when is a publisher sufficiently beholden to a manufacturer to engage in commercial speech?

Ariix, LLC v. NutriSearch Corp., No. 19-55343 (9th Cir. Jan.
22, 2021)

Over a dissent, the court reverses the district court’s dismissal
of a false advertising claim
against a purportedly independent supplement
guide that allegedly is linked, behind the scenes, with one producer,
motivating its praise of that producer and refusal to praise others. On the facts
alleged, the supplement’s relevant statements constitute commercial speech;
there’s a remand to determine whether the statements are designed to encourage
the purchase of relevant products as required by a remaining element of the
“commercial advertising or promotion” test. There is no First Amendment
protection for “a publisher of supposedly independent product reviews if it has
secretly rigged the ratings to favor one company in exchange for compensation.” 

“NutriSearch publishes a widely used nutritional supplement
guide.” It is allegedly “a trusted name among sales representatives in the
direct marketing supplement industry.” It rates supplements comparatively;
companies that get a five-star rating can get NutriSearch Medals of Achievement,
which require compliance with the FDA’s pharmaceutical good manufacturing
practices (GMP) and certification from an approved laboratory that its label
claims are true. The medals are allegedly “described as a binary determination:
either a company obtains [GMP] certification and laboratory verification of the
label claims, or it does not.” In the sixth edition, Usana Health Science was
the only company that obtained the highest ranking, the platinum medal.

NutriSearch allegedly “portrays itself as an independent
company that presents only objective data and scientific analyses to the public,”
claiming “it relies on scientific criteria to mathematically calculate the
ratings.” The guide’s author, the former CEO, appeared on the Dr. Oz Show
promoting the Guide as an evidence-based book that does not have any
“particular bias.” The inside of every edition of the Guide through the fifth
edition stated:

This guide is intended to assist in
sorting through the maze of nutritional supplements available in the
marketplace today. It is not a product endorsement and does not make any health
claim. It simply documents recent findings in the scientific literature.

This guide was not commissioned by
any public sector or private sector interest, or by any company whose products
may be represented herein. The research, development, and findings are the sole
creative effort of the author and NutriSearch Corporation, neither of whom
is associated with any manufacturer or product represented in this guide
. (emphasis

NutriSearch removed the second paragraph from the sixth
edition, published after Ariix filed this lawsuit.

However, NutriSearch allegedly rigged its ratings to favor
Usana under a hidden financial arrangement. The author/ex-CEO, MacWilliam, worked
as a Usana sales representative and served on its scientific advisory board
until another company exposed this affiliation. He allegedly told former Usana
executives, “I should not be on the board or a representative anymore because
it looks like I’m biased. I am going to create more of a third-party
appearance, but I’d like you to use me for speaking and support me.” Usana
allegedly agreed in exchange for the number one rating in the Guide, and uses
it in marketing pitches.

Usana allegedly pays hundreds of thousands of dollars
annually in speaking and promotion fees to NutriSearch and MacWilliam in
exchange for being rated the top supplement company in the Guide, accounting
for more than 90% of his income. In addition, NutriSearch allegedly “promotes
certain scientific claims to dovetail with Usana’s marketing campaign, or
emphasizes certain ingredients that Usana has added to its products to ensure
that Usana attains the top ranking in the Guide.”

In 2008, Usana allegedly withdrew its support for
NutriSearch after other companies obtained a medal certification in the Guide,
causing NutriSearch and MacWilliam to suffer financially. Usana allegedly
suggested that Usana would recommence providing fees and speaking engagements
if Usana obtained a number one ranking in some way. NutriSearch released a new
“Editor’s Choice” award and gave it to Usana, and MacWilliam then asked for and
received a nationwide tour from Usana.

Ariix alleged it was wrongly denied a medal certification in
the Guide, including through the use of metrics that exempted Usana from the
same standards. NutriSearch initially rated one Ariix product 3.5 stars, “but
after public criticism and incontrovertible evidence of quality, NutriSearch
revised the rating to 5 stars.” When Ariix tried to get MacWilliam as a
speaker, he allegedly admitted that “[t]hey [Usana] will cut me off the second
I do this [speak for Ariix].”

Were the challenged statements commercial advertising or
promotion? This is “(1) commercial speech, … (3) for the purpose of influencing
consumers to buy defendant’s goods or services, and (4) that is sufficiently
disseminated to the relevant purchasing public.” The omitted (2), everyone here
agrees, is a competition requirement that was abrogated by Lexmark; one
satisfies Lexmark by having a relevant commercial interest and showing
proximate cause.

The complaint plausibly alleged that the Guide was
commercial speech by plausibly alleging “that the Guide is essentially a sham
marketing ploy intended to boost Usana products.” Under Bolger, “speech
that does not propose a commercial transaction on its face can still be
commercial speech.” Although the question was close, the majority agreed with Ariix.

Although the Guide lacked “the traditional form of an
advertisement” and didn’t provide price or availability information,

this fact alone does not tell us
much, especially given today’s sophisticated and subtle marketing campaigns. For
example, companies now pay so-called “influencers” to issue posts on social
media touting their products or services. While such social media posts may not
have the indicia of a traditional advertisement, there can be little doubt that
these paid posts are in fact advertisements. [citing FTC alert; footnote about
how much Kim Kardashian West is paid per Instagram post according to publicly
filed litigation documents]

The Guide also referred to specific products, though that is
far from dispositive.

The Bolger test also asks “whether the speaker acted
primarily out of economic motivation, not simply whether the speaker had any
economic motivation.” Obviously, “not all types of economic motivation support
commercial speech. A simple profit motive to sell copies of a publication or to
obtain an incidental economic benefit, without more, does not make something
commercial speech.” But at the same time, “economic motivation is not limited
simply to the expectation of a direct commercial transaction with consumers.”
Indirect benefits can also count, such as “benefits to employee compensation, improvements
to a brand’s image, general exposure of a product, and protection of licensees’
interests.” The key is whether “the economic benefit was the primary purpose
for speaking.”

FWIW, I think this point could be helpfully sharpened: the
key is whether the hoped-for economic benefit involves people buying some
product other than the speech itself. If you write a song with the intention of
creating an earworm that will have a zillion plays on Spotify, that is not a
commercial speech motivation: you want people to buy the speech itself. If you
write a song with the intention of promoting a beer brand, and you are paid
based on the beer company’s hope of success, then the results are commercial
speech (though there may well be no regulable factual statements in the song).
[My formulation has to do a bit of finessing when there are potentially
falsifiable statements made about the speech itself—“this album costs $9.99” is
commercial speech; that specific statement about the noncommercial speech on
the album is separable from the content of the album, though the titles of the
songs on the album aren’t—but I believe that it addresses the key distinction.]

Footnote: Not any economic benefit will suffice; “speech
that is mainly motivated out of economic benefit can still be fully protected,
such as in labor cases…. Rather, the question is context-specific and requires
determining whether the speaker’s purpose primarily turns on the economic
benefit that the speaker receives from the speech.” [Again, I think we can
usefully distinguish “unions will increase employee pay” from “hire me to do
this job because I have a JD” here, but reasonable minds might disagree.]

Anyway, Ariix “plausibly alleged that NutriSearch and
MacWilliam published the Guide mainly with the economic goal of furthering
their own self-interests beyond simply benefiting from sales of the
,” given the facts alleged above. [Emphasis added because this
gets at how I would phrase the distinction.]

The court noted that it wasn’t relying only on alleged
payments. “Many of Ariix’s allegations raise significant doubts about whether
the Guide is an objective compilation of product reviews and suggest that the
Guide is instead a sham marketing scheme intended to benefit Usana,” such as
the allegedly false disclaimer in the first five editions.

The district court noted that the
factual allegations do not show that the defendants should be treated as a
single entity subject to the same conflicts of interest. But showing that the
defendants are so closely related as to constitute a single entity is not
required to plausibly allege that the Guide was published primarily for
economic benefit. We are not asking whether MacWilliam’s actions influence
NutriSearch or vice versa, but whether allegations involving either defendant
reveal the primary purpose of the Guide.

…. Usana even uses MacWilliam as
part of its image advertising; the complaint includes an image of MacWilliam
that states that “I have full confidence that USANA will once again stand out
as an industry leader and will continue to receive an elite standing in the new
Comparative Guide.” That NutriSearch and MacWilliam chose such a strongly
worded yet false disclaimer — disclaiming any association with all
manufacturers in the Guide despite having obvious ties to Usana — raises substantial
questions about the Guide’s true purpose, if the allegations in the complaint
are true.

The court cautioned that its decision was “narrow.”
Consumers face so many choices that they often seek out independent reviews. “But
when someone falsely claims to be independent, rigs the ratings in exchange for
compensation, and then profits from that perceived objectivity, that speaker
has drowned the public trust for economic gain. Society has little interest in
protecting such conduct under the mantle of the First Amendment.” Ultimately,
the majority embraced “a common-sense distinction between protected speech and
commercial speech — in this case, legitimate product reviews versus paid
product promotion …. Simply put, paid promotion is commercial speech.”

This wasn’t just an allegation of bias and inaccuracy—and
here comes a line defendants may well quote: “A mere failure to disclose bias or
financial interest would not necessarily make speech commercial.”

Here, though, we face allegations
that the defendants conceived the Guide to juice sales of Usana products,
actively misled the public about their supposed independence, and fiddled with their
own ratings criteria to boost a favored company that lavishes them with
hundreds of thousands of dollars in compensation. Put another way, it is more
paid promotion than product review, according to the complaint. It is not
controversial to conclude that “liability can arise under the Lanham Act if
websites purporting to offer reviews are in reality stealth operations intended
to disparage a competitor’s product while posing as a neutral third party.”

Nor was this speech “inextricably intertwined” with fully protected
speech. The Guide also “describes the benefits and science of nutritional
supplements.” But the commercial, specifically, the allegedly rigged ratings “are
not so connected to this informational section to lose their commercial character.
On the contrary, they seem easily separable.” The Guide even allegedly comes in
two parts, informational and ratings; the first could easily be published
separately. “[T]he Guide does not gain full First Amendment protection simply
because it includes a distinct summary of scientific ideas as a prelude to its
supposed product reviews.”

But was the Guide “intended to influence consumers to buy
the defendants’ goods,” as required by a remaining factor of the “commercial
advertising or promotion” test? The advertising was allegedly intended to help
Usana’s goods, not NutriSearch’s product. The parties didn’t brief the issue
and the district court didn’t rule on it, so the court of appeals remanded.
Though the dissent made good points on this element, the district court should
address it. “In considering this question, though, it may be useful to
determine whether the defendants and Usana had an agency relationship; for
example, it might be the case that the defendants were acting as agents of
Usana and therefore had a vested interest in the goods that Usana sold, which
might be enough to satisfy this element.” [Also, the false claims of neutrality
might well be helping sell the Guide, too.]

Final element: was the Guide allegedly sufficiently
disseminated to the relevant purchasing public? Sure. Ariix alleged that the
“professional edition [of the Guide] is specifically designed for and marketed
to tens of thousands of Usana sales representatives, who are told that
referring prospective customers to the guide is one of the most effective ways
to sell Usana products.” The district court mistakenly looked at whether
statements within the Guide were sufficiently disseminated.

The district court also found that Ariix didn’t sufficiently
allege misrepresentations; the court of appeals disagreed. The comparative
five-star ratings were non-actionable statements of opinion; even though the
Guide purported to rely on scientific and objective criteria, “there is an
inherently subjective element in deciding which scientific and objective
criteria to consider.” However, the disclaimer of independence was a factual,
falsifiable statement. And the failure to award Ariix a medal certification
presents specific and measurable statements about Ariix, given that it was allegedly
based on two falsifiable criteria: compliance with the FDA’s pharmaceutical
good manufacturing practices and certification of product labels’ claims from
an approved laboratory. “By not awarding Ariix a medal certification — despite
Ariix being eligible for such an award — the Guide falsely implies to consumers
that Ariix did not comply with the FDA’s GMPs or that it did not obtain the
appropriate laboratory certification.”

The district court wrongly found that compliance with the
GMPs wasn’t a statement of fact because consumers would merely “conclude that
perhaps a manufacturer did not follow practices that the FDA considered good.” But
whether Ariix followed those practices was itself a question of fact.

Judge Collins dissented.

First, he would not give any weight to allegations that
defendants falsely advertised the Guide itself, rather than Usana’s products.
But “advertisements that accurately reprint[] false claims contained in the
advertised works [are] protected from tort liability to the same degree as the
underlying works.” Anyway, Ariix didn’t plausibly plead that its injuries were proximately
caused by the advertising of the Guide, as opposed to the product reviews
contained in the Guide. [FWIW, I disagree: Independence is what makes such claims
more credible; consumers may discount claims made by a party with an economic
interest, which is why disclosure is so important to the FTC. Proximate cause
is an issue of legal causation, not a matter of counting steps in the chain.]

Rather than stretching the Lanham Act in ways that threaten
the First Amendment, the dissent would have relied on the remaining prongs of
the “commercial advertising or promotion” test. The dissent agreed with
everyone else that Lexmark abrogated the “competition” requirement in
older versions of the test. “Given that (1) a competitors-only limitation
similarly lacks any textual grounding in the phrase ‘commercial advertising or
promotion,’ (2) Gordon & Breach derived this atextual limitation
from its review of pre-Lexmark caselaw; and (3) Lexmark’s
emphatic rejection of a competitors-only limitation would be wholly undone by
continued adherence to this aspect of Gordon & Breach, the
conclusion is inescapable that Lexmark precludes limiting ‘commercial
advertising or promotion’ only to the commercial advertising and promotion of a
direct competitor.”

Lexmark left the sufficient dissemination requirement
intact; this was adequately pleaded.

What about “for the purpose of influencing consumers to buy
defendant’s goods or services”? This too

flows from the statutory language
and remains valid after Lexmark. By referring to representations that a
“person” makes “in commercial advertising or promotion,” the Lanham Act clearly
refers to commercial speech promoting sales of goods that may fairly be said to
be those of that “person,” i.e., the defendant. We do not normally think of
third-party product reviews or endorsements as being that person’s “commercial
advertising”—at least when they are not done on behalf of the product’s
manufacturer or seller.

That last qualification seems to be at issue here; also it’s
interesting that the dissent doesn’t discuss the nearby statutory language
making clear that statements in commercial advertising or promotion are
actionable if they “misrepresent[] the nature, characteristics, qualities, or
geographic origin of his or her or another person’s goods, services, or
commercial activities” (emphasis added). Even if, as the dissent says,
independent reviews are fully protected speech, that’s not the situation
alleged here, and the concerns governing the lesser protection for deceptive
commercial speech are clearly implicated.

The dissent recognized that the statute extends beyond
advertising by manufacturers and distributors themselves. “[W]hen an entity
acts as an agent of a manufacturer in making a product review, then that entity
acts on behalf of the manufacturer and is in that sense advertising its own
product. ‘[P]aid publicists’ speech’ about their payor’s products is commercial
speech.” Likewise “there may be other endorsers who have such a direct
financial stake in specific sales of a product—such as a cut of each sale—that
it may likewise be fair to say that they are thereby advertising their own
product.” But being cautious here avoids difficult constitutional questions. [It
is notable that those difficult questions have generally involved regulation of
truthful speech, like information about contraceptives; where the speech
is deceptive, there is less reason to be concerned for the free flow of
information.] The dissent thought that the majority created “a substantial
amount of uncertainty as to the scope of First Amendment protection for product
reviews, a result that I find doubtful and disquieting.”

The dissent would thus have concluded that Ariix failed to
plausibly plead that the statements promoted NutriChoice’s own products. The
complaint didn’t allege “Usana’s advance direction and control in preparing the
content of the Guide,” which might have sufficed. The dissent wanted Usana to
have changed or put “specific content” in the Guide—a standard that would
likely free many influencers from regulation. It wasn’t enough to allege that “Defendants
produced biased reviews in the craven hope that Usana would then act in ways
that were economically favorable to Defendants.” [That really seems like a
misdescription of the allegations—it might be a fair characterization if the
parties had never before interacted and the first contact was when MacWilliam
reached out to say “look how well I rated you!”]

The dissent thought that the allegations merely showed “that
Usana liked favorable reviews and that Usana promoted the Guide and its author
when the reviews were distinctly superlative and did not do so when they were
not…. That Defendants wrote obsequious reviews in the hope that Usana would be
pleased and buy more Guides or give MacWilliam speaking engagements does not
make them Usana’s agents in writing those reviews.” Sure, MacWilliam was
Usana’s agent when he did paid speaking tours expressly promoting Usana’s
products, but the complaint didn’t rest on that theory. [Surely it is relevant
to what MacWilliam was doing with the Guide, though.]

Nor was there anything else justifying the conclusion that  Usana’s products were in any relevant sense NutriChoice’s
products, such as an entitlement to a cut of each sale, or other links to
profit if consumers chose particular supplements.

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