Making Sense of Tobacco Regulation: The First and Fifth Amendment Challenges

[posted on behalf of Richard Epstein]

The entire question of the FDA’s tobacco regulation is likely to spur extended commentary, given the split of opinions between the D.C. Circuit, which knocked out the packaging labels by a divided vote in RJ Reynolds v. FDA, and the earlier decision in the Sixth Circuit, that sustained the regulation.  The packaging regulations have to be resolved once and for all on a national level, so the case will go up even, I think, if the D.C. Circuit decides to follow the Sixth Circuit in an en bank opinion.  So what then should be done?

The issue is one that I have approached before.  In the interests of full disclosure, I am a fierce opponent of smoking, who worked in from the mid-1980s into the early 1990s as a consultant for the tobacco lawyers on tort liability issues.  After that time, I worked on a number of other issues, in some instances taking positions adverse to the industry.  This particular post is done solely and wholly on my own.

In thinking about this case, much of the doctrinal dispute revolved around the much mooted  Central Hudson test used in too many First Amendment Cases.

The canonical legal form under that test runs as follows:

(1) whether the speech at issue concerns lawful activity and is not misleading;

(2) whether the asserted government interest is substantial; and, if so,

(3) whether the regulation directly advances the governmental interest asserted; and

(4) whether it is not more extensive than is necessary to serve that interest.

It puts the cart before the horse, however, to begin with this test on the ground that both Central Hudson and the current tobacco cases involve commercial speech.  It is, rather, imperative to recall first the particular regulation that the New York Public Utility Commission wanted to impose on these utilities.  As Justice Powell stated succinctly, the NY PUC ordered the utility “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.”

The logic behind the PUC order was as follows.  PUCs have constant capacity constraints, and to advertise for additional consumption in the face of blackout risk may be in the interest of the PUC, but it is not in the interest of the system as a whole.  Indeed, the last set of advertisements I read from Consolidated Edison in the New York subways indicates that the utilities well understand their economic position under regulation.  Most firms push for customers to buy their goods, but Con Ed’s advertisements now encourage consumers to save on their electric bills by taking all sorts of energy efficient steps from cleaning filters to turning off light switches.  Why?  Because the lack of peak-load pricing for consumers hurts Con Ed, which now collects less for those marginal units than it has to pay out. That point was raised in Central Hudson, but Justice Powell nonetheless held that this order was overbroad insofar as it prevented Central Hudson from advertising the use of efficient energy devices that would drive down consumption. A close case, but one that poses no long-term threat to the system of public utility regulation.

What is bizarre is the thought that this scheme actually applies in the current situation. We don’t have in this case a restriction on the ability of the tobacco companies to advertise their products.  There are many such restrictions that deal with youth advertisement and celebrity advertisements that have passed muster on the grounds of the need to protect the young in the one instance, and to stop misleading in the next.  But we have in this case something that goes far beyond the restriction of what the companies can say about their products. We are now in the world in which the government can commandeer the packages of the companies, put on them messages that in my view overstate the risks associated with tobacco, without any real assurance that these messages will reach the youth audiences who are the intended targets.

The simple fact that we go beyond restriction to forced publication should raise the level of scrutiny beyond what Central Hudson requires for simple restrictions on what the companies say.  Indeed on the takings side, the occupation of space on the packages seems to fall within Loretto v. Teleprompter Manhattan CATV Corp.  rule that permanent occupations are compensable under a per se rule.  To be sure, Loretto was concerned with land that lasts and not a consumer good that is used up within a very short time. But the restrictions in question hit the entire run of production, which means that the government should have to pay for the privilege. Certainly it could not commandeer a random billboard to state its message on grounds of health.  Why then should it be able to weigh in on the package for this message, when it could not, surely, use the space to promote a new vaccine program?

All this might sound odd, but it is consistent with the overall structure of the Takings Clause, whose central purpose is to be sure that the burdens of public information is not borne solely by a small fraction of the population, but by the public at large.  There are no false or misleading statements that the FDA seeks to suppress in this case, so at this point its actions fall outside the traditional health and safety justifications, which have never been broad enough to allow the government to commandeer the property of private individuals to make their campaign.  The proper response is to handle those risks by a ban on any misleading health claim, which is not part of this case.  At this point, the unjustified intrusion is one that calls for a damage remedy that either compensates the tobacco companies for their loss of good will from the dilution of their trade name, or provides them on a restitution theory for the fair market value of the space that was taken. The point here is not to say that public health campaigns are improper.  It is to say that they should be funded by the public at large, which is not done here.  None of these issues were raised in Central Hudson, which had nothing to do with forced speech, which for what it is worth demands heightened scrutiny under the First Amendment as well.

The FDA has a long history of going over the top on many issues.  This is one time that it should be slapped down, and hard.