Topic Overview
Commercial speech is the term used to distinguish ads proposing
commercial transactions from other kinds of ads. Advertising means commercial
speech. The Court affirmed the ability of governments to regulate advertising
and suggested that a FA interest could be served by advertising a commercial
proposal, and the interest could outweigh the government’s interest in
regulating advertising. Determining the type of speech conveyed in ads are
weighed between purely commercial speech and ads that contained factual
material of clear public interest in addition to a proposed commercial
transaction. Speech is not stripped of FA protections because it has they are
paid commercial ads. While untruthful express could be regulated, the law is
more tolerant of error and falsehood in a political content than of speech in
the commercial arena. In the Central Hudson case, the court developed a test
for bans and ruled that gov regulation is constitutional only if there is a
substantial state interest that justifies the regulation, the regulation
directly advances that state interest, and the regulation directly advances the
state interest through the least speech restrictive means possible. Now there
only has to be a reasonable fit between the regulation and state interest
making it easier for advertising regulations to pass the test and be ruled
constitutional.
A federal law prohibiting information about alcohol content appearing
on product labels or in advertising to prevent strength wars failed the Central Hudson test. It failed because
there are alternatives that would be less intrusive on the commercial speech’s
FA protections. A law against advertising bargain prices on alcoholic beverages
because it would increase consumption did not hold up in court ruling it fails
to establish a causal relationship between its abridgment of commercial speech
and achieving its goal of temperance. Withholding information about price does
not work to decrease drinking.
There is a legitimate state interest in regulating tobacco advertising:
preventing minors from accessing tobacco products. Regulations and restrictions
on tobacco products upheld because the state’s interest was unrelated to the
communication of ideas. Clinton the FDA to initiate steps to stop sales and
marketing of tobacco to children and had the authority to regulate tobacco
products. The industry agreed to stop billboard and transit ads and cartoons.
The Public Health Smoking Act of 1969 required a ban on tobacco ads on
broadcast TV and radio stations. Tobacco company free speech rights were not
infringed because they had other advertising outlets.
While there is a substantial state interest for reducing the social
costs associated with gambling, laws banning broadcasters from airing ad for
legal casino gambling did not advance this interest and was not as narrowly
tailored as could be. Prohibiting ads for private casinos but allowing it for
others only steered gamblers to specific outlets rather than others.
Court found law prohibiting lawyer service ads in violation of the FA.
The ruling emphasized it stopped short of granting a blanket endorsement to
attorney advertising. Reasonable restriction pertaining to false advertising
could survive the FA.
The Court upheld the right of corporations to communicate through
purely political speech; political speech has more FA protection than
commercial. In Nike’s case, speech was ruled commercial and could not be
punished under state false advertising and unfair competition laws. Nike
engaged in commerce, the intended audience was largely composed of potential
Nike customers and the speech consisted of representations of fact of a
commercial nature that were intended to maintain and increase sales of Nike
products. Nike argued that although false, speech was absolutely protected by
the FA because it was political in nature concerning discussions about factory
working conditions and not commercial speech involving things like products and
prices. The Court dismissed the case stating the plaintiff did not suffer
sufficient injury to file a lawsuit. This case is seen as a missed opportunity
for clarifying commercial speech.
Advertising is subject to regulation on the state level, but the
federal gov has most responsibility mostly because ads cross state lines;
falling under the Constitution’s commerce clause, Congress may also control it
within FA limits. The Lanham Act prohibits any false/misleading description of
goods, services, or commercial activities in any forum including ads and
promos. It became the foundation for lawsuits as ads grew into comparative ads.
The FTC was established in 1914 as an independent agency that reports
to Congress. It I headed by five commissioners nominated by the president,
confirmed by Senate, each serving a seven-year term. One acts as chair and no
more than three can be of the same political party. It protects consumers from
unfair/deceptive practices by businesses and is the primary federal regulator
of advertising. It has the authority to demand that advertisers substantiate
accurate claims. The FTC included the Bureau of Consumer Protection, which
protects against unfair/deceptive/fraudulent practices. The Division of
Advertising Practices is a division of the bureau and is the enforcer of
federal truth-in-advertising laws focusing on: deceptive ads of fraud cure-all
claims for dietary supplements and weight loss products, deceptive internet
marketing practices for health issues, enforcement strategies for new ad
techniques and media, ads of food to children like impacts on obesity, industry
practices regarding marketing violent media, and alcohol and tobacco marketing
practices. Puffery is fine if it is not deceptive and if advertisers have
adequate substantiation before a claim is made. A literally true statement can
have deceptive implications when considered in the context of the whole ad even
if it is not the only possible interpretation.
The FTC is made aware of potentially problematic ads by complaints
from consumers, businesses, etc. FTC investigations are generally nonpublic to
protect the investigation and companies involved. Measures are taken to protect
the public.
Preventive measures: advertiser advice is requested in an opinion
letter from the FTC. The advice does not bind the commission in any way but it
can be an efficient way to avoid ad problems. Advisory opinions contain more
info and are more official. It is placed in public record making the FTC
accountable to its advice so opinions tend to be harsh with a heavy obligation
to adhere to them. Industry guides outline policies concerning a particular
category of product or service. They are intended to prevent future problems
wtih testimonials, endorsements, etc. They affect celebrity endorsements and
est. practices of broadcasters and new media companies. Endorsers are liable or
false claims and “results not typical” disclaimers do not excuse endorsers or
companies from responsibility. Material connections like payments must be
disclosed, warnings to understand guidelines and guidelines are directed at
nontraditional ads like celebrity endorsements. The trade regulation rule
targets an entire trade allowing the FTC to deal with an entire group of
advertisers at once. Under the commission’s voluntary compliance function,
advertisers have the opportunity to comply with complaints that the judges to
have merit.
Corrective measures: A cease and desist order demands the stopping of
one or more advertising practices. It is contained within a consent
order/consent agreement. A consent order is for settlement purposes and does
not constitute an admission of guilt by the advertiser. Failure to sign it will
likely generate negative publicity and the FTC is likely to impose severe
penalties. If they choose not to, the FTC can issue a litigated order to stop
an ad claim filed in an administrative court. If it is upheld, the advertiser
may appeal to a fed court can result in serious fines. Substantiation gives the
FTC authority to demand an advertiser prove its claims—to provide competent and
reliable evidence for claims made. The FTC may require corrective
advertising—to set the record straight in future ads or other kids on info
distribution. Listerine was the first corrective advertising case. A court
injunction or a restraining order can be used if ads are false/misleading and
cause immediate harm (credit card claims for reducing debt).
The FCC is the primary regulator of advertising cut the FCC can deal
with problem ads in broadcast media and the FDA can deal with ads for products
within its influence at least indirectly.
Advertisers view Internet advertising as cost effective. Technology
allows them to gather data on user activity for marketing purposes (data
mining), which is controversial. The instantaneous nature of Internet ads have
created fraud and unwanted ads across the Internet. The FTC monitors illegal
practices on the Internet and enforces laws against fraud online advertisers in
other media. The first deceptive Internet ad case was in 1994; ads advising
consumers to take illegal steps to repair credit records. A consent decree
required the advertiser to est. a compensation fund, not engage in future
misrepresentations, to disclose future credit programs and to cooperate in FTC
investigations. The FTC supports providing “do not track” options like
cookie-blocking features to avoid targeting ads. In response to unsolicited,
unwanted email or spam Congress enacted the Controlling the Assault of
Non-Solicited Pornography and Marketing (CAN-SPAM) Act under which ISPs, states
attorney generals and federal agencies can pursue spammers in fed courts with
criminal and civil penalties. The law prohibits the use of false header info in
commercial email and requires unsolicited messages to include opt-out
instructions. There is also protection against spam with unmarked pornographic
material. Penalties include millions in fines and imprisonment. The FTC
approved provisions in ’08 to strengthen enforcement.
37 states enacted anti-spam regulations to supplement fed law. The
Court ruled the right to engage in anonymous speech was protected by the FA so
a law prohibiting false routing info in emails infringed on this FA right.
Key Definitions
Puffery- ads that exaggerate the merits of products or services in a
way that no reasonable person would take it seriously
Litigated order- FTC order to stop a specific ad claim
Industry guides- FTC measure that outlines the policies concerning a
category of product or service
Trade regulation rule- statement by the FTC that outlines ad
requirements for a trade
Substantiation- authority of the FTC to demand an advertiser prove
claims made in ads
Corrective advertising- FTC requirement forcing an advertiser to
include info in future ads that corrects false or misleading claims in previous
ads
Important Cases
1.
Central
Hudson Gas & Electric Corp. v. Public Service Commission of New York- ad
ban test- Court reaffirmed the constitutionality of regulations forbidding
untruthful and misleading ads and prohibition on ads that promote illegal
products or services. Gov regulation is constitutional only if there is a
substantial state interest that justifies the regulation, the regulation
directly advances that state interest, and the regulation directly advances the
state interest through the least speech restrictive means possible.
2.
Lorillard
v. Reilly- ban on tobacco ads and sales within 1,000 ft of school and
playgrounds- Court applied Central Hudson test and ruled ban restricted
company’s FA rights and was too broad
Relevant Doctrine
Free Flow of Commercial Information
Supreme Court established several principles concerning advertising
-
Freedom of
speech applies to both the speaker and recipient of info. There is a right to
receive info.
-
FA
protection had never been denied to speech merely because it was commercial.
-
Speech
doesn’t lose it FA protection because money is spent to project it, as in a
paid ad.
-
Speech does
no more than propose a commercial transaction is not so removed from any
exposition of ideas that it lacks all protection.
-
Consumer
interest in the free flow of commercial info may be as high as, if not higher
than, the interest in the day’s most urgent political debate. Even an
individual ad, though entirely commercial, may be of general public interest.
-
Particularly
in a free enterprise economy, it is a matter of public interest that economic
decisions be intelligent and well informed
-
As with
other categories of speech, some forms of commercial speech may be regulated.
Untruthful speech, for example, has never been protected for its own sake.
The Commercial Speech Doctrine
-
The gov may
regulate advertising that it is false, misleading or deceptive.
-
The gov may
regulate advertising for unlawful goods and services.
Even truthful, honest advertising for legal goods and services may be
regulated if the following conditions are met:
-
The gov
claims a substantial state interest to justify the regulation.
-
The gov
demonstrates that the regulation directly advances the claimed interest.
-
The gov
shows that there is a reasonable fit between the claimed interest and the
regulation.
FTC: False and Misleading Advertising
The FTC Policy Statement explains false and misleading advertising
from the commission’s viewpoint:
-
First,
there must be a representation, omission or practice that is likely to mislead
the consumer.
-
Second, we
examine the practice from the perspective of a consumer acting reasonably in
the circumstances. If the representation or practice affects or is directed
primarily to a particular group the omission examines reasonableness from the
perspective of that group.
-
Third, the representation
, omission or practice must be a material one. The basic question is whether
the act or practice is likely to affect the consumer’s conduct or decision with
regard to a product or service.
FTC Mechanisms
Preventive Measures:
-
Opinion
letters
-
Advisory
opinions
-
Industry
guides
-
Trade rules
-
Voluntary
compliance
Corrective Measures:
-
Cease and
desist orders
-
Consent
orders
-
Substantiation
-
Litigated
orders
-
Corrective
advertising
-
Injunctions
Issues/Controversies
Commercial speech was outside the range of the FA until the court
articulated the idea that advertising could be considered speech and was
entitled to FA protection. Distinguishing ads as a commercial ad or an
informational one as paid political speech sparked the need for determining
what kinds of commercial speech would have FA protection. Issues with determining the type of
speech conveyed in ads were weighed between purely commercial speech and ads
that contained factual material of clear public interest in addition to a
proposed commercial transaction. Speech is not stripped of FA protections
because it has they are paid commercial ads. The degree of protection for
certain ads and the degree of tolerance for error and falsehood are also
issues. There are many who question the fed government’s ability to enforce
Internet restrictions and criticize the way the CAN-SPAM Act supersedes
stricter state laws.
Questions/Concerns
My only concern is keeping up with FCC regulations. They will constantly be changing and applied differently as various mediums become more pervasive, flexible and ever changing.
References:
Trager, R.,
Russomanno, J. & Ross, S.D. (2012), The law of journalism and mass
communication. Thousand Oaks, CA: Sage Publications.Image:
http://law2.umkc.edu/faculty/projects/ftrials/conlaw/camelad.jpg
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