I.                     Commercial Advertising Before Government Control

A.     Prior to the federal government asserting control over commercial speech, people had to rely on common law (civil suits) for protection against false advertising.

B.     American Medical Association helped to educate the public on medical issues and outrageous drug claims.

C.    44 states adopted the Printer's Ink code before the U.S. Congress created the FTC.
 

II.                   The Federal Trade Commission

A.     Federal Trade Commission Act passed in 1914
 

B.     FTC v. Winsted Hosiery Co., 1922
– found false advertising when the company labeled the product woolen when it was less than 10% wool
– 22 of 29 cases on false advertising were upheld between 1922 and 1931
 

C.    FTC v. Raladam Co., 1931
– restricted the FTC to matters of unfair business “competition in commerce” not consumer protection as a violation of the 1914 act.
 

D.    Wheeler-Lea Amendment of 1938 resolved this setback in Raladam
– “unfair or deceptive acts or practices in commerce” were now in the FTC domain
– FTC can now act in the interest of the general public
 

E.     The FTC is currently an independent government agency headed by 5 commissioners appointed by the President and approved by the senate

G.    Three Bureaus make up the FTC

1.      Bureau of Competition – enforce anti-trust laws

2.      Bureau of Economics – deals with stats and economic reports

3.      Bureau of Consumer Protection – false/deceptive ads, other unfair practices
 

III.                  Basic Rules for Commercial Advertising

A.     FTC now has the authority to define “deceptive advertising”, including messages with the “tendency” to deceive (but not restrictions on ads in order to promote "fairness.")
 

B.     James Miller’s (Reagen's Chair of the FTC) developed three points for defining deceptive advertising.
 

1.      Consumer characteristics - uses the response of the reasonable consumer

2.      Probability of deception - that consumers will probably be deceived by the ad taken as a whole

3.      Significance of deception - the deception must be significant enough to actually influence a consumer's decision.
 

C.   FTC definitions of  deception include

1. Puffery – abstract claims and assertions of opinions that are difficult if not impossible to test empirically is acceptable (p. 191)

2. Testimonials  must come from an actual product user; who has some expertise to make claims; the claims must be true (not just opinion); and the person cannot be an actor pretending to be an ordinary consumer.

3. Specific dishonest claims and procedures - e.g. price deception, bait-and-switch, etc.

IV.               Other Federal Administrative Agencies that have some regulatory power over "commercial speech

A.     Food and Drug Administration

B.     Federal Communications Commission

C.    Securities and Exchange Commission

D.    U.S. Postal Service

V.                 Commercial Advertising Cases

A.        Valentine v Chrestensen (1942)  handbills, even ones with a political message do not have right to be distributed on the streets as would political messages since they're mere advertising

B.        Times v Sullivan gave a political ad. more protection (see ch. 4) but Pittsburg Press v PCHR (1973)gave no protection to ads which violate the law

C.        Bigelow v Virginia (1975) - advertising abortion services (in NY state) violated Virginia law.  USSC ruled this unconstitutional.

1.         changed the Chrestensen doctrine

2.         advertising facts and information "of potential interest and value" to the public merits considerable first amendment protection.

D.        Bates v State Bar of AZ (1977) - denies bar associations the right to prohibit advertising of lawyers prices and services.  "Distribution of truthful information cannot be restricted by professional organizations."

E.        Consolidated Edison v Public Service Comm.  (1980) and Central Hudson Gas v PSC (1980) established a four part test.  Commercial ads can be regulated:

1.  Message Content -- must be  truthful and for lawful activities,

2.  Government Interest -- the government interest in constraint must be legitimate or substantial

3.  Advancement of the Government Interest -- the regulation must directly advance the government interest asserted in step 2

4.  Reasonable Fit between Ends and Means (SUNY v Fox 1989 added this concept replacing the "narrowly drawn" test of Hudson) The restriction must be designed to reasonably accomplish the goal and not restrict substantially more speech.

• Recent decisions suggest the SCOTUS takes a "good sense" approach to these four tests.

• Generally, the courts still take a position that commercial speech has less value and, thus, less protection than non-commercial speech.