C Law Ch. 12

For print media, "ad" revenue plus nominal subscription revenue provides

funds to create non- commercial content (news and entertainment)

In a non-advertising context, the Supreme Court has

held as far back as 1943 that government (or an agent of government such as a school teacher or judge) cannot "compel speech." (outside the context of a subpoena to testify). Government can't require us to pray, take an oath or pledge. (These are the school prayer cases).

The right to refuse ads

i. Any entity providing free or paid advertising can refuse to do business with any prospective advertiser for any reason or no reason at all - unless the refusal would constitute discrimination on a protected basis.

The Lanham Act allows:

"Puffery" or "ad-speech" Examples would include, "Best Hamburger in Town," "Lowest Prices Ever," "All Our Customers Are Satisfied Customers." The logic is that consumers are smart enough to understand sales-speak, distinguishing hype from statements of provable fact. "New and Improved," "Our Lowest Price Ever," "Save Like You've Never Saved Before" are puffery. Clever wording is allowed: "No credit application refused." Accepting an application does not mean credit will be approved.

The FTC has many

"consumer protection" functions related to labeling and disclosure of pricing (costs). It also has Lanham Act enforcement responsibility.

The Chrestensen handbill case (1942) illustrates the "purpose" distinction.

(1) Chrestensen purchased a surplus submarine that was docked in New York. He printed handbills to pass out on the streets, inviting potential customers to tour the submarine for a price. In this context, the words and image of the handbill had proposed a business transaction - only. (2) New York had a city law banning handbills, probably because most became litter. (3) Chrestensen complained about his right to expression, but was told that because what he proposed was purely a commercial transaction, no First Amendment right was involved. (4) Cleverly, Chrestensen then reprinted his handbills advertising the submarine tours, but he added a statement opposing the ordinance. His legal theory was that the political statement was protected by the First Amendment (and the "Visit My Sub" part would be a ride-along). (5) The Supreme Court didn't let him get away with it, but, again, he set the stage for legal consideration of how a distinction (if any) could be drawn between advertisements and other types of speech.

For legal analysis, advertising messages are split into two categories.

(1) If the issue is truthfulness, are not evaluated under freedom of expression guarantees of the First Amendment. Such messages are subject abundant laws and rules in the name of consumer protection. (2) If the purpose is other than truth, regulation of advertising is subject to the Commercial Speech Doctrine, which requires narrowly tailored language to serve a public purpose as a prerequisite to constitutionality.

In the last half of the last century, a trend started that continues. Stated simply, government began to regulate in more and more arenas

- ranging from community aesthetics to health to equal rights. Coincident with this, government discovered that by regulating advertising, it could also attempt to regulate/steer society. Commercial interests decided to fight back in court.

The business model has been

1) advertisers pay media platforms to include messaging about their products or services along with their noncommercial content and (2) the revenue, in turn, funds the news and entertainment content media provide.

Regulatory authorities do impose "compelled content" in certain types of advertising.

1. Car ads with a specific price must contain the model number. 2. Medicine ads must list risk factors. 3. Tobacco packaging must contain warnings. 4. Political ads must state who paid and whether the candidate approved.

Other regulation of advertising.

1. Self-regulation references standards set by individual media companies and the media industry's internal, shared standards organizations. 2. The National Advertising Division (NAD) of the Better Business Bureau serves as a review/recommendation/arbitration group. NAD receives complaints from competitors. Complaints are reviewed and recommendations made. 3. The Children's Advertising Review Unit (CARU) does the same thing as it relates to ads targeting young people. This is often in compliance with the Children's Online Privacy Act.

Penalties

1. There is little comfort in being a "mere advertising agency." The FTC can impose fines on contractual firms for "active participation" in deception. Most of the time, the remedy is "stop it." 2. There are money damages and, rarely, compensation is ordered for individual consumers. 3. Other remedies include ordering "substantiation," which means an advertiser has the opportunity to prove the truth of a claim, and 4. "Corrective advertising," which for a brand manager is like the death penalty. An advertiser is required to tell the public, in essence, "We are liars," which, naturally, is very harmful to the brand.

Paid advertising has been the primary revenue source for media operations for about

150 years. It is the engine that makes commercial media "go."

Not surprisingly, localities have been known to enact facially neutral regulations when there is actually a specific agenda.

A graphic pro-life billboard appears and attracts complaints and the town officials react by banning all billboards. The ordinance content-neutral in its wording, but is actually targeted at one advertiser. Courts regularly invalidate such end-run uses. Regulations must be content-neutral, period, and not covertly aimed at protected speech.

It's not always super-easy to differentiate advertising from other content. Sometimes context matters.

A press release announcing that a hospital was top-rated is designed to be reported by media as news (free media). The hospital will be happy if there is a favorable consumer response, but the primary purpose is news. (Implicitly, if the hospital received a poor rating, that would be news, too, but no PR release.) Later, a billboard purchased by the hospital with the same "top-rated" message would clearly be advertising designed for the same purpose - to court favorable opinion.

Customer wants to buy an ad with this copy: Single woman with no kids needed to provide housekeeping duties. Non Smoker. There is lots of discrimination in this ad copy. Gender, familial status, tobacco - but only two are protected, gender and familial status.

A publisher would be fined for accepting this advertisement. Legal version: Housekeeper needed. Must be non-smoker.

First Amendment?

Advertising (handbills and in newspapers) existed in colonial America, but no one saw it as "free speech." The founding logic of the First Amendment, which was to guarantee individual freedoms, especially in the context of citizen participation in a democratic republic. Advertising included words and pictures just as protected speech does, but the purpose was entirely different, so advertising simply wasn't considered as speech government could not regulate.

There are endless examples of a dimensional increase in the role of government controls in everyday life.

As people became more diet-conscious, regulations regarding food labeling increased. As people became more safety-aware, wearing seat belts became a requirement. Building safety codes were ramped up; subdivision regulations increased. Laws were passed to combat predatory lending. Much expansion took place as part of the expansion of civil rights to people who had been targeted for discrimination. Where it had been legal to advertise "white waitresses wanted" or "No Jews" apartments, the public asked government to drive societal changes and a method of doing this was regulation of advertising.

While most new regulations were accepted, there was pushback from commercial enterprises that felt lawmakers were going too far. The results included the

Bigelow and Central Hudson decisions by the U.S. Supreme Court that formed what has become known as the Commercial Speech Doctrine. The court ruled: The First Amendment does not have any role when the issue is whether advertising is false or misleading. Advertising can thoroughly be regulated for truthfulness. Otherwise, advertising may be regulated by law ONLY if it passes the three-part Commercial Speech Doctrine test:

It's one thing for a parent to say, "My child is smart." People will smile and nod. If a parent says, "My child is smarter than your child," the stakes become very different.

Expect to be required to back up any claim made in a comparative ad.

In all these cases, it's important to remember that "falsity" and "misrepresentation" are not always the same.

For instance, a dealership could print an ad showing the "winner of a car" holding keys and standing by a Ferrari. The ad doesn't say the patron won THAT car (may have won a 2002 Saturn), so the ad wasn't false. It was likely a misrepresentation, though, which is equally illegal under the Lanham Act.

This is one-off from a "normal" linear retail model.

In a more typical transaction, a business sells an item to a consumer and the revenue from the sale goes to overheard, profit and more inventory.

We are now in an era of marketing innovation.

In additional to traditional 15- or 30-second messages during a football telecast you might see the Dr Pepper logo displayed electronically whenever the down and distance information is projected onscreen. A sponsoring advertiser's logo will appear with a weather or traffic report or in a video crawl. Product placement has also evolved. As you look through your Twitter feed, you encounter someone talking about how much she loves her Revlon lipstick. Is she sincere, or is she being paid as an influencer or for an endorsement?

Definition of "advertisement." (Not getting any easier.)

In legal speak, an advertisement is called "commercial speech." i. Commercial speech can be free media or paid media. Makes no difference.ii. Commercial speech will almost always reference a specific product or service. iii. A third test is whether the central purpose for the message is a commercial or other benefit to the advertiser.

The traditional form of advertising has also expanded.

In print and earlier broadcasts, advertising content was clearly identified. The expectation was that a person reading a sports story might also notice advertising elsewhere on the page showing Goodyear had tires on sale. In broadcasting, programs had sponsors who purchased commercial time during programming breaks. On the internet, individual feeds on social media or elsewhere include paid advertising tailored to the person who is browsing.

The issue of "compelled speech" in an advertising context is rare.

It arose in the context of cattle growers were required by law to pay into a marketing fund as a condition of required membership in a trade association. The marketing fund was then used to buy ads promoting beef. Some growers objected, saying they shouldn't be compelled to speak via the advertisements. The court held that the ads were the government speaking, not the growers, so there was no First Amendment issue. (minor and rare) situation).

The public purpose doesn't have to have to be overwhelming.

It's enough if the regulation is rationally related to a police power (health or safety) outcome such as no beer signs within 500 feet of an elementary school. Tobacco ads can be regulated because under the Commercial Speech Doctrine test 1. There's a public health issue in that smoking is harmful. 2. Banning tobacco ads on television will result in reduced sales which, in turn, improves public health. 3. Tobacco sellers are still free to operate, advertise via other platforms.

In situations where refusing content would constitute discrimination on a protected basis, an entity

MUST ACCEPT the ad.

In situations where ad content would support discrimination on a protected basis in housing or employment, an entity

MUST REFUSE the ad.

For broadcast media, the ad revenue paid

all costs (although there is revenue from cable and satellite/premium channels and pay per view).

Federal law defines protected bases race, national origin, marital status, religion, gender or familial status. In some states, this extends to gender preference

Not fully tested in Mississippi is a statute that allows discrimination in a commercial transaction if the seller/provider asserts a religious privilege. Example: A caterer who believes same-gender marriage is a sin could decline to do business with a same-gender couple.

"Influencer" advertising is a form of advertising that can be illustrated by:

Product placement. (A TV star who always drinks Pepsi during a show in exchange for payment or a race car painted with the sponsor's trademark.) Consumers are to be informed when there is payment to praise or otherwise promote a product on social media in order to induce or influence others to purchase the product. There is no widespread or uniform enforcement of this requirement

This is the golden rule of advertising:

Reach the best audience for the least.

Bob, a magazine publisher, is a member of a church that espouses non-violence. He refuses ads for knives, guns or weapons of any type. Not a problem. Bob also refuses to sell ads to unmarried women over 21 because his church requires all women to marry before their 21st birthdays.

That's a problem because Bob's refusal would constitute discrimination on marital status, which is protected.

If CBS Television decided today that there are too many cars in America, CBS could stop accepting car ads.

That's entirely up to the management of CBS. GM, Ford, Toyota and the others have no "right" to buy ads from CBS. Many publications routinely reject certain advertisers - casinos, strip clubs, liquor, firearms - and are perfectly free to do so.

Commercial Speech Doctrine.

The First Amendment does not have any role when the issue is whether advertising is false or misleading. Advertising can thoroughly be regulated for truthfulness. Otherwise, advertising may be regulated by law ONLY if it passes the three-part Commercial Speech Doctrine test: i. Is there a substantial state (public) interest to justify the regulation. (Does the regulation confer a health, safety or welfare benefit to the public?) ii. Is there evidence that the regulation directly advances the state interest. (Can't be vague or overbroad). iii. Is there a reasonable fit between the state interest and the government regulation (narrowly tailored). (Will the regulation accomplish the intended purpose?)

Former Supreme Court Justice Harry Blackmun made this distinction: He described advertisements as "proposing a commercial transaction" and First Amendment expression as an "exposition of ideas."

The different nature created a legal distinction.

Do Not Call Lists

The federal government and most states have registries where the "owner" of a phone number can enroll to avoid "cold" telemarketing calls. Right now, technology has the upper hand through spoofing and Do Not Call is not very effective. 1. Sellers with "existing relationships" are exempt from DoNot Call. Many things constitute an "existing relationship." Having an open account or credit card, e.g. 2. Several specific interest groups are exempt from the act. Among them media companies and candidates for public office. (Robo-calls from political candidates are legal. They exempted themselves from the law.) 3. Otherwise, telemarketers are required to purchase the list and program their devices to avoid numbers on the list or face fines. (This does not work very well because, in reality, these are usually corrupt scammers who don't bother to follow the law.)

Comparative advertising.

There are no specific, separate laws governing ads that compare one advertiser's product or service to other firms' product or services, a higher level of scrutiny is natural.

The CAN-SPAM Act.

This federal law is designed to limit unsolicited faxes and (more recently) emails. A) Mass senders must: 1. Avoid false header claims; e.g. "Free Vacations in the Bahamas." 2. Contain WORKING opt-out/unsubscribe links and process requests within 10 days. 3. Contain REAL names and addresses. 4. Warn if sexually explicit. B) As in other contexts, international enforcement is problematic, at best. There are serious penalties for violations, but savvy operators are becoming more savvy and savvy consumers are becoming more savvy. There are apps to block SPAM calls.

This basic media model continues, but has also changed and become scattered by hundreds of television stations and the near-infinite capacity of the internet.

Today, the first challenge is for people with products or services to offer to find their prospective clients wherever those clients may be, and deliver a message that translates into consumer action.

REMEMBER, the free speech component has nothing to do with truth or falsity.

Truthfulness is regulated. Only if the issue is something other than truth does the three-step Commercial Speech Doctrine kick in.

Bait and Switch laws

Unscrupulous advertisers will often advertise a stove or shoes or a car at a ridiculously low price to generate store traffic. Once a person comes to their location (or website) that particular model will not be available ... but a more expensive one will be. (The best illustration of these is when you see a car advertised for a major, major discount. By law that car must exist.

When truthfulness is the issue, the governing law is the Lanham Act, which is more than 60 years old but has been updated many times. It provides:

a. Generating "any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which, ... in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origins of his or another person's goods, services or commercial activities" creates a likelihood for fines and/or civil damages. Basic tenets are: Can't misrepresent own products. Can't misrepresent the competition.

A nice bright-line rule is that it is illegal for an advertiser or any platform to

advertise for violations of civil or criminal law. EXAMPLE: "Heroin For Sale" Nope. "Wanted: Person willing to kill my neighbor's dog." Nope.

Paid or unpaid, via mass marketing or more personalized marketing,

advertisers still try to reach the their most likely "customers" at the lowest possible cost.

REMEMBER, a client hires you for your marketing and advertising expertise -

and that extends beyond crafting content and managing budget and placements. Your client expects you to know the law.

While we think of 30-second car ads or Rice Krispies commercials as the standard, an advertisement is

any communication in any form primarily designed to elicit a response related to a product or service.

Marketing never really was limited to the printed ad or the 30-second commercial,

but methods and varieties of messaging are exponentially greater today.

This is nominally a consumer protection law, but

consumers have a much more difficult time recovering damages for false or misleading advertising. For the most part, the Lanham Act is used by competitors to police each other's messages.

"Compelled speech"

describes a situation is which a private person is required to speak certain messages whether the person agrees or disagrees.

Native Advertising is advertising designed to

disguise commercial advertising by mirroring the tone, style and the nonadvertising context in which it is placed. Sponsored content is a subcategory of native advertising in which content is purposed as editorial matter but paid for by a third party. In 2019, native advertising was the largest share of $44 billion spent in the U.S. advertising in digital spaces.

As the name indicates, the FDA

establishes rules and regulations regarding the marketing of food and medicines. For instance, the definition of "organic" and "low-calorie" are, generally FDA responsibilities. Also, when prescription medicines are advertised, all of the side effects and dosage information are a requirement of the FDA.

The ad customer's First Amendment rights are not

infringed by refusal. Purchase of an advertisement is a private transaction between private parties; the First Amendment is not implicated (involved) in any way. There is no provision in the Constitution that requires one private party to provide a platform for any other party.

Weight loss ads provide a typical illustration of this requirement. The impression given is that everyone who enrolls in/purchases a plan has tremendous success. If that's not so, it's a

material misrepresentation unless "results are not typical" or some other disclaimer language is included.

Commercial messages are piggybacked with

news, sports, features, comics, entertainment. Viewing ads is the "price" that consumers pay to seek and find value in news and entertainment.

Two federal agencies, the Federal Trade Commission (FTC) and the Food and Drug Administration (FDA) are most often associated with

regulating advertising

Marketing and advertising practitioners will need to learn

specific local, state and national rules and regulations regarding the various products and services they are engaged to promote. Some of these are detailed (political ads) and some general (don't lie or misrepresent). When dealing with any law or regulation for a purpose other than truthfulness of the content, the commercial speech doctrine will apply. If challenged on that basis, the regulating authority will need to "pass" the three-part test or the regulation will be invalidated. Otherwise, marketing and media practitioners need to rely on specific guidance from advertising federations of a really good service, such as Rosden on Advertising. When in doubt, do your research first.

To discern the difference between puffery and misrepresentation, it helps to look

to whether there's an objectively provable statement of fact. Not including information a reasonable consumer would consider relevant and important can also be a misrepresentation. It is the sin of omission.

native advertising

which is advertising designed to not look like advertising, is more common.

many of the newly minted local laws were for protectionist reasons:

• Chain "discount" pharmacies were a threat to local drug stores. Many communities, in response, passed laws against advertising prices of prescription drugs. This favored local family drug stores in competition with an increasing number of discount chains. • A law against placing "for sale" signs in yards was an effort to curb "tilting," common in the 1970s/ At that time, when a minority family moved into an all-white neighborhood and all the white majority families moved out in a panic. • As energy prices surged, people started watching expenditures of monopolistic utilities. Why should a power company — the only power company certificated to sell electricity in a region — spend money on advertising? Local politicians curried favor by insisting utilities not spend money on advertising because their customers had no choice about where to buy electricity. (The mantra was, "You don't need to advertise when consumers have no options, so use your ad budget to offset price increases.")