When the D.C. Circuit Court of Appeals ruled that POM Wonderful was overstating pomegranate juice's health benefits in its advertisements, a press release from the FTC, which was challenging POM in court, called the decision “a victory for consumers.” The Wall Street Journal agreed, describing it as “a notable win.” In a sense, it was: The company was banned from trumpeting its juice as an elixir that could help prevent heart disease, prostate cancer, and erectile dysfunction if there wasn't sufficient research done to back up those claims.
But in another sense, the decision wasn’t a victory at all. Buried in the FTC’s press release was the reluctant acknowledgement that the Circuit Court denied the FTC the ability to require that POM base its advertising on at least two randomized, well-controlled clinical trials. (POM only relied on one.) It’s a loss for consumers if there are situations in which no disclaimer of “initial” or “preliminary” must accompany any product whose benefits were determined by a single study—a fairly flimsy standard, given how frequently published studies are withdrawn.
To arrive at this decision, the Court wasn’t relying on some obscure bit of corporate law; it was relying on the First Amendment. How problematic is it that a company selling at least $100 million worth of juice every year based on sketchy empiricism could defend its preposterous advertising claims in court on free-speech grounds, and still be humored?
That’s one question that John Coates, a professor at Harvard Law School and a former corporate lawyer, explores in a recent survey of what he calls “the corporate takeover of the First Amendment.” According to Coates, companies are now the beneficiaries of cases involving the First Amendment just as often as individuals, and the frequency of those cases has been rising since the mid-70s. This represents a troubling appropriation of the law: “Power is taken from ordinary individuals with identities and interests as voters, owners, and employees, and transferred to corporate bureaucrats pursuing narrowly framed goals with other people’s money,” Coates writes.
To determine the most-frequent beneficiaries of First Amendment, Coates analyzed the 423 Supreme Court cases between 1946 and 2014 that dealt with questions of speech. He noticed a turning point in the data in 1975, the year that the Court decided Virginia Pharmacy, a case that overruled the precedent that commercial speech deserved no First Amendment protection. (The case involved a drug store that wanted to advertise its prices, and was challenging a ban that would have prevented it from doing so.) Before Virginia Pharmacy, businesses were involved in an average of 1.5 free-speech cases per year, and they had a 20 percent win rate. After, they were involved in 2.2 cases per year, with a 55 percent win rate.
The large jump in the 1970s came shortly after Justice Lewis Powell joined the Supreme Court. Powell was well known as a proponent of corporate interests at a time when anticorporate sentiments began agglomerating—a confidential memo he wrote that went public the year before began serving indicates as much. “The time has come,” he wrote to the director of the Chamber of Commerce, “for the wisdom, ingenuity and resources of American business to be marshaled against those who would destroy it.” Suffice it to say Powell sided with the drug store in 1975, and many other businesses during his 15-year tenure.
(In order to make sure that the data wasn’t being warped by the fact that the Supreme Court is highly selective in the cases it takes on, Coates also examined data from appeals courts. He found that the number of cases citing Central Hudson, a 1979 case that formed an important basis for corporate speech, has increased each year since then. Coates's methodology is convincing, but the possibility does remain that what has increased in recent decades is not corporations' desire to appropriate the First Amendment, but regulators' likeliness to try to regulate, for instance, advertising language—in which case an escalated reliance on free-speech precedents could be read as a creative defense rather than a shrewd arrogation of power.)
Coates’s work is a reminder, in a decade when Citizens United is many Americans’ foremost association with corporate speech, not to forget what corporations have and haven’t been allowed to do since 1789. In 1819, Chief Justice John Marshall legally defined a corporation as “an artificial being, invisible, intangible, and existing only in the contemplation of law.” And in the hundreds of years since, corporate speech has been tightly regulated, as courts have restricted what companies can and cannot communicate in contracts, to employees, and to the public. In fact, some 150 years passed between the writing of the First Amendment and its first use to strike down a law in favor of an individual (a decision supporting corporate free speech came even later)—which is to say that corporations got along just fine without First Amendment rights before Justice Powell decided they were in need of help.
So if the Court says, as it did in its decisions in Citizens United and Hobby Lobby, that a company should be viewed as a collection of individuals, it seems to be overlooking centuries of precedents that suggest otherwise—that corporations’ speech is something to be controlled firmly. Given that, as Coates says, these pro-business First Amendment rulings encourage companies to “increasingly place bets not on new technologies and marketing strategies, but on legal and political ‘innovation,’” the courts’ stances are only that much more puzzling.