The Development of the Commercial Speech Doctrine

Development of Commercial Speech Jurisprudence

Clearly, most advertising of goods and services falls directly within the definition of “commercial speech.” Less clear is whether marketing/ public relations efforts by a profit-making corporation (e.g., a press release announcing a new product) fall within this definition. Advertising and public relations speech not directly focused on a for-profit organization’s goods or services (e.g., a company’s advertisement in the local newspaper publicly thanking its employees for community service efforts) finds itself in an even more ambiguous position vis-à-vis its relation to commercial speech. Advertising and public relations speech advancing a social issue or discussing important public problems, as well as speech by not-for-profit organizations, may not fit the definition of commercial speech at all.

The History of Regulation of Commercial Speech from the Eighteenth to the Early Twentieth Centuries

Walking down the streets of Colonial Williamsburg, Virginia, or Old Sturbridge Village in Massachusetts or reading one of the newspapers these reconstructed communities of the late eighteenth and early nineteenth centuries produced, you might be struck by the virtual absence of advertising compared to the neon signs and commercial-filled mass media of a modern metropolis. This lack of advertising is no historic oversight.

In the days before the advent of regional or national mass-distribution of goods, residents of a community bought most items from local crafts-people, with the exception of a few relatively expensive products shipped by sea from England and the Continent. A window display, small painted sign, or, in larger communities, a classified-sized advertisement in the local weekly or monthly newspaper sufficed to inform a merchant’s target market. By the end of the nineteenth century, however, first the railroads and then the mail-order business changed all that. Railroads made it possible for local stores to sell mass-produced goods shipped from sites perhaps hundreds of miles away. The mail-order catalog business meant that you need not depend only on your local tradesperson to make or purchase what you wanted.

Mass producers of items such as soap or cereal or wearing apparel depended at first only on local merchants to push their products. Soon, however, smart manufacturers saw the need for their own marketing and advertising campaigns to spur demand for particular brands and to build brand loyalty. Thus by the end of the nineteenth century, techniques of mass marketing and advertising began to catch up with the techniques for the mass production and distribution of goods, particularly the use of display advertising in rapidly expanding mass-circulation newspapers and magazines.

Until the development of advertising via the mass media, few manufacturers, retailers or consumers worried about the quality or the truthfulness of commercial speech. Strange as it seems in modern times, accustomed as we are to consumer watchdog groups and government regulatory agencies, most people in the nineteenth century followed the maxim of caveat emptor (“let the buyer beware”). Consumers depended on their proximity to the makers and sellers of goods to ensure quality control of the items they purchased. If the clientele found either the merchant’s goods or services disappointing, they were sure to mention it the next time they saw the merchant in the street or stopped by the shop. Much of the commercial speech of the time communicated simple information such as store hours or featured items. Most people saw little advertising or product publicity of any kind as it would be defined today, and what little they did see generally was dismissed by all but the most gullible as inherently unbelievable, particularly because of the extravagant claims made for the benefits to be gained by selecting the touted products or services.

Congress created the Federal Trade Commission (FTC) in 1914. Its mandate was to ensure a level playing field in the competitive arena by preventing, among other things, “deceptive acts and practices.”¹ Eventually, this included regulatory overview of commercial speech to ensure truthful, non-deceptive claims. The federal Food and Drug Administration (FDA) and the Bureau of Alcohol, Tobacco and Firearms (BATF) were created in the 1930s to regulate specialized products (e.g., medicines, health-care and beauty aids and controlled substances), including claims and other information manufacturers could put on container labels for these products. These government efforts to control commercial speech paralleled the development of self-regulatory schemes by various trade associations such as the Associated Advertising Clubs of America. These self-regulatory efforts depended largely on the use of moral suasion rather than penalizing offenders (such regulatory efforts will be discussed in more detail in later chapters).

From these early beginnings at the dawn of the twentieth century until World War II, federal and state efforts to regulate commercial speech continued to grow, albeit in piecemeal fashion. Somewhat surprisingly, however, despite this nearly half century of regulatory efforts, it was not until 1942 that attempts by government to limit commercial speech were challenged as inherent violations of the Federal Constitution’s guarantee of free speech. It took an eccentric individual entrepreneur to see the issue all the way through to the Supreme Court of the United States.

The Commercial Speech “Exception” to the First Amendment: Valentine v. Chrestensen

The stage was set for the Court’s initial foray into examining the constitutionality of commercial speech regulation by its decision in the 1939 case of Schneider v. State (Town of Irvington).² Police arrested Clara Schneider, a Jehovah’s Witness, for failing to obtain a permit before proselytizing her religious views door to door. The Court overturned her conviction on First Amendment speech and religion grounds but, in so doing, was careful to note that “[w]e are not to be taken as holding that commercial soliciting and canvassing may not be subjected to such regulation. …”³ The Court seemed to suggest that rather than control commercial speech by a content-neutral, time-place-and-manner regulation, the community could legitimately discriminate against commercial speech based on the content of the message—the rationale being that commercial speech did not possess the same degree of First Amendment protection as other speech.

This apparent willingness by the Court to distinguish between regulation of commercial speech and other kinds of speech was borne out three year later in Valentine v. Chrestensen,⁴ the first instance in which the Court decided the First Amendment issues in the case solely on the basis that the content of the speech in question was purely commercial speech.

F.J. Chrestensen was a small-time entrepreneur/showman who hit on the idea of rescuing a decommissioned United States Navy submarine from the scrap heap by purchasing it, refurbishing it and charging a small admission to tour the ship. After finally gaining permission from New York State officials to tie up at a pier in the East River (New York City officials had refused his initial request to use a city pier), Chrestensen was faced with the problem of how to attract visitors to his exhibition.

In New York City, it was virtually impossible for a small business to use conventional advertising to attract business. Because of scarcity and economies of scale, generally only large corporations or other organizations could either afford or need to reach the hundreds of thousands of readers, listeners and viewers the city’s mass media served. A businessman like Chrestensen might have afforded a small advertisement or two to publicize his submarine tours, but unless he could spend thousands of advertising dollars to get his message across on a grand scale, his commercial speech was bound to be lost in the clutter of the other commercial messages vying for consumers’ attention.

Having no large advertising budget at his disposal, Chrestensen turned instead to another traditional big-city publicity technique—handbills. Determining this to be a cheap (if less effective) means of reaching potential customers, Chrestensen created and had printed handbills that he distributed to passersby on the city’s streets. Unfortunately for Chrestensen, this was in violation of the New York City Sanitary Code which said, in part, “No person shall … distribute … any handbill, circular … or other advertising matter whatsoever in or upon any street or public place . …”⁵ The city ordinance made an exception, however, for “the lawful distribution of anything other than commercial and business advertising matter.”⁶

The government interests were straightforward—protecting pedestrians from being accosted and perhaps impeded by street solicitors and preventing litter on city streets caused by the likelihood that those taking the handbills would throw them on the pavement. The countervailing interest of Chrestensen was equally clear—the freedom to advertise his submarine tour using a handbill containing legal, accurate and truthful speech.

After a number of unpleasant encounters with the police, Chrestensen, rather than face the continuing risk of arrest, chose instead to reprint his handbill with the commercial message (minus any mention of a tour fee) on one side and, as the Court later noted, “a protest against the action of the City Dock Department in refusing the respondent wharfage facilities at a city pier”⁷ on the other. The police, seeing this as simply an effort by Chrestensen to get around the law by turning his commercial speech into a political protest, which the ordinance specifically allowed, again refused permission to distribute his reprinted handbill, although they conceded that distributing a circular with just the protest message would be legal under the city code.

At this point, Chrestensen turned to the federal courts, seeking a restraining order to stop the police from interfering with the distribution of his handbills. The district court found that the city ordinance indeed went too far and granted a permanent injunction against police enforcement of the disputed regulation.⁸ The federal appeals court agreed, upholding the lower court’s order in a divided opinion.⁹

The Supreme Court of the United States disagreed. The question, said the Court, is “whether the application of the ordinance to [Chrestensen’s] activity was, in the circumstances, an unconstitutional abridgement of the freedom of the press and of speech.”¹⁰ While noting that previous decisions had “unequivocally held that the streets are proper places for the exercise of the freedom of communicating information and disseminating opinion and that … states and municipalities … may not unduly burden or proscribe its employment in these public thoroughfares … [W]e are equally clear that the Constitution imposes no such restraint on government as respects purely commercial advertising.”¹¹ This clear rejection of “purely commercial advertising” as a category of speech protected by the Federal Constitution created what eventually became known as the “commercial-speech doctrine.”¹² The Court did not return to evaluating the First Amendment status of pure commercial speech until more than three decades later with its decision in Pittsburgh Press Co. v. Pittsburgh Commission on Human Relations.¹³

The “Exception” Begins to Narrow

The Pittsburgh Press Co. case is complex for a variety of reasons, not the least of which is that it requires the reader to think of by-gone times when newspapers like the Pittsburgh Press routinely ran classified advertising for employment under “HELP WANTED—MALE” and “HELP WANTED—FEMALE” columns. Typically, ads under the “MALE” heading sought lawyers, physicians and other professionals, whereas ads under the “FEMALE” heading were for public school teachers, nurses and office workers. The advertisements clearly implied that if you were female, you need not apply for jobs in the well-paid professions or for managerial positions in industry.

The general public gave little thought to such sex-based discrimination until these practices were challenged by civil rights laws passed by Congress in the mid-1960s. These federal statutes inspired state and local ordinances prohibiting sexual bias in the workplace, including the Human Relations Ordinance legislated by the city of Pittsburgh. The regulation prohibited hiring based on the job-seeker’s sex, and made it unlawful “[f]or any person whether or not an employer, employment agency or labor organization, to aid … in the doing of any act declared to be an unlawful employment practice by this ordinance …” including publishing or circulating “any notice or advertisement relating to ‘employment’ or membership which indicates any discrimination because of … sex.”¹⁴

In October 1969, the National Organization for Women filed a complaint with the Pittsburgh Commission on Human Relations charging that the Pittsburgh Press was in noncompliance with the ordinance. The Commission agreed and issued a cease-and-desist order instructing the newspaper to discontinue using the sex-based classification scheme. The newspaper’s arguments that it simply was following the requests of advertisers and that the ordinance violated the newspaper’s right to determine the layout and content of its advertising pages were specifically rejected. The Pittsburgh Press appealed the Commission’s order to the local court of common pleas which upheld the order. On appeal, the Pennsylvania Commonwealth Court modified the order slightly but basically left it intact. The Pennsylvania Supreme Court refused to review the case and the newspaper appealed to the Supreme Court of the United States.

Conceding that protection of speech and press was paramount to a democracy, the Court nonetheless found that the city ordinance was not a significant infringement of the newspaper’s economic well-being. Based on Valentine, the Court also found that the advertisements in question were “classic examples of commercial speech.”¹⁵ The newspaper had argued that, unlike Valentine, the commercial speech distinction was inapplicable in this case because the issue was the regulation of the editorial judgment of a newspaper rather than the control of commercial content or the actions of an advertiser. The Court rejected this argument, finding that decisions about placement of an advertisement failed to “lift the newspaper’s actions from the category of commercial speech.”¹⁶

The Court also rejected the newspaper’s final argument that a distinction between commercial speech and other kinds of speech was inappropriate and should be abandoned. Saying this argument would be best left until a later day, the Court noted that the discriminatory advertising policy and contents of the advertisements in contention were “not only commercial activity but illegal commercial activity under the Ordinance.”¹⁷ The Count concluded that “[a]ny First Amendment interest which might be served by advertising an ordinary commercial proposal and which might arguably outweigh the government interest supporting the regulation is altogether absent when the commercial activity itself is illegal and the restriction on advertising is incidental to a valid limitation on economic activity.”¹⁸

At first reading, the decision in Pittsburgh Press appeared to be a simple re-affirmation of the Court’s commercial speech exception to the First Amendment. However, a more thorough analysis provided hope that the Court’s blanket denial of constitutional protection for purely commercial speech was not as absolute as it had seemed. Rather than simply refusing to hear the case or dismissing the newspaper’s First Amendment arguments out of hand, the Court was careful to base its decision on the notion that the commercial speech in question was for an illegal purpose and that the government’s interests in regulation therefore outweighed the newspaper’s speech interests. This opened the door ever so slightly to the idea that courts should scrutinize more carefully any government attempts to ban or in other ways regulate commercial speech for legal products or services.

This wedge in opening the way for at least some constitutional protection for commercial speech, and the unusual circumstances of the next important commercial speech case, Bigelow v. Virginia,¹⁹ combined to create the first major breakthrough in the drive to place commercial speech within the ambit of the First Amendment.

The Court’s decision in Bigelow emanated from a case involving an advertisement for an abortion referral service. Bigelow, the director and managing editor of his self-described “underground weekly newspaper,” The Virginia Weekly,²⁰ published a display advertisement that read as follows:

All of the information in the advertisement was true, including the legality of regulated abortions in New York State. Unfortunately for Bigelow, abortions were illegal at this time in his home state of Virginia as were, according to a Virginia statute, efforts of “any person by publication, lecture, advertisement, or by the sale or circulation of any publication, or in any other manner, [to] encourage or prompt the procuring of abortion or miscarriage . …”²² The statute made such efforts a misdemeanor.

Bigelow was convicted of violating the statute and fined $500 ($350 of which was forgiven if he promised not to run similar advertisements in the future). The Supreme Court of Virginia upheld his conviction, specifically rejecting his First Amendment-based claim that the statute was unconstitutional. The Virginia court found that the speech in question was a “commercial advertisement” and therefore it could “constitutionally [be] prohibited by the state … [when] the advertising relates to the medical-health field.”²³

On appeal, the Supreme Court of the United States vacated Bigelow’s conviction and returned the case to Virginia for further consideration without deciding on the merits of his First Amendment claims. It did so because of the decision in Roe v. Wade,²⁴ in which the Court—on a Federal Constitution-based, individual-privacy theory—limited a state’s ability to regulate abortions. Roe v. Wade was decided soon after Bigelow’s request for the Court to hear his case. The Supreme Court of Virginia reaffirmed its earlier opinion, upholding Bigelow’s conviction on the basis that Roe v. Wade had not “mentioned the subject of abortion advertising.”²⁵ Bigelow again appealed to the Supreme Court of the United States, and the high Court again reversed his conviction, this time on First Amendment grounds.

The Court began its opinion by noting that reliance on Valentine for the proposition that purely commercial speech is unprotected by the First Amendment is misplaced. “The fact that [Valentine] had the effect of banning a particular handbill does not mean that [it] is authority for the proposition that all statutes regulating commercial advertising are immune from constitutional challenge.”²⁶ The Court said that although the classified advertisements in Pittsburgh Press were purely commercial speech, even they “would have received some degree of First Amendment protection if the commercial proposal had been legal.”²⁷ The Court found that the advertisement in Bigelow

It seems reasonable to believe that underlying the Court’s decision in Bigelow was concern that Virginia’s regulation of commercial speech for an abortion referral service was a none-too-subtle attempt to regulate a woman’s constitutional right to seek an abortion. Support for this view comes from the language of the decision, including a disclaimer by the Court that “[w]e do not decide in this case the precise extent to which the First Amendment permits regulation of advertising that is related to activities the State may legitimately regulate or even prohibit.”²⁹ Later in the opinion, the Court again noted that “[w]e need not decide here the extent to which constitutional protection is afforded commercial advertising under all circumstances and in the face of all kinds of regulation.”³⁰

However, the Court did find that “[t]o the extent that commercial activity is subject to regulation, the relationship of speech to that activity may be one factor among others, to be considered in weighing the First Amendment interest against the government interest alleged. Advertising is not thereby stripped of all First Amendment protection.”³¹ From now on, said the Court, “a court may not escape the task of assessing the First Amendment interest at stake and weighing it against the public interest allegedly served by the [government] regulation”³² particularly if the commercial speech is not deceptive or fraudulent and it is related to a legal product or service.

Although Bigelow represented a significant step forward in overcoming the Court’s 30-year acquiescence to government regulation of purely commercial speech, the decision failed to address a number of major issues. Although, after Bigelow, courts were required to balance speech interests against government regulatory interests, there was little discussion by the Court about how that balancing was to take place or how much weight should be assigned to either speech or government interests. (Remember that in other earlier cases, the Court placed a “heavy burden” on those who wish to regulate fully protected speech.) Nor was there discussion of the range of activities the Court had in mind when it noted that “the State may legitimately regulate or even prohibit”³³ advertising for some activities.

The Court also did not define the terms “deceptive” and “fraudulent” or the legality of a state limiting non-deceptive, legal advertising in its media for an activity or product illegal in another state (e.g., a New York statute banning advertising of an illegal abortion-referral service in Virginia). Finally, the Court did not indicate what the result might have been if Virginia’s regulation had been aimed at an advertiser rather than at the newspaper or if potential consumers of the advertised service or product had any independent First Amendment rights to receive the information contained in the disputed advertising.

Virginia State Board of Pharmacy: The High-Water Mark for Protection of Commercial Speech

It was this last issue that formed the basis for the Court’s next decision, Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council, Inc.,³⁴ still the high-water mark in the development of First Amendment protection for purely commercial speech. The Virginia State Board of Pharmacy is the agency empowered by the state to license and regulate pharmacists and the practice of pharmacy in Virginia. The Board had ruled that advertising the price of prescription drugs was inherently “unprofessional conduct”³⁵ and that such conduct could subject the pharmacist who violated this rule to sanctions, including license revocation. The Board’s regulations were questioned neither by advertisers nor the media, but rather by a consumer group allegedly representing potential purchasers of prescription medicines. The council challenged the Board’s anti-advertising rules on the somewhat novel thesis that consumers, who would benefit from information about prescription drug prices, had a First Amendment right to receive such information.

A three-judge district court weighed the state’s stated interests in preventing abuse and deception in the practice of pharmacy against the speech-related arguments advanced by the plaintiff that price information could significantly reduce the costs of prescription medicines. Noting evidence that prices charged for the same drugs could vary as much as 600 percent from pharmacy to pharmacy, the court found that the consumer group’s arguments carried greater weight and struck down the anti-advertising regulation on First Amendment grounds. The state pharmacy board appealed to the Supreme Court of the United States, arguing that Virginia’s ban on advertising was a legitimate regulation of purely commercial speech.

The Court characterized the basic issue in this case as

The Court stressed four factors favoring disseminating commercial information about the price of prescription drugs over the government regulatory interests in banning such information. First, said the Court, the economic motivation behind the speech did not serve to disqualify it automatically from First Amendment protection. Second, the Court noted that “consumer’s interest in the free flow of commercial information … may be as keen, if not keener by far, than his interest in the day’s most urgent political debate.”³⁷ This was especially true in this case, said the Court, because the poor and elderly represented by the plaintiff tend to spend a disproportionate amount of income on prescription drugs yet have little ability to comparison shop. The Court also found that striking down the ban on this form of commercial speech served to underlie the more general interest society has “in the free flow of commercial information.”³⁸ Information of general public interest, like advertisements discussing the benefits of environmentally friendly products, would likely be protected from such government regulation and, the Court said, it could find little reason for not affording prescription-drug advertising similar status.

Finally, acknowledging that the American economic system is based on free enterprise, the Court concluded that the system, “no matter how tasteless and excessive it sometimes may seem is nonetheless [dependent on] dissemination of information as to who is producing and selling what product, for what reason, and at what price.”³⁹ For it to work, said the Court, the system requires that “decisions, in the aggregate, be intelligent and well informed. To this end, the free flow of commercial information is indispensable.”⁴⁰

The Court accepted Virginia’s arguments that prescription drug advertising could weaken the professionalism of licensed pharmacists but rejected banning advertising as a legitimate means for the state to accomplish its ends, noting the availability of many other regulations controlling the licensing and practices of the profession. Most such regulations would be permissible, said the Court, but adopting the one that relies “in large measure on the advantages of [keeping the public] in ignorance”⁴¹ is not among them. “It is precisely this kind of choice, between the dangers of suppressing information, and the dangers of its misuse if it is freely available, that the First Amendment makes for us.”⁴²

In striking down the ban on prescription drug advertising, the Court added that it was not affording fully protected, First Amendment status to purely commercial speech. Legitimate time-place-and manner regulations would still be legal, said the Court, as would regulations restricting false, misleading or deceptive commercial speech. In an extensive footnote, the Court stated that because of the “hardiness” of commercial speech, and because the truth of the statements in such speech “may be more easily verifiable by its disseminator than, let us say, news reporting or political commentary,” government could be granted greater leeway under the First Amendment to regulate purely commercial speech.⁴³

The Court concluded that none of these rationales for lawful regulation of purely commercial speech applied in this case. “What is at issue [here] is whether a State may completely suppress the dissemination of concededly truthful information about entirely lawful activity, fearful of that information’s effect upon its disseminators and its recipients. … [W]e conclude that the answer … is in the negative.”⁴⁵

Despite the Court’s reluctance to grant full First Amendment protection to pure commercial speech, the Court’s change of focus in Virginia State Board of Pharmacy from protecting the rights of the speaker to protecting the needs and the rights of the audience to receive information gave hope to commercial-speech advocates that the commercial speech exception to the First Amendment was now limited to speech that touted an illegal product or activity or to commercial claims that could mislead or deceive the potential consumer. Under such a consumer-based approach, the government would be hard pressed to deny readers and viewers the information they needed to make informed choices when deciding how to conduct their personal commercial transactions.

The Supreme Court Begins to Retreat: Bates et al. v. State Bar of Arizona

Unfortunately, the euphoria generated by Virginia State Board of Pharmacy was almost immediately tempered by the reasoning of the Court in Bates et al. v. State Bar of Arizona⁴⁶ just one year later. John Bates and Van O’Steen, both attorneys practicing law in Phoenix, Arizona, formed a partnership to run a legal clinic to provide low-cost legal services for people of moderate income. It became apparent almost immediately that they would need to advertise to build a client base.

As part of this advertising, the partners decided they should include information about the fees charged for standard services such as uncontested divorces and simple personal bankruptcies. Advertising was expressly forbidden, however, by the rules covering the practice of law in Arizona administered by the state’s bar association. When the two attorneys placed an advertisement in the Arizona Republic, the state bar president filed a complaint that eventually resulted in both Bates and O’Steen being suspended from the practice of law for one week. Both appealed their suspensions to the Arizona Supreme Court, arguing that the sanctions by the bar violated both antitrust and free-speech laws. The Arizona court upheld the suspensions and Bates and O’Steen appealed to the Supreme Court of the United States.

Ordinarily, said the Court, there is no need for a finding that a specific speaker’s rights in fact have been violated before a court should strike down a law or regulation that suppresses speech as an infringement of the First Amendment. This, the Court said, “reflects the conclusion that the possible harm to society from allowing unprotected speech to go unpunished is outweighed by the possibility that protected speech will be muted.”⁴⁷ In a case involving purely commercial speech, however, the Court noted that this overbreadth doctrine does not apply because there are “‘commonsense differences’ between commercial speech and other varieties [of speech].”⁴⁸

One such difference, said the Court, is that because