First Amendment Constitutional Limitations on Government Restrictions of Commercial Speech

Jarod BonaPartner, Bona Law PC

The First Amendment to the U.S. Constitution protects the right to freedom of speech. As it is written, the Free Speech Clause constrains the government’s power to punish people based on the content of their speech, or to restrict people’s ability to speak.

But not all speech is created equal under the law, and the courts have identified certain types of speech that are not protected. They have also identified speech that may be subject to limited government regulation.

Commercial speech, meaning speech or writing created for the purpose of generating revenue, had almost no First Amendment protection until about 50 years ago. Starting in the mid-1970s, the U.S. Supreme Court began to set limits on the government’s ability to prohibit, restrict, or compel commercial speech in various forms.

Exceptions to Freedom of Speech

The Supreme Court has identified multiple exceptions to the Free Speech Clause over the years. Some of them may directly affect commercial speech.

False Statements of Fact

Justice Oliver Wendell Holmes provided perhaps the most famous example of speech that would not be protected under the First Amendment in a 1919 decision, Schenck v. United States. He wrote that free speech protections would not apply to “falsely shouting fire in a theater and causing a panic.”

A key part of Justice Holmes’ example is falsity. A person should not get into legal trouble for shouting fire in a theater if there is a fire. False statements of fact are generally not subject to First Amendment protection, and especially not when they cause damage, such as by inciting panic. A court can award damages for slander or libel when a false statement results in financial harm. The government can similarly regulate commercial speech that is false or misleading. For example, the Lanham Act, in addition to protecting Trademarksprovides a cause of action for false advertising.

Intellectual Property

Enforcement of intellectual property rights may supersede freedom of commercial speech. A business may not, for example, use copyrighted or trademarked materials owned by someone else in advertising or other communications without the owner’s permission.

Time, Place, and Manner Restrictions

The right to speak on a matter of public interest does not mean the right to speak about it anywhere and at any time. The government cannot prohibit a person from speaking altogether, but it can restrict them from speaking through a megaphone on a residential street at 3:00 a.m. Reasonable restrictions on the time, place, and manner of public speech can include, for example, regulations on where advertisements may be placed.

Commercial Speech Restrictions Before 1976

For much of the country’s history, commercial speech had no protection at all under the First Amendment. The Supreme Court made this clear in Valentine v. Chrestensen in 1942, when it upheld a city ordinance that banned the distribution of “commercial advertising matter” in public streets. The Court found that, while the government “may not unduly burden or proscribe” non-commercial communication in public places, the First Amendment “imposes no such restraint on government [regarding] purely commercial advertising.”

First Amendment Protections for Commercial Speech

The Supreme Court reversed course in 1976, when its decision in Virginia State Pharmacy Board v. Virginia Citizens Consumer Council overturned Valentine. Virginia had enacted a law prohibiting pharmacists from including prescription drug prices in their advertising. The state defended the statute by arguing that it helped to “maintain[] a high degree of professionalism on the part of licensed pharmacists.” The Court found that the statute was invalid, finding that the public’s interest in information about drug prices outweighed the state’s interest in professionalism.

In the following year, the Court used similar reasoning to strike down a law prohibiting attorney advertising in Bates v. State Bar of Arizona. The state argued, again, in favor of protecting “professionalism,” but the Court found this to be an “anachronism” that was outweighed by consumers’ need for information about legal services. The Court briefly addressed acceptable regulation of advertising by attorneys and others, noting that prohibitions on false or misleading statements are acceptable, as are reasonable time, place, and manner restrictions.

The Central Hudson Framework

In 1980, the Court developed a framework for regulation of commercial speech for the first time in Central Hudson Gas & Electric Corp. v. Public Service Commission. It held that courts should apply “intermediate scrutiny” to laws restricting commercial speech. As suggested by the name, this is the middle level of judicial review in U.S. constitutional law. It is more rigorous than “rational basis review,” but less rigorous than “strict scrutiny.”

Central Hudson establishes a four-part test to determine whether a restriction on commercial speech violates the First Amendment:

  1. Does the commercial speech at issue involve lawful activity? Is it misleading?
  2. Has the government asserted a “substantial” interest in support of the regulation?
  3. Does the regulation “directly advance” the government’s interest?
  4. Is the regulation any more extensive than necessary to serve that interest?

Restrictions on Speech vs. Restrictions on Conduct

Another important consideration when looking at constitutional protections for commercial speech is whether the government is attempting to regulate the speech itself, or conduct surrounding the speech. This is closely related to time, place, and manner restrictions.

In Ohralik v. Ohio State Bar Association, decided in 1978, the Supreme Court affirmed restrictions on in-person solicitation of clients by attorneys. The year before, the Court reversed a ban on attorney advertising in Bates. The issue in Ohralik was not the advertising or marketing itself, but the way in which the lawyer went about doing it — specifically, approaching an accident victim while they were still hospitalized to offer to represent them (the literal ambulance chaser).

The Court reached a similar conclusion in 2007 in Tennessee Secondary School Athletic Assn. v. Brentwood Academy, when it upheld a rule prohibiting high school coaches from recruiting middle school students. The rule was not a content-based restriction on speech, as lower courts had held, but instead an effort to guard against “undue influence and overreaching.”

Compelled Commercial Speech

When discussing freedom of speech, the focus tends to be on government efforts to restrict or penalize speech. Commercial speech presents an issue not commonly found elsewhere, in which the government may require businesses to make certain statements. Well-known examples of this issue include the requirement that prescription drug advertisements list all known side effects, as well as the various disclosures presented in a rapid-fire style at the end of commercials for financial services.

The Supreme Court identified a test for the constitutionality of compelled commercial speech in 1985 in Zauderer v. Office of Disciplinary Counsel of the Supreme Court of Ohio. Under the Zauderer standard, compelled commercial speech does not violate the First Amendment when the information to be disclosed is “purely factual and uncontroversial.”


Contributing Advisors

Aaron GottOf Counsel, Bona Law PC

Altug GuzeldereManaging Partner, Guzeldere & Balkan Law Firm

Steven CernakPartner, Bona Law PC