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Compelled Product Disclosures After NIFLA – First Impressions

This is an exciting time for manufacturers on guard against compelled disclosures in their product labeling or advertising.  Late last June, the Supreme Court decided  National Institute of Family & Life Advocates v. Becerra, 138 S. Ct. 2361 (2018) (“NIFLA”), an abortion case with potentially far-reaching effects on the law of compelled commercial speech more generally.  However, as lower courts begin to interpret and apply NIFLA in the context of product disclosures, major uncertainties remain.

It is well-settled that the First Amendment protects not only “the right to speak freely,” but also “the right to refrain from speaking at all.”  Wooley v. Maynard, 430 U.S. 705, 714 (1977).  It is also equally well-settled that the First Amendment’s protections extend to corporate speakers.  See Citizens United v. FEC, 558 U.S. 310, 342 (2010).  At the same time, businesses do not have an absolute right to exclude all unwanted text from product labels, advertisements, or other corporate communications.  In Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626 (1985), the Supreme Court held that, in at least some contexts, the government may require “purely factual and uncontroversial” disclosures, as long as the requirement is “reasonably related” to a substantial governmental interest and not “unjustified or unduly burdensome.”

Under this fairly deferential “Zauderer test,” it is generally accepted that regulators and courts can require businesses to disclose undisputedly factual and ideologically neutral information about their products, such as ingredients, nutrient content, net weight, and at least some health and safety warnings. But in recent years, there have been legal skirmishes over the constitutionality of statutes, regulations, and ordinances requiring manufacturers to make disclosures with little or no objective connection to product composition or safety.  Examples of disclosures in this category include:

In addition to positive-law enactments that explicitly require disclosures, private plaintiffs also bring lawsuits under the common law or consumer protection statutes claiming that a label without a desired disclosure is “misleading.”  For example, in 2015, plaintiffs brought an (unsuccessful) class action suit against Mars claiming that it had “misled” consumers, and thereby violated California’s consumer protection statutes, by failing to include a disclosure on the labels of its chocolate products stating that its African cocoa supply chain may contain forced labor and child labor.

Before NIFLA, manufacturers had mixed success challenging these novel types of compelled disclosures under the First Amendment.  For example, in 2014, the D.C. Circuit upheld the USDA’s regulation requiring country-of-origin labeling on meat products.  See Am. Meat Inst. v. USDA, 746 F.3d 1065 (D.C. Cir. 2014).  But the following year, the same court held that the SEC’s rule requiring “conflict mineral” disclosures violated the First Amendment.  See Nat’l Ass’n of Mfrs. v. SEC, 800 F.3d 518, 530 (D.C. Cir. 2015).  Meanwhile, in tort and consumer protection cases brought by private plaintiffs, courts have generally avoided the First Amendment issue by concluding that the relevant state’s common law or consumer protection statutes did not require the relevant disclosure in the first place. See, e.g., Hodsdon v. Mars, Inc., 162 F. Supp. 3d 1016 (2016), aff’d, 891 F.3d 857 (9th Cir. 2018). NIFLA may give a boost to manufacturers challenging compelled disclosures like these.  See Cigar Ass’n of Am. v. United States FDA, 317 F. Supp. 3d 555, 558, 562 (D.D.C. 2018) (noting that NIFLA “makes clear that [defendant’s compelled-speech argument] raises serious legal questions”).

In NIFLA, the Supreme Court addressed two disclosure requirements that California had imposed on “crisis pregnancy centers”—pro-life clinics that discourage women from having abortions.  The first requirement compelled licensed clinics to distribute a government-drafted notice informing patients that “California has public programs that provide immediate free or low-cost access” to “family planning services,” including “contraception” and “abortion.”  138 S. Ct. at 2369.  The Court first found that this requirement was subject to heightened scrutiny, not Zauderer’s deferential test, because it was not “purely factual and uncontroversial.”  Specifically, although the statement about California’s public programs was factual and undisputedly true, it concerned abortion, which was “anything but an ‘uncontroversial’ topic.” Id. at 2372.  The Court then held that the requirement could not meet heightened scrutiny because it was underinclusive (applying only to certain types of clinics), and because California could have gotten its desired message across “without burdening a speaker with unwanted speech” (e.g., through a public-information campaign).  Id. at 2375-76. The other requirement compelled unlicensed clinics to post a notice on-site, and include a statement in all their advertising materials, stating that “[t]his facility is not licensed as a medical facility by the State of California….”  Id. at 2370.  The Court struck this requirement down too.  Assuming, without deciding, that Zauderer applied, the Court held that the requirement did not satisfy even that deferential standard.  This was so because (1) there was no evidence that California women “do not already know” that the covered facilities are unlicensed; (2) the requirement was underinclusive, applying only to “facilities that primarily provide ‘pregnancy-related’ services,” even though other types of unlicensed facilities were similarly situated; and (3) the size and prominence of the required disclosure made it unduly “burdensome.”  Id. at 2376-78.

The four dissenting Justices expressed concern that the majority’s decision would authorize “[u]sing the First Amendment to strike down economic and social laws that legislatures long would have thought themselves free to enact.”  Id. at 2383 (Breyer, J., dissenting).  In response to this claim, the NIFLA majority summarily assured that it was not “question[ing] the legality of health and safety warnings long considered permissible, or purely factual and uncontroversial disclosures about commercial products.”  Id. at 2376.  This suggests that courts are unlikely to strike down (for example) the FDA’s ingredient-list or nutritional-facts regulations any time soon.  On the other hand, the majority’s language potentially implies that “health and safety warnings” without a “long” historical pedigree, and product disclosures that are not both “factual and uncontroversial,” are now subject to “question.”

Of course, the devil is in the details.  For example, when is a product disclosure “controversial”?  NIFLA tells us that “controversial” means something different from “factual,” since the abortion-services disclosure in that case was found controversial even though it was undisputedly true and factual.  Beyond this, all we know for sure is that abortion qualifies as controversial.  But what about true and factual disclosures regarding GMO content, or a manufacturer’s carbon footprint, or its record on workplace diversity or sexual-harassment issues?  How much dissent does there have to be from the majority view on a subject (e.g., global warming or vaccine safety) before the subject qualifies as “controversial”?  NIFLA provides scant guidance, and lower courts are likely to diverge in their interpretations.

The Ninth Circuit’s recent en banc decision striking down San Francisco’s sugar-sweetened-beverage ordinance is a case in point.  See Am. Bev. Ass’n v. City & Cnty. of San Francisco, Nos. 16-16072 & 16-16073, 2019 U.S. App. LEXIS 3175 (9th Cir. Jan. 31, 2019).  That ordinance required ads for sugar-sweetened beverages to include a prominent disclosure that “[d]rinking beverages with added sugar(s) contributes to obesity, diabetes, and tooth decay.”  All eleven judges on the court agreed that heightened scrutiny, rather than deferential Zauderer scrutiny, applied to this requirement.  And all eleven judges agreed that, under heightened scrutiny, the ordinance was likely unconstitutional.  However, their reasoning was divided.

  • Seven judges joined the majority opinion, which did not reach the question of whether the warning was “purely factual and uncontroversial.”  Instead, the majority held that the ordinance did not qualify for Zauderer scrutiny because its requirement that the warning take up fully 20% of the advertisement’s space made it unduly burdensome.
  • Judge Ikuta agreed with the majority that the ordinance did not qualify for Zauderer scrutiny.  However, she would have held that the warning was not “purely factual and uncontroversial” because it “require[d] … advertisers to convey San Francisco’s one-sided policy views about sugar-sweetened beverages.”  In particular, while the warning painted sugar-sweetened beverages as an unqualified health risk, the FDA’s position was that added sugars can be part of a healthy lifestyle.  Judge Ikuta faulted the majority for focusing on the size of the warning, which implied—incorrectly, in her view—that a smaller warning might withstand First Amendment scrutiny.
  • Judge Christen, joined by Chief Judge Thomas, agreed with Judge Ikuta that the analysis should start with the “purely factual and uncontroversial” prong, rather than the “much more subjective” question of undue burden.  Judge Christen concluded that the proposed warning was not “purely factual” because of its reference to “diabetes.”  Specifically, even if sugar consumption may cause Type 2 diabetes, it cannot cause Type 1 diabetes, and the warning fails to make that distinction.
  • Finally, Judge Nguyen wrote that, in her view, Zauderer’s deferential test is limited to disclosure requirements that are necessary to counteract or correct “commercial speech that is … false, deceptive, or misleading.”  San Francisco’s ordinance did not serve this purpose: its aim was to communicate an affirmative public-health message, not to correct affirmatively misleading speech in the advertisements in which the required disclosure appeared.

It should be obvious from the Ninth Circuit’s array of opinions that NIFLA will not be the last word on compelled product disclosures.  In particular, it remains to be settled whether Zauderer’s deferential test can ever apply to disclosure requirements meant to educate or inform, rather than to correct inherently deceptive speech; what makes a disclosure requirement “purely factual”; what makes a disclosure requirement “controversial”; when a disclosure requirement is “unduly burdensome”; and what order courts should consider these questions in.  However these questions are ultimately answered, it seems likely that NIFLA will result in more challenges to compelled disclosure requirements, especially novel or unusual ones—and more decisions striking them down.