All Native Advertising is Not Equal: Why that Matters Under the First Amendment and Why it Should Matter to the FTC – Part III

In this five part series, originally published in the Summer 2014 edition of the Media Law Resource Center Bulletin,[1] we take an in-depth look at the native advertising phenomenon and the legal issues surrounding the practice. After canvassing the many faces of native advertising and the applicable law, the series ultimately examines the pervasive assumption that all native advertising is, and should be regulated as, “commercial speech.” This assumption presumes that all native advertising is equal under the eyes of the law, and we come to the conclusion that it probably isn’t. Native advertising that is closer to pure content than pure commercial speech may deserve greater or even full First Amendment protection, which would carry significant implications for government regulation[2].

Part 1: Introduction to Native Advertising

Part 2: Early Native Advertising and the Current FTC Regulatory Landscape

Part 3 below provides a quick overview of the commercial speech doctrine the protections traditionally afforded to advertisers by the First Amendment.

—PART III—

Commercial Speech and the First Amendment

One question that curiously has only sporadically come up in the native discussion is the level of First Amendment protection that should be afforded to such speech. From a constitutional and regulatory perspective, the critical question is whether native is considered “commercial” speech under Supreme Court precedent. If native is considered commercial speech, then government regulations are subject to intermediate judicial scrutiny. If native is considered noncommercial, then government regulations are subject to the more heightened strict scrutiny standard.[3] This section provides a primer on the First Amendment and commercial speech before turning to its application to Native Advertising.

The Evolution of Commercial Speech’s First Amendment Protection

One of the fundamental purposes of the First Amendment is to promote the free flow of information in the “marketplace of ideas.”[4] To that end, the First Amendment prevents the government from restricting speech because of its message, its ideas, its subject matter, or its content.[5] The Constitution requires that “content-based restrictions on speech be presumed invalid…and that the Government bear the burden of showing their constitutionality.”[6] The level of protection given to speech depends on its categorization, with political speech receiving the greatest and commercial speech receiving the lowest.[7]Accordingly, government regulations of political and other core noncommercial speech are subject to the highest standard of strict scrutiny, while commercial speech regulations are only subject to intermediate scrutiny.[8] Finally, some limited categories of speech receive no protection at all, including obscenity, defamation, fraud, incitement, and speech integral to criminal conduct.[9]

For much of its history, commercial speech was also included in the category of non-protected speech. [10] Through the 1900’s, speech that “did no more than propose a commercial transaction” received zero First Amendment protection and could be freely regulated.[11] The Supreme Court was in fact dismissive of commercial speech, even when combined with other traditionally protected expression.[12]

The Court’s view on commercial speech and the First Amendment began to evolve in the early 1970’s. In the first of these cases, Pittsburgh Press Company, the Supreme Court addressed the constitutionality of prohibiting gender-segregated classified ads (e.g. “Help Wanted, Male”).[13] While the Court ultimately upheld the regulation, it explained for the first time that “speech that does no more than propose a commercial transaction” may be entitled to some First Amendment protection.[14] As the Court noted, “speech is not rendered commercial merely by the mere fact it relates to an advertisement.”[15] Two years later, in Bigelow v. Virginia, the Court overturned a criminal conviction under a Virginia law prohibiting advertisements for abortion clinics on First Amendment grounds.[16] The Court rejected the claim that because the speech had a commercial component it was unprotected, explaining that “diverse motives, means, and messages of advertising may make speech ‘commercial’ in widely varying degrees…” but whatever the label, it did not absolve a court of its duty to assess the “First Amendment interests at stake in weighing it against the public interest allegedly served by the regulation.”[17]

The following year in Virginia Pharmacy v. Virginia Citizens Consumer Council, the Court squarely addressed whether commercial speech was protected under the First Amendment.[18] In holding that it was, the Court finally arrived at the definition of commercial speech still applicable today, namely “speech that does no more than propose a commercial transaction.”[19] The legislation at issue prohibited pharmacists from advertising. In striking down the prohibition, the Virginia Pharmacy Court reasoned that because even pure commercial advertisements served a valuable consumer purpose by promoting the free flow of information, commercial speech was not wholly outside the protection of the First Amendment.[20] The Court noted that, “[a]s to the particular consumer’s interest in the free flow of commercial information, that interest may be as keen, if not keener by far, than his interest in the most urgent political debate.”[21] However, the Virginia Pharmacy Court emphasized that the advertisements at issue were not alleged to be false or misleading. “Untruthful speech, commercial or otherwise, has never been protected for its own sake. Obviously, much commercial speech is not provably false, or even wholly false, but only deceptive or misleading. We foresee no obstacle to a State’s dealing effectively with this problem. The First Amendment…does not prohibit the State from insuring that the stream of commercial information flows cleanly as well as freely.”[22]

While Virginia Pharmacy found that commercial speech is entitled to at least some level of First Amendment protection, the level of judicial review was not articulated until a few years later in the seminal case Central Hudson v. New York.[23] Central Hudson held that restrictions on commercial speech are subject to intermediate scrutiny.[24] Under the four part analysis, the court must first ask whether the commercial speech at issue is false, misleading, or illegal.[25] If it is, then the government may restrict it and no further inquiry is necessary. Importantly, the court will look to the speech itself, and not the general purpose of the regulation in making this determination—thus safeguarding against well-intentioned but unconstitutionally broad legislation.[26] If the speech however is not false, misleading, or illegal, then the inquiry turns to whether the asserted government interest is substantial. The last two steps require the court to determine whether the regulation directly advances the “substantial government interest asserted and is no more extensive than necessary to serve that interest.”[27]

By contrast, regulation of noncommercial or “fully protected speech” is afforded the highest constitutional protection of strict scrutiny. A content based regulation of protected speech must be narrowly tailored to promote a compelling government interest.[28] “It is not enough to show that the Government’s ends [in restricting speech based on its content] are compelling; the means must be carefully tailored to achieve those ends.”[29]

What is Commercial Speech?

Whereas the judicial standard of review for commercial speech regulation is clear, the threshold question as to what speech is in fact commercial is much less so. Much of the Supreme Court precedent defines commercial speech by what it is not. In holding that commercial speech was protected under the First Amendment, Virginia Pharmacy announced “several propositions…beyond serious dispute”[30]:

1. “Speech does not lose its First Amendment protection because money is spent on it, as in a paid advertisement of one form or another,”[31]
2. “Speech likewise is protected even though it is carried in a form that is sold for profit,”[32]
3. “Speech …is protected … even though it may involve a solicitation to purchase or otherwise pay or contribute money.”[33]

In sum, the Court explained that speech was not “commercial” because of an expenditure of money or a profit motive; otherwise, political and other traditionally core protected speech could be easily regulated.[34]

In Bolger v. Youngs Drug Products Corp., the Supreme Court went further, setting forth several elements courts should consider in deciding whether speech is commercial.[35] In Bolger a condom manufacturer was charged with violating a federal statute prohibiting the unsolicited mailing of advertisements for contraceptives.[36] The manufacturer mailed three items: (1) multi- page, multi item flyers promoting a large variety of products available at a drug store, including prophylactics; (2) flyers exclusively or substantially devoted to promoting prophylactics; and (3) informational pamphlets discussing prophylactics in general and the manufacturer’s products in particular, including the 12 page pamphlet “Condoms and Human Sexuality” and 8-page pamphlet “Plain Talk about Venereal Disease.”[37]

With respect to the first two mailings promoting the sale of products, the Court held that these easily fell “within the core notion of commercial speech—speech which does no more than propose a commercial transaction”.[38] However, the informational packets presented a “closer question” for the Court because they could not “be characterized merely as proposals to engage in commercial transactions.”[39]

The Court highlighted three elements in determining whether the speech was “commercial”:

1. Whether the speech is an advertisement;
2. Whether the speech references a specific product; and
3. If there is a discernable economic motivation on the part of the advertiser.[40]

Although none of these three elements standing alone would lead to a conclusive determination, “the combination of all these characteristics … provides strong support” for characterizing speech as commercial.[41] Applying these factors, the Bolger court upheld the district court’s conclusion that all three mailings were in fact commercial speech because of the publisher’s economic interest and references to products sold by the publisher and the court ultimately struck down the statute under intermediate scrutiny.[42] The Bolger tri-part test has been the most widely adopted and applied analysis of commercial speech by lower courts.[43] That said, despite Bolger’s admonition that economic motivation or profit alone is insufficient to support a finding of commercial speech, several lower courts erroneously continue to rely on this single factor.[44]

[1] The MLRC has graciously allowed republication of this article. For more information on the MLRC check out www.mlrc.org.

[2] Disclaimer – the MLRC Journal is a legal journal. With that in mind, we give the caveat up front that our writing style here is going to be a little less loose and little more dense that our typical blog.

[3] The distinction between commercial and non-commercial speech implicates more than just government agency regulations. If an advertisement is deemed “commercial speech” it may, for instance, be subject to state law right of publicity, invasion of privacy, and unfair business practices claims, as well as Federal Lanham Act false endorsement claims. See generally Alan Friel, Bask in the Light of Stars Without Paying Them, and You might Get Burned, Bloomberg Law Reports Vol. 32 No. 5 (2011), available at http://www.bna.com/bask-in-the-light/.

[4] The often quoted “marketplace of ideas” metaphor has been widely attributed to Justice Holmes’ dissent in Abrams v. United States,250 U.S. 616, 630 (1919) (Holmes, J. dissenting) (“[t]the best test of truth is the power of the thought to get itself accepted in the competition of the market, and that truth is the only ground upon which their wishes safely can be carried out. That at any rate is the theory of our Constitution.”); however, it was actually Justice Brennan who coined the phrase. See Lamont v. Postmaster Gen., 381 U.S. 301, 308 (1965) (Brennan, J., concurring) (“The dissemination of ideas can accomplish nothing if otherwise willing addressees are not free to receive and consider them. It would be a barren marketplace of ideas that had only sellers and no buyers.”)

[5] U.S. v. Stevens, 559 U.S. 460, 468 (2010) citing Ashcroft v. American Civil Liberties Union, 535 U.S. 564, 573 (2002) (internal quotation marks omitted).

[6] Ashcroft v. American Civil Liberties Union, 542 US. 656, 660 (2004).

[7] See Central Hudson Gas & Elec. Corp. v. Public Service Comm’n of New York, 447 U.S. 557 (1980) (holding that First Amendment requires intermediate scrutiny for commercial speech); Citizens United v. Federal Election Com’n, 558 U.S. 310, 340 (2010) (“Laws that burden political speech are subject to strict scrutiny, which requires the Government to prove that the restriction furthers a compelling interest and is narrowly tailored to achieve that interest.”) (internal citations omitted).

[8] Id.

[9] Roth v. United States, 354 U.S. 476, 483, (1957) (obscenity); Beauharnais v. Illinois, 343 U.S. 250, 254–255, 72 S.Ct. 725, 96 L.Ed. 919 (1952) (defamation); Virginia Bd. of Pharmacy v. Virginia Citizens Consumer Council, Inc., 425 U.S. 748, 771 (1976) (fraud); Brandenburg v. Ohio, 395 U.S. 444, 447–449, (1969) (per curiam) (incitement); Giboney v. Empire Storage & Ice Co., 336 U.S. 490, 498 (1949) (speech integral to criminal conduct).

[10] See Alex Kozinski & Stewart Banner, Who’s Afraid of Commercial Speech?, 76 VA. L. REV. 627, 627-631 (1990); see also Steven G. Brody & Bruce E. H. Johnson, Advertising and Commercial Speech: A First Amendment Guide §2:2, p. 2-8 (2d Ed. 2013).

[11] See Kozinski & Stewart Banner at 627-628; Brody & Johnson, §2:2 at 2-8.

[12] Valentine v. Chrestensen, 316 U.S. 52 (1942). In Valentine, the Court analyzed whether handbills, distributed on the streets of New York City were protected by the First Amendment when they combined both advertisements and political protests. Under the Sanitation Code, political protest was allowed while distributing handbill ads was not. The handbills at issue featured an ad for a submarine tour on one side and a protest of wharfage laws on the other. The Court held that even combining political protest with commercial speech (in this case literally printing them back to back) could not save the handbills from regulation as the commercial speech fell outside the First Amendment and the defendant could not skirt that fact by combining it with protected speech.

[13] Pittsburgh Press Co. v. Pittsburgh Comm’n on Human Relations, 413 U.S. 376 (1973).

[14] Id. at 385.

[15] Id. at 384.

[16] Bigelow v. Virginia, 421 U.S. 809 (1975).

[17] Id. at 826.

[18] Virginia State Bd. of Pharmacy v. Virginia Citizens Consumer Council, Inc., 425 U.S. 748 (1976).

[19] Id. at 776.

[20] Id.

[21] Id. at 763.

[22] Id. at 771-772; see also In Re RMJ, 455 U.S. 191, 207 (“States retain the authority to regulate advertising that is inherently misleading or that has proved to be misleading in practice.”)

[23] Central Hudson Gas & Elec. Corp. v. Public Service Comm’n of New York, 447 U.S. 557 (1980).

[24] Id. at 564.

[25] Id.

[26] See, e.g., Id.

[27] Id.

[28] United States v. Playboy Entm’t Group, 529 U.S. 803, 813 (2000).

[29] Sable Communications, Inc. v. FCC, 492 U.S. 115, 126 (1989).

[30] Virginia Pharmacy, 425 U.S. at 761.

[31] Id. at 761.

[32] Id.

[33] Id.

[34] Id.citingSmith v. California, 361 U.S. 147, 150 (1959).

[35] Bolger v. Youngs Drug Prods Corp., 463 U.S. 60 (1983).

[36] Id.

[37] Id. at 62.

[38] Id. at 66.

[39] Id.

[40] Id. at 66-67.

[41] Id. at 67.

[42] Id.

[43] See, e.g., United States v. Bell, 414 F.3d 474, 480 (3rd Cir. 2005).

[44] See Brody & Johnson, supra note 72 at §2:3 pp.17-20.