Opinion ID: 201623
Heading Depth: 2
Heading Rank: 2

Heading: Central Hudson test

Text: 17 The parties agree that this case involves commercial speech, which is defined as expression related solely to the economic interests of the speaker and its audience. Central Hudson, 447 U.S. at 561, 100 S.Ct. 2343. Although commercial speech is generally entitled to less protection under the First Amendment than other forms of speech, it nonetheless has a claim to safekeeping from unwarranted government intrusion. See Va. State Bd. of Pharmacy v. Va. Citizens Consumer Council, 425 U.S. 748, 758-70, 96 S.Ct. 1817, 48 L.Ed.2d 346 (1976). Article 24 of the Regulation clearly represents such an intrusion as to El Día, and, as we will explain, as to its nonresident client/advertisers because it fails to meet the second and third prongs of the Central Hudson test.
18 In order to satisfy the second prong of Central Hudson, a governmental body seeking to sustain a restriction on commercial speech must demonstrate that the harms it recites are real and that its restrictions will in fact alleviate them to a material degree. Edenfield v. Fane, 507 U.S. 761, 770-71, 113 S.Ct. 1792, 123 L.Ed.2d 543 (1993). [M]ere speculation or conjecture is insufficient to fulfill these requirements. Id. at 770. 19 We agree with the district court that DACO fails to meet this standard: The record lacks evidence that support the allegations that the harms Article 24 is intended to remedy are real, and the bond requirement provides only ineffective and remote support for DACO's asserted purpose of enforcing the consumer protections contained in the Regulation. El Día, 313 F.Supp.2d at 61. 20
21 DACO alleges that the harm Article 24 prevents is difficulty enforcing the Regulation's consumer protections against nonresident advertisers. Article 24 addresses this harm, according to DACO, by providing a mechanism for in personam jurisdiction over, and funds for the payment of fines or damages charged to, advertisers who often lack assets in Puerto Rico. But DACO has failed to provide any evidence, other than conclusory assertions, that nonresident advertisers pose a greater enforcement problem than resident advertisers, who are not subject to the bond requirement. Neither has it justified the distinction drawn in Article 24(B) between resident intermediaries, who must act as guarantors of their advertisers' compliance with the bond requirement, and nonresident intermediaries, who are not obliged to act as guarantors. 7 22 DACO argues that it need not provide empirical data to meet the second prong of Central Hudson, but rather that speech restrictions can be justified solely on history, consensus, and 'simple common sense.' Florida Bar v. Went For It, Inc., 515 U.S. 618, 628, 115 S.Ct. 2371, 132 L.Ed.2d 541 (1995) (quoting Burson v. Freeman, 504 U.S. 191, 211, 112 S.Ct. 1846, 119 L.Ed.2d 5 (1992)). The Supreme Court recognized in Florida Bar, however, that the government's burden is not met when a State offer[s] no evidence or anecdotes in support of its restriction. . . . Id. (emphasis in original) (explaining finding of First Amendment violation in Edenfield ). That is exactly the case here. 23 The only available evidence concerning the Regulation's enforcement directly contradicts DACO's assertion that it might have difficulty enforcing the Regulation against nonresident advertisers. DACO estimates that it imposed approximately 355 fines against resident advertisers for violations of the Regulation between March and July 2003, although it was able to collect on only 318. See Defendant's Answers to Plaintiff's Supplementary Set of Interrogatories at 3, El Día, Inc. (No. 00-2631). In contrast, there was no evidence of difficulty enforcing fines levied against nonresident advertisers. DACO has no record of any resolution or adjudication requiring execution of a bond posted by a nonresident advertiser or a resident intermediary. See Defendant's Answers to Plaintiff's First Set of Interrogatories at 5-6, El Día, Inc. (No. 00-2631). Plainly, DACO has failed to demonstrate that the harm it seeks to avoid with Article 24 is real. 24
25 A regulation may not be sustained if it provides only ineffective or remote support for the government's purpose. Central Hudson, 447 U.S. at 564, 100 S.Ct. 2343. Thus, even if there were a documented enforcement problem with regard to nonresident advertisers, DACO would still have to demonstrate that Article 24 has a material effect thereon. 26 Aside from Article 24, the Regulation is facially applicable to both resident and nonresident advertisers: it is aimed at protecting Puerto Rico consumers from false advertisements and illicit merchandising practices regardless of who engages in such actions or where they originate. Nevertheless, it is mostly unenforced against a large segment of the nonresident advertising trade, and the resident intermediaries therefor. DACO was able to produce records of only seven entities having obtained bonds in compliance with Article 24, see Defendant's Answers to Plaintiff's First Set of Interrogatories, exhibits 1-7, and it has not alleged that any additional, unrecorded bonds exist. Countless other nonresident advertisers reach Puerto Rico residents every day, without having posted a bond, through media ranging from newspapers to satellite television to direct mail. DACO, however, could identify records of only three fines having been imposed for violations of Article 24, two of which were against El Día. 8 See Defendant's Answers to Plaintiff's Supplementary Set of Interrogatories at 2. 27 There is no evidence that DACO has attempted to enforce the Regulation, including the provisions of Article 24, against the vast majority of newspapers, magazines, television broadcasts, internet announcements, satellite communications, and other varieties of information media with access to consumers in Puerto Rico. From all of these sources, the Puerto Rican consumer is subjected to, and in many cases is the intended target of, commercial messages directly from nonresident advertisers. Many of these messages are broadcast within Puerto Rico via nonresident intermediaries, 9 to whom Article 24(B)'s resident intermediary requirements do not apply and against whom Article 24(D)'s prohibition on broadcasting has not been enforced. Meanwhile, DACO issued well over three hundred fines for violating the Regulation to resident advertisers in a single four-month period of 2003. 28 Thus, Article 24 imposes no restraint on the resident advertisers who are the principal violators of the Regulation, nor does it improve DACO's apparently limited ability to enforce the fines levied against resident violators. Neither has Article 24 restrained nonresident intermediaries, through which myriad advertisements reach Puerto Rico residents every day. Finally, the bulk of incoming advertising traffic remains de facto unsupervised due to DACO's failure to enforce compliance with Article 24's bond requirement. Article 24, therefore, has no material effect on DACO's ability to enforce the other provisions of the Regulation.
29 Although we are dealing with commercial speech, the First Amendment mandates that speech restrictions be narrowly drawn. Central Hudson, 447 U.S. at 565, 100 S.Ct. 2343 (internal quotation marks omitted). The regulatory technique may extend only as far as the interest it serves. Id. The bond requirement has a direct discriminatory effect against nonresident advertisers, who must have the resources to obtain a $25,000 bond before they can engage in commercial speech in Puerto Rico. In effect, it penalizes protected commercial speech preemptively, on the possibility that some commercial speech may be subject to proscription under the Regulation. Moreover, Article 24 places a heavy burden on resident intermediaries, who must either post a $25,000 bond or forego advertising revenue from those nonresidents unwilling or unable to supply the bond. Resident intermediaries like El Día are forced, thereby, to serve as guarantors of their nonresident advertisers' compliance with the substantive requirements of the Regulation. 30 DACO makes no effort, however, to explain why less drastic methods of ensuring nonresident advertisers' compliance with the Regulation are not available. It argues only that the narrow tailoring prong of Central Hudson requires only a reasonable fit between the restriction and the government interest it serves. See Bd. of Trustees v. Fox, 492 U.S. 469, 480, 109 S.Ct. 3028, 106 L.Ed.2d 388 (1989). A reasonable fit, however, represents not necessarily the single best disposition but one whose scope is in proportion to the interest served. Id. (internal quotation marks omitted). In the instant case, given the speculative nature of, and Article 24's failure to have an effect on, the purported nonresident enforcement problem, the net is cast too broadly for such a small catch.