Assessing Commercial Disclosure Requirements under the First Amendment 
Released: 2019-04-23T00:00:00

Introduction

Disclosure provisions that require commercial actors to convey specified information to consumers occupy an uneasy and shifting space in First Amendment jurisprudence. The First Amendment's Free Speech Clause protects the right to speak as well as the right not to speak, and at least outside the context of commercial speech, courts generally disfavor any government action that compels speech. Indeed, the Supreme Court in 1943 described the First Amendment's protection against compelled speech as a "fixed star in our constitutional constellation." Accordingly, government actions mandating speech are generally subject to strict scrutiny by courts, and will be upheld "only if the government proves that they are narrowly tailored to serve compelling state interests." However, the Court has also long accepted a variety of laws that require commercial actors to make certain disclosures to consumers, confirming that Congress can compel certain disclosures, even those involving protected speech, without running afoul of the First Amendment.

Commercial disclosure requirements have largely withstood constitutional scrutiny in part because, historically, commercial speech has received less protection under the First Amendment than other speech. The government's ability to more freely regulate commercial speech has been linked to its general authority "to regulate commercial transactions." Thus, notwithstanding the fact that commercial disclosure requirements compel speech, courts generally have not analyzed such provisions under the strict scrutiny standard. Instead, courts have often employed less rigorous standards to evaluate such provisions.

The precise nature of a court's First Amendment analysis, however, will depend on the character of the disclosure requirement at issue. In a recent decision, the Supreme Court distilled and explained its prior cases on this subject. First, the Court said that it has upheld some commercial disclosure requirements that target conduct and only incidentally burden speech. This rubric likely only applies if the disclosure provision is part of a larger scheme regulating commercial conduct. If the disclosure provision instead regulates "speech as speech," it might be subject either to intermediate scrutiny, as a government regulation of commercial speech, or to something closer to rational basis review, if the disclosure provision qualifies for review under the Supreme Court's decision in Zauderer v. Office of Disciplinary Counsel . Some of the Court's recent cases, however, have suggested that in certain circumstances, disclosure requirements may be subject to heightened scrutiny.

This report begins with a short background on how courts generally view commercial speech under the First Amendment, then reviews in more detail the possible legal frameworks for analyzing the constitutionality of commercial disclosure requirements.

First Amendment Protection of Commercial Speech

Supreme Court precedent explaining the application of the First Amendment to commercial disclosure requirements is relatively recent. The Court did not squarely hold that purely commercial speech was entitled to any protection under the First Amendment until 1976 in Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council . The Court has defined commercial speech alternately as speech that "does 'no more than propose a commercial transaction'" and as "expression related solely to the economic interests of the speaker and its audience." In Virginia Board of Pharmacy , the Court said that commercial speech was protected, but it also emphasized that the First Amendment did not prohibit all regulations of such speech. In particular, the Court said that it foresaw "no obstacle" to government regulation of "false" speech, or even of commercial speech that is only "deceptive or misleading."

In subsequent cases, the Court has explained why "regulation to assure truthfulness" is more readily allowed in the context of commercial speech, as compared with other types of speech. While the First Amendment usually protects even untruthful speech, in order to better encourage uninhibited and robust debate, the Court has recognized that regulating "for truthfulness" in the commercial arena is unlikely to "undesirably inhibit spontaneity" because commercial speech is generally less likely to be spontaneous. Instead, it is more calculated, motivated by a "commercial interest." In particular, if a particular advertisement concerns a subject in which "the public lacks sophistication" and cannot verify the claims, the Court has suggested that the government may have a freer hand to address such concerns.

Four years after Virginia Board of Pharmacy , in 1980, the Supreme Court set out the standard that generally governs a court's analysis of government restrictions on commercial speech in Central Hudson Gas & Electric Corp. v. Public Service Commission . The Court first explained that commercial speech enjoys "lesser protection" than "other constitutionally guaranteed expression." After emphasizing that First Amendment protection for commercial speech "is based on the informational function of advertising," the Court said that "there can be no constitutional objection to the suppression of commercial messages that do not accurately inform the public about lawful activity." Accordingly, the Court held that the government may prohibit "forms of communication more likely to deceive the public than to inform it" as well as "commercial speech related to illegal activity." But if the regulated "communication is neither misleading nor related to unlawful activity," the government's action is subject to intermediate scrutiny. Under Central Hudson 's intermediate standard, the government must prove that the government's interest is "substantial," and that the regulation "directly advances" that interest and is "not more extensive than is necessary to serve that interest."

The Central Hudson test continues to govern the constitutional analysis of government acts that infringe on commercial speech. However, in certain circumstances, commercial speech may lose its commercial character if "it is inextricably intertwined with otherwise fully protected speech." And more generally, some members of the Supreme Court have questioned whether commercial speech should categorically receive less protection under the First Amendment, suggesting that in at least some circumstances, infringements on commercial speech should instead be subject to strict scrutiny. Commentators have pointed out that, as a practical matter, Supreme Court decisions have increasingly struck down, rather than upheld, restrictions on commercial speech.

Also relevant to the discussion of disclosure requirements, judges and legal scholars have noted that the Court may be adjusting the role of the content neutrality doctrine with respect to commercial speech. As a general matter, if a law is "content-based," in the sense that it "target[s] speech based on its communicative content," it will be subject to strict scrutiny. The Supreme Court stated in Reed v. Town of Gilbert that a regulation is content-based if it "applies to particular speech because of the topic discussed or the idea or message expressed," if it "cannot be 'justified without reference to the content of the regulated speech,'" or if it was "adopted by the government 'because of disagreement with the message [the speech] conveys.'" Disclosure requirements are generally considered content-based, given that they require regulated parties to speak a certain message, and outside the commercial context, ordinarily trigger the application of strict scrutiny. In Central Hudson , however, the Supreme Court explained that in the context of commercial speech, "regulation of its content" is permissible. And, as commentators have pointed out, "the very category of commercial speech is a content-based category."

Nonetheless, the Court has struck down certain regulations that prohibit commercial speech solely because its content is commercial, suggesting that content neutrality might be relevant in the commercial sphere. In its 2011 decision in Sorrell v. IMS Health, Inc. , the Supreme Court considered the constitutionality of a state law prohibiting pharmacies from disclosing certain pharmacy records for marketing purposes. After observing that the law included "content- and speaker-based restrictions on the sale, disclosure, and use of" covered information, the Court concluded that the law was "designed to impose a specific, content-based burden on protected expression" because it applied specifically to marketing, a particular type of speech. Consequently, the law was subject to "heightened judicial scrutiny," notwithstanding the fact that the "burdened speech result[ed] from an economic motive" and was therefore commercial. Ultimately, however, the Court declined to say definitively whether Central Hudson or "a stricter form of judicial scrutiny" should apply because, in the Court's view, the law failed to pass constitutional muster even under Central Hudson .

As discussed in more detail below, the shifting role of content neutrality in commercial speech doctrine holds special significance for commercial disclosure requirements: these requirements are content-based because they "compel[] individuals to speak a particular message." At least one legal scholar has suggested that lower courts have read Sorrell as an expression of the Supreme Court's increasing skepticism toward restrictions on commercial speech and, since that decision, have been more likely to strike down commercial disclosure requirements. However, the Court did not expressly limit the reach of Central Hudson in Sorrell or in subsequent cases, suggesting that, at least for now, Central Hudson 's standard of review applies even when a challenged action would otherwise trigger strict scrutiny as a content-based regulation of speech. Indeed, lower courts analyzing commercial disclosure requirements usually ask whether Zauderer or Central Hudson supplies the appropriate standard of review, contemplating at most only intermediate scrutiny —even in cases decided after Sorrell .

Regulation of Speech Incidental to Regulatory Scheme Targeting Conduct

In its First Amendment jurisprudence, the Supreme Court has generally distinguished between laws that regulate conduct and laws that regulate speech. The Court has held that conduct-focused regulations will not violate the First Amendment by merely incidentally burdening speech. For instance, while the government may regulate prices, attempts to regulate "the communication of prices" implicate the First Amendment. To take another example, the Court has noted that pursuant to "a ban on race-based hiring," a regulation "directed at commerce or conduct," the government "may require employers to remove 'White Applicants Only' signs." To differentiate a regulation targeting conduct from one targeting speech, the Court generally looks to the purpose of the law, asking whether the law appears to target certain content or certain speakers. As part of this inquiry, the Court may also ask whether a regulation applies because of the communicative content of the regulated party's actions.

This distinction between speech and conduct is especially significant in the context of commercial speech, given that such speech "occurs in an area traditionally subject to government regulation." Thus, in 1978, the Supreme Court said:

"[I]t has never been deemed an abridgment of freedom of speech or press to make a course of conduct illegal merely because the conduct was in part initiated, evidenced, or carried out by means of language, either spoken, written, or printed." Numerous examples could be cited of communications that are regulated without offending the First Amendment, such as the exchange of information about securities, corporate proxy statements, the exchange of price and production information among competitors, and employers' threats of retaliation for the labor activities of employees. Each of these examples illustrates that the State does not lose its power to regulate commercial activity deemed harmful to the public whenever speech is a component of that activity.

The Court has previously "upheld regulations of professional conduct that incidentally burden speech." For example, the Court upheld an informed consent requirement in Planned Parenthood of S outheastern Pennsylvania v. Casey . The Casey challengers argued that a law requiring doctors to inform patients seeking abortions about "the nature of the procedure, the health risks of the abortion and of childbirth, and the probable gestational age of the unborn child" compelled doctors to speak in violation of the First Amendment. The Court rejected that argument, concluding that while "the physician's First Amendment rights not to speak are implicated," this was "only as part of the practice of medicine, subject to reasonable licensing and regulation by the State."

In National Institute of Family and Life Advocates (NIFLA) v. Becerra , the Supreme Court emphasized that the informed consent requirement upheld in Casey was part of the broader regulation of professional conduct: specifically, the practice of medicine. By contrast, the Court held that the disclosure requirement at issue in NIFLA , which required certain health facilities to provide clients with information about state-sponsored services, could not be upheld as "an informed-consent requirement or any other regulation of professional conduct" because it was not tied to any medical procedure. Instead, in the Court's view, the requirement "regulate[d] speech as speech," as opposed to regulating speech only incidentally.

While the Court has made clear that the First Amendment does not prohibit such incidental regulation of commercial speech, it has not articulated one overarching standard for evaluating whether such provisions are constitutionally permissible. Its decisions in this area have considered a wide variety of government actions incidentally burdening speech, and it may be that the standard varies according to the nature of the particular speech restriction evaluated. In some cases, the Court has suggested that "the First Amendment is not implicated by the enforcement" of a broader regulatory scheme where the regulated conduct does not have "a significant expressive element" or the statute does not inevitably single out "those engaged in expressive activity." In other cases where the Court has upheld a regulation that it characterized as focused on conduct rather than speech, the Court investigated the strength of the government's interest and asked whether the regulation advances that interest, suggesting that the Court subjected the regulation to some First Amendment scrutiny—albeit using a relatively relaxed standard.

The Court has never explicitly held that a commercial disclosure requirement qualifies as a constitutionally permissible incidental restriction on commercial speech. While Planned Parenthood of Southeastern Pennsylvania v. Casey did involve a disclosure requirement, the Court did not address whether the informed consent requirement involved commercial or noncommercial speech either in Casey or when discussing that requirement in NIFLA . In NIFLA , the Court held that a state law imposing disclosure requirements on clinics providing pregnancy-related services could not be characterized as a regulation that only incidentally burdened speech because the requirement was not tied to any specific medical procedures. However, the Court never expressly stated whether it considered the disclosures to consist of commercial or noncommercial speech.

Similarly, in Expressions Hair Design v. Schneiderman , the Court rejected the application of this doctrine without expressly characterizing the government action as a commercial disclosure requirement. In that case, the Court considered the constitutionality of a state law prohibiting sellers from imposing surcharges on customers who use credit cards. The Supreme Court rejected the argument that this law primarily "regulated conduct, not speech," concluding that the law did not merely regulate pricing, but regulated the communication of prices by prohibiting merchants from posting a cash price and an additional credit card surcharge. The Court then remanded the case to the lower courts to consider the First Amendment challenges in the first instance, leaving open the question of whether the provision could be characterized as a requirement for sellers to disclose an item's credit card price, rather than as a prohibition of certain speech.

As these cases suggest, the Court has seemed reluctant in recent years to uphold government actions as conduct-focused regulations that merely incidentally burden speech, especially in the context of compelled disclosure requirements. Instead, the Court has distinguished the few cases upholding government acts as incidental restrictions and subjected disclosure requirements to further scrutiny. Nonetheless, the Court has left open the possibility that commercial disclosure requirements might, in the future, qualify as permissible incidental speech regulation, if they are part of a broader regulatory scheme.

Regulation of Speech as Speech

If the government regulates "speech as speech," its actions will implicate the First Amendment's protections for freedom of speech and may trigger heightened standards of scrutiny. However, the First Amendment does not prescribe a single analysis for all government actions that potentially infringe on free speech protections. Instead, a court's review will depend on the nature of both the government action and the speech itself. This section first introduces the three possible levels of scrutiny a court might use to analyze a speech regulation and then explains their application to compelled commercial disclosures in more detail.

Three Levels of Scrutiny

In the context of commercial disclosure requirements, there are three primary categories of First Amendment analysis that may be relevant. First, as a general rule, government actions that compel speech are usually subject to strict scrutiny. To survive strict scrutiny, the government must show that the challenged action is "narrowly tailored to serve compelling state interests." Laws are unlikely to meet this "stringent standard." Second, as discussed above, government actions regulating commercial speech generally receive only intermediate scrutiny. The intermediate scrutiny standard, pursuant to Central Hudson , requires a "substantial" state interest and requires the government to prove that the law "directly advances" that interest and "is not more extensive than is necessary to serve that interest." This standard is less demanding than strict scrutiny, but laws may still be struck down under this test.

The final and most lenient category—one specific to commercial disclosure requirements—comes from a 1985 case, Zauderer v. Office of Disciplinary Counsel . In that case, the Supreme Court considered the constitutionality of state disciplinary rules regulating attorney advertising. As relevant here, the rules required advertisements referring to contingent-fee rates to disclose how the fee would be calculated. An attorney who had been disciplined by the state for violating these provisions argued that this disclosure requirement was unconstitutional because the state failed to meet the standards set out in Central Hudson . The Court acknowledged that it had previously held that prohibitions on commercial speech were subject to heightened scrutiny under Central Hudson , and that it had "held that in some instances compulsion to speak may be as violative of the First Amendment as prohibitions on speech." "But," the Court said, "[t]he interests at stake in this case are not of the same order as those" implicated in cases involving the compulsion of noncommercial speech.

Instead, the Court noted that the state's provision only involved "commercial advertising, and its prescription has taken the form of a requirement that appellant include in his advertising purely factual and uncontroversial information about the terms under which his services will be available." In this commercial context, the Court said that the attorney's "constitutionally protected interest in not providing any particular factual information in his advertising is minimal," noting that in previous cases it had stated that states might "appropriately require[]" warnings or disclaimers "in order to dissipate the possibility of consumer confusion or deception." Rather than applying heightened scrutiny, the Court held that under these circumstances, "an advertiser's rights are adequately protected as long as disclosure requirements are reasonably related to the State's interest in preventing deception of consumers."

The Zauderer Court did warn, however, that commercial disclosure requirements raise First Amendment concerns, observing that "unjustified or unduly burdensome disclosure requirements might offend the First Amendment by chilling protected commercial speech." But the Court rejected the contention that the disclosure requirement before it was unduly burdensome. Instead, the Court concluded that "[t]he State's position that it is deceptive to employ advertising that refers to contingent-fee arrangements without mentioning the client's liability for costs is reasonable enough to support a requirement that information regarding the client's liability for costs be disclosed." Although the state had not submitted evidence that clients were in fact being misled, the Court stated that "the possibility of deception" was "self-evident," making the state's "assumption that substantial numbers of potential clients would be . . . misled" regarding the terms of payment reasonable.

Applying Zauderer

Zauderer sets out the most lenient of the three standards of review discussed above, and, as a result, a commercial disclosure requirement is most likely to be upheld if it is reviewed under the rubric of that case. However, the Zauderer standard of review has been interpreted to apply only to certain types of disclosure requirements. As described by the Court and discussed above, the state regulation upheld in Zauderer required "purely factual and uncontroversial information about the terms under which [attorneys'] services [would] be available," and the provision was "reasonably related to the State's interest in preventing deception of consumers." Subsequent cases in both the Supreme Court and the lower courts have tested the extent to which this reasonableness review applies outside of the specific factual circumstances presented in Zauderer .

Supreme Court Precedent

The Supreme Court has decided whether to apply Zauderer review to government acts compelling commercial speech in three significant cases. First, in United States v. United Foods , decided in 2001, the Court invalidated a federal statute that compelled "handlers of fresh mushrooms to fund advertising for the product." United Foods thus involved a compelled subsidy, rather than a compelled disclosure. The Court concluded that these statutorily compelled subsidies for government-favored speech implicated the First Amendment and that "mandat[ing] support" from objecting parties was "contrary to . . . First Amendment principles." The Court held that Zauderer was inapplicable, noting that in the case before it, there was "no suggestion . . . that the mandatory assessments . . . are somehow necessary to make voluntary advertisements nonmisleading for consumers."

By contrast, the Court applied Zauderer in a 2010 decision, Milavetz, Gallop & Milavetz, P.A. v. United States , another case concerning attorney advertising. In that case, the Court considered an attorney's First Amendment challenges to a federal statute that required "debt relief agencies" to "make certain disclosures in their advertisements." "Debt relief agencies" was a statutorily defined term covering some attorneys who provided clients with bankruptcy assistance. Among other things, agencies advertising "bankruptcy assistance services or . . . the benefits of bankruptcy" were required to disclose that they were "a debt relief agency" that "help[ed] people file for bankruptcy relief under the Bankruptcy Code." Rejecting the challenger's contention that Central Hudson 's intermediate scrutiny governed the disclosure requirement, the Court held instead that "the less exacting scrutiny described in Zauderer " governed its review.

The Court concluded that the provision "share[d] the essential features of the rule at issue in Zauderer ." The disclosure requirement was "intended to combat the problem of inherently misleading commercial advertisements—specifically, the promise of debt relief without any reference to the possibility of filing for bankruptcy, which has inherent costs." Further, the law required the covered entities to provide "only an accurate statement identifying the advertiser's legal status and the character of the assistance provided." As in Zauderer , where the "possibility of deception" was "self-evident," the Court was not troubled by the lack of evidence that current advertisements were misleading. Instead, "evidence in the congressional record demonstrating a pattern of advertisements that hold out the promise of debt relief without alerting consumers to its potential cost" was "adequate." The Court ultimately upheld the disclosure requirement as "reasonably related to the [Government's] interest in preventing deception of consumers."

Most recently, in 2018, the Court considered the application of Zauderer in NIFLA . That case involved two distinct disclosure requirements imposed by California's Reproductive Freedom, Accountability, Comprehensive Care, and Transparency Act (FACT Act), which regulated crisis pregnancy centers. First, the FACT Act required any " licensed covered facility" to notify clients that "California has public programs that provide immediate free or low-cost access to comprehensive family planning services (including all FDA-approved methods of contraception), prenatal care, and abortion for eligible women," and give the telephone number of the local social services office. Second, any " unlicensed covered facility" had to provide notice that the "facility is not licensed as a medical facility by the State of California and has no licensed medical provider who provides or directly supervises the provision of services."

The Court first held that Zauderer 's reasonableness review did not apply to the licensed notice. In the Court's view, the notice was "not limited to 'purely factual and uncontroversial information about the terms under which . . . services will be available.'" The Court explained that the disclosure requirement "in no way relate[d] to the services that licensed clinics provide." The Court said that instead, the law "require[d] these clinics to disclose information about state -sponsored services—including abortion, anything but an 'uncontroversial' topic." The Court ultimately held that the licensed notice could not "survive even intermediate scrutiny."

Turning to the unlicensed notice, the Court determined that it did not need to "decide whether the Zauderer standard applies to the unlicensed notice" because the disclosure requirement failed scrutiny even under Zauderer . The Court said that "under Zauderer , a disclosure requirement cannot be 'unjustified or unduly burdensome.'" The Court interpreted this statement to require that the government prove it was seeking "to remedy a harm that is 'potentially real, not purely hypothetical.'" Based on the record on appeal, the Court found that California's stated interest in "ensuring that pregnant women in California know when they are getting medical care from licensed professionals" was "purely hypothetical." Further, the Court held in the alternative that "[e]ven if California had presented a nonhypothetical justification for the unlicensed notice, the FACT Act unduly burden[ed] protected speech" by requiring a government statement to be placed in all advertisements, regardless of an advertisement's length or content. The Court also expressed concern that the unlicensed notice "target[ed]" certain speakers in imposing those burdens by focusing on "facilities that primarily provide 'pregnancy-related' services."

Defining a Zauderer Disclosure

While the Supreme Court has emphasized that Zauderer 's reasonableness review is available only for certain types of compelled commercial disclosures, lower courts have disagreed on the precise circumstances required to apply Zauderer . A few requirements have emerged in the case law. First, courts agree that to qualify for review under Zauderer , a commercial disclosure requirement must compel speech that is "factual and uncontroversial." Next, the disclosure must be related to the goods or services the speaker provides. Finally, courts have disagreed on the type of government interest that may be asserted to justify a Zauderer -eligible regulation: while Zauderer itself approved of the challenged disclosure requirement after concluding that the state was permissibly seeking to "prevent[] deception of consumers," lower courts have sometimes applied Zauderer review even where the regulation is not specifically intended to prevent deception.

Before discussing the particulars of these requirements, it is worth noting that these elements are related to the Court's overarching justifications for affording the government more leeway to regulate commercial speech. The seminal Supreme Court case establishing that commercial speech is protected by the First Amendment, Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council , tied commercial speech's value to its ability to inform consumers. Critically, the Court said that governments could continue to ban false or misleading commercial speech , noting in another case that "the public and private benefits from commercial speech derive from confidence in its accuracy and reliability." It was against this background that the Court in Zauderer concluded that the provision requiring the disclosure of factual information about contingent fee arrangements did not involve First Amendment interests "of the same order as those" involved in other cases involving the compulsion of noncommercial speech. Accordingly, the state acted reasonably by prescribing that attorneys had to include in their advertising "purely factual and uncontroversial information about the terms under which [their] services [would] be available."

Factual and Uncontroversial

The first element for a commercial disclosure requirement to be eligible for Zauderer review is that the government regulation must require the disclosure of "factual and uncontroversial" information. The two parts of Zauderer's initial requirement are often evaluated as one, although courts have sometimes pointed out that "factual" and "uncontroversial," logically, connote two different things. Viewing the two words together, some have characterized the "factual and uncontroversial" requirement as distinguishing regulations that compel the disclosure of facts from those that compel individuals to state opinions or ideologies.

As discussed, the Supreme Court has said that the value of commercial speech largely lies in its ability to inform consumers. And in Zauderer , the Court emphasized that because protection for commercial speech is justified by its informational value, the attorney challenging the disclosure requirement had a "minimal" First Amendment interest "in not providing any particular factual information in his advertising." As the Second Circuit has explained:

Commercial disclosure requirements are treated differently from restrictions on commercial speech because mandated disclosure of accurate, factual, commercial information does not offend the core First Amendment values of promoting efficient exchange of information or protecting individual liberty interests. Such disclosure furthers, rather than hinders, the First Amendment goal of the discovery of truth and contributes to the efficiency of the "marketplace of ideas." Protection of the robust and free flow of accurate information is the principal First Amendment justification for protecting commercial speech, and requiring disclosure of truthful information promotes that goal. In such a case, then, less exacting scrutiny is required than where truthful, nonmisleading commercial speech is restricted.

In this vein, the Supreme Court upheld disclosure requirements regarding the nature of contingent fee arrangements in Zauderer and statements clarifying the nature of the bankruptcy-related assistance provided by debt relief agencies in Milavetz . Lower courts have approved as "factual and uncontroversial" within the meaning of Zauderer a variety of other commercial disclosure requirements, including regulations requiring the disclosure of: country-of-origin information for meat; calorie information at restaurants; the fact that products contain mercury; and textual and graphic warnings about the health risks of tobacco products.

By contrast, in a 2015 opinion, the D.C. Circuit concluded that a federal regulation requiring firms to disclose whether their products used "conflict minerals" that originated "in the Democratic Republic of the Congo or an adjoining country" could not be characterized as factual and uncontroversial. The court said that "[t]he label '[not] conflict free' is a metaphor that conveys moral responsibility for the Congo war. . . . An issuer, including an issuer who condemns the atrocities of the Congo war in the strongest terms, may disagree with that assessment of its moral responsibility. . . . By compelling an issuer to confess blood on its hands, the statute interferes with that exercise of the freedom of speech under the First Amendment."

Similarly, the Seventh Circuit, in a 2006 opinion, held that disclosure requirements in a state law regulating sexually explicit video games were not "factual and uncontroversial" as required for Zauderer to apply. In relevant part, the law required "video game retailers to place a four square-inch label with the numerals '18' on any 'sexually explicit' video game," and to post signs and provide brochures "explaining the video game rating system." The court held first that the sticker "ultimately communicates a subjective and highly controversial message—that the game's content is sexually explicit." Similarly, the panel concluded that "the message" communicated by the signs and brochures was "neither purely factual nor uncontroversial" because it was "intended to communicate that any video games in the store can be properly judged pursuant to the standards described in the . . . ratings."

As mentioned above, some courts have treated "factual" and "uncontroversial" as two distinct requirements. But at times, courts have struggled to define "controversial," standing alone. The D.C. Circuit has suggested that controversial must mean that a disclosure "communicates a message that is controversial for some reason other than dispute about simple factual accuracy." One trial court interpreting a decision of the Second Circuit suggested that "it is the nature of the regulation of compelled speech that controls, not the nature of the legislative debate that gave rise to its enactment." That court then noted that other courts had equated controversial messages with disclosures that are "opinion-based." Courts have disagreed about whether a disclosure may be characterized as "controversial" because it is "inflammatory" or "evoke[s] an emotional response." In NIFLA , the Supreme Court struck down the licensed notice after noting that the required disclosures related to "abortion, anything but an 'uncontroversial' topic," although it did not further explain when a topic is "uncontroversial" for purposes of Zauderer.

Related to Speaker's Services

Second, to be eligible for review under Zauderer , a commercial disclosure requirement must be related to the services provided by the speaker. In Zauderer itself, the Court had noted that the disputed disclosure required the attorney to provide information in his advertising "about the terms under which his services will be available." By and large, lower courts, at least prior to NIFLA, had not treated this relationship to the speaker's services as a distinct requirement. The Court in NIFLA , however, said that this was a necessary prerequisite for Zauderer review and held in that case that the notice requirement for licensed clinics at issue was not "relate[d] to the services that licensed clinics provide" because it instead provided information "about state -sponsored services."

Intended to Prevent Deception

Judges have disagreed on whether there exists a third requirement for Zauderer review. In Zauderer itself, the Supreme Court noted that the disclosure requirements at issue in that case were intended to "prevent[] deception of customers." Further, when applying Zauderer review to the bankruptcy-related disclosures at issue in Milavetz , the Court stated that the disclosures were "intended to combat the problem of inherently misleading commercial advertisements." Perhaps most notably, in United Foods , the Court explained its decision not to apply Zauderer by noting that there was "no suggestion" that the compelled subsidies at issue in that case were "somehow necessary to make voluntary advertisements nonmisleading for consumers."

The Supreme Court's decisions applying Zauderer have thus suggested that one factor in deciding whether to apply this "reasonably related" review is whether the targeted commercial speech is misleading, or whether the state's interest in requiring the disclosure is to prevent "consumer confusion or deception." Nonetheless, the Court has not squarely held that this is a necessary condition for Zauderer review, and several lower courts have rejected this position. The D.C. Circuit concluded that Zauderer 's justification characterizing "the speaker's interest in opposing forced disclosure of such information as 'minimal' seems inherently applicable beyond" the state's "interest in remedying deception." The Second Circuit has also held that Zauderer review applies more broadly. In rejecting a litigant's argument that the Supreme Court's decision in United Foods limited Zauderer only to laws intended to prevent consumer deception, the Second Circuit said that United Foods "simply distinguishes Zauderer on the basis that the compelled speech in Zauderer was necessary to prevent deception of consumers; it does not provide that all other disclosure requirements are subject to heightened scrutiny."

Zauderer Review

If a commercial disclosure requirement involves only "purely factual and uncontroversial information" about the goods or services being sold, and is therefore eligible for review under Zauderer , then it will be constitutional so long as the disclosure requirement is "reasonably related" to the government's interest. This reasonableness review is relatively lenient, especially as compared with the standards that would otherwise apply to compelled speech. But, as emphasized in NIFLA , even under Zauderer , "unjustified or unduly burdensome disclosure requirements might offend the First Amendment by chilling protected commercial speech." Lower courts had previously come to different conclusions regarding whether "unjustified or unduly burdensome" presented an additional inquiry, to be conducted separately from the reasonableness inquiry otherwise prescribed by Zauderer , or whether instead this inquiry was subsumed by the "reasonably related" inquiry. NIFLA did not entirely resolve this issue, although it did frame its analysis using the "unjustified or unduly burdensome" language rather than the language of rational basis review.

Government Interest

In Zauderer , the Supreme Court upheld the contingent fee disclosure after concluding that the requirement was "reasonably related to the State's interest in preventing deception of consumers." But as noted above, lower courts have largely concluded that Zauderer 's reasonableness review may govern the analysis even when the government asserts an interest other than preventing consumer deception. The D.C. Circuit has, so far, largely declined to articulate a clear standard for "what type of interest might suffice." That court did conclude in one case that where the government's interest was "substantial under Central Hudson 's standard," that would qualify as a sufficient interest under Zauderer . Perhaps taking a different approach, in a case upholding a disclosure requirement under Zauderer , the Second Circuit described the state's interest as "legitimate and significant."

Other than "the interest in correcting misleading or confusing commercial speech," the federal courts of appeals have upheld commercial disclosure requirements where the government asserted interests in food safety, preventing obesity, "protecting human health and the environment from mercury poisoning," and in protecting health benefit providers "from questionable . . . business practices." By contrast, the Second Circuit held in International Dairy Foods Association v. Amestoy that "consumer curiosity alone is not a strong enough state interest to sustain the compulsion of even an accurate, factual statement."

In NIFLA , the Supreme Court indicated that under Zauderer , the government must assert an interest that is "more than 'purely hypothetical.'" As discussed above, the State of California's justification for the notice requiring unlicensed clinics to disclose that they were unlicensed was to "ensur[e] that pregnant women in California know when they are getting medical care from licensed professionals." The Court concluded that the state had "point[ed] to nothing suggesting that pregnant women do not already know that the covered facilities are staffed by unlicensed medical professionals." NIFLA 's requirement that the government provide evidence supporting an asserted interest differs from the Court's approach in Zauderer itself and in Milavetz . In both Zauderer and Milavetz , the Court rejected arguments that the government had failed to present sufficient evidence to support its interest in the disclosure requirement, concluding that in both of those cases, "the possibility of deception" in the regulated advertisements was "self-evident." Although the standard is not entirely clear, it is possible that in future cases the Court could conclude again that a particular advertisement is so obviously deceptive that the government does not need to submit significant evidence proving that the advertisements are misleading.

"Reasonably Related"

If the government has asserted a sufficient interest, then under Zauderer , it needs to show only that the disputed disclosure requirement is "reasonably related" to that interest. Describing the Supreme Court's decision in Zauderer , the D.C. Circuit has said that the "evidentiary parsing" required by more rigorous First Amendment tests "is hardly necessary when the government uses a disclosure mandate to achieve a goal of informing consumers about a particular product trait, assuming of course that the reason for informing consumers qualifies as an adequate interest." That court further elaborated that "[t]he self-evident tendency of a disclosure mandate to assure that recipients get the mandated information may in part explain why, where that is the goal, many such mandates have persisted for decades without anyone questioning their constitutionality." Similarly, the Second Circuit has observed in one case that "while the First Amendment precludes the government from restricting commercial speech without showing that 'the harms it recites are real and that its restriction will in fact alleviate them to a material degree,'" the First Amendment "does not demand 'evidence or empirical data' to demonstrate the rationality of mandated disclosures in the commercial context."

Notwithstanding the suggestion that little evidence is required to show that a disclosure requirement is reasonably related to an appropriate government interest, lower courts have often relied on the government's evidence supporting the disputed requirement when they uphold the provision. This showing may be easiest where the government asserts an interest in preventing misleading speech, given "the self-evident tendency of a disclosure mandate to assure that recipients get the mandated information." Additionally, courts have sometimes held that commercial disclosure requirements fail even this lenient test for rationality, particularly where the government has asserted an interest other than preventing consumer confusion. For example, in National Association of Manufacturers v. SEC , the D.C. Circuit held that a provision requiring companies to disclose whether their products were "conflict free" violated the First Amendment. In defending this rule, the government asserted an interest in "ameliorat[ing] the humanitarian crisis in the [Democratic Republic of the Congo (DRC)]." In the court's view, however, the government had failed to demonstrate that its measure would achieve this interest. The D.C. Circuit observed that the government had "offered little substance beyond" statements by political officials to support "the effectiveness of the measure." The court assumed that the government's theory "must be that the forced disclosure regime will [lead to boycotts that] decrease the revenue of armed groups in the DRC and their loss of revenue will end or at least diminish the humanitarian crisis there." But in the view of the court, this theory could not justify the regulation, as the idea was "entirely unproven and rest[ed] on pure speculation."

To take another example, the Third Circuit struck down a commercial disclosure requirement concerning attorney advertising in Dwyer v. Cappell . In that case, an attorney challenged a state regulation that prohibited attorneys from using quotations from judicial opinions in their advertising unless they presented "the full text" of those opinions. The state argued that such quotations were "inherently misleading because laypersons . . . would understand them to be judicial endorsements." The court, however, said that even assuming "that excerpts of judicial opinions are potentially misleading to some persons," the state had failed "to explain how [an attorney's] providing a complete judicial opinion somehow dispels this assumed threat of deception." The court reasoned that "providing a full judicial opinion does not reveal to a potential client that an excerpt of the same opinion is not an endorsement." Additionally, the court held that the disputed requirement was "unduly burdensome," as it "effectively rules out the possibility that [an attorney] can advertise with even an accurately quoted excerpt of a judicial statement about his abilities." And in the view of the Third Circuit, "that type of restriction—an outright ban on advertising with judicial excerpts—would properly be analyzed under the heightened Central Hudson standard of scrutiny."

As Dwyer suggests, courts may strike down disclosure requirements under Zauderer if the requirement is "unduly burdensome." In NIFLA , the Supreme Court held that the unlicensed notice was likely unconstitutional because it "unduly burden[ed] protected speech," noting that it applied to all advertisements for these licensed facilities, regardless of their content. In particular, the majority opinion highlighted one hypothetical discussed at oral argument, noting that "a billboard for an unlicensed facility that says 'Choose Life' would have to surround that two-word statement with a 29-word statement from the government, in as many as 13 different languages." In this instance, the Court said, the notice would "drown[] out the facility's own message," and therefore be unduly burdensome.

Heightened Standards: Central Hudson and Strict Scrutiny

If a commercial disclosure requirement is not a factual and uncontroversial disclosure related to the speaker's goods or services under Zauderer , courts will likely apply a heightened standard of review. Under prevailing Supreme Court precedent, if a provision does not qualify for Zauderer 's reasonableness review, a court may review the challenged regulation under Central Hudson . As discussed above, Central Hudson established the general standard of review for government restrictions on commercial speech. The Supreme Court described "a four-part analysis:"

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.

The Court has described the Central Hudson test as "intermediate" scrutiny. If a disclosure requirement affects commercial speech but does not qualify for Zauderer review, courts have generally held that Central Hudson 's intermediate scrutiny applies.

However, courts have sometimes suggested that some higher standard of review, more stringent than Central Hudson 's intermediate scrutiny, should apply to commercial disclosure requirements that do not qualify for review under Zauderer . Some lower court judges have concluded that because such disclosures compel particular speech and are by definition not content-neutral, they should be evaluated under strict scrutiny. In contrast to Central Hudson review, which requires the government to show that a law is "not more extensive than is necessary to serve" a "substantial" interest, strict scrutiny "requires the Government to prove that the restriction furthers a compelling interest and is narrowly tailored to achieve that interest."

The Supreme Court has suggested—but not squarely held—that at least some types of commercial disclosure requirements might be subject to some form of scrutiny more strict than Central Hudson . In NIFLA , the Supreme Court considered the constitutionality of state provisions requiring crisis pregnancy centers to make certain disclosures to clients and in their advertising. The Court suggested that the provision requiring licensed facilities to disseminate notices about state-provided services might be subject to strict scrutiny as a content-based regulation of speech, but concluded that it did not need to resolve that question because the notice could not "survive even intermediate scrutiny."

Significantly, however, the NIFLA Court never described the licensed notice as involving commercial speech. In the decision below, the Ninth Circuit had held that the notice should not be subject to strict scrutiny because it regulated "professional speech." That court, like other federal courts of appeals, had recognized "speech that occurs between professionals and their clients in the context of their professional relationship" "as a separate category of speech that is subject to different rules." The Ninth Circuit had concluded that speech that was part of the practice of a profession could be regulated by the state, subject only to intermediate scrutiny. The Court rejected this idea, saying that the First Amendment does not encompass a tradition of lower scrutiny "for a category called 'professional speech.'"

Ultimately, the Court said that it saw no "persuasive reason" to treat "professional speech as a unique category that is exempt from ordinary First Amendment principles." To the extent that "professional speech" could be seen to overlap with commercial speech, this sentence could be read to suggest that commercial speech should also be subject to "ordinary First Amendment principles." This suggestion would seem to conflict with prior cases saying that commercial speech occupies a "subordinate position in the scale of First Amendment values." Although the NIFLA Court implicitly suggested that disclosure requirements for professionals might constitute commercial speech by evaluating the FACT Act's requirements under Zauderer and Central Hudson , it never expressly clarified whether "professional speech" overlaps with commercial speech.

Because the FACT Act's requirements applied outside of the advertising context, it may be open to some debate whether these licensed notices involved commercial speech. The unlicensed notice challenged in NIFLA was required to be included in advertising, and advertisements are "classic examples of commercial speech." But the unlicensed notice was also required to be posted on-site, and the state required licensed facilities to post disclosures on-site or to otherwise distribute the notice to clients directly. Further, in a similar context, at least one federal court of appeals concluded that a Baltimore ordinance requiring certain pregnancy centers to make specified disclosures regulated noncommercial speech. That court said the pregnancy centers were not motivated by economic interest or proposing a commercial transaction, but were instead "provid[ing] free information about pregnancy, abortion, and birth control as informed by a religious and political belief." If the licensed disclosures in NIFLA did not regulate commercial speech, then it would be unsurprising that the Court would consider applying strict scrutiny rather than Central Hudson .

Others, however, have pointed out that crisis pregnancy centers, even if they do not charge fees, operate "in a marketplace where other providers generally charge fees," and argued that these centers "are engaged in commercial activity by providing physical and mental health services to pregnant women." And more generally, some have pointed out the similarities between "professional" and commercial speech. The fact that the NIFLA Court did not directly address the relationship between professional and commercial speech may suggest that heightened scrutiny may be necessary with respect to some commercial disclosure requirements. Specifically, the Court did not cite the commercial speech doctrine as "a persuasive reason for treating professional speech as a unique category that is exempt from ordinary First Amendment principles." At least one commentator has argued that the Court's failure to mention Central Hudson —"not even to dismiss it as . . . another inapposite exception to Reed 's general rule [of strict scrutiny]"—may suggest that the Court is seeking to limit Central Hudson 's holding that commercial speech may be more freely regulated than other speech under the First Amendment.

Although NIFLA may not have expressly altered the framework used to evaluate commercial disclosure requirements, it may nonetheless signal that the Supreme Court will view them with more skepticism in the future. The majority opinion, authored by Justice Thomas, emphasized that "[t]he dangers associated with content-based regulations of speech are also present in the context of professional speech." Even if "professional speech" is not coterminous with "commercial speech," this statement does seem to suggest that the Court believes content neutrality principles are relevant in the commercial sphere. In dissent, Justice Breyer, viewing the majority opinion as adopting such a view, argued that the majority's approach, "if taken literally, could radically change prior law, perhaps placing much securities law or consumer protection law at constitutional risk." He pointed out that "[v]irtually every disclosure law could be considered 'content based,' for virtually every disclosure law requires individuals 'to speak a particular message.'"

In response to Justice Breyer, the NIFLA majority stated that it did not "question the legality of health and safety warnings long considered permissible, or purely factual and uncontroversial disclosures about commercial products." This view echoed the Court's prior statement that "[p]urely commercial speech is more susceptible to compelled disclosure requirements." Following the Court's 2010 decision in Reed , in which the Court articulated a more "precise test to determine whether speech regulations are content based," many lower courts had rejected the idea that content-based requirements affecting only commercial speech should be subject to strict scrutiny, even if they otherwise discriminated based on content under Reed . But because NIFLA appeared to suggest that content neutrality is relevant in the commercial sphere, it seems reasonable to think that lower courts may now be more likely to conclude that strict scrutiny could apply to content-based commercial disclosure requirements. This would be consistent with what some commentators have described as the Court's increasingly heightened scrutiny of restrictions on commercial speech.

For now, though, Central Hudson generally continues to govern the analysis of government actions affecting lawful, non-misleading commercial speech, including commercial disclosure requirements that do not qualify for Zauderer review. As discussed, Central Hudson requires that the government prove that its interest is "substantial," and that the regulation "directly advances" that interest and is "not more extensive than is necessary to serve that interest." Government regulations are more likely to fail this more rigorous standard than the Zauderer reasonableness standard, often because a court believes there is some less restrictive means available for the government to achieve its goals. Courts will require more "evidence of a measure's effectiveness" under Central Hudson , as compared to Zauderer .

However, Central Hudson is more forgiving than strict scrutiny, and courts do uphold government actions infringing on commercial speech under Central Hudson . For example, in Spirit Airlines v. Department of Transportation , the D.C. Circuit concluded that a federal regulation governing the way that airlines must display flight prices "satisfie[d] . . . the Central Hudson test." In the court's view, "[t]he government interest—ensuring the accuracy of commercial information in the marketplace—[was] clearly and directly advanced by a regulation requiring that the total, final price be the most prominent" price displayed. And the regulation was "reasonably tailored to accomplish that end" because the rule "simply regulate[d] the manner of disclosure."

Government actions are unlikely to be upheld if a court applies strict scrutiny. Nonetheless, some scholars have argued that many disclosure requirements might survive strict scrutiny, and the Supreme Court has, in rare instances, said that the government may "directly regulate speech to address extraordinary problems, where its regulations are appropriately tailored to resolve those problems without imposing an unnecessarily great restriction on speech." It is possible that a court could hold that the government has a compelling interest in protecting consumers, for example, and that particular disclosures are narrowly tailored to meet that interest. The Supreme Court has long emphasized that the government can regulate commercial activity "deemed harmful to the public." But a court would likely require more proof from the government under strict scrutiny and likely would not simply accept the government's allegations as "self-evident" under such review.

Considerations for Congress

Congress has enacted a wide variety of disclosure requirements, many of which arguably compel commercial speech. For example, the Securities and Exchange Act of 1934 sets out disclosure requirements for registering securities. Federal law, among a host of other food labeling requirements, requires "bioengineered food" to bear a label disclosing that the food is bioengineered. Direct-to-consumer advertisements for prescription drugs must contain a series of disclosures, including the drug's name and side effects. Certain appliances must contain labels disclosing information about their energy efficiency. Bills in the 115 th and 116 th Congresses have proposed additional disclosure requirements, including a bill that would require large online platforms to disclose any studies conducted on users for the purposes of promoting engagement, and a bill that would require public companies to disclose climate-related risks.

Recent Supreme Court precedent suggests that the Court is more closely reviewing commercial disclosure requirements, perhaps moving away from a more deferential treatment of such provisions. In NIFLA , the Court held that a disclosure requirement was likely unconstitutional under Zauderer because the government had not presented sufficient evidence to justify the measure —even though in other cases, the Court had rejected similar challenges to commercial disclosure requirements, saying that the government did not need to present more evidence because the harm it sought to remedy was "self-evident." Further, the Court has recently suggested that if a law regulating commercial speech discriminates on the basis of content—as all disclosure requirements seemingly do —then this content discrimination might subject the law to heightened scrutiny. If the Court further embraces this view, it could be a marked departure from its opinions holding that commercial speech could be regulated on the basis of its content, so long as the government's justification for the content discrimination were sufficiently related to its legitimate interests in regulating the speech.

In concurring and dissenting opinions that have been joined by other Justices, Justice Breyer has argued that insofar as the Court's recent decisions suggest that commercial disclosure requirements should be subject to heightened scrutiny, they are inconsistent with prior case law and are not a proper application of the First Amendment. The Supreme Court said in NIFLA 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." And lower courts have frequently upheld commercial disclosure requirements, perhaps suggesting that disclosures of the kind cited by Justice Breyer are not in danger of wholesale invalidation under the First Amendment. However, the majority opinion in NIFLA did not clarify what kind of disclosures it would consider permissible, and its opinion made clear that disclosure requirements should be scrutinized in light of the speakers they cover and the burdens they pose. Moreover, although the NIFLA Court said that it was not questioning these disclosures' "legality," it left open the possibility that these disclosure should nonetheless be subject to heightened scrutiny. This statement may mean only that the Court believes that many commercial disclosure requirements would meet a higher standard of scrutiny.

At least one federal appellate court seems to have taken NIFLA as a signal that lower courts should more closely scrutinize commercial disclosure requirements. In American Beverage Association v. City & County of San Francisco , the Ninth Circuit, sitting en banc , relied on NIFLA to reverse a prior decision that had upheld an ordinance requiring "health warnings on advertisements for certain sugar-sweetened beverages." While a panel of judges had previously concluded that the disclosure requirement was constitutional under Zauderer , the full Ninth Circuit, reviewing that decision, said: " NIFLA requires us to reexamine how we approach a First Amendment claim concerning compelled speech." Namely, the court held that, in light of NIFLA , the health warnings were likely unjustified and unduly burdensome under Zauderer , noting that the regulation required the warnings to "occupy at least 20% of those products' labels or advertisements"—but that the record showed that "a smaller warning—half the size—would accomplish [the government's] stated goals." As such, the court held that the warnings violated the First Amendment "by chilling protected speech."

Accordingly, when Congress and federal agencies consider adopting new commercial disclosure requirements, or reauthorizing old ones, it may be wise to develop a record with more evidence demonstrating a need for the regulation. Under any level of scrutiny, courts will examine the government's asserted purpose for the legislation, as well as how closely tailored the disclosure requirement is to achieve that purpose. Under Zauderer , particularly in light of NIFLA , courts may ask for evidence to support the government's claim that the regulated speech is misleading or that the government has some other interest in regulating that speech, and will likely scrutinize the disclosure requirement to make sure it is not unduly burdensome. Under intermediate scrutiny or strict scrutiny, a court may also ask whether the government considered alternative policies that would be less restrictive of speech, examining more closely the government's justifications for choosing a disclosure requirement.