Opinion ID: 176237
Heading Depth: 4
Heading Rank: 2

Heading: Evaluation of the disclosure requirement under Zauderer

Text: Under Zauderer, the Rule's disclosure requirement for production claims must be reasonably related to the State's interest in preventing deception of consumers and cannot be unjustified or unduly burdensome. Zauderer, 471 U.S. at 651, 105 S.Ct. 2265. The district court concluded that the Rule was in compliance with the Zauderer standard because the production claim that this milk is from cows not supplemented with rbST, despite its accuracy, nevertheless implies that those processors that do use rbST have an inferior or unsafe product or that it is compositionally different. Ohio's Rule, the court continued, strikes the right balance between preventing misleading information and providing enough information for consumers to make an informed choice. The Processors first contend that the State failed to show that their production claims are misleading. But the State's burden of providing such evidence is more relaxed where disclosure requirements are at issue (as opposed to a ban on commercial speech) and the possibility of deception is . . . self-evident. See Zauderer, 471 U.S. at 652, 105 S.Ct. 2265 (holding that, to justify the state's imposition of a disclosure requirement for attorney advertising, the state need not conduct a survey of the public before it may determine that the advertisement had a tendency to mislead (alterations, citation, and ellipsis omitted)). The Supreme Court rejected a similar argument made by those challenging the revised Bankruptcy Code in Milavetz, noting Zauderer's holding that a survey of the public was unnecessary. Milavetz, 130 S.Ct. at 1340. It instead determined that [e]vidence in the congressional record demonstrating a pattern of [misleading] advertisements . . . is adequate to establish that the likelihood of deception in this case is hardly a speculative one. Id. (citation and internal quotation marks omitted). Although the FDA's Interim Guidance and the consumer comments relied on by the State constitute weak evidence of deception, they at least demonstrate that the risk of deception in this case is not speculative. At a minimum, the Guidance supports the conclusion that production claims can be misleading and the comments show that there is general confusion among some Ohio consumers regarding what substances are (or are not) in the milk they purchase. The district court accordingly did not err in concluding that the Rule's disclosure requirement is reasonably related to thwarting that risk. Notwithstanding our conclusion that the Rule's disclosure requirement is reasonably related to the State's interest in preventing consumer deception, we find there to be no rational basis between this concern and the contiguous requirement of such a disclosure. The Rule stipulates that disclosures must be in the same label panel, in exactly the same font, style, case, and color and at least half the size (but no smaller than seven point font) as the production claim. Ohio Admin. Code § 901:11-8-01(B)(2). A disclosure also must be contiguous to the production claim. The font, style, case, and color requirements for the disclosure's text have a self-evident rational basis. As Director Boggs testified in his deposition, these provisions are in place to prevent marketers from rendering the disclosure unreadable by using a miniscule font or washing the color out. These provisions thus prevent label designers from hiding the disclosure by manipulating the text. In contrast, we find no rational basis in the record for the Rule's contiguity requirement. The Processors specifically take issue with this provision, noting that it prevents them from linking the production claim to the disclosure through the use of an asterisk. Director Boggs testified in his deposition that the ODA decided against the use of an asterisk based on his anecdotal experience of talking to consumers in grocery stores. According to Director Boggs, these consumers informed him that oftentimes it's hard to understand labels, especially when the print is so small. But these observations reveal nothing about whether the use of an asterisk to link information was effective in conveying a disclosure to consumers. Nor did Director Boggs point to any other basis for his belief. He instead asserted, without any supporting evidence, that he had been aware of [asterisks being a problem in conveying information] for a long time. In light of the paucity of evidence supporting the Rule's contiguity requirement, we conclude that it has no demonstrable connection to ensuring that consumers are not misled. We therefore hold that it lacks a rational basis. See Nat'l Elec. Mfrs. Ass'n v. Sorrell, 272 F.3d 104, 115 (2d Cir.2001) (The [First] Amendment is satisfied . . . by a rational connection between the purpose of a commercial disclosure requirement and the means employed to realize that purpose.). Finally, the Processors challenge the Rule's disclosure requirement as being unduly burdensome. They contend that it hinders their ability to convey their message regarding rbST as well as their ability to operate in interstate commerce. But the Processors' concerns regarding the ability to convey their message stem largely from the Rule's prohibition on asterisks, a concern that we have dealt with above. And they have not pointed to any evidence that the Rule's font, size, and color requirements impair their ability to communicate effectively. Any alleged burden that the Rule imposes on the Processors' ability to participate in interstate commerce has similarly been alleviated. The Processors argue that the Rule's requirements are sufficiently distinct from those of other states so as to necessitate Ohio-specific labels and to cause disruption of the nationwide distribution of dairy products. Without the prophylactic ban on composition claims and the prohibition on asterisk use, however, the Rule will be largely indistinguishable from similar regulations in other states. See, e.g., Alaska Stat. § 17.20.013(a) (requiring production claims to be accompanied by the disclaimer No significant difference has been shown between milk derived from rBST treated and non-rBST treated cows); Vt. Stat. Ann. tit. 6, § 2762(3) (requiring production claims to be followed by a disclaimer such as [T]he U.S. Food and Drug Administration has not found a significant difference to exist between milk derived from rbST-treated and non-rbST-treated cows). The Processors' concerns regarding the allegedly more demanding scope of Ohio's regulation, including the extra costs of compliance, have thus been effectively addressed by our rulings above.