Legal Beat-Commercial Speech (658 words)
The First Amendment protects freedom of speech. Nevertheless, during the years, the federal courts have distinguished the concept of commercial speech from non-commercial speech.
Non-misleading commercial speech regarding a lawful activity is a form of protected speech under the First Amendment, although it's afforded less protection than non-commercial speech.
The core notion of commercial speech includes speech that does no more than propose and deal with a commercial transaction. The Central Hudson case established a four-pronged test to determine whether a government regulation is reasonable and does not violate the First Amendment.
Non-Misleading Commercial Speech
The first test is to conduct a "threshold inquiry": whether the commercial speech concerns a lawful activity that is not misleading. If this threshold requirement is met, the government may restrict the speech only if it proves all of the following:
1. It has a substantial interest in regulating the speech and that interest is served by the restriction on the commercial speech.
2. The regulation must directly and materially advance that asserted governmental interest.
3. The regulation must be no more extensive than is necessary to serve that interest.
As required by the Telecommunications Act of 1996, the Federal Communications Commission (FCC) recently adopted rules restricting the use of "Customer Proprietary Network Information" (CPNI) on telephone customer data. One of the restrictions was the adoption of opt-in customer consent, as opposed to opt-out. CPNI includes data about individual customers' identities, calling patterns, services they buy and other account information. The CPNI data are confined to telecom carriers, but may have application to certain marketers and may affect the use and accessibility for marketing and directory purposes generally.
The First Amendment provides that Congress shall make no law abridging the freedom of speech. The government argued that this regulation did not affect speech, because it only prohibited the telecommunications carrier from using CPNI to target customers and did not prevent the petitioner from communicating with customers or limiting anything they say to their customers.
The court viewed the argument as flawed since speech has two components: a speaker and an audience. A restriction on speech tailored to a particular audience (that is, targeted speech) cannot be cured simply by the fact that the speaker can speak to a larger indiscriminate audience. The petitioner's targeted speech to customers was for the purpose of soliciting those customers to buy more or different telecommunications services—and that was the speech being restricted.
The court acknowledged that while the speech was truthful and non-misleading, the government did not satisfy the second criteria of Central Hudson by merely asserting a broad interest in privacy. It must specify the particular notion of privacy and the interest served, which it did not do. The FCC did not explicitly state the privacy harm to customers. And the court narrowed the FCC's argument to the fact that it was thin justification that disclosure of the information as to call destination and other details, could prove embarrassing to some. It was this particular harm that the government sought to cure.
As to the third criteria, the government seemed to present no evidence that there was harm to either privacy or competition.
With regard to the fourth and final criteria, the court held that while the state's interest in privacy and competition is substantial, they do not think the rules regarding customer approval were tailored narrowly enough.
In a 2-1 decision, the court held that to require an opt-in procedure to obtain consent to use telephone customer data violated the First Amendment. The FCC must demonstrate not only that it acted rationally, but that it narrowly tailored its regulations to meet its goal.
Jay Winston is a partner in Winston & Winston, P.C. He is primarily engaged in the practice of direct marketing and Internet law. Contact him at (212) 532-2700, ext. 106, or e-mail: firstname.lastname@example.org. This quarterly column is for general information only and is not intended as a substitute for legal counsel.