COOL, Conflict Minerals, GMOs & Beyond: Much Hangs in the Balance of DC Circuit En Banc Rehearing in Commercial Speech Case

EnglishChip_lowGuest Commentary

by Chip English, Davis Wright Tremaine LLP

Americans are naturally curious and interested about the food we eat and the products we buy—e.g., non-GMO labeling, country of origin labeling (“COOL”) and “conflicts minerals.” The question I explore here is whether and how far the government may constitutionally compel commercial interests to disclose information about their products when such compelled speech goes beyond preventing consumer confusion or deception.

These First Amendment issues are now front and center before the United States Court of Appeals for the District of Columbia Circuit (often referred to as the second highest court in the United States).   While commercial speech is not as protected under the Supreme Court’s First Amendment jurisprudence, it is still subject to heightened scrutiny. But the question now before the D.C. Circuit is whether the general four part test formulated in Central Hudson Gas & Electric Corp. v. Public Ser. Comm’n, 447 U.S. 557, 566 (1980) applies to compelled speech, or whether the decision in Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626, 651 (1985) carves out a special rule for all compelled speech as opposed to compelled speech designed to prevent confusion or deception.

On Monday, May 19, the entire D.C. Circuit, sitting en banc, will hear arguments regarding the constitutionality of USDA’s COOL requirements for meat and poultry labels. COOL requires all USDA regulated food labels to disclose the country or countries where the product was grown or produced. A panel of three judges upheld the constitutionality of COOL on March 28, 2014, concluding that Zauderer establishes essentially an exception to the more rigorous (if amorphous) Central Hudson heightened scrutiny test when the government seeks to compel commercial speech. American Meat Institute v. USDA, 1:13-cv-01033 (Mar. 28, 2014). The American Meat Institute (“AMI”) panel concluded that in addition to preventing deception, there may be multiple government interests in mandating a disclosure such as COOL that “are reasonably related to the state’s interests.” Id. at 11. The panel strained to define COOL as being supported by more than consumer curiosity—e.g., consumers may conclude that food produced in a particular country is not as safe as food produced in the U.S. (even though FDA and USDA are charged with appropriate food safety).

The Supreme Court’s limiting language in Zauderer “preventing deception of consumers” is essentially wiped out in the panel’s decision. In Zauderer, Ohio sought to enforce regulations that required attorneys in contingent-fee cases to disclose that their clients may be required to pay “costs” if they lose their case if the attorney in advertisements claimed that injured plaintiffs could be represented at no cost to them. The U.S. Supreme Court in upholding the Ohio regulation of attorney advertisements concluded that the disclosure was necessary to avoid consumer deception. The AMI panel decision would expand Zauderer application to many other justifying interests beyond preventing deception. There are no obvious limits to the AMI panel decision on government compelled speech. Fortunately, the panel requested en banc review, recognizing that “reasonable judges may read [R. J. Reynolds Tobacco Co. v. FDA, 696 F.3d 1205, 1212, 1216-1217 (D.C. Cir. 2012) (striking down FDA’s proposed tobacco labeling requirements using vivid images)] as holding that Zauderer can apply only where the government’s interest is in correcting deception.” American Meat Inst., supra at 14, n.1.

A scant two weeks later a 2-1 majority of another D.C. Circuit panel (with one judge sitting in both cases dissenting) struck down the Securities and Exchange Commision’s requirement that public companies disclose in securities filings whether they do business with “conflicts minerals”—minerals mined from countries where there are known conflicts that may be financed with the proceeds from mineral rights—e.g., “blood diamonds.” National Association of Mnfrs. v. SEC, 1:13-cv-00635 (Apr. 14, 2014).   This panel applied the traditional Central Hudson analysis, concluding that Zauderer “reasonably related” analysis is limited to preventing consumer deception. As of this date, en banc status has not been granted in this case.

The AMI decision is in conflict with the Reynolds and National Ass’n of Mnfrs. decisions within the Circuit. The AMI decision also fails to account for the fact that Zauderer involved an attorney’s advertisement which absent the disclosure would be incomplete and misleading. Thus, the attorney, subject to special regulation based upon licensed status, only has to make the additional disclosure because he chose to make an affirmative claim in the first instance. COOL, conflicts minerals disclosure mandates and, as discussed below, non-GMO labeling ignore these distinctions. And nothing prevents an Iowa pork producer from proudly proclaiming, without government speech police, that her products are 100% produced in the United States.

But the AMI decision is also is in conflict with two circuit decisions involving FDA’s approval of recombinant Bovine Somatotropin (“rBST”)—an injectable recombinant hormone for cows that increases milk production.  BST is naturally occurring in cows and it is debatable whether one can successfully test for the use of rBST. Regardless, FDA has concluded (the conclusion remains controversial) that there is no significant difference between milk produced from cows treated or not treated with rBST. Upon FDA’s approval of rBST, Vermont sought to require manufacturers to disclose treatment with rBST. The second circuit, in a 2-1 decision, invalidated the Vermont statute on First Amendment grounds, invoking the Central Hudson test. Int’l Dairy Foods Ass’n v. Amestoy, 92 F.3d 67 (2d Cir. 1996). To be sure, the Second Circuit has since suggested that the Amestoy decision is limited to its facts; however, the facts are that there was no deception and consumer curiosity is insufficient to justify the government compelling speech.

Without government interference in the rBST debate, consumers began to demand that their dairy products be produced without the use of rBST. As the market for “rBST free” milk grew due to consumer demand, the pendulum of government compelled speech swung in the other direction and Ohio adopted a regulation that would limit the ability of manufacturers to make voluntary label claims that milk was not produced using rBST by, for instance, prohibiting the use of an asterisk to link to government-mandated disclaimer language diluting the private message. A unanimous Sixth Circuit panel struck down Ohio’s requirement on First Amendment grounds, concluding that Central Hudson analysis applied and that there was no deception in using the asterisk (FDA has for decades concluded that asterisk linked information actually enhances consumer awareness). Int’l Dairy Foods Ass’n v. Boggs, 622 F.3d 628 (6th Cir. 2010).

The COOL and Conflicts Minerals cases are just the tip of the compelled speech iceberg. Perhaps the biggest food fight today is being debated in multiple states, in referenda and in state and proposed federal legislation regarding “genetically modified organisms” (“GMO”) used in food production. Consumers and environmentalists are seeking mandatory disclosure of GMOs in food. While referenda in California and Washington have been defeated, the issue is very much alive in the legislative arena. Maine and Connecticut have already passed laws requiring GMO disclosure; however, those laws only become effective upon adoption of similar laws in a sufficient number of New England or neighboring states or upon implementation in states with a minimum population requirement. However, on May 8, 2014, Vermont’s governor signed a stand-alone mandatory GMO labeling law that becomes effective in mid-2016. The law establishes a $1.5 million “legal defense fund” to which private individuals can contribute. The legal costs of defending the law are being estimated between $5 and $8 million. Meanwhile competing mandatory and voluntary labeling, with state preemption of mandatory labeling, bills have been introduced in the U.S. Congress. U.S. legislation does not appear to be moving in either direction for the time being.

In the private arena, Whole Foods has moved to require its vendors to disclose GMO use in products sold at Whole Foods beginning by 2018. The rBST debate may be quite instructive in that consumer demand eventually drove disclosure. The question of course is: why should our government tell us what to say when the marketplace of ideas appears to work so well? Moreover, the AMI panel decision would open the door to mandatory speech on a host of fronts, and perhaps those who want mandatory disclosure of COOL or Conflicts Minerals or non-GMO won’t want future disclosure rules that government may require based upon its “interests.”

The First Amendment can and should prevent government compelled speech at least unless there is actual consumer deception. As both the rBST debate and Whole Foods’ requirements show, the market place can more efficiently and legally address any need for speech.

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