Beginning with an evaluation of commonly evoked philosophical justifications for freedom of expression, Piety determines that, while these are appropriate for the protection of an individual’s rights, they should not be applied too literally to commercial expression because the corporate person is not the moral equivalent of the human person. She then gathers evidence from public relations and marketing, behavioral economics, psychology, and cognitive studies to show how overly permissive extensions of First Amendment protections to commercial expression limit governmental power to address some of the major social, economic, and environmental challenges of our time.
“The timeliness of the topic and the provision of original positions are sure to make the book a valuable contribution that should draw much attention.”
—Kevin W. Saunders, Michigan State University
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Brandishing the First AmendmentCommercial Expression in America
By TAMARA R. PIETY
THE UNIVERSITY OF MICHIGAN PRESSCopyright © 2012 University of Michigan
All right reserved.
Chapter OneCommercial and Corporate Speech
[T]he free flow of commercial information is indispensable. —Supreme Court of the United States, Virginia Pharmacy (1976)
Prior to the twentieth century neither the courts nor most commentators appeared to believe the First Amendment had much bearing on commercial communications. Although, as legal historian David Rabban has noted, there is substantial evidence of interest in the First Amendment prior to 1917, most conventional discussions of First Amendment doctrine and its meaning begin there. So, with respect to the commercial speaker, it is probably fair to say that if the First Amendment itself was not given much consideration prior to the twentieth century, it is axiomatic that little attention was paid to commercial speech specifically. Some have argued that the Framers had advertising in mind when they drafted the First Amendment because of the degree to which advertising supported the development of a free press at the time; but there had been little direct evidence in the academic literature to support this reading. Given that the modern corporation and modern modes of communication were unknown to the Framers, they could have hardly had those practices in mind.
Thus, there is no venerable tradition supporting freedom of expression for the conduct of commerce—at least not as a matter of constitutional law. To the contrary, at least until the latter part of the twentieth century, most observers thought it was self-evident that the government could regulate commercial speech with impunity. While there may have been titanic struggles about the scope of Congress's power to regulate commerce, those struggles were not framed as issues arising under the First Amendment. Indeed, in 1942 the Supreme Court dismissively declared there was "no such [First Amendment restriction] on government [ability to regulate] as respects purely commercial advertising." The decisions creating First Amendment protection for commercial speech and for corporate political speech were not issued until the latter half of the twentieth century.
The Commercial Speech Doctrine
Most observers agree that the commercial speech doctrine was created in 1976 by the decision in the Virginia Pharmacy case. The issue in Virginia Pharmacy was whether Virginia could forbid pharmacists to advertise drug prices. A consumer group protested, arguing that by preventing pharmacies from advertising prices, the state unreasonably burdened their ability to find the cheapest drugs. In response, the state argued that price advertising would lead to pharmacy price wars and, in turn, to diminished professionalism, which, in the end, would hurt consumers. Consumers countered that the state's rationale was excessively paternalistic, that the government ought not to be in the business of protecting the public from the truth. The Supreme Court agreed and held that truthful commercial speech was protected by the First Amendment. In so holding, the Court observed,
So long as we preserve a predominately free enterprise economy, the allocation of our resources in large measure will be made through numerous private economic decisions. It is a matter of public interest that those decisions, in the aggregate, be intelligent and well informed. To this end, the free flow of commercial information is indispensable.
The Court's holding, that truthful commercial speech ought to enjoy a measure of First Amendment protection, was a fairly novel interpretation of that amendment. Only a few years earlier, the Court had rejected out of hand the notion that advertising was protected by the First Amendment. It was also novel because it focused on the listeners' (consumers') right to hear rather than on the speakers' (pharmacies') right to speak, the usual focus in First Amendment cases. It was so novel that apparently the Court felt that in order to find the consumer group had standing to raise the speech issue, it first had to find that the pharmacies had a First Amendment right to advertise, a right that the consumers were asserting derivatively. With little discussion of this point, the Court held that they did have such a right. But the Court's key holding was that protection was necessary because the consumers had a First Amendment right to hear the price information.
Had the Court been writing on a blank slate, these gyrations might not have been necessary. Indeed, it might not have been necessary to invoke the First Amendment at all. If you were looking simply at the language of the Constitution, you might have thought that the Commerce Clause was the provision applicable to a case about advertising. But because the Court's earlier decisions interpreting the Commerce Clause called for a fairly undemanding rational basis test for laws regulating commerce (a test that Virginia's rationale for its prohibition of price advertising for prescription drugs would have almost certainly passed), the consumers would not have gotten very far had they raised a Commerce Clause challenge. So they needed a different constitutional claim. What they hit on was the argument that consumers had a First Amendment right to hear this price information. As noted, this was not a conventional reading of the First Amendment, but it was not unprecedented. The argument had been made in a law review article a few years earlier.
In 1971 a professor of law at Northwestern University, Martin Redish, published an article entitled "The First Amendment in the Marketplace," in which he argued that commercial speech was entitled to First Amendment protection because it was critical to market function, which was, in turn, an essential part of social welfare and self-actualization. He claimed that there was no intellectually respectable basis on which to distinguish between commercial and noncommercial speech for First Amendment purposes. His argument placed the public's right to receive the information on the same plane as the speaker's interest in speaking. Moreover, he argued that as a category, commercial speech was as valuable as other types of protected speech, such as art or political speech. Of course, from the conventional perspective, the argument that information (speech) is critical to market function only applies to truthful information, at least if we are thinking of efficient markets. Not surprisingly then, Redish argued that it was primarily truthful commercial speech that had this constitutional value. He did not claim that there was First Amendment value in false commercial speech, although he did argue that some false speech might need to be protected so as to avoid chilling valuable speech.
When the Virginia consumers group picked up this argument, it found a receptive audience in the Supreme Court. The Court's opinion in Virginia Pharmacy mirrored Redish's argument in virtually every respect, including his explanations for why commercial speech, unlike political speech, could be safely regulated for its truth. Regulation of commercial speech for its truth, Redish argued (and the Court later held), was not as troubling as similar regulation would be in the political sphere, because the economic motive for issuing it made commercial speech hardier; that is, because companies had a powerful motive (profit) to communicate, they would be unlikely to forgo speech altogether, even if it was regulated. This claim made it possible to extend First Amendment protection to commercial speech while simultaneously leaving intact much consumer protection regulation that might otherwise seem inconsistent with the First Amendment.
After announcing the commercial speech doctrine in Virginia Pharmacy, the Court further clarified it four years later in Central Hudson. There the Court set out the four-part test for commercial speech still applicable today. In order to receive First Amendment protection pursuant to the commercial speech doctrine, speech must meet four criteria: (1) it must concern a legal activity and not be misleading (i.e., it must be truthful speech about a legal activity); (2) if the government seeks to regulate speech, it must do so pursuant to a "substantial interest"; (3) such regulatory efforts must directly further the asserted substantial interest; and (4) the regulation must be no more expansive than necessary to advance that substantial interest (this is often described as the "fit" prong).
What Makes Speech "Commercial"?
The Central Hudson opinion is clear that only truthful commercial speech receives First Amendment protection. It observed that because the whole justification for protecting some commercial expression was because of its informational function, this justification evaporated in the case of misleading speech. "The government," the Court said, "may ban forms of communication more likely to deceive the public than to inform it."
This sets up something of a definitional problem. Pursuant to Central Hudson, if speech is commercial, it is protected only if it is truthful. But being truthful does not make speech "commercial." Unfortunately, the Court did not define what does makes speech "commercial." This is important because the government may not set up a truth test for most other sorts of protected speech (libel and defamation being exceptions). Redish himself argued that commercial speech was "communication concerned solely with promoting the sale of commercial services or products, which services or products are themselves not speech traditionally protected by the first amendment." (Notice that this description neatly sidesteps the media problem.) The Supreme Court did not use this precise language in either Virginia Pharmacy or Central Hudson, leaving unclear what makes speech commercial. Typically, if clear definitions are not provided in a decision, lawyers will look at the facts of subsequent cases to see if a definition can be inferred from the pattern of decided cases. However, this is not easy to do with the commercial speech cases.
The Supreme Court has decided only a handful of commercial speech cases, yet they include a fairly broad range of factual circumstances. The Virginia Pharmacy case itself suggested an early definition: that by "commercial speech" the Supreme Court meant "advertising." Given that the Court used the terms advertising and commercial speech interchangeably in the Virginia Pharmacy opinion, this approach has some attraction. However, the Court also suggested that speech is "commercial" when it does "no more than propose a commercial transaction." This formulation remains one of those most often cited as a definition. However, it is not terribly helpful, since it could either simply be a restatement of the "commercial speech equals advertising" formulation or could be read much more broadly to encompass speech that is not synonymous with advertising. Moreover, in yet other cases, the Court appeared to explicitly reject the idea that commercial speech was nothing more than advertising. So the definition problem is still unresolved.
Although many cases the Court has decided involved advertising of the same sort of straightforward, factual information involved in Virginia Pharmacy (price), others have involved communications that were not so clearly just advertising. One case, Bolger v. Youngs Drug Products, involved a pamphlet with information about sexually transmitted diseases and their prevention. The pamphlet included references to its publisher's product, Trojan condoms. In another case, the question presented was whether a utility company could be required to include an insert about energy usage in every electricity customer's bill. In Posadas de Puerto Rico, the Court upheld a ban on advertising of casino gambling to the residents of Puerto Rico, a ban that included bans on certain kinds of promotional merchandise. Still other cases involved in-person solicitation or advertising or promotional bans supported by professional organizations, in particular the regulation of lawyer advertising. 28 Whatever the factual circumstances, the Court's decisions tended to focus not on the difficulty of defining commercial speech but, rather, on the power of the government to regulate it.
When the Court did address the definitional issue, as it did in Youngs Drug, the Court had no difficulty in concluding that the inclusion of some communications on a matter of public concern did not necessarily convert commercial speech into protected speech. The test the Court articulated in Youngs Drug for determining whether something is commercial speech is the test the California Supreme Court majority used to guide its decision in Nike: (1) whether the speech in question is an advertisement, (2) whether it is about a product, and (3) whether the speaker has an economic motivation for speaking. Using this test, the California Supreme Court had no difficulty concluding that some of the speech in the Nike case could have easily been deemed commercial. But by dismissing the Nike case, the Supreme Court of the United States did not make clear whether it agreed. To date, the definitional boundaries of commercial speech remain ambiguous. I argue that properly understood, commercial speech is much broader than the Court has suggested to date and ought to include any promotional speech by a corporation, perhaps even including speech that has been the subject of a separate line of cases—corporate political speech.
At the same time that the Court was crafting protection for commercial speech—based on the nature of the speech and the rights of the listener to receive the speech—it was confronted with claims by corporations that they had the right to expend resources on political ads. The Court did not analyze these claims as falling under the commercial speech doctrine, since political ads did not seem to obviously involve commerce (although, as I will argue later, it could have done so if the Court had considered the purpose for business participation in political speech). Instead, it analyzed these cases as ones involving quintessential protected speech and, in so doing, laid the foundation for the conclusion that for-profit corporations could be legitimate rights holders for purposes of the First Amendment. This conclusion would have spillover effect on commercial speech. Even though both individuals and corporations engage in commercial speech, it is the largest, multinational corporations that spend the most and contribute the most to commercial speech.
In First National Bank of Boston v. Bellotti, the bank petitioner sought a declaratory judgment that it had a First Amendment right to take out ads urging voters not to approve a personal income tax proposal on the ballot. Massachusetts law prohibited such expenditures by corporations (on pain of criminal sanctions) where such expenditures did not "materially affect" the property of the business. The Massachusetts attorney general had announced that he interpreted the law to prohibit the proposed ads and that he intended to enforce the law against the bank. The bank sought a declaratory judgment that it had as much right as any citizen to offer speech on a matter of public concern. That claim made its way to the Supreme Court.
Although the lower courts had framed the issue much the way the bank did—as whether a corporation had First Amendment rights that were the equivalent of a human being's—Justice Powell, writing for the majority, said this was "the wrong question." "The proper question," he wrote in the opinion finding in favor of the bank, "is not whether corporations 'have' First Amendment rights and, if so, whether they are coextensive with those of natural persons. Instead, the question must be whether § 8 [the statute limiting corporate speech] abridges expression that the First Amendment was meant to protect. We hold that it does."
Excerpted from Brandishing the First Amendment by TAMARA R. PIETY Copyright © 2012 by University of Michigan . Excerpted by permission of THE UNIVERSITY OF MICHIGAN PRESS. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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Table of Contents
Introduction: The Problem of Commercial Expression 1
Part I Foundational Concepts
1 Commercial and Corporate Speech 17
2 The Scope of Commercial Expression 31
3 Why Protect Speech? Four Fundamental Interests 52
Part II Autonomy and Truth
4 Autonomy as a Human Interest 77
5 Brands, Information, and Consumer "Education" 88
6 Advertising and Manipulation 107
7 Tough Love Paternalism 121
8 The Corporate Person 141
Part III Democracy and Stability
9 Commercial Democracy 165
10 Commercial Expression and Economic Instability 186
11 Commercial Expression and Environmental Instability 202