North American Meat Institute Concedes the Battle but not the War

The court battle between the North American Meat Institute et al. and the US Dep’t of Agriculture (discussed here and here) is over.  On February 9, the Institute filed papers in U.S. District Court to drop its lawsuit seeking to block the USDA’s implementation of mandatory country of origin labeling rule (“COOL rules”).

The initial COOL legislation was amended in 2008 to include guidelines for labeling imported fresh fruits, nuts and vegetables. It was amended a second time in 2013 in response to concerns that meat products were being “co-mingled,” wherein animals born outside the United States but shipped to American feedlots for finishing and slaughter might pass with a “Product of the USA” label. New COOL guidelines require specific designations for livestock born outside the United States but shipped to U.S. feedlots prior to slaughter.

NAMI opposed these rules but suffered three losses in their attempt to black them.  The case was initially filed in July 2013 and NAMI had until Monday to either file paperwork to continue their case or drop it. They dropped it.  

For those of us interested in governmental regulation of corporate speech the cessation of the case means a lost opportunity for the courts to clarify what is now muddled doctrine.  At issue in the North American Meat case was whether the COOL rules violated First Amendment rights, an issues which required the court to consider the reach of Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626, 651 (1985), which found that because: 

• commercial speech warrants protection mainly due to its information-producing function, …… a commercial actor has only a “minimal” First Amendment interest in not providing purely factual information with which the actor does not disagree….. Such mandates do not violate an advertiser’s First Amendment rights, as long as disclosure requirements are reasonably related to the State’s interest in preventing deception of consumers.” 

North American Meat argued that the COOL rules went beyond preventing the deception of consumers and therefore should be tested under the more stringent Central Hudson Gas & Elec. Corp. v. Public Service Comm'n test which states that: 

• For commercial speech to come within the First Amendment, it at least must concern lawful activity and not be misleading. Next, it must be determined whether the asserted governmental interest to be served by the restriction on commercial speech is substantial. If both inquiries yield positive answers, it must then be decided whether the regulation directly advances the governmental interest asserted, and whether it is not more extensive than is necessary to serve that interest. 

The DC District Court of appeals disagreed that Zauderer was limited to disclosures aimed solely at preventing the deception of consumers.  Instead it stated  “[f]inding that Zauderer is best read as applying not only to mandates aimed at curing deception but also to ones for other purposes….., we adopt that reading,….” In a somewhat odd move, it then went on to articulate the governmental interests in the COOL rules, stating that

we can see non-frivolous values advanced by the information. Obviously it enables a consumer to apply patriotic or protectionist criteria in the choice of meat. And it enables one who believes that United States practices and regulation are better at assuring food safety than those of other countries, or indeed the reverse, to act on that premise. 

It therefore upheld the rules.  So where are we?  We know that Zauderer will apply to a “commercial speech mandate that compels firms to disclose purely factual and non-controversial information.”  But must the proponent of the mandate still provide justification in the form of governmental interests underlying the mandate?  How strong must those interests be? 

And what is “purely factual and non-controversial information?”   That critical legal issue is left open after this case and will certainly continue to be hard fought in future cases.  We have already seen it called into question in the conflict minerals battle where opponents of the compelled disclosure argue that the information required by the rule goes far beyond what is factual and non-controversial.  The expansion of Zauderer beyond disclosures aimed at preventing consumer deception makes the delineation of “purely factual and non-controversial” all the more important.  The dropping of American Meat means we will have to wait for more guidance on just what that terms means.

While North American Meat Institute may have ceded this legal battle, the war over the COOL rules is not over.  Last October, the World Trade Organization ruled against the US and the COOL rules in response to a complaint brought by Canada and Mexico arguing that the rules unfairly discriminate against meat imports and give the advantage to domestic meat products.  The US appealed that ruling.  Agriculture Secretary Tom Vilsack has said that the WTO should have the final say on COOL suggesting that if the US loses its appeal, the rules will be re-written despite their validation in the US courts.  Failure to do so could lead to retaliatory action by Canada and Mexico Canada who sought WTO permission to impose more than $2 billion a year in tariffs in response to COOL. A WTO decision is expected to be made public next July.