After a lengthy hearing (involving 14 expert witnesses and nearly 2000 exhibits), an administrative law judge (ALJ) concluded that petitioners had violated the FTC Act. . . . On de novo review, the Commission found that petitioners had violated the FTC Act by using misleading, unsubstantiated ads to market their products. . . . .[T]he FTC factual findings at issue in this case are entitled to judicial deference under the substantial-evidence standard. — Government brief in POM Wonderful
This past Monday the Court denied cert in POM Wonderful, LLC v. FTC, a commercial speech case. It was the 14th First Amendment free-speech case the Justices denied review in this Term (see below). The issue in the case was whether a finding by the FTC that a truthful advertisement nonetheless implies a misleading message to a minority of consumers, and therefore receives no First Amendment protection, must be reviewed de novo.
The U.S. Court of Appeals for the D.C. circuit ruled in favor of the Federal Trade Commission in an opinion by Judge Sri Srinivasan joined in by Chief Judge Merrick Garland and Senior Circuit Judge Douglas H. Ginsburg.
The Federal Trade Commission (FTC) deemed several of petitioners’ advertisements unprotected by the First Amendment and banned them on the theory that their truthful content nonetheless implied a false or misleading message to a “significant minority” of consumers. Petitioners challenged that ban under the First Amendment. The Court of Appeals upheld the ban in its entirety because—applying only generic principles of administrative law—it gave great deference to the FTC’s determination that all of the challenged ads implied the alleged false or misleading messages and for that reason received no First Amendment protection.
The Cato Institute filed an amicus brief supporting the Petitioner. In it, Cato’s lawyers argued:
This case raises the issue of whether the U.S. Courts of Appeals should defer broadly to Federal Trade Commission (“FTC”) adjudicative factual and legal findings when the agency’s order restrains commercial speech. The Court has not addressed that issue in 50 years. See F.T.C. v. Colgate-Palmolive Co. (1965). Since 1965, the deference accorded the FTC’s factual and legal findings in every administrative deceptive advertising case has effec- tively transformed the agency into a court of last resort despite the fact that all FTC deceptive adver- tising decisions necessarily involve limitations on prospective commercial speech and, thus, raise First Amendment issues, and despite the fact that in administrative cases the FTC not only initiates prose- cutions but also serves as the ultimate judge, an inherent conflict of interest.
All of those claims fell to the wayside when the Court denied cert. in the case earlier this week. Instead, the Court let stand the position argued for by the government in its reply brief in POM: “the court of appeals’ holding that substantial-evidence review applies in this context is correct and does not conflict with any decision of this Court or of another circuit or a state court of last resort.”
That said, the FTC’s powers to regulate misleading ads remained intact and the Commercial Speech doctrine likewise remained as it is.
By bringing [this] case [up for review] POM [put] all of its cards on the table. But other food and supplement advertisers will have to live with the results. — Bruce Silverglade (counsel for Olsson Frank Weeda Terman Matz)
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