Consumer right-to-know campaigns, Green Chemistry, social compliance programs, and reform of the Toxic Substances Control Act (TSCA) are among a number of initiatives aimed at significantly expanding the availability of information related to chemicals in the marketplace. While the government’s authority to require labeling and other disclosures is often not in doubt, there is a risk of overreaching and implicating the First Amendment. Specifically, there is a concern that the government will go beyond requiring factual information and force private industry to adopt a message or opinion of the government or a third party.
While courts often apply a minimal level of scrutiny to compelled disclosures in the commercial context, practitioners should still ask whether First Amendment matters are implicated. In this article, we briefly trace the history of the First Amendment as applied to commercial speech, examine the various levels of scrutiny applied to labeling requirements and other compelled disclosures, and offer guidance on how to analyze these constitutional issues in the area of chemical control.
The First Amendment provides that “Congress shall make no law . . . abridging the freedom of speech.” U.S. Const. amend I. This limitation, which extends to the states through the Fourteenth Amendment, applies equally to the right to speak and the right to refrain from speaking at all. W. Va. State Bd. of Educ. v. Barnette, 319 U.S. 624, 634 (1943). It governs both expressions of opinion and statements of fact. Riley v. Nat’l Fed’n of the Blind, 487 U.S. 781, 797–98 (1988). When the government compels an individual or company to speak, the First Amendment, depending on the type of speech, can provide the speaker with substantial or little protection.
At one end of the spectrum, courts diligently guard the speaker’s rights by subjecting the government to a strict level of scrutiny when political, nationalistic, or religious speech is involved. Barnette, 319 U.S. at 642. In contrast, when commercial speech is at stake, decisions on First Amendment grounds often discount the speaker’s interests in favor of giving the consumer access to information. In those circumstances, courts apply lower levels of scrutiny.
The Supreme Court, in Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, 425 U.S. 748 (1976), held that the First Amendment applies to “commercial speech.” In that case, which involved a statute prohibiting licensed pharmacists from advertising prescription drug prices, the Court asked whether the First Amendment is concerned with speech that does “no more than propose a commercial transaction” or where the speaker’s “interest is a purely economic one.” Id. at 762. In answering that question in the affirmative, the Court focused on the “free flow” of commercial information, where in a free enterprise economy, it is “a matter of public interest that [private economic] decisions, in the aggregate, be intelligent and well informed.” Id. at 765.
The Court was careful to note, however, that while “commercial speech enjoys First Amendment protection, . . . a different degree of protection is necessary to insure that the flow of truthful and legitimate commercial information is unimpaired.” It then identified circumstances where the government could regulate such speech to protect the consumer rather than the speaker. These include time, place, and manner restrictions, forbidding false or misleading speech, and of interest to companies that are subject to environmental or health and safety regulations, requiring warnings and disclaimers “necessary to prevent [commercial speech] from being deceptive.” Id. 770–73, 771 n. 24.
Four years later, in Central Hudson Gas & Electric Corp. v. Public Service Commission of New York, 447 U.S. 557 (1980), the Supreme Court revisited commercial speech and the First Amendment in a case involving a ban on promotional advertising by electric utilities. The Public Service Commission of New York had ordered all utilities to cease advertising that promoted the use of electricity. The Commission’s stated interest was that such advertising would “encourage energy consumption at a time when conservation is needed.” Id. at 558–60.
At issue was whether the government could limit speech even when there was no risk of consumer deception. The Court held that it could, provided that the government met a three-part test that has become known as “intermediate scrutiny.” Under this approach, the state must: (1) assert a “substantial” interest; (2) demonstrate that the regulation directly advances the governmental interest; and (3) show that the restriction is not more extensive than is necessary to serve that interest. Id. at 564–66.
The Court held that the order violated the First Amendment because it was not “narrowly tailored” to achieve the state’s goal of energy conservation. Because the ban applied to all promotional advertising, not just speech related to energy consumption, the Commission had failed to consider less intrusive alternatives, such as establishing a system whereby the Commission would review proposed advertisements to ensure that advertising unrelated to conservation issues was permitted. Id. at 568–71.
Left unanswered in Central Hudson, however, was whether intermediate scrutiny or some other test would apply to compelled disclosures involving commercial speech. That question was finally addressed in Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626 (1985) in which the Court applied a more lenient “reasonable relation” test to an Ohio regulation that required attorneys advertising contingent-fee arrangements to disclose that clients would have to pay costs even where the case was unsuccessful and there was no recovery. In doing so, the Court distinguished compelled disclosures from the restrictions or bans it had confronted in Virginia State Board and Central Hudson.
In Zauderer, the Court stated that the attorney’s “constitutionally protected interest in not providing any particular factual information in his advertising is minimal.” Id. at 651 (emphasis in original). The Court reasoned that “because disclosure requirements trench much more narrowly on an advertiser’s interests than do flat prohibitions on speech, warning[s] or disclaimer[s] might be appropriately required . . . in order to dissipate the possibility of consumer confusion or deception.” Id. (internal quotation marks and citation omitted). Accordingly, it held that an “advertiser’s rights are adequately protected as long as disclosure requirements are reasonably related to the State’s interest in preventing deception of consumers.” Zauderer, 471 U.S. at 651.
In applying the “reasonable relation” test to the Ohio regulation, and ultimately finding that it “easily passe[d] muster” under the standard, the Court made clear that, in cases of compelled disclosures, the government action will often be subject to a low First Amendment bar. For example, the Zauderer decision flatly rejected the notion that the state was required to show that the attorney disclosure requirement was narrowly tailored to preventing deception in advertising. Id. at 651 n. 14. The Court also spent little time debating whether the government’s interest was sufficient. It did not require the state to submit any evidence showing that attorney advertising could potentially confuse or mislead those seeking legal services; rather, the “possibility of deception [was] self-evident” and that was reasonable enough to support the requirement. Id. at 652–53.
Zauderer is not, however, without limitation. As a threshold matter, the “reasonable relation” test only applies to “purely factual and uncontroversial” disclosures. Yet certain compelled disclosures, which at first blush appear to satisfy this factor, actually force the speaker to convey a message or opinion that demands a higher level of First Amendment scrutiny. Moreover, even where Zauderer applies, the Court noted that a speaker’s interests are implicated when the disclosure has the effect of being “unjustified or unduly burdensome . . . by chilling protected commercial speech.” Id. at 651. Thus, while Zauderer presents a challenge to any party questioning the constitutionality of a compelled disclosure, the government’s interests will not always carry the day.
The Proper Level of Scrutiny
Although Zauderer filled a gap left by Central Hudson, it was not entirely clear from the Court’s decision whether a lower level of scrutiny should be applied to all compelled disclosures or only those aimed at preventing consumer deception. Indeed, Zauderer could be read narrowly, as it dealt with a state regulation geared toward eliminating misleading statements in attorney advertising and couched the “reasonable relation” test in those terms (i.e., the state must have an “interest in preventing deception of consumers”). Id. But the Court also spoke from a broader perspective when it harked back to Virginia State Board in noting that “First Amendment protection to commercial speech is justified principally by the value to consumers of the information such speech provides” and, as a consequence, a speaker’s interest in not providing information is “minimal.” Id. How courts interpret Zauderer and its scope is no small matter. At stake is the level of scrutiny to be applied, which in turn could mean the difference between finding a First Amendment violation or not.
Until recently, the D.C. Circuit generally adopted the narrow view and concluded that Zauderer does not apply to commercial speech unless the underlying goal of the government’s compelled disclosure is to guard against consumer deception. The court’s decision in R.J. Reynolds Tobacco Co. v. F.D.A., 696 F.3d 1205 (D.C. Cir. 2012), is instructive. In that case, tobacco companies challenged a Food and Drug Administration (FDA) regulation requiring graphic images to be placed on cigarette packaging. The FDA’s stated goal was to reduce smoking rates in the United States, particularly among children and adolescents, and it justified the labeling requirements based on scientific studies that, according to the government, showed that such images were more effective at discouraging cigarette use than textual warnings. Id. at 1208–09.
In response to the government’s arguments that the court should apply the “reasonable relation” test, the D.C. Circuit held that Zauderer is limited to situations where disclosure requirements are “designed to correct misleading commercial speech.” Citing Supreme Court precedent, the court held that Zauderer is “only appropriate if the government shows that, absent a warning, there is a self-evident—or at least ‘potentially real’—danger that an advertisement will mislead consumers.” Id. at 1213–14 (e.g., citing to United States v. United Foods, 533 U.S. 405 (2001); Ibanez v. Fla. Dept. of Bus. & Prof’l Regulation, 512 U.S. 136 (1994)). It pointed to language in Zauderer that the decision is “limited to cases in which disclosure requirements are ‘reasonably related to the State’s interest in preventing deception of consumers.’” R.J. Reynolds, 696 F.3d at 1213 (quoting Zauderer, 471 U.S. at 651). Because the cigarette labeling was not intended to prevent deception, lower level scrutiny did not apply.
The D.C. Circuit also rejected suggestions that the FDA’s graphic images were “purely factual and uncontroversial.” This was not a case where the required disclosures were “clear statements that were both indisputably accurate and not subject to misinterpretation by consumers.” R.J. Reynolds, 696 F.3d at 1216. Rather, the images could mislead smokers into thinking that they represented a typical result of cigarette use, like one image showing a man smoking through a tracheotomy hole. The images were not purely factual because they were designed to “evoke an emotional response” and “shock” the consumer into quitting. The court concluded that while the labels were not “patently false, they certainly [did] not impart purely factual, accurate or uncontroversial information to consumers.” Id. at 1216–17.
The court went on to apply intermediate scrutiny under Central Hudson, holding that the images violated the First Amendment because the agency did not satisfy the second factor of the three-part test. The FDA did not offer substantial evidence showing that the labeling directly advanced the government’s interest in reducing smoking rates. The court found that studies cited by the FDA did not demonstrate that images would have a significant impact on smokers and cigarette use. Id. at 1218–22. See also Nat’l Ass’n of Mfrs. v. S.E.C., 748 F.3d 359 (D.C. Cir. 2014) (NAM) (rejecting application of Zauderer to requirement that manufacturers disclose whether their products contain “conflict minerals,” which were mined in or near the Democratic Republic of the Congo and helped finance armed conflict in the region, because the disclosure was not designed to address deception).
Regulations compelling disclosure in the commercial context have found smoother sailing where Zauderer has been broadly applied. In National Electrical Manufacturers Ass’n v. Sorrell, 272 F.3d 104 (2d Cir. 2001), the Second Circuit applied lower level scrutiny to labeling requirements that were not geared toward preventing consumer deception. In that case, Vermont required manufacturers of mercury-containing products to inform consumers that their products, including fluorescent light bulbs, contain mercury and that the products should be recycled or otherwise disposed of in a safe manner. Id. at 107. The stated purpose underlying the statute was to protect human health and the environment from mercury exposures. In other words, it was “not intended to prevent ‘consumer confusion or deception’ per se.” Id. at 115.
In finding that the statute “pass[ed] First Amendment muster,” the Second Circuit rejected arguments that intermediate level scrutiny, not the “reasonable relation” test, was applicable. Id. at 113, 115. In contrast to R.J. Reynolds, the Second Circuit relied on the more expansive principles underlying the First Amendment’s role in commercial speech as first articulated in Virginia State Board. The court stated that “[p]rotection of the robust and free flow of accurate information is the principal First Amendment justification for protecting commercial speech, and requiring disclosure of truthful information promotes that goal. In such a case, . . . less exacting scrutiny is required than where truthful, nonmisleading commercial speech is restricted.” Id. at 114.
The court concluded that labeling for mercury was “rationally related” to the state’s objective of reducing mercury exposures by “increasing consumer awareness.” In so holding, the court did not cite any evidence proffered by the state that labeling would, in fact, achieve the underlying public health and safety goals. The court simply found that “a reasonable relationship is plain in the instant case.” Id. at 115.
Sorrell’s analysis did not end there. The court went on to comment on the implications of applying more exacting intermediate scrutiny to labeling and other disclosure requirements. It cited to the “[i]nnumerable federal and state regulatory programs [that] require the disclosure of product and other commercial information.” Id. at 116 (listing as examples nutritional labeling, chemical exposure information, and pesticide formulas). From the court’s perspective, “[t]o hold that the Vermont statute is insufficiently related to the state’s interest in reducing mercury pollution would expose these long-established programs to searching scrutiny by unelected courts. Such a result is neither wise nor constitutionally required.” Id.; see also Disc. Tobacco City & Lottery, Inc. v. United States, 674 F.3d 509, 557 (6th Cir. 2012); N.Y. State Rest. Ass’n v. N.Y. City Bd. of Health, 556 F.3d 114 (2d Cir. 2009); Pharm. Care Mgmt. Ass’n v. Rowe, 429 F.3d 294, 310 n. 8 (1st Cir. 2005).
Zauderer’s narrow application by the D.C. Circuit, however, did not withstand the force of Sorrell. In 2014, an en banc panel upheld labeling requirements adopted by the Secretary of Agriculture requiring meat packaging to indicate country of origin (e.g., born in the United States) in American Meat Institute v. U.S.D.A., 760 F.3d 18 (D.C. Cir. 2014). In doing so, the court overruled R.J. Reynolds and NAM to the extent that those decisions limited the “reasonable relation” test to instances of consumer deception. Id. at 22–23. While noting that Zauderer is not entirely clear as to its proper scope, the court ultimately found that the language used by the Supreme Court to justify lower-level scrutiny to factual and uncontroversial disclosures “sweeps far more broadly than the interest in remedying deception.” Echoing the analysis in Sorrell, the court cited to Zauderer’s distinction between disclosure requirements and prohibitions on commercial speech, with First Amendment protections for speakers much weaker when the former is involved. While reiterating the First Amendment’s role in improving the flow of information to consumers, the court stated that “[a]ll told, Zauderer’s characterization of the speaker’s interest in opposing forced disclosure of such information as ‘minimal’ seems inherently applicable beyond the problem of deception, as other circuits have found.” Id. at 22.
The court concluded that country-of-origin labeling was justified by the government’s interest in allowing consumers to make an informed choice regarding the characteristics (e.g., processing safety) associated with meat products. It rejected arguments that the Secretary was required to offer evidence that the disclosures would, in fact, effectively meet this goal or make an affirmative showing that they are narrowly tailored to their underlying purpose. The court said the government showed that the labeling advances the informational goal and represents a reasonable fit “between . . . means and ends” simply by crafting a “purely factual and uncontroversial” disclosure requirement. Id. at 23–27. As with the Second Circuit in Sorrell, the en banc panel noted that the “self-evident tendency of a disclosure mandate to assure that recipients get the mandated information may in part explain why, where that is the goal, many such mandates have persisted for decades without anyone questioning their constitutionality.” Id. at 26 (citing labeling requirements for fiber content, care instructions for clothing, and listing of ingredients).
First Amendment and Chemical Control
American Meat is the latest in a line of cases broadly applying Zauderer to all forms of compelled disclosures, which also spotlights the difficulties in challenging disclosure requirements in the area of chemical control. Indeed, intermediate level or strict scrutiny will likely be employed in only limited circumstances. Yet Zauderer is not without boundaries. Practitioners must carefully evaluate compelled disclosures related to the manufacture and use of chemicals to determine whether they raise First Amendment concerns. This will hold particularly true as federal and state governments adopt “right-to-know” and other disclosure requirements that seemingly reach beyond straightforward warnings and disclaimers first mentioned in Virginia State Board almost forty years ago.
As already discussed, Zauderer only applies when the disclosure is “factual and uncontroversial.” If compelled speech forces a company to adopt an opinion or message of the government or a third party to which it disagrees, or the disclosure is otherwise misleading, lower level scrutiny is inappropriate. For instance, the D.C. Circuit in NAM stated in dicta that “it is far from clear that the description at issue—whether a product is [free of conflict minerals]—is factual and non-ideological.” While indicating whether minerals used in a product may have a connection to armed conflict is, on some level, a factual statement, the court also characterized the descriptor as a “metaphor that conveys moral responsibility for the Congo war” which forces a manufacturer “to confess blood on its hands”—a message that companies may not wish to convey. 748 F.3d at 371 (the D.C. Circuit recently granted a panel rehearing to reconsider NAM in light of the en banc decision in American Meat).
Another limitation involves disclosure requirements that promote nothing more than “consumer curiosity” as a legitimate state interest. For instance, in International Dairy Foods Ass’n v. Amestoy, 92 F.3d 67 (2d Cir. 1996), the Second Circuit addressed a Vermont statute that required dairy manufacturers to disclose whether their products “were, or might have been, derived from dairy cows treated with a synthetic growth hormone used to increase milk production.” Vermont did not justify the labeling requirement based on health or safety concerns. In fact, the FDA had determined that dairy products produced from cows treated with the hormone were “indistinguishable” from untreated animals. Id. at 69. Instead, Vermont characterized the statute as simply a “right-to-know” law. The court, in applying Central Hudson’s “substantial interest” test, held that consumer interest, standing alone, was “insufficient to . . . compel the dairy manufacturers to speak against their will.” Id. at 74.
While courts applying Zauderer point out that it is “self-evident” that a required disclosure will be “reasonably related” to preventing consumer confusion or helping consumers make informed decisions, there may be instances where the connection between these goals and the compelled speech is specious or highly speculative and, therefore, would not satisfy even lower level scrutiny. For instance, the Environmental Protection Agency (EPA) recently alluded to this type of scenario in a letter denying citizen petitions for mandatory disclosure on pesticide labels of inert ingredients. The agency noted the absence of any evidence that “a large percentage of pesticide users’ decisions would be significantly influenced by that information.” EPA found that the evidence “suggest[s] most consumers will not pay attention to information on product labels disclosing the identity of inert ingredients.” Letter from Jim Jones, Assistant Administrator, EPA, to Kamala Harris, Attorney General, California Department of Justice (May 22, 2014).
Practitioners also should ask whether a federal or state agency has authority to require a certain disclosure. If not, the government, as a matter of law, may not be able to maintain that it has a legitimate interest in preventing consumer confusion or promoting informational transparency. This issue recently came to the fore in an EPA Advance Notice of Proposed Rulemaking (ANPR), which sought comments on whether the oil and gas industry should be required to disclose information regarding chemicals used in hydraulic fracturing. 79 Fed. Reg. 28,664 (May 19, 2014). EPA would issue the rule, in part, under section 8(a) of TSCA, which authorizes EPA to require “manufacturers” and “processors” of chemical substances to submit information. 15 U.S.C. § 2607(a). However, in the ANPR, EPA suggested that end users of these chemicals, such as companies who inject chemical mixtures into a well as part of the fracturing process, could fall under the proposed rule. 79 Fed. Reg. at 28,667. These “consumers” do not qualify as a manufacturer or processor, and EPA’s First Amendment interest in subjecting them to compelled disclosure could be tested.
Even where Zauderer applies, a compelled disclosure cannot be so unjustified or unduly burdensome so as to chill protected speech. 471 U.S. at 651. While Zauderer did not provide examples as to what would be “unjustified” or “unduly burdensome,” in the labeling context, courts have “found that this condition exists where the required disclosure is so lengthy that it ‘effectively rules out’ advertising by the desired means.” Dwyer v. Cappell, 762 F.3d 275, 283 (3d Cir. 2014) (quotations in original) (quoting Ibanez, 512 U.S. at 146).
Federal and state governments undoubtedly have a lot of leeway to require disclosures of chemical-related information. But the First Amendment is not boundless. Going forward, it will be interesting to see if, for example, Vermont’s GMO labeling law AB 120 survives an industry legal challenge based on First Amendment grounds and whether the intermediate scrutiny applied in NAM withstands a panel rehearing. Regardless, even with commercial speech, practitioners should always remain cognizant of the constitutional limitations placed on compelled disclosures.