Chapter 12 addresses the law that governs the intersection of commerce and speech: advertising. This area addresses the financial lifeblood of the media and the field of primary interest for students of marketing, advertising, and, to some degree, corporate public relations. The topic tends to resonate with students, perhaps because they attend closely – and too often uncritically – to today’s slickly packaged sales techniques or because its cases and situations deal with products with which they often are familiar.

As with other areas of journalism and mass communication law, advertising is regulated through the courts, legislation, and agencies. This three-pronged dynamic, however, is especially prominent in this area. Chapter 12 is structured largely according to these categories.

Understanding the regulation of advertising requires an understanding that even the U.S. Supreme Court was slow to accept. Advertising is a kind of speech – indeed, it is commercial speech. Beyond mere promotion of consumption, advertising often contains information of importance to the public, and the desire to communicate that information deserves at least some First Amendment protection.

The U.S. Supreme Court long viewed advertising as an integral part of the commerce that the Constitution’s commerce clause (Article 1, Sec. 8, Clause 3) explicitly allows Congress to regulate. The 1942 ruling in Chrestensen v. Valentine is typically used as a starting point to illustrate the Court’s view of commercial speech as subject to reasonable regulation. While a form of advertising was at the root of the Court’s 1963 libel decision in New York Times v. Sullivan, the transformation of commercial speech law was not noticeably significant until the 1970s.

The Court’s decisions in the past nearly 50 years have crafted an unclear definition of commercial speech or advertising. Initially, the Court exempted purely commercial speech from First Amendment protection and said such commercial speech did no more than propose and facilitate commercial transactions. Since the 1970s, the Court has said that truthful commercial speech is protected to some degree. False and deceptive advertising, and advertising that does “no more” than propose a commercial transaction may be regulated. However, in Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, the Supreme Court recognized that advertising may contain information that approaches the importance of political speech; it may provide information that is of the highest importance to some people.

The Court’s commercial speech doctrine has shifted through time. In Central Hudson Gas & Electric Co. in 1980, the Court established that government may regulate advertising for false or deceptive advertising or advertising for illegal products. However, if truthful commercial speech relates to legal products, government must demonstrate (1) a substantial government interest (2) that is directly advanced (3) by regulations that “fit” the government interest. Many courts found this test difficult to apply, and some of its most noteworthy applications have involved regulation of controversial goods and services, where the Supreme Court has expanded the constitutional protection of commercial speech through time.

In the past two decades, the Court’s decisions in 44 Liquormart and Sorrell have essentially rewritten (or overturned?) the Central Hudson test. Although lower courts have been slow to apply the new standard, the Supreme Court has made clear that today courts must use a multi-step test to determine the constitutionality of regulation of advertising. Courts must decide:

1. Is the commercial speech false or related to an illegal activity?

1. If yes, the speech may be banned or strictly regulated.
2. If no, proceed with the test.

2. Is the regulation of commercial speech based on its content?

1. If yes, the court must apply heightened, or strict, scrutiny and presume that the rule is unconstitutional. If not, proceed with the test.

3. Is the regulation of commercial speech content neutral?

1. If yes, the court must apply the Central Hudson test and strike down the regulation unless the answer to all of the following is yes.
   
   1. Does the rule relate to a significant government interest?
   2. Does the rule directly advance that government interest?
   3. Is the regulation unrelated to the suppression of speech?
   4. Does the regulation “fit” the government interest without unduly infringing on speech?

Few regulations of truthful commercial speech survive this test unless the speech promotes an illegal activity. The Supreme Court has struck down bans on advertising for legal products.

The Lanham Act, the Federal Trade Commission Act establish the federal power to oversee false or deceptive advertising and allocate authority primarily to the Federal Trade Commission. Although other agencies (most notably, the Federal Communications Commission and the Food and Drug Administration) are involved, the FTC is the primary advertising regulator. The commission uses several measures to police advertising – some preventive and some corrective. Advertisers who believe the FTC unjustly sanctions them may appeal FTC rulings in federal court.

The FTC has interpreted its power to create broad requirements that advertising be clearly identified and its sources clearly disclosed. The FTC says false and deceptive advertising makes (1) a false or deceptive material claim that (2) affects the consumer decisions of (3) a reasonable consumer. Puffery, or exaggerated claims no reasonable consumer would believe, are not false and deceptive. FTC enforcement mechanisms encompass opinion letters, advisory opinions, industry guides, trade rules, requests for voluntary compliance, cease and desist orders, consent orders, substantiation, litigated orders, corrective advertising and injunctions.

Today it is not always clear what constitutes advertising or when it requires disclosure, but entities promoting sales would do well to disclose all paid promotions whether through tweets, emails, word-of-mouth campaigns, employee endorsements or native advertising. The FTC has authority to apply its requirements and penalties to the product producer, the endorser and/or the publisher of the offending commercial speech. The FTC prohibits companies from tracking children’s online behavior that allows them to target ads to interested children.

Congress enacted the CAN-SPAM Act to help prevent unsolicited e-mail messages. The law applies to advertising and promotions. A majority of states also have anti-spam laws. The federal Controlling the Assault of Non-Solicited Pornography and Marketing Act also provides for punishment of unsolicited email marketing or pornography.

Using reasoning similar to that in New York Times v. Sullivan, the Supreme Court’s decision in Federal Election Commission v. Citizens United distinguished between corporate political “speech” and commercial speech. Relying on the public’s right to free-flowing information and the nearly impossible differentiation of “the press” from other companies, the Court held that regulations of businesses’ non-commercial speech should be reviewed under something close to strict scrutiny rather than under the commercial speech doctrine.

Outline

I. What Is Commercial Speech?

II. Evolving Commercial Speech Protection

1. False and Deceptive Advertising
2. Puffing Up Claims
3. Promoting Vice and Dangerous Products 
4. Advertising That Offends
5. Promoting Corporations and Professional Activities
6. Advertising Online

III. Remedying Problems Through Executive Agencies

        g. The Federal Trade Commission
        h. The Federal Communications Commission

IV. Cases for Study

        i. Central Hudson Gas & Electric Corp. v. Public Service Commission of New York
        j. Sorrell v. IMS Health Inc.