Court upholds SF’s required warning on sugar-sweetened beverage ads, including pure logos

American Beverage Association v. City & County of San
Francisco, No. 15-cv-03415 (N.D. Cal. May 17, 2016)
 
The court denied plaintiffs’ attempt to enjoin a
sugar-sweetened beverage warning imposed on certain soda ads by San Francisco.  The warning is: “Drinking beverages with
added sugar(s) contributes to obesity, diabetes, and tooth decay. This is a
message from the City and County of San Francisco.” S.F. Health Code § 4203(a).
  The ordinance’s findings included that
consumption of sugar-sweetened beverages (SSBs) was associated with numerous
health problems; that obesity is a big problem in the US and SF specifically,
particularly with low-income and nonwhite populations; that SSBs contribute way
too much sugar and too many empty calories to the average American diet; that
even moderate consumption of SSBs is associated with health risks; that children
are particularly at risk (“On average, children consumed 11.96 teaspoons of
added sugars from sodas and fruit drinks per day – 47% of their total intake of
added sugars.”); that the results are costly for California; that food labels
typically don’t show whether sugar has been added; and that young adults are
targeted by SSB marketers.
 
Thus, the warning, which must occupy at least 20% of the
area of each SSB ad.  Some beverages are
specifically excluded, such as milk and milk alternatives and 100% natural
fruit or vegetable juice. Covered ads include “any logo, that identifies,
promotes, or markets a [SSB] for sale or use that is any of the following: (a)
on paper, poster, or a billboard; (b) in or on a stadium, arena, transit
shelter, or any other structure; (c) in or on a bus, car, train, pedicab, or
any other vehicle; or (d) on a wall, or any other surface or material.”  Newspaper, internet, TV and similar ads are
excluded, as are containers or packages for SSBs; vehicles used by businesses
that make, distribute, or sell SSBs; standalone logos under 36 square inches; shelf
tags/labels; and certain signs permitted before the law became effective.
 
Plaintiffs argued that the ordinance covered noncommercial
speech, such as Coke ads proclaiming “Love Wins” after the Supreme Court’s
marriage equality ruling, and publicity for the Pride Parade and the Chinese New
Year’s Festival on signs depicting soda products and logos. The court thought
it was debatable whether all of the examples involved inextricably intertwined
commercial and noncommercial speech, citing Jordan v. Jewel Food Stores, Inc.,
743 F.3d 509 (7th Cir. 2014).  Even if
those were examples of noncommercial speech, plaintiffs couldn’t succeed on a
facial challenge because they didn’t show that a substantial amount of noncommercial
speech would be affected in relation to the amount of commercial speech
regulated.
 
Zauderer v. Office of Disciplinary Counsel of Supreme Court,
471 U.S. 626 (1985), not strict scrutiny, applied.  In Retail Digital Network, LLC v. Appelsmith,
810 F.3d 638 (9th Cir. 2016), the Ninth Circuit held that Sorrell v. IMS
Health, Inc., 131 S. Ct. 2653 (2011), required the application of strict
scrutiny to content-or speaker-based restrictions on nonmisleading commercial
speech regarding lawful goods or services. 
But Retail Digital involved a
restriction on speech, not a disclosure requirement.  And Zauderer
applies to disclosure requirements whether or not the relevant government
interest is preventing consumer deception.
 
Compelled disclosure doesn’t violate the First Amendment so
long as the disclosure requirement is reasonably related to the state’s
interest. Plaintiffs argued that some greater scrutiny was required because the
warning was imposed only when they decided to speak in the first place, rather
than being triggered by a transaction. 
But Zauderer was the same
situation—the lawyer decided to advertise that there’d be no fees if the case
failed, without disclosing that there’d be costs.  In the court’s view, Zauderer was basically a rational basis standard; it wasn’t even
clear that “factual and uncontroversial” was required, or whether that was just
the Court’s description of the disclosure in Zauderer itself, as long as the disclosure was “reasonably related
to the State’s interest.”
 
Nonetheless, the court continued to apply the “factual and
uncontroversial” requirement, interpreting it to mean that the compelled
disclosure “must convey a fact rather than an opinion and that, generally
speaking, it must be accurate.”  “Uncontroversial”
didn’t require more than accuracy, because the requirement shouldn’t “be so
easily manipulated that it would effectively bar any compelled disclosure by
the government,” particularly “where public health and safety are at issue.” As
the court had previously held, “[a] ‘controversy’ cannot automatically be
deemed created any time there is a disagreement about the science behind a
warning because science is almost always debatable at some level.”  Here, the warning was accurate.
 
Plaintiffs argued that the warning was misleading because it
suggests that “consuming beverages with added sugar is dangerous regardless of
one’s diet or lifestyle” and that “consuming beverages with added sugar
necessarily and inevitably contributes to . . . tooth decay at any level of
consumption.”  But the warning just said
that SSBs “contribute” to tooth decay, which is true, not that they make tooth
decay inevitable.  No reasonable consumer
would interpret the warning as suggested by the plaintiffs; the Zauderer-related case law doesn’t give
an interpretive standard, but the court couldn’t see what other standard could
apply; plus, claims are often evaluated from the perspective of a reasonable
consumer, as in false advertising law.  “Contribute”
isn’t as strong as “causes,” and to hold otherwise would cast doubt on things
like tobacco warnings that say “causes” even though lung cancer isn’t
inevitable for smokers. 
 
Nor does it matter that other things cause tooth decay;
underinclusiveness is not a problem under Zauderer,
because “governments are entitled to attack problems piecemeal, save where
their policies implicate rights so fundamental that strict scrutiny must be
applied. The right of a commercial speaker not to divulge accurate information
regarding his services is not such a fundamental right.”  The court concluded that it was ok to target
a significant source of sugar per serving, particularly because it didn’t
provide healthful nutrients as milk and juice do.
 
The same basic reasoning supported the obesity/diabetes
warning.  “[N]o reasonable consumer would
likely construe the warning as specific to him or her and instead would
understand the warning is directed to the general public.”  Even if, as plaintiffs argued, SSBs represented
only 5% of total caloric intake, each serving still offered a substantial
number of calories: one serving size was more than 10% of a 2,000 calorie/day
diet.  Dietary guidelines recommend a
daily limit of 10% of total calories for added sugars, but a single 20-ounce
serving exceeds that limit, and it’s worse for kids.
 
Plaintiffs also challenged the size of the warning, but the
City had a reasonable  basis for making
it be 20% of the advertisement. It had to be “of a sufficient size to be salient
– i.e., noticed and attended to – and research on health warnings for tobacco
products has led the World Health Organization, for instance, to
recommend that tobacco product packaging and labeling bear a health warning of
50% or more, but no less than 30%, of the principal display areas. By
comparison, 20% is relatively modest.” Even if a smaller warning would still be
effective, Zauderer isn’t a least
restrictive means test.
 
Plaintiffs argued that the ordinance still had an
unconstitutional chilling effect because the large size of the warning would
deter them from advertising at all or from engaging in counterspeech, because
counterspeech would transform the ad from promotion into a scientific debate.  However, under Zauderer, as long as the disclosure requirements were “reasonably”
related to the State’s interest, the advertiser’s rights were “adequately
protected,” meaning that the degree of any chilling effect was already
accounted for.
 
Plus, the warning was not unduly large.  Because it was text-only, “the force of the
pictorial advertisement is not likely to be overcome by the text warning,” since
ads with color and pictures are more salient. 
In addition, a paper in JAMA showed that ad messages are still effective
in the presence of health warnings on ads: brand information recall remained
very high.  Though plaintiffs’ expert
noted that recall of an ad’s specific message or heading was lower than in the
presence of a warning message, the court pointed out that, “at least for the
products at issue in this case – SSBs – the advertising message is, in effect,
the brand, and brand recall is not particularly affected by a text warning
message.”
 
Moreover, 20% wasn’t unprecedented, though it was
substantial and raised serious questions. “Not only is 80% of the space
available, Plaintiffs have shown that they have employed pithy advertising on
how to achieve balanced diets and lifestyles.”  Moreover, though plaintiffs submitted
declarations from major beverage companies stating that they’d decline to run
covered ads under the ordinance, the court wasn’t persuaded by these self-serving
claims.  Other industries, including
cigarette and smokeless tobacco products, have successfully incorporated
warnings into ads.  If the medium was as
valuable to sales as plaintiffs claimed, they wouldn’t completely abandon it.  Pharmacos, too, still advertise despite
having to disclose warnings.  “[A]s
anyone who has witnessed a television advertisement for pharmaceutical products
will know, the scope of the information required about potential adverse side
effects often makes the disclosure seemingly as long as the advertising message
itself,” but they still advertise.
 
The court turned to irreparable harm: without showing likely
success on the merits, they didn’t show a First Amendment irreparable
harm.  Plaintiffs also identified harm to
their goodwill and reputation, but the court wasn’t convinced; many consumers
were likely familiar with the high sugar content of SSBs and aware of
calorie-induced weight gain. Plaintiffs could also “engage in counterspeech to
combat the asserted harm, not only in the advertisement containing the warning
itself but also through other means and media.”
 
The court did find that the size of the warning raised
serious questions going to the merits, assuming that test survives eBay and Winter, but the balance of hardships didn’t tip sharply in their
favor given the public health interests at stake.

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