Supreme Court Pro-Business and First Amendment - Targeted Regulations in Trouble
What do pharmaceutical and data mining companies have in common with the video game industry? For starters, both recently prevailed in front of the U.S. Supreme Court when they challenged state legislation on First Amendment grounds. By a 6-3 vote on June 23, 2011, the Court struck down a Vermont statute that prohibited pharmacies and similar entities from disclosing prescriber-identifying information for marketing purposes. The statute also barred pharmaceutical manufacturers and marketers from using prescriber-identifying (“PI”) information for marketing purposes. The Court held that the statute’s speaker- and content-based restrictions violated the First Amendment right of pharmaceutical manufacturers and data mining companies. By a 7-2 vote on June 27, 2011, the Court struck down a California statute that sought to prohibit the rental or sale of violent video games to minors for violating the First Amendment. The statute imposed a restriction on the content of protected speech and California failed to demonstrate that the statute served a compelling government interest. In both cases, the Court evidenced its commitment to free speech through broad readings of the First Amendment as well as its skepticism of government regulation controlling private behavior. What are the potential implications of these decisions? This post gives you the highlights.
Sorrell v. IMS Health, Inc.
When pharmacies fill prescriptions they collect information such as the doctor prescribing the medication, as well as the medication and dosage prescribed. Under federal law, this data excludes information that could be used to identify individual patients. Pharmacies often sell this PI information to data miners who produce reports on prescriber behavior. Data miners then lease their reports to pharmaceutical companies. Pharmaceutical companies use data miners’ reports to identify specific doctors they believe might be interested in their products. The companies dispatch sales representatives, known as “detailers,” to meet individually with these targeted doctors. Detailers pitch their company’s products, answer questions about existing products, and try to convince the doctors to prescribe their company’s products more frequently. Since advertising is most effective when it is directed at purchasers who are likely to be interested in the advertised product, detailing allows pharmaceutical companies to get more bang for their advertising buck.
Vermont’s Prescription Confidentiality Law. The Vermont legislature enacted the Prescription Confidentiality Law in 2007 in an effort to curtail detailers from convincing doctors to prescribe expensive name-brand drugs rather than low-cost generics. Vermont justified its statute, in part, by claiming it had a strong interest in promoting public health and protecting medical privacy. The statute provided that PI data could not be sold by pharmacies and similar entities, disclosed by those entities for marketing purposes, or used for marketing by pharmaceutical manufacturers absent the prescriber's consent. However, the prohibitions on sale, disclosure, and use were subject to a host of exceptions that permitted entities possessing PI data to sell and use the data for a variety of purposes other than marketing. In addition, the Vermont statute specifically prohibited pharmaceutical manufacturers and marketers from using PI data for marketing or promoting prescription drugs. Interestingly, the statute permitted insurers and benefits managers to use PI data to require or encourage doctors to prescribe generics. Similarly, another Vermont statute permits the state to use PI data in a “counter-detailing” program to target doctors and persuade them to switch to low-cost generics. Vermont itself could thus use PI data to market generic drugs while at the same time restricting pharmaceutical companies and data miners from using PI data for marketing. Three companies that sell the information they gather — IMS Health, SDI and Source Healthcare Analytics — challenged the statute on First Amendment grounds. The drug industry’s trade group, the Pharmaceutical Research and Manufacturers of America, joined the lawsuit.
Commercial Speech and Heightened Scrutiny. Whether speech protected by the First Amendment was involved at all was a contentious issue in Sorrell. Vermont argued that sales, transfer, and use of PI data are conduct, not speech. Public Citizen filed an amicus brief in support of Vermont’s position, arguing that aggregate PI data lacks the expressive element required for strong First Amendment protection. Some view aggregate information akin to an ordinary commodity (one lower court compared it to beef jerky) that the legislature has broad latitude to regulate in its discretion. The Court disagreed, noting “the creation and dissemination of information are speech for First Amendment purposes” and “Vermont’s statute could be compared with a law prohibiting trade magazines from purchasing or using ink.”
Vermont argued in the alternative that if speech was involved, heightened judicial scrutiny was unwarranted because the statute was merely a commercial regulation - restrictions on protected expression are distinct from restrictions on economic activity. Although the First Amendment does not prevent restrictions directed at commerce from imposing incidental burdens on speech, the Court noted that in addition to the burdens it imposed, the statute was aimed at particular speakers and restricted specific content. Such targeted censorship of commercial speech warrants heightened judicial scrutiny, and violates the First Amendment unless it achieves at least a substantial governmental interest.
Vermont attempted to justify the statute in part by claiming that it fulfilled “an important privacy interest in giving prescribers control over the use of their prescription-history information.” “While Vermont’s stated policy goals may be proper,” stated Justice Kennedy for the majority, the Court didn’t buy the argument. The legislative history of the statute demonstrated the Vermont legislature was mainly concerned that detailers were too effective at convincing doctors to prescribe their name-brand products – privacy concerns were a mere side note. Additionally, the statute’s many exceptions permitted those in possession of PI data to distribute it without prescribers’ consent “in almost every instance.” The only restriction on the non-consensual use of PI data was that the information couldn’t be used for marketing by drug companies. “The statute thus is not a genuine attempt to protect prescribers’ privacy,” according to the Court. Vermont’s interest in giving prescribers “a slight degree of control” over the use of their prescription history data did not justify the statute’s restrictions on free speech. “Privacy is a concept too integral to the person and a right too essential to freedom to allow its manipulation to support just those ideas the government prefers,” according to the Court.
Brown v. Entertainment Merchants Association
On October 7, 2005, Governor Schwarzenegger signed into law California Assembly Bill 1179, which prohibited the sale or rental of “violent video games” to minors and required their packaging to be labeled “18.” Representatives from the video game and software industries brought a preenforcement challenge to the statute. The Court held that the statute imposed an unconstitutional content-based restriction on protected speech.
Video Games Entitled to First Amendment Protection. Writing for the majority, Justice Scalia explained that all speech that communicates ideas, including video games, is protected by the First Amendment. The Court emphasized the basic tenet that content-based restrictions on expression – such as the California statute’s violence-based restriction - are presumptively invalid. The rule is subject to a few limited exceptions for historically unprotected speech such as obscenity, incitement, and fighting words. Essentially, California’s statute attempted to categorize violent video games as obscenity beyond reach of the First Amendment’s protection. The statute covered games “in which the range of options available to a player includes killing, maiming, dismembering, or sexually assaulting an image of a human being, if those acts are depicted” in a manner that a reasonable person “would find appeals to a deviant or morbid interest of minors,” that is “patently offensive to prevailing standards in the community as to what is suitable for minors.” According to the Court, California tried to make its content-based restriction look like obscenity regulation by excluding video games with literary, artistic, political, or scientific value from the statute’s coverage (language borrowed from Supreme Court obscenity jurisprudence). However, the Court emphasized that the obscenity exception to the First Amendment only covers depictions of sexual conduct, not “whatever a legislature finds shocking.” Just last term, the Court held in United States v. Stevens that “new categories of unprotected speech may not be added to the list by a legislature that concludes certain speech is too harmful to be tolerated.” The holding in Stevens controlled the case at issue – “violence is not part of the obscenity that the Constitution permits to be regulated.” Thus the Court determined that video games are protected speech under the First Amendment.
Strict Scrutiny Applied. The Court then subjected the statute to strict scrutiny because it imposed a content-based restriction on protected speech. In other words, California had to demonstrate that the Act was justified by a compelling government interest and was narrowly drawn to serve that interest. No doubt there is a legitimate interest in protecting children from harm. California argued that video games present a unique set of problems because they are interactive - players participate in the violent action on screen and determine its outcome. The Court rejected the argument as “all literature is interactive,” referencing Choose-Your-Own-Adventure stories where the reader makes decisions that determine the plot by following instructions about which page to turn to (remember those? I do!).
A belief shared by many – including the California legislature – is that children exposed to violence in video games are more likely to experience feelings of aggression and to exhibit violent antisocial or aggressive behavior. California justified the Act by claiming a “compelling interest in preventing violent, aggressive, and antisocial behavior, and in preventing psychological or neurological harm to minors who play violent video games.” Yet to survive strict scrutiny California was required to specifically identify an actual problem in need of solving and demonstrate that the curtailment of free speech was necessary to the solution. California didn’t meet that standard – it didn’t show a direct causal link between violent video games and harm to children. According to the Court, studies purporting to show a connection between exposure to violent video games and harmful effects on children “do not prove that violent video games cause minors to act aggressively” and “suffer from significant, admitted flaws in methodology.” Even if violent video games produce some effect on children's feelings of aggression, “those effects are both small and indistinguishable” from effects produced by exposure to other media such as violent cartoons. Since “California has (wisely) declined” to restrict other forms of violent speech, the Court considered the Act to be “wildly underinclusive” when judged against its asserted justification. According to the Court, underinclusiveness indicates that the government is disfavoring a particular speaker or viewpoint – in this case, California singled out the purveyors of video games for disfavored treatment without sufficient justification.
The Impact - Regulations for the Future… Or Not
With greater frequency, new technologies and marketing strategies introduce a profit motive into what would otherwise be protected speech. In a number of past opinions, the Court has given the government greater latitude when regulating commercial speech. Yet the majority in Sorrell gave strong First Amendment protections to speech that is commercial in nature. This may be good news for Internet advertising companies despite the growing number of recent proposals for government regulation of behavioral advertising. Using data about a user’s browsing history to deliver targeted advertisements to consumers is quite similar to the practice of “detailing” used by pharmaceutical companies. If the government tries to regulate online tracking, the industry may ask the courts to strike those regulations down using Sorrell as a precedent. Sorrell and Brown indicate that despite an industry’s profit motive, government regulations containing speaker- and content-based restrictions must address genuine, recognizable harms in order to survive heightened judicial scrutiny. However, it’s notoriously difficult to identify and quantify privacy-related harms. After Sorrell, legislatures will need to design privacy regulations more carefully, focusing on restricting industry practices that actually cause cognizable harms to individuals.
Rather than regulate in the face of this First Amendment tightrope, perhaps leaving the industry to self-regulate is preferable, particularly when the harms are nebulous and there are alternative ways to mitigate them. In Sorrell, Vermont contended that its Prescription Confidentiality Law protected doctors from “harassing sales behaviors.” Yet Vermont offered no explanation why remedies other than content-based rules would be inadequate. The Court noted that physicians can, and often do, simply decline to meet with detailers, including detailers who use PI data. Additionally, “Doctors who wish to forgo detailing altogether are free to give ‘No Solicitation’ or ‘No Detailing’ instructions to their office managers or to receptionists at their places of work.”
Justice Breyer dissented in Brown, stating “the First Amendment does not disable government from helping parents make such a choice here - a choice not to have their children buy extremely violent, interactive video games, which they more than reasonably fear pose only the risk of harm to those children.” California State Senator Leland Yee (D-San Francisco), original author of California Assembly Bill 1179, responded to the Court’s decision by stating “It is simply wrong that the video game industry can be allowed to put their profit margins over the rights of parents and the well-being of children.” Again, there are viable alternatives that address the potential harms raised in Brown – perhaps rendering regulation of protected speech unnecessary. As the National Association of Broadcasters noted in its amicus brief, “technology that can limit youth access to violent media has proven to be effective” and “the government should continue its constitutionally appropriate role in developing and promoting technological tools to assist parents in monitoring their children's use of media.” Even absent blocking technologies, the industry’s voluntary rating system informing consumers about the content of video games and responsible parenting can help protect children from violent media. Nothing prohibits parents from telling their kids “no” – they can simply (and have the right to) restrict their children’s access to media they deem inappropriate.
One core principle we can take away from this pair of cases was summed up by Justice Scalia in Brown: “whatever the challenges of applying the Constitution to ever-advancing technology, the basic principles of freedom of speech and the press, like the First Amendment's command, do not vary when a new and different medium for communication appears.” In Sorrell, Vermont asked for an exception to the rule that information is speech, but the Court found no need to consider Vermont’s request. Speaker- and content-based burdens on protected expression are sufficient to justify application of heightened judicial scrutiny, even if the information at issue is “a mere commodity.” Content-based restrictions were also the death of California’s violent video game statute in Brown. Brown evidences the Court’s unwillingness to expand the categories of speech that fall outside of the protections of the First Amendment. The bottom line is that the ambit of protected speech and expression is broad and the exclusions are narrow.
According to Greg Beck, who filed an amicus brief in Sorrell on behalf of Public Citizen, legislators need to be careful about the scope of regulations they enact given the Court’s recent stance on the scope of First Amendment protection. Regulations that are too narrow may unfairly target particular speakers. Regulations that are too broad may not be fully supported by the government’s rationale, thereby burdening more speech than justified. Given the Court’s recent decisions striking down statutes in the face of First Amendment challenges, perhaps regulation should take a back seat to alternative solutions when speech is involved. As Justice Kennedy wrote in Sorrell, “Many are those who must endure speech they do not like, but that is a necessary cost of freedom.”