Public Interest Information as Commercial Speech

Paid-For Public Interest Speech by Not-For-Profit Organizations

In Valentine v. Chrestensen,¹ the Court’s initial foray into determining the constitutional limits on the regulation of commercial speech, the Court made no attempt to define the terms it used in determining New York City’s legal right to ban handbills that advertised tours of Chrestensen’s submarine. Chrestensen’s disputed handbills did not contain any mention of an admission fee, but city authorities and the Court treated them as “commercial and business advertising matter”² forbidden by a municipal ordinance. The Court said that although citizens may use city streets to disseminate opinion, “[w]e are equally clear that the Constitution imposes no such restraint on government as respects purely commercial advertising.”³

The Court noted that although New York City officials would have much less latitude to regulate the distribution of handbills that contained only public information or opinion, Chrestensen could not avoid regulation simply by adding a discussion of public issues if his speech still remained basically commercial in nature. In so doing, the Court’s opinion foreshadowed two issues that continue to haunt commercial speech cases: the constitutional status of speech that takes the form of commercial speech but is not related to commercial activity, and the differences, if any, in the protection of that speech depending on the nature of the speaker.

Nearly two decades passed after Valentine before the Court again made a major pronouncement about the constitutionality of government regulations of commercial speech. It did so in its discussion of a variety of issues in New York Times v. Sullivan,⁴ a 1964 case that made a major impact on libel law and the civil rights movement. In Sullivan, the Court carved out an important exception for what today are often called “advertorials” as well as for other forms of paid-for speech used by not-for-profit organizations to discuss matters of public interest.

The backdrop of the case was formed by the desegregation efforts led by Dr. Martin Luther King, Jr. in southern states in the late 1950s and early 1960s. On March 29, 1960, The New York Times carried a full-page advertisement entitled “Heed Their Rising Voices” that detailed what the advertisement called “the wave of terror” directed against the civil rights activities of Dr. King and other activists. Included as an example were charges that King and his followers had been threatened and arrested on trumped-up charges. The advertising copy, signed by 64 prominent Americans, included a request for monetary donation to help carry on the work of Dr. King.

The Court disagreed. Those relying on Valentine, said the Court, for the proposition that “the constitutional guarantees of freedom of speech and of the press are inapplicable here … because the allegedly libelous statements were published as part of a paid, ‘commercial’ advertisement”⁵ were guilty of misinterpreting the Court’s intent. According to the Court, the crucial distinction was that its earlier holding was based on the conclusion that unlike the speech in the Sullivan case, the speech in Valentine was primarily purely commercial advertising.

The Sullivan Court said, “[t]he publication … was not a ‘commercial’ advertisement in the sense in which the word was used in [Valentine]. 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.”⁶

Saying that failure to provide First Amendment protection would discourage others from buying or running what the opinion called “editorial advertisements,”⁷ the Court noted that this result “might shut off an important outlet for the promulgation of information and ideas by persons who do not themselves have access to publishing facilities—who wish to exercise their freedom of speech even though they are not members of the press.”⁸ The Court concluded that “[t]o avoid placing such a handicap upon the freedoms of expression, we hold that if the allegedly libelous statements would otherwise be constitutionally protected from the present judgment, they do not forfeit that protection because they were published in the form of a paid advertisement.”⁹

Definitional problems may occur whenever courts make distinctions in levels of protection for either classes of speakers or speech itself. Such problems occasionally have surfaced involving organizations fraudulently claiming to be not-for-profit or charitable in nature. Overall, however, since the Sullivan decision, there has been no serious challenge to its holding that “commercial” speech on matters of public interest by truly not-for-profit organizations is protected under the First Amendment, except in unusual circumstances.

Paid-For Public Interest Speech by For-Profit Organizations

Roughly a decade after New York Times v. Sullivan, the Court returned to the subject of paid-for speech used to addresses public issues in First National Bank of Boston v. Bellotti.¹⁰ Unlike Sullivan, this time, however, it was in the context of a case involving the government’s efforts to regulate such speech by a profit-making corporation.

At issue was an attempt by the state of Massachusetts to enforce its statute limiting corporate expenditures “for the purpose of influencing the vote on referendum proposals. …”¹¹ The statute prohibited banks, telephone companies, public utilities and most business corporations (and their officers) from spending money “for the purpose of … influencing or affecting the vote on any question submitted to the voters, other than one materially affecting any of the property, business or assets of the corporation.”¹² Another provision of the statute specified that no questions “submitted to the voters solely concerning the taxation of the income, property or transactions of individuals shall be deemed materially to affect the property business or assets of the corporation.”¹³

First National Bank and other corporations challenged the statute as violating free speech when the corporations desired to purchase advertising space and time to express their opposition to a proposed state constitutional amendment authorizing the state to institute a graduated personal income tax. They were informed by the state’s attorney general, Francis X. Bellotti, that he would enforce the state’s statutory prohibitions against such advertisements if the corporations persisted in their efforts to state their views via media advertising.

The state’s highest court held the statute to be a valid limitation on the speech interests of the plaintiffs, finding that the First Amendment rights of corporations could constitutionally be “limited to issues that materially affect its business, property or assets.”¹⁴ It characterized the issue as whether a corporation’s First Amendment rights were the equal of individuals and found as a matter of law that they were not. The state court noted that the statute did not prohibit speeches on the topic by corporate executives or statements to the press, internal newsletters, bulletins to stockholders or other typical corporate public relations activities so long as they did not involve contributions or “expenditure of corporate funds.”¹⁵

On appeal, the Supreme Court of the United States made short work of the state’s arguments. Refusing to frame the issue as the nature and extent of corporate First Amendment rights, the Court instead said, “[t]he proper question … is not whether corporations ‘have’ First Amendment rights and, if so, whether they are co-extensive with those of natural persons. Instead, the question must be whether [the statute] abridges expression that the First Amendment was meant to protect. We hold that it does.”¹⁶

The Court rejected arguments that allowing for-profit corporations to spend corporate assets to campaign against such referenda or to speak out on public issues would overwhelm the marketplace of ideas by drowning out other voices. There was no evidence of such a threat, said the Court, and there were other less drastic measures a state might take in order to alert its citizens about potential abuses of the marketplace of ideas, such as requiring advertisements placed by corporations to carry information identifying the source of the speech. In short, said the Court, when a for-profit corporation wishes to use advertising or other forms of paid-for speech to discuss matters of general public interest not connected with its commercial activities, such speech should receive the same degree of constitutional protection as speech from other sources.

Four years after Bellotti, the Court, in Consolidated Edison Co. of New York, Inc. v. Public Service Commission of New York,¹⁷ reversed a lower court decision that had upheld a Commission policy banning the utility company’s discussion of public issues in brochures and fliers included with monthly customer billings. The Commission’s policy was based on the fact that the utility was a state-regulated monopoly and that ratepayers, characterized as a “captive audience,”¹⁸ would not want to receive such information and commentary.

The Court disagreed. Citing Bellotti, Justice Powell reiterated that “the inherent worth of the speech in terms of its capacity for informing the public does not depend on the identity of its source.”¹⁹ Despite what Justice Blackmun (in dissent) called a “free ride”²⁰ for the utility company’s propaganda at ratepayer expense, the majority held that such a total ban “strikes at the heart of the freedom to speak.”²¹ Amplifying its dislike of government arguments for differing levels of protection for speech based on the nature of the speaker, the Court noted, “the First Amendment’s hostility to content-based regulation [dependent on the speaker] extends not only to restrictions on particular viewpoints, but also to prohibition of public discussion of an entire topic.”²² The Court also dismissed the public service commission’s arguments involving the privacy interests of ratepayers, noting that any harm could be avoided “simply by transferring the bill from envelope to waste basket.”²³

The general euphoria that free-speech champions derived from the holdings in Bellotti and Consolidated Edison was dampened, however, by the subsequent opinion of the Court in Austin v. Michigan Chamber of Commerce,²⁴ a 1990 decision that appeared to shine a caution light on the Court’s willingness to require the government to surmount a rigorous First Amendment challenge to government regulations in such cases. In Austin, the Court upheld government restrictions on a corporation’s political speech for reasons similar to those struck down in Bellotti because, said the Court, the government had satisfied the definition of a compelling government interest.

Section 54(1) of the Michigan Campaign Act expressly prohibited corporations from contributing directly “to the nomination or election of a candidate.”²⁵ The Act defined such contributions as “a payment, donation, loan, pledge, or promise of payment of money or anything of ascertainable monetary value …”²⁶ although it allowed corporations to spend money for such purposes if the money was maintained in a separate fund.

The Michigan Chamber of Commerce is a corporation established to encourage economic development and improve the state’s business climate. Although not normally engaged in direct political support of candidates, the Chamber desired to buy advertising space in a local newspaper to support a candidate in a special election to fill a vacancy in the state legislature. The Chamber considered this candidate more pro-business than his opponent. Fearing that the campaign Act would prohibit such activity, the Chamber sought a declaratory judgment in federal district court that the statute should be unenforceable on First Amendment grounds.

Although the district court upheld the Act as a legitimate limitation on corporate activity²⁷ (the state statute was modeled in part on a similar federal statute), on appeal, the Sixth U.S. Circuit Court of Appeals ruled that the Michigan Campaign Act could not, for First Amendment reasons, apply to the Chamber because it was not a traditional corporation and was formed expressly to spread economic and political messages.²⁸ The federal appeals court found no compelling interest that would justify infringing the speech interests of the Chamber. On appeal by the state, the Supreme Court of the United States disagreed.

Although it was appropriate for the court of appeals to apply the compelling government interest test to this case, said the Court’s majority, the lower court had erred in not recognizing that the state had met this requirement. The Court held that Michigan obviously was concerned with “the corrosive and distorting effects of immense aggregations of wealth that [were] accumulated with the help of the corporate form and that have little or no correlation to the public’s support for the corporation’s political ideas.”²⁹

The Court conceded both that the desire to support candidates for public office via advertising is speech that “constitute[s] ‘political expression at the core of our electoral process and of the First Amendment freedoms,’” and that “[t]he mere fact that the Chamber is a corporation does not remove its speech from the ambit of the First Amendment.”³⁰ However, said the Court, “the unique state-conferred corporate structure that facilitates the amassing of large treasuries warrants the limit in independent expenditures. Corporate wealth,” continued the Court, “can unfairly influence elections when it is deployed in the form of independent expenditures. … We therefore hold that the State has articulated a sufficiently compelling rationale to support its restriction on independent expenditures. …”³¹

The Court also rejected the argument that the Chamber was a not-for-profit corporation and therefore not subject to the statute. Citing earlier cases as precedent, the Court noted that the Chamber failed to meet the three criteria distinguishing not-for-profit corporations in terms of the campaign expenditure stature. “The first characteristic,” said the Court, “[is] that the organization ‘[is] formed for the express purpose of promoting political ideas and cannot engage in business activities.’… [T]he second feature [is] the absence of ‘shareholders or other persons affiliated so as to have a claim on its assets or earnings.’ … The final characteristic [is] the organization’s independence from the influence of business corporations.”³² The Court concluded that “the Chamber does not possess the features that would compel the State to exempt it from restriction on independent political expenditures.”³³

In dissent, Justice Kennedy noted that in this situation involving the regulation of advertising constituting “a paradigm of political speech,”³⁴ the Court clearly “adopts a rule that allows Michigan to stifle the voices of some of the most respected groups in public life on subjects central to the integrity of our democratic system. …”³⁵ Justice Kennedy continued,

Justice Kennedy characterized the majority as demonstrating “hostility to the corporate form used by the speaker in this case,”³⁷ concluding that Michigan’s “wholesale ban on corporate political speech”³⁸ could not be squared with the First Amendment.

The holding in Austin cast a pall over those who believed that the Court in Bellotti had recognized an almost absolute First Amendment protection for corporate speech about public issues. Nonetheless, it still seems safe to say that in most instances paid-for speech by for-profit corporations will be free from regulation if that speech discusses matters of general public interest and there is not a countervailing government interest of great importance.

Admittedly, corporate and other organizational paid-for speech on matters of public interest usually is of little concern to most advertising professionals who make their fortunes promoting the goods and services a corporation sells for profit. For public relations professionals, however, the continuing viability of full First Amendment protection for such speech is particularly important as it provides protection for an important weapon in the arsenal of public relations techniques for communicating organizational messages to important publics.

Definitional Problems: Is It Commercial or Non-Commercial Speech?

It seems clear that, in most instances, the Court will treat speech by both not-for-profit and profit-making organizations as deserving full First Amendment protection when that speech addresses important matters of public policy unrelated to the economic interests of the organizations. This includes speech appearing in time or space purchased by organizations to disseminate their views. It is by no means as clear, however, how the courts or regulatory agencies will (or should) treat speech that, although not directly urging the purchase of goods or services, is, nonetheless, arguably commercial in nature.

This issue is particularly important to advertising and public relations professionals because those who advocate limitations on the speech of for-profit corporations may continue to press for greater regulation of such corporate speech on public policy grounds. If a corporation’s speech is classified as commercial speech, there are a variety of legally acceptable means for regulating such speech that would be impermissible if the speech were fully protected under the First Amendment.

As discussed in Chapter 1, prior restraint in the form of bans or limitations is the least preferred remedy that courts and regulators may employ. However, there are other remedies, arguably less restrictive of speech, that have found favor with the Court and with lower courts particularly when involving commercial speech. In Central Hudson, Justice Powell, while decrying the complete ban on the utility company’s advertising, suggested that other regulations on the “format and content”³⁹ of the advertisements might be acceptable. For instance, citing Banzhaf v. FCC,⁴⁰ Justice Powell noted that requiring the advertising to include “information about the relative efficiency and expense of [the utility company’s] offered service, both under current conditions and for the foreseeable future”⁴¹ would be preferable to the banning-of-speech remedy sought by the state’s public service commission.

As calls for regulation of corporate paid-for speech have increased during the past two decades, critics of such speech have also suggested such measures as (a) limiting appeals especially targeting racial or ethnic groups (tobacco and liquor advertising); (b) requiring commercial speakers to include additional information representing other points of view, such as warning labels; and (c) restricting the design or graphic components of commercial speech presentations by banning cartoon characters or pictures of users of the product or service (so-called “tombstone ads”).

Alternatively, regulation of paid-for speech might take the form of requirements, like those of the Federal Trade Commission, that the speaker bear the burden of demonstrating that the speech, if challenged, is neither false nor illegal nor deceptive. Additionally, such regulatory bodies have legally required speakers to back up factual claims with scientific data or results of rigorously conducted public opinion polls. Critics of corporate activity, including speech, clearly wish to have as broad a definition of commercial speech as possible so that almost all corporate speech could be subject to the restrictions noted above.

If speech designated as commercial speech continues to be accorded only second-class constitutional protection by the Supreme Court, it seems essential for the Court to draw a “bright line” that unambiguously provides a clear division between speech defined as commercial and speech classified as non-commercial (or, perhaps more to the point, speech that is fully protected and speech that is not). Despite numerous opportunities, the Court has failed to do so. What is worse, the Court itself continues to waiver in its handling of definitional issues related to commercial speech, depending on the nature and the facts of the case it is deciding.

For example, what is the First Amendment status of a cigarette company’s advertisement questioning the validity of anti-smoking research claims; a press release by an automobile manufacturer touting the virtues of its new models; a magazine or brochure containing some information of general interest but obviously intended to promote the publisher’s instructional programs, or a brewing company that prominently affixes its logo design on the side of a NASCAR racer? All of these examples are taken from real-life cases (some of which are discussed later), producing results that are confusing and often appear to be in direct conflict with each other over the issue of whether they fall within the definition of commercial speech.

The formulation of commercial speech preferred by partisans of as little restriction of speech as possible is the narrow definition mentioned in the Court’s first modern-day “purely commercial speech” case—Pittsburgh Press.⁴² Reacting to the split in rationales and outcomes in the Valentine and Sullivan decisions, the Court attempted to position the gender-based, help-wanted ads at issue in Pittsburgh Press as more like those prohibited in Valentine. Characterizing the ads as “classic examples of commercial speech,”⁴³ the Court noted that the “critical feature” of the speech in question was that it “did no more than propose a commercial transaction.”⁴⁴ The Court subsequently picked up this language in its decision in Virginia State Board of Pharmacy,⁴⁵ the case that stands as the high-water mark in the Court’s meandering course toward ultimately establishing the level of First Amendment protection afforded commercial speech.

Before defining commercial speech, however, the Court in Virginia State Board of Pharmacy