Advertising and commercial speech is one of the most complex areas of media law. It involves issues such as:
-- Historical regulations about about advertising commercial products like soap or medicine
-- The evolving doctrine of commercial speech from a "two-tier" system to a fully protected status
-- Constitutional issues about political speech and advertising
-- Speccial regulatory issues such as the advertising of tobacco and liquor and ethical problems concerning advertising to children
Advertising of products and services is regulated
through the Federal Trade Commission,
an agency created in 1914. Originally, the FTC regulated unfair methods of competition.
However, by 1938 Congress expanded the FTC's powers to clearly include regulation
of deceptive advertising and to to protect consumers.
If you are advertising a product or service, it is illegal to make false
claims or to phrase your claims in a deceptive way. For example, suppose
a package once made from 2 percent recycled fibers is now being made from
3 percent recycled fibers. Clearly, would be false to say the package is
100 percent recycled. But could you say: "Now with 50 percent more
recycled fibers" ? No, according to the FTC's guidelines on environmental
advertising, such a claim would be deceptive even though it is literally
true. (See Environmental marketing claims)
The FTC issues guidelines
which help advertisers understand regulations in areas such as price
claims, use of the word "free," endorsements, diet plans, food
advertising and so on. For example, the FTC says:
- Agencies, publishers and web sites are themselves responsible for ensuring that their advertisers claims are substantiated. It is not enough to take the claims at face value.
- Disclaimers and disclosures must be clear and conspicuous.
- Demonstrations must show how the product will perform under normal use.
- "Bait and switch" advertising is not permitted.
When the FTC learns of a deceptive practice, it may meet informally with
a company and propose a cease and desist order. If the company agrees, and
a consent order can be worked out, no further action is taken. However,
companies may challenge proposed orders before an administrative law judge
and appeal any decisions in federal court.
The FTC may order fines, corrective advertising or other remedies in
cases of misleading advertising. For instance, some companies have been
forced to advertise that their product doesnt cure tired blood in all cases
of anemia, or that there may be substantial penalties for early withdrawl
from certain types of bank accounts.
Class action lawsuits on behalf of the victims of deceptive advertising have been another mechanism by which enforcement of fair trade laws take place. For instance, in March, 2006, a lawsuit against makers of sun screen products was filed claiming false and deceptive advertising, even though the Federal Trade Commission has warned consumers that sun block is not very effective.
Advertising ethics
Most publications and broadcast organizations have codes, standards or guidelines for deciding what will and will not be accepted. The publisher or broadcaster has the responsibility for libel, invasion of privacy or other faults in an advertisement, as we saw in the New York Times v. Sullivan case, among others. But by the same token, publishers and broadcasters have the right to refuse advertising, with rare exceptions. ( FCC Section 315 political broadcasting and direct competitors advertising under anti-trust laws). Of course, in the WDAY case, the courts said that broadcasters could not be held responsible on the one hand if they were being forced to air political ads on the other hand.
Most organizations have guidelines for advertising that rely on the American Advertising Federations Code of Ethics. They may also be simplified or elaborated as well as in-house guidelines. The Roanoke Times, for instance, has the following ten basic rules:
Roanoke Times advertising guidelines |
| Clear statement
No loss of money
No injury to health
Follow the law
No unfair attacks |
No misleading ads
No obscene advertising
Identified advertisers
Follow classifications
Clear advertising sources
|
Advertising as free speech
Commercial speech did not really have First Amendment protection
until the 1970s, when the anomalies in the original hierarchy
of speech doctrine became obvious. The courts started with a two-tier view of speech, as either protected or unprotected. But there were problems. For example, an ad asking for help in
the Civil Rights movement (New York Times v Sullivan, below) is clearly political. But what
about an offer for abortion services? Is it political or commercial? (See Bigelow).
Or how about generic drugs for senior citizens? (See Virginia Board). Eventually,
the lack of distinction between commercial and political speech led the court
to provide First Amendment protection for any truthful commercial speech.
Chaplinsky v. New Hampshire, 1942 -- Several weeks before the Valentine decision, the court issues a "two-tier theory" of communication, in which "certain well-defined and limited classes of speech, the prevention and punishment of which have never been thought to raise any constitutional problem.” The Chaplinsky case is a prior restraint / "fighting words" case but it guided advertising doctrine for several decades.
** Valentine v. Chrestensen, 316 U.S. 52, 1942 --
The Supreme Court said that the First Amendment does not apply to commercial advertising. F.J Chrestensen had a surplus
Navy submarine on display and was advertising it with handbills passed out
on New York streets. However , a city ordinance allowed only political handbills
on the street. The court said that the Constitution "imposes no restraint
on government as respects commercial advertising."
** New York Times v. Sullivan, 376 U.S. 254, 1964 -- Although
this case involved advertising, the Supreme Court took pains to distinguish
it from the Valentine case because it involved "idea" or political
advertising, which had full First Amendment protection. (See section on libel
law). The Court took pains to distinguish this case from Chrestensen,: "The publication here was not a "commercial" advertisement in
the sense in which the word was used in Chrestensen. It communicated information,
expressed opinion, recited grievances, protested claimed abuses, and sought
financial support on behalf of a movement whose existence and objectives are
matters of the highest public interest and concern."
Pittsburgh Press v Pittsburgh Commission on
Human Relations, 413 U.S. 376, 1973 -- A city ordinance banning sex descrimination
did apply to newspaper classified ads for employment. Before this, newspaper
classified help wanted ads were always categorized under "Help Wanted:
Male" and "Help Wanted: Female." After this case, newspaper
advertising changed nationwide and no gender distinctions were permitted.
** Bigelow v Virginia 421 US 809 1975 -- An advertisement
in a University of Virginia paper, the Virginia Weekly, for abortion services
in New York City was both political and commerical. The court upheld Bigelow's
right to advertise and inform people of abortion services in other states.
(Note this case came up just after Roe v. Wade).
Va. Board of Pharmacy v. Virginia Citizens Consumer
Council 1976 -- Before this decision, pharmacies were not free
to advertise the price of drugs and the availability of generic drugs. The
decision allowing advertising is another example where the Court could no
longer separate commercial and political speech.
Bates v. Arizona State Bar 1977 --
Supreme Court said state regulation of professional advertising for lawyers
is not constitutional. Bates is another commercial speech case with political
underpinnings. In this case, lawyers for a legal aid service to low income
Hispanics challenged state laws forbidding advertising by lawyers and won.
* National Bank of Boston v. Bellotti, 1978
-- A state statute prohibited commercial businesses from getting involved in
public affairs unless they were directly affected. 1st National campaigned against
a progressive personal income tax. Court held that non-media corporations have
at least some first amendment rights. This case is very interesting because of the influence of corporations on later public initiatives, such as Proposition 87 in California in 2006. In Bellotti, Chief Justice Rehnquist's dissent has been of particular interest among those who believe corporate speech is too strong. Rehnquist said:
"A state grants to a business corporation the blessings of potentially perpetual life and limited liability to enhance its efficiency as an economic entity. It might reasonably be concluded that those properties, so beneficial in the economic sphere, pose special dangers in the political sphere... Furthermore, it might be argued that liberties of political expression are not at all necessary to effectuate the purposes for which States permit commercial corporations to exist. So long as the Judicial Branches of the State and Federal Governments remain open to protect the corporation's interest in its property, it has no need, though it may have the desire, to petition the political branches for similar protection. Indeed, the States might reasonably fear that the corporation would use its economic power to obtain further benefits beyond those already bestowed. 6 I would think that any particular form of organization upon which the State confers special privileges or immunities different from those of natural persons would be subject to like regulation, whether the organization is a labor union, a partnership, a trade association, or a corporation. .."
Consolidated Edison Co. v. PSC NY 1980
-- Con-Ed inserted a promotion of good old clean, safe, nuclear power (watch
out for the three eyed fish) in its regular monthly bills. The Natural Resources
Defense Council, a group opposed to nuclear power, wanted to insert anti-nuclear
power arguments into consumers bills also. Since there was no guarantee of access
under Miami Herald v. Tornillo or Red Lion v. FCC (which applies only to scarce
airwaves), the PSC told Con Ed to stop advertising controversial stuff.
The NY supreme court said that was reasonable time, place and manner restriction
on free speech. US supreme court reversed, said the ban wasnt reasonable time
place restriction or narrowly tailor way to serve a compelling state interest.
Prior restraint on commercial speech has to be content neutral. The case led
to a test for restrictions on corporate speech:
** Central Hudson Gas & Electric Corp. v.
Public Service Commission (PSC)
of New York, 447 U.S. 557 1980 -- This case is important as a major
test of the validity of government restrictions on commercial speech. The
PSC had issued rules forbidding advertising that might encourage consumption
of electricity. (It was the "energy crisis," after all.) Central
Hudson challenged the rules. The Supreme Court used the case to issue a
FOUR PART TEST for determining whether government restrictions are valid:
1. Does the ad involve a lawful activity?
2. Is there a substantial government interest?
3. Does the regulation advance this interest?
4. Is the regulation the least restrictive means to serve the interest?
Bolger v. Youngs Drug Products Corp 1983
-- This case involved straightforward advertising of condoms through the
mail. The US Postal Service said the company could not mail such ads. The
Central Hudson test was applied, USPS claiming substantial government interest
in preventing interference with parents attempts to discuss birth control..
However, the court said the Postal Service regulation was overly broad. "The level of discourse reaching a mailbox cannot be limited to that
which would be suitable for a sandbox." This argument is often cited
in obscenity cases.
* Posadas de Puerto Rico Associates v. Tourism
Co. of Puerto Rico 478 U.S. 328 1986 -- This was a major exception
to the trend of commercial speech protection and has since been reversed.
In Posadas, the Central Hudson test did not prevent restrictions on ads
in Puerto Rico concerning legal gambling there. Legislation in Puerto Rico
banned casino advertising directed at residents of Puerto Rico, although
not casino advertising directed to tourists. The Court said a legitimate
government interest (preventing casino gambling by Puerto Ricans) was served
even though other types of gambling, including horse racing and lotteries,
could be advertised. The casinos argued that once an activity is legal,
restrictions cant be applied to advertising. But the court turned the argument
on its ear: Because the activity could be made illegal, its ill effects
can be minimized by regulating advertising. This is similar to the arguments
in the questions of alcohol or tobacco advertising. Also, the court said
not all regulations had to be the "least restrictive" ones. Reasonable
regulations could be reasonable in proportion ot the interest served.State University of New York v. Fox 1989
-- Here the court upheld a university's restrictions on commercial speech
on campus.
** Rubin v. Coors 1995 -- Coors was
advertising the alcohol content of its beers and the Bureau of Alcohol,
Tobacco and Firearms did not approve, fearing that once consumers knew which
brands had higher alcohol content it would lead to market competition for
high alcohol beers and more intoxication among the public. But the Court
said advertising that discloses only truthful information can't be prohibitied.
** 44 Liquormart v. Rhode Island 517 U.S. 484 1996 -- In
this case, a business wanted to advertise its liquor prices and the state of
Rhode Island said it couldn't. The Supreme Court disagreed. One justice, Clarence
Thomas, said that if an activity is legal it is not constitutional to "keep
people in the dark for what the government perceives to be their own good."
Lorillard Tobacco v. Reilly, 2001 -- The Federal Cigarette Labelling and Advertising Act 15 USC 1333 was not as restrictive as a state of Massachusetts law, especially with respect to advertising near schools and on billboards. The US Supreme Court found that the state law was overly broad under the fourth part of the Central Hudson test.
** Nike v. Kasky, 2003 -- In April 1998, California activist Marc Kasky sued Nike for unfair and deceptive practices under California's Unfair Competition Law and False Advertising Law. He asserted that "in order to maintain and/or increase its sales," Nike made a number of "false statements and/or material omissions of fact" concerning the working conditions under which Nike products are manufactured in foreign facilities. The US Supreme Court decided not to hear the case for procedural reasons. Nevertheless, the court noted that new First Amendment questions were presented. "On the one hand, if the allegations of the complaint are true, direct communications with customers and potential customers that were intended to generate sales--and possibly to maintain or enhance the market value of Nike's stock--contained significant factual misstatements. The regulatory interest in protecting market participants from being misled by such misstatements is of the highest order. That is why we have broadly (perhaps overbroadly) stated that "there is no constitutional value in false statements of fact"-- eg Gertz v. Robert Welch, Inc., 418 U. S. 323(1974). On the other hand, the communications were part of an ongoing discussion and debate about important public issues that was concerned not only with Nike's labor practices, but with similar practices used by other multinational corporations... Knowledgeable persons should be free to participate in such debate without fear of unfair reprisal. The interest in protecting such participants from the chilling effect of the prospect of expensive litigation is therefore also a matter of great importance... That is why we have provided such broad protection for misstatements about public figures that are not animated by malice. See New York Times Co. v. Sullivan, 376 U. S. 254 (1964). See the First Amendment Center's article on this case.
McConnell v. Federal Election Commission, 540 U.S. 93 (2003 -- Supreme Court upheld the constitutionality of most of the Bipartisan Campaign Reform Act of 2002, also known as the McCain Fiengold Act. The question was whether the Federal Elections Commission can regulate speech by regulating campaign spending on political advertising , which has an enormous influence over the outcome of political campaigns. According to a Wikipedia article:
"The BCRA was a mixed bag for those who wanted to remove the money from politics. It eliminated all soft money donations to the national party committees--but it also doubled the contribution limit of hard money, from $1,000 to $2,000 per election cycle, with a built-in increase for inflation. In addition, the bill aimed to curtail so called "issue ads" by banning the use of corporate or union money to pay for broadcast advertising that identifies a federal candidate within 30 days of a primary or nominating convention, or 60 days of a general election. Any ads within those periods that identify a federal candidate must be paid for with regulated, hard money or with contributions exclusively made by individual donors."
The right to advertise / Access to the
media There are three advertising media to consider in this area:
- Public media, that is, media controlled by city and state governments,
such as bus or subway ads; Broadcast media, that is, radio and television;
- Print media, of course, newspapers and magazines.
** Lehman v. Shaker Heights 418 U.S. 298 1974 --
This is a public media case and it resulted in the Lehman rule. Here
a candidate for office wanted to advertise on a city-run bus line. The Supreme
Court said that the city was free to limit its advertising to commercial
products only so long as it did so consistently. If all political ads are
rejected there is no discrimination.
* Friends of the Earth v. FCC 1971
-- This is a broadcast media case. When the FCC first moved against
tobacco advertising, in 1967, it did so under the "Fairness Doctrine" which said that viewpoints must be allowed to compete on television. The
tobacco industry's ads were countered under the Fairness Doctrine by ads
urging people to quit smoking starting. The Friends of the Earth, an environmental
public intertest group, sued the FCC under the Fairness Doctrine saying
it should be able to counter gasoline a nd automotive advertising for high
octane gas guzzling cars. In 1974 the FCC reinterpreted the Fairness Doctrine
as not giving a right of reply in cases involving commercial advertising.
Later the entire Fairness Doctrine was scrapped. (See "Chilling the Internet: Lessons learned from the Regulation of Broadcasting")
** Miami Herald v. Tornillo 1974
-- This case involves the print media. Here the Supreme Court said
that a Florida law imposing a "right of reply" on the print media
was not constitutional. A candidate for public office insisted that the
Herald print his advertisement responding to a Herald editorial, and the
Herald refused. The court said that the print media had a right to control
its contents without government interference. While the press should be
responsible, Chief Justice Warren Burger said, "like many other virtues
it cannot be legislated."
Note, however, that under anti trust laws,
even a newspaper cannot reject advertising concerning activities that are in
competition with the newspaper's business.
