Media Law and Ethics

A Casebook

Roy L. Moore

• Publisher: Routledge
• Year: 2020
• ISBN:
  9781000155525
• Edition: 2
• Topic: Sprachen & Linguistik
• Subtopic: Kommunikationswissenschaften

This newedition of the casebook includes extensive excerpts from 25 major decisions by the Supreme Court of the United States in media law or related to media law. The cases are presented in the order in which they are discussed in the third edition of Media Law and Ethics by Roy L. Moore and Michael D. Murray, but the casebook is designed to be used as a supplemental text in any media law course. Each case includes a brief overview and has been edited to delete detailed citations and highly technical material. However, every effort has been made to preserve the Court's original language, including its recitation of the facts, its reasoning and the holding in the case. Most of the cases also include excerpts from the Court's syllabus, a summary prepared by the Court's Reporter of Decisions. A few of the cases include excerpts from concurring and/or dissenting opinions, where those opinions illustrate the complexity of the case or were influential in later decisions.

Corporate and Commercial Speech

Central Hudson Gas & Electric Corp. v.
Public Service Commission of New York

Argued March 17, 1980
Decided June 20, 1980

447 U.S. 557, 100 S.Ct. 2343, 65 L.Ed.2d, 341, 6 Med.L.Rptr. 1497

Appeal from the Court of Appeals of New York

In Central Hudson Gas & Electric Corp. v. Public Service Commission of New York (MCLE, page 200) the Supreme Court struck down as unconstitutional a state public utilities regulation prohibiting advertising by electric utilities. In an 8-1 decision the Court applied a four-prong test for determining whether a specific form of commercial speech enjoyed First Amendment protection. On the same day, the Court held that another regulation by the same agency, the Public Service Commission of New York, also violated the First Amendment. In Consolidated Edison Company of New York v. Public Service Commission of New York, the Court struck down an order banning consumer bill inserts on controversial issues. The four-prong Central Hudson analysis continues to be the test the Court applies in determining when commercial speech falls under the First Amendment umbrella.

Syllabus

Held: A regulation of appellee New York Public Service Commission which completely bans an electric utility from advertising to promote the use of electricity violates the First and Fourteenth Amendments.

(a) Although the Constitution accords a lesser protection to commercial speech than to other constitutionally guaranteed expression, nevertheless the First Amendment protects commercial speech from unwarranted governmental regulation. For commercial speech to come within the First Amendment, it at least must concern lawful activity and not be misleading. Next, it must be determined whether the asserted governmental interest to be served by the restriction on commercial speech is substantial. If both inquiries yield positive answers, it must then be decided whether the regulation directly advances the governmental interest asserted, and whether it is not more extensive than is necessary to serve that interest.

(b) In this case, it is not claimed that the expression at issue is either inaccurate or relates to unlawful activity. Nor is appellant electrical utility’s promotional advertising unprotected commercial speech merely because appellant holds a monopoly over the sale of electricity in its service area. Since monopoly over the supply of a product provides no protection from competition with substitutes for that product, advertising by utilities is just as valuable to consumers as advertising by unregulated firms, and there is no indication that appellant’s decision to advertise was not based on the belief that consumers were interested in the advertising.

(c) The State’s interest in energy conservation is clearly substantial, and is directly advanced by appellee’s regulations. The State’s further interest in preventing inequities in appellant’s rates—based on the assertion that successful promotion of consumption in “off-peak” periods would create extra costs that would, because of appellant’s rate structure, be borne by all consumers through higher overall rates—is also substantial. The latter interest does not, however, provide a constitutionally adequate reason for restricting protected speech because the link between the advertising prohibition and appellant’s rate structure is, at most, tenuous.

(d) Appellee’s regulation, which reaches all promotional advertising, regardless of the impact of the touted service on overall energy use, is more extensive than necessary to further the State’s interest in energy conservation which, as important as it is, cannot justify suppressing information about electric devices or services that would cause no net increase in total energy use. In addition, no showing has been made that a more limited restriction on the content of promotional advertising would not serve adequately the State’s interests.

47 N.Y.2d 94, 390 N.E.2d 749,reversed.

POWELL, J., delivered the opinion of the Court, in which BURGER, C.J., and STEWART, WHITE, and MARSHALL, JJ., joined. BRENNAN, J., filed an opinion concurring in the judgment, BLACKMUN, J., and STEVENS, J., filed opinions concurring in the judgment, in which BRENNAN, J., joined. REHNQUIST, J., filed a dissenting opinion.

POWELL, J., lead opinion

This case presents the question whether a regulation of the Public Service Commission of the State of New York violates the First and Fourteenth Amendments because it completely bans promotional advertising by an electrical utility.

I

In December, 1973, the Commission, appellee here, ordered electric utilities in New York State to cease all advertising that “promot[es] the use of electricity.” [ ] The order was based on the Commission’s finding that “the interconnected utility system in New York State does not have sufficient fuel stocks or sources of supply to continue furnishing all customer demands for the 1973-1974 winter.” [ ]

Three years later, when the fuel shortage had eased, the Commission requested comments from the public on its proposal to continue the ban on promotional advertising. Central Hudson Gas & Electric Corp., the appellant in this case, opposed the ban on First Amendment grounds. [ ] After reviewing the public comments, the Commission extended the prohibition in a Policy Statement issued on February 25, 1977.

The Policy Statement divided advertising expenses

Into two broad categories: promotional—advertising intended to stimulate the purchase of utility services—and institutional and informational, a broad category inclusive of all advertising not clearly intended to promote sales.

[ ] The Commission declared all promotional advertising contrary to the national policy of conserving energy. It acknowledged that the ban is not a perfect vehicle for conserving energy. For example, the Commission’s order prohibits promotional advertising to develop consumption during periods when demand for electricity is low. By limiting growth in “off-peak” consumption, the ban limits the “beneficial side effects” of such growth in terms of more efficient use of existing powerplants. [ ] And since oil dealers are not under the Commission’s jurisdiction and thus remain free to advertise, it was recognized that the ban can achieve only “piecemeal conservationism.” Still, the Commission adopted the restriction because it was deemed likely to “result in some dampening of unnecessary growth” in energy consumption. [ ]

The Commission’s order explicitly permitted “informational” advertising designed to encourage “shifts of consumption” from peak demand times to periods of low electricity demand. [ ] Informational advertising would not seek to increase aggregate consumption, but would invite a leveling of demand throughout any given 24-hour period. The agency offered to review “specific proposals by the companies for specifically described [advertising] programs that meet these criteria.” [ ]

When it rejected requests for rehearing on the Policy Statement, the Commission supplemented its rationale for the advertising ban. The agency observed that additional electricity probably would be more expensive to produce than existing output. Because electricity rates in New York were not then based on marginal cost, the Commission feared that additional power would be priced below the actual cost of generation. The additional electricity would be subsidized by all consumers through generally higher rates. [ ] The state agency also thought that promotional advertising would give “misleading signals” to the public by appearing to encourage energy consumption at a time when conservation is needed. [ ]

Appellant challenged the order in state court, arguing that the Commission had restrained commercial speech in violation of the First and Fourteenth Amendments. The Commission’s order was upheld by the trial court and at the intermediate appellate level. The New York Court of Appeals affirmed. It found little value to advertising in “the noncompetitive market in which electric corporations operate.” [ ] Since consumers “have no choice regarding the source of their electric power,” the court denied that “promotional advertising of electricity might contribute to society’s interest in ‘informed and reliable’ economic decision-making.” [ ] The court also observed that, by encouraging consumption, promotional advertising would only exacerbate the current energy situation. [ ] The court concluded that the governmental interest in the prohibition outweighed the limited constitutional value of the commercial speech at issue. We noted probable jurisdiction [ ], and now reverse.

II

The Commission’s order restricts only commercial speech, that is, expression related solely to the economic interests of the speaker and its audience. [ ] The First Amendment, as applied to the States through the Fourteenth Amendment, protects commercial speech from unwarranted governmental regulation. [ ] Commercial expression not only serves the economic interest of the speaker, but also assists consumers and furthers the societal interest in the fullest possible dissemination of information. In applying the First Amendment to this area, we have rejected the “highly paternalistic” view that government has complete power to suppress or regulate commercial speech…

[ ] Even when advertising communicates only an incomplete version of the relevant facts, the First Amendment presumes that some accurate information is better than no information at all. [ ]… [ ]

The Constitution therefore accords a lesser protection to commercial speech than to other constitutionally guaranteed expression. [ ] The protection available for particular commercial expression turns on the nature both of the expression and of the governmental interests served by its regulation.

The First Amendment’s concern for commercial speech is based on the informational function of advertising. [ ] Consequently, there can be no constitutional objection to the suppression of commercial messages that do not accurately inform the public about lawful activity. The government may ban forms of communication more likely to deceive the public than to inform it [ ], commercial speech related to illegal activity [ ]

If the communication is neither misleading nor related to unlawful activity, the government’s power is more circumscribed. The State must assert a substantial interest to be achieved by restrictions on commercial speech. Moreover, the regulatory technique must be in proportion to that interest.

The limitation on expression must be designed carefully to achieve the State’s goal. Compliance with this requirement may be measured by two criteria. First, the restriction must directly advance the state interest involved; the regulation may not be sustained if it provides only ineffective or remote support for the government’s purpose. Second, if the governmental interest could be served as well by a more limited restriction on commercial speech, the excessive restrictions cannot survive.

Under the first criterion, the Court has declined to uphold regulations that only indirectly advance the state interest involved. In both Bates and Virginia Pharmacy Board, the Court concluded that an advertising ban could not be imposed to protect the ethical or performance standards of a profession. The Court noted in Virginia Pharmacy Board that “[t]he advertising ban does not directly affect professional standards one way or the other.” [ ] In Bates, the Court overturned an advertising prohibition that was designed to protect the “quality” of a lawyer’s work. “Restraints on advertising… are an ineffective way of deterring shoddy work.” [ ]

The second criterion recognizes that the First Amendment mandates that speech restrictions be “narrowly drawn.” [ ] The regulatory technique may extend only as far as the interest it serves. The State cannot regulate speech that poses no danger to the asserted state interest [ ], nor can it completely suppress information when narrower restrictions on expression would serve its interest as well. For example, in Bates, the Court explicitly did not “foreclose the possibility that some limited supplementation, by way of warning or disclaimer or the like, might be required” in promotional materials. [ ] And in Carey v. Population Services International [ ] (1977), we held that the State’s “arguments… do not justify the total suppression of advertising concerning contraceptives.” This holding left open the possibility that the State could implement more carefully drawn restrictions. [ ]

In commercial speech cases, then, a four-part analysis has developed. At the outset, we must determine whether the expression is protected by the First Amendment. For commercial speech to come within that provision, it at least must concern lawful activity and not be misleading. Next, we ask whether the asserted governmental interest is substantial. If both inquiries yield positive answers, we must determine whether the regulation directly advances the governmental interest asserted, and whether it is not more extensive than is necessary to serve that interest.

III

We now apply this four-step analysis for commercial speech to the Commission’s arguments in support of its ban on promotional advertising.

A

The Commission does not claim that the expression at issue either is inaccurate or relates to unlawful activity. Yet the New York Court of Appeals questioned whether Central Hudson’s advertising is protected commercial speech. Because appellant holds a monopoly over the sale of electricity in its service area, the state court suggested that the Commission’s order restricts no commercial speech of any worth. The court stated that advertising in a “noncompetitive market” could not improve the decision-making of consumers. [ ] The court saw no constitutional problem with barring commercial speech that it viewed as conveying little useful information.

This reasoning falls short of establishing that appellant’s advertising is not commercial speech protected by the First Amendment. Monopoly over the supply of a product provides no protection from competition with substitutes for that product. Electric utilities compete with suppliers of fuel oil and natural gas in several markets, such as those for home heating and industrial power. This Court noted the existence of interfuel competition 45 years ago. [ ] Each energy source continues to offer peculiar advantages and disadvantages that may influence consumer choice. For consumers in those competitive markets, advertising by utilities is just as valuable as advertising by unregulated firms.

Even in monopoly markets, the suppression of advertising reduces the information available for consumer decisions, and thereby defeats the purpose of the First Amendment. The New York court’s argument appears to assume that the providers of a monopoly service or product are willing to pay for wholly ineffective advertising. Most businesses—even regulated monopolies—are unlikely to underwrite promotional advertising that is of no interest or use to consumers. Indeed, a monopoly enterprise legitimately may wish to inform the public that it has developed new services or terms of doing business. A consumer may need information to aid his decision whether or not to use the monopoly service at all, or how much of the service he should purchase. In the absence of factors that would distort the decision to advertise, we may assume that the willingness of a business to promote its products reflects a belief that consumers are interested in the advertising. Since no such extraordinary conditions have been identified in this case, appellant’s monopoly position does not alter the First Amendment’s protection for its commercial speech.

B

The Commission offers two state interests as justifications for the ban on promotional advertising. The first concerns energy conservation. Any increase in demand for electricity—during peak or off-peak periods—means greater consumption of energy. The ...