En banc D.C. Circuit upholds USDA country-of-origin labeling rule

July 30

Yesterday, in American Meat Institute v. USDA, the U.S. Court of Appeals for the D.C. Circuit, sitting en banc, upheld the constitutionality of USDA regulations mandating detailed country-of-origin labeling for meat products. Specifically, the Court held 9-2 that compelled disclosure requirements should be evaluated under the less exacting scrutiny provided by Zauderer v. Office of Disciplinary Counsel, even when such requirements are not “reasonably related to the State’s interest in preventing deception of consumers,” as was the case in Zauderer.  The alternative would have been to evaluate the USDA’s labeling rules under the Central Hudson test that is generally applied in the commercial speech context. Judge Williams wrote the opinion for the court.  Judge Rogers concurred in part, and Judge Kavanaugh concurred in the judgment.  Justices Henderson and Brown each dissented.

In its AMI decision, I think the D.C. Circuit unnecessarily confused an important (and under-developed) area of First Amendment law.  As I explained in this prior post (and explain in more detail in an as-yet-unfinished paper), Zauderer and Central Hudson are fully compatible with one another.

Zauderer, properly understood, fits comfortably within the Central Hudson framework.  First, recall (as the court has reiterated time and again) that the First Amendment provides equivalent protection for both the right to speak and the right not to speak.  Thus there is no reason to assume that mandatory disclosures get a pass, even in the commercial context.  Next, recall that under Central Hudson, commercial speech is only eligible for heightened protection if the speech concerns lawful activity and is not misleading.  Thus the Zauderer court’s holding that mandatory disclosures will be readily upheld so long as they are “reasonably related to the State’s interest in preventing deception of consumers,” was nothing new.  Rather it was a straightforward application of Central Hudson (even if the Zauderer Court did not say as much).  To reiterate: misleading speech does not receive Central Hudson‘s enhanced protection, so mandatory disclosure requirements related to the government’s interest in preventing deception need not satisfy Central Hudson‘s requirement of a substantial governmental interest. . . .

Misleading speech is not entitled to Central Hudson‘s protection at all.  Further, even ifpotentially misleading speech were to be protected by Central Hudson —say, speech that has the potential to mislead some consumers in some contexts – the government clearly has a substantial governmental interest in preventing consumer deception or confusion.   Thus applying Central Hudson does not prevent the government from adopting all manner of rules designed to ensure consumers are not defrauded or unduly confused by commercial messages.

Zauderer emphasizes that a commercial speaker only has a “minimal” interest in refusing to disclosure “factual and noncontroversial” information about the product or service being offered, suggesting that mandatory disclosure laws are often preferable to regulations that limit or suppress commercial speech. This is true, and is also accounted for under Central Hudson. Provided that the speech at issue concerns lawful activity and is not misleading, Central Hudson requires the government to assert a substantial interest in regulating speech and, assuming such an interest can be demonstrated, requires that the regulation at issue directly advance the asserted interest and not be more extensive than necessary to advance that interest.  In most cases where a compelled disclosure requirement is at issue, the substantial interest prong will be most important, as where the government has a substantial interest in informing consumers, the mandatory disclosure of factual information will directly advance that interest and do so in the least restrictive way. (The only exceptions to this will be when the government mandates something more than simple factual disclosures, such as with graphic cigarette labels, or the disclosed information is politically charged, as in the SEC’s conflicts minerals disclosure rule I discussed here.)

The D.C. Circuit’s AMI decision actually illustrates the point that Central Hudson and Zauderer are easy to reconcile.  While holding that interests other than preventing consumer deception can trigger less-rigorous scrutiny under Zauderer, the court’s analysis suggested the USDA’s rules would have satisfied Central Hudson.  This is because, according to the majority opinion by Judge Williams, the USDA was able to assert a substantial interest and the disclosure requirements. Once the court reached this conclusion (a conclusion I recognize some could dispute), the sorts of disclosure mandated here easily passes muster as all that USDA is requiring is the disclosure of straightforward factual information.

As I wrote in this post about the D.C. Circuit’s decision striking down the SEC’s conflict minerals rule:

Requiring government disclosure requirements to meet the standard commercial speech test of Central Hudson does not threaten most disclosure requirements.  Under Central Hudson, the government must identify a substantial governmental interest in order to regulate commercial speech.  Disclosure or labeling requirements that serve to prevent consumer deception or prevent unwitting harms easily meet this requirement.  Indeed, Central Hudson makes clear that commercial speech is only protected if it concerns lawful activity and is non-deceptive. So understood, most SEC financial disclosure rules, FDA and USDA food labeling requirements, consumer safety warnings, and the like are likely constitutional.  The sorts of disclosure requirements put at risk by such a rule are only those, like conflicts mineral disclosure, that seek to force producers or retailers to stigmatize products so as to discourage consumers from buying them.  If the government wants to influence consumer behavior in this way, it can do so with its own speech — such as through advertising campaigns and consumer education.

Thus, for me, the real question in these sorts of cases is whether the government can identify a substantial interest beyond consumer curiosity or a generically asserted consumer “right to know.”  If that threshold is met, straightforward and factual disclosure requirements post little problem.  And why is that threshold important? Because, as I wrote before:

forcing the disclosure of facts about goods or services is rarely a value-neutral act.  There are always a near-infinite number of facts about a good or service that may be of interest to consumers, and yet there is only limited space to communicate such information.  Label space is limited, as is the attention span of consumers.  There can be too little information about a product, but also too much.  When the government mandates the disclosure of specific information it is declaring that such information is more important — and is entitled to greater consideration — than other potentially relevant information about the good or service.  So, for instance, when the government mandates conflict mineral disclosure, it is suggesting that consumers should care more about this than, say, the sustainability of the products, the source of labor used, the company’s environmental record or charitable giving, and so on.  This is not a neutral act, and thus should be subject to constitutional scrutiny.

To say that consumer curiosity, by itself, is enough to justify mandated labeling or disclosure is to greenlight mandatory disclosures on any subject under the sun. After all, if a statute or regulation mandates disclosure, this is itself evidence that somebody, somewhere, would like disclosure.  At the very least the government should have to identify a more substantial interest — such as protecting consumers or even correcting a true “market failure — than a generic “right to know.”

Some wonder whether the AMI decision casts a cloud over the D.C. Circuit’s decision striking down the SEC’s conflicts mineral disclosure rule. While I expect the panel in that case will reconsider its opinion in light of AMI (as the SEC will surely ask it to do, if it has not already) I don’t think AMI need change that result.  There is a long history of imposing country-of-origin disclosure requirements and, for reasons noted above, the conflicts mineral disclosure rule is not a straightforward requirement that producers disclose material facts to consumers, and should be readily distinguished from the country-of-origin labels at issue here.  Thus I don’t believe AMI should alter the result in NAM v. SEC, but we’ll have to see.


Jonathan H. Adler teaches courses in constitutional, administrative, and environmental law at the Case Western University School of Law, where he is the inaugural Johan Verheij Memorial Professor of Law and Director of the Center for Business Law and Regulation.
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