion)
• First, we need not address the peculiar problems
  associated with advertising claims relating to
  the quality of legal services. Such claims might
  well be deceptive or misleading to the public, or
  even false
• Second, we also need not resolve the problems
  associated with in-person solicitation of clients
  at the hospital room or the accident site
  Activity of that kind might well pose dangers of
  overreaching and misrepresentation... Hence, this
  issue also is not before us. (Justice Blackmun)

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Ambulance chasingOhralik v. Ohio State Bar
(1978)

• FACTS
• Appellant, an Ohio lawyer, visited an accident
  victim in her hospital room, where she signed a
  contingent-fee agreement. Then he did the same
  with another victim
• Eventually, both young women discharged appellant
  as their lawyer and filed a complaint against the
  appellant
• The disciplinary Board of the Ohio Supreme Court
  found that appellant solicited clients in
  violation of certain Disciplinary Rules, and
  rejected appellant's defense that his conduct was
  protected by the free speech.

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Ambulance chasingOhralik v. Ohio State Bar
(1978)

• Conclusion For Ohio State Bar
• From the opinion In Bates v. State Bar of
  Arizona this Court expressly reserved the
  question of the permissible scope of regulation
  of "in-person solicitation of clientsat the
  hospital room or the accident site...
• Today we answer part of the question so reserved,
  and hold that the State or the Bar may discipline
  a lawyer for soliciting clients in person, for
  pecuniary gain, under circumstances likely to
  pose dangers that the State has a right to
  prevent. (Justice Powell)

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Central Hudson Gas Electric v. Public Service
Commission of New York (1980)

• Facts of the Case 
• The Public Service Commission of New York, in the
  interest of conserving energy prohibited electric
  utilities from promoting electricity use. The
  PSC's regulation distinguished promotional
  advertising from informational advertising, which
  was permitted. Central Hudson Gas and Electric
  challenged the regulation
• Question 
• Did the PSC's ban on advertising violate the
  freedom of speech?

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Central Hudson Gas Electric v. Public Service
Commission of New York (1980)

• Conclusion
• Yes. The Court held that the ban violated the
  right to commercial speech. The Court cited the
  protections for "commercial speech from
  unwarranted governmental regulation" set forth in
  Virginia Pharmacy Board case.
• The Court recognized New York's interest in
  promoting energy conservation and accepted that
  the PSC's regulation would directly further that
  interest. However, since the regulation
  restricted all promotional advertising, it
  violated the First Amendment

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Central Hudsons Test (Four-Point)

• 1. Is the commercial message either misleading
  or related to illegal activity?
• 2. Does the government assert a substantial
  interest to be achieved by the restriction on
  speech?
• 3. Does the restriction directly advance this
  interest?
• 4. Is the restriction no more extensive than
  necessary?

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In other words The Commercial Speech Doctrine
States That

• False or misleading advertising, as well as
  advertising about unlawful goods and services,
  receives no First Amendment protection.

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In other words The Commercial Speech Doctrine
States That

• Truthful and non-misleading advertising about
  lawful goods and services receives an
  intermediate level of First Amendment protection
• more protection than speech such as obscenity,
  which is not protected by the First Amendment,
• but less protection than political speech, which
  often is said to be at the core of the First
  Amendment.

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Standard of judicial review

• Minimum Scrutiny
• Rational Standard / Legitimate Interest
  requires the law to be reasonably related to a
  legitimate state interest.
• Intermediate Scrutiny
• Important governmental interest requires the
  law to be substantially related to an important
  government interest
• Strict Scrutiny
• Compelling governmental interest the law must
  be narrowly tailored to address a compelling
  state interest.

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Commercial Speech Doctrine Analysis

• If it is commercial speech, then is the speech
  false or misleading, or does it pertain to an
  unlawful product or service? If so, then it
  receives no First Amendment protection and the
  analysis ends.

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Commercial Speech Doctrine Analysis

• If the commercial speech is true, non-misleading,
  and pertains to a lawful product or service, then
  it receives First Amendment protection.
• It may, however, still be regulated and
  restricted if the government can prove three
  things

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Commercial Speech Doctrine Analysis

• the government must prove that
• there is a substantial government interest that
  justifies the regulation
• there is some evidence the regulation directly
  advances the substantial interest and
• there is a reasonable fit between the state
  interest and the government regulation.

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No Vice Exception

• Government cannot arbitrarily ban commercial
  advertisement.
• All regulations must meet a certain level of
  scrutiny intermediate (or sometimes minimum)
• Examples restrictions on advertisement
  newsracks, gambling ads, tobacco ads, alcohol ads
• However Federal Cigarette Labeling and
  Advertising Act of 1966 (amended ) prohibits
  tobacco advertisement on radio and TV
• Other restrictions negotiated in the 1998 tobacco
  lawsuit

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Federal Regulation of Advertising

• FTC Federal Trade Commission. Nearly 100 years
  old, the FTC polices unfair methods of business
  competition and protects consumers from deceptive
  advertisements. www.ftc.gov/
• FDA Food Drug Administration Responsible for
  protecting public health and ensuring that
  products like cosmetics, drugs, and food are
  honestly and accurately represented to the
  public. www.fda.gov/

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FTC Definition of False or Deceptive Advertising

• 1. There must be a representation, omission or
  practice that is likely to mislead or to confuse
  the consumer.
• 2. The act or practice must be considered from
  the perspective of a reasonable consumer.
• 3. The representation, omission, or practice
  must be material such that it is likely to
  influence the purchasing decision.

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False and deceptive advertising

• Perpetual "sales"
• Psychological pricing
• Advertising the maximum
• Bait and switch. Offering a product at a low
  price with no intention to sell it
• "Going out of business" sales a message of
  urgency and "dumped" prices
• Scare tactics

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False and deceptive advertising

• Units of sale and pricing
• Memberships. Problems in comparing prices of
  items sold in regular packages and bulk packages.
• Fillers and oversized packaging
• Hidden fees and surcharges

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False and deceptive advertising

• Meaningless Awards e.g., Best in class
• Meaningless terms deluxe, advanced, hi-tech,
  heavy duty, super, ultra.
• Undefined terms organic, light, low-tar, mild,
  natural,

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Top Consumer Fraud Complaints to the FTC in 2006

• Over 670,000 complaints filed
• Identity theft complaints represented 36 percent
• Shop-at-Home/Catalog Sales - 7 percent
• Prizes/Sweepstakes and Lotteries - 7 percent
• Internet Services and Computer - 6 percent
• Internet Auctions - 5 percent
• Foreign Money Offers - 3 percent
• Advance-Fee Loans and Credit Protection - 2
  percent

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Top Consumer Fraud Complaints to the FTC in 2012

• more than 2 million complaints overall
• Identity Theft 369,132 18 percent
• Debt collection 199,721 10 percent
• Banks and Lenders 132,340 6 percent
• Shop-at-Home and Catalog Sales 6 percent
• Prizes, Sweepstakes and Lotteries 5 percent
• Impostor Scams 4 percent
• Internet Services 4 percent
• Auto-Related Complaints 4 percent

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FTC Tools Remedies To Stop False Advertising

• Guides
• Voluntary Compliance
• Consent Agreements
• Litigated Orders
• Substantiation
• Corrective Advertising
• Injunctions
• Trade Regulation Rules

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Lanham Act Section 43(a)The federal trademark
protection law

• The section of the Act allows for federal civil
  lawsuits based upon both false advertising and
  false endorsements.

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POM Wonderful LLC v. The Coca Cola Company (2014)

• The Facts
• The Coca-Cola Company introduced a new beverage
  called Pomegranate Blueberry in September 2007.
• Pom Wonderful LLC (Pom), a producer of
  pomegranate juice products, sued the Coca-Cola
  Company in September 2008 for deceptive labeling
  under the Lanham Act.

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POM Wonderful LLC v. The Coca Cola Company (2014)

• Coca-Colas product contains 99.4 apple and
  grape juices, 0.3 pomegranate juice, 0.2
  blueberry juice, and 0.1 raspberry juice.
• Based on the Pomegranate Blueberry name and an
  illustration of a pomegranate, Pom argued that
  Coca-Cola misled its consumers through false
  representation of its product.
• Coca-Cola says the FDA permits naming products by
  their "minority" contents. The label is not
  misleading. It says "Pomegranate Blueberry
  Flavored Blend of 5 Juices.

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POM Wonderful LLC v. The Coca Cola Company (2014)

• Issue
• Whether the court of appeals erred in holding
  that a private party cannot bring a Lanham Act
  claim challenging a product label regulated under
  the Food, Drug, and Cosmetic Act.
• Do the FDA and FDCA preempt private claims of
  false advertisement under the Lanham Act?

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POM Wonderful LLC v. The Coca Cola Company
(2014)LOWER COURTS DECISIONS

• The district court granted Coca-Cola summary
  judgment because the FDA permits beverage makers
  to label their beverages based on non-primary
  components. The district court also held that the
  FDCA barred Poms Lanham Act and state law
  claims.
• The U.S. Court of Appeals for the Ninth Circuit
  ruled that although compliance with the FDCA or
  the FDA may not always insulate a party from
  Lanham Act liability, it would respect Congresss
  judgment to place regulation of food labeling in
  the hands of the FDA.

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POM Wonderful LLC v. The Coca Cola Company (2014)

• This case examines whether the FDCA and FDA bar
  claims under the Lanham Act for false
  representation.
• Those who side with Pom argue that limiting
  companies from bringing suits for misleading
  advertising will harm consumers and fair
  competition.
• Those who side with Coca-Cola counter that
  permitting such suits will undermine the FDA and
  create confusion around the limits of permissible
  language in advertising.

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• Your Guide to Quackery, Health Fraud, and
  Intelligent Decisions
• For example 25 Ways to Spot Quacks and Vitamin
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  edTopics/spotquack.html