Freedom of Commercial Speech in Europe

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What is commercial speech?

There is no satisfactory definition of commercial speech, neither in Europe nor in America. The attempts to define commercial speech have constituted the core of commercial speech doctrine in the United States. It is considered useful to take a look at the American developments before analysing how the commercial speech is treated in Europe.
As defined in the First Amendment case law11 commercial speech is “a speech that does nothing more than propose a commercial transaction”. Therefore it may also be referred to as transactional speech, whose content is primarily determined by the underlying transaction. “Such speech indeed raises concerns different from those raised by pure speech, alone because it is intertwined with, and an inseparable component of, the underlying commercial transaction itself.”12 It is however important to distinguish core transactional speech from non-transactional speech by commercial speakers. The U.S. Supreme Court presented different approaches when defining commercial speech. The attempts to construe a positive definition by stating what commercial speech is, are definitely overshadowed by statements as to what commercial speech is not. It is not speech on which money is spent to project.13 It is not speech in a form sold for profit.14 It is not speech that solicits money.15 It is not speech on a commercial subject.16 In Central Hudson,17 commercial speech was defined as expression related solely to the economic interests of the speaker and its audience.
The most recent case decided by the California Supreme Court - Kasky v. Nike18 - started anew the debate on the necessity of revision of the American commercial speech doctrine. On June 26, 2003, the U.S. Supreme Court dismissed a previously granted writ of certoriari as improvidently granted.19 In the background of the dispute lay a debate over globalisation, in particular over the conditions under which multinational corporations invested in developing countries. At some point of this heated debate Nike became target of allegations that the working conditions in its factories in Southeast Asia were dangerous, that workers were underpaid and mistreated, and finally that child labour was being used. To meet with this criticism Nike wrote letters to newspaper editors and to universities and was publishing communications addressed to the general public. Independent investigations were carried out and concluded that some allegations against Nike did have merit. Nike commissioned an independent investigation carried by a former United Nations Ambassador Andrew Young, who then concluded that the charges were false. The results of this investigation were published by Nike in the form of an “editorial advertisement” (i.e. paid political advertisement). Mark Kasky, a California resident acting on behalf of the general public, brought a suit against Nike, under California unfair trade practices and false advertising laws, submitting that the statements were untrue and amounted to misrepresentations. The statutes invoked imposed strict liability (even non-negligent misstatements are actionable, and even truth is not a defence when the truthful statements are deemed misleading). It had been submitted that Nike’s statements, although addressed to the public generally, were also intended to reach and influence actual and potential purchasers of Nike’s products. Nike claimed full First Amendment protection due to the fact that the statements constituted a part of a political debate in which certain allegations were formulated with regard to its practices in the oversees factories. Kasky argued the opposite, claiming that Nike’s speech was commercial and therefore merited only limited, if any, First Amendment protection. The classification of the speech as commercial stems from the fact that Nike took part in a debate only for its own commercial purposes, in order to convince the consumers and therefore maintain or even raise the sales of its products. Kasky alleged that Nike’s statements were false and misleading and should thus be subjected to unfair competition and false advertising laws’ regimes. The California Supreme Court agreed with Marc Kasky.20
The question posed in the motion to the U.S. Supreme Court to revise the Kasky judgement was as follows:

“[w]hen a corporation participates in a public debate – writing letters to newspaper editors and to educators and publishing communications addressed to the general public on issues of great political, social, and economic importance – may it be subjected to liability for factual inaccuracies on the theory that its statements are “commercial speech” because they might affect consumers’ opinions about business as a good corporate citizen and thereby affect their purchasing decisions?”21

A more detailed analysis of the case falls outside the limited scope of this paper. It has been mentioned in order to give the reader an example of a possible variable of commercial speech which reveals the difficulty of distinguishing between political and commercial speech in order to define the latter.
In the light of numerous efforts by American doctrine and jurisprudence to define commercial speech the question arises whether it is at all possible to fashion such a definition of commercial speech, which would coherently encompass all its variables. As Allan Howard puts it “[a]s a matter of definition, there are no convincing reasons why one definition of commercial speech is better than another22 Consequently, a clear and coherent guidance enabling the distinction between commercial and non-commercial speech remains an open question.
Part I. Commercial Expression and the European Convention on Human Rights and Fundamental Freedoms
The European Court of Human Rights held on several occasions that statements made in commercial context shall come within the realm of protection of Article 10 ECHR. The provision of this article reads as follows:

“Everyone has the right to freedom of expression. This right shall include freedom to hold opinions and to receive and impart information and ideas without interference by public authorities and regardless of frontiers. This article shall not prevent States from requiring the licensing of broadcasting, television or cinema enterprises.

This is a rather general declaration, as it does not specify what categories of expression are to be protected. The Court noted that it does not distinguish between various forms of expression.23 Consequently, all expression, whatever its content, falls within the scope of Article 10 ECHR. The key question is therefore the scrutiny of the justification for interference under Art. 10 (2) ECHR.24 It provides that:

“[t]he exercise of these freedoms [freedom to hold opinions and to receive and impart information and ideas], since it carries with it duties and responsibilities, may be subject to such formalities, conditions, restrictions or penalties as are prescribed by law and are necessary in a democratic society, in the interests of national security, territorial integrity or public safety, for the prevention of disorder or crime, for the protection of health or morals, for the protection of the reputation or rights of others, for preventing the disclosure of information received in confidence, or for maintaining the authority and impartiality of the judiciary.”

Thus, for an interference to come within the margin of appreciation it has to be:

  1. prescribed by law,

  2. pursuing one or more of the legitimate aims set out in the second paragraph of Art. 10 ECHR and,

  3. necessary in a democratic society to achieve such aims.

The necessity test is less strict with regard to commercial statements than in case of political speech.25 The states enjoy a wider margin of appreciation in commercial matters, which implies that they may interfere with commercial speech to a greater extent than would be allowed with regard to other kinds of expression (e.g. political speech).

The commentators point out that advertisement is a form of speech, since - though often in an embellished or exaggerated manner - it aims at conveying information or opinions.26 The profit-making purpose is considered irrelevant.27 Neither the financial element nor the competition-related promotional statements are excluded from the ambit of protection of Art. 10 ECHR.28 The justification for considering advertising a protected form of speech is that an individual (consumer) has got the right to receive information helping him or her to make an informed choice, regardless of whether this information concerns a political party or candidate s/he should vote for or the characteristics of a product s/he is planning on to buy.29
According to some opinions, the fact that the speaker defends a particular interest, economic or any other, does not deprive him or her of protection.30 Nor does the speaker’s professional status remove the speech from the realm of protection. In the Barthold case the ECtHR held that a rule of professional conduct, prohibiting a veterinary doctor from advertising, could not be invoked so as to prevent him from uttering statements on the need for an emergency veterinary service.31 The Court held that the strict approach to the prohibition of advertising contained in the professional rules of conduct is not consistent with the freedom of expression. Such an approach, prohibiting the speech if there is even a slightest likelihood that the utterances will entail an advertising effect, deprives the members of a particular profession from contributing to the public debate and hampers the press in its role as public watchdog.32
The European approach to commercial speech – balancing the interests at stake
The leading case concerning speech in commercial context - Markt Intern33 - concerned a publisher of a trade bulletin, who represented the interests of small and medium sized retail businesses in their competition with large distribution companies (e.g. supermarkets and mail-order companies). The bulletins published by Markt Intern contained information on developments in the market with special emphasis on the commercial practices of large-scale companies. In a bulletin for chemist and beauty product retailers - “Markt Intern – Dorgerie- und Perfuemeriefachhandel”, Klaus Beermann described an incident involving an English mail-order firm – Cosmetic Club International. It allegedly did not return the purchase price to a client, who – not satisfied with the goods received - returned them to the seller. The article was based on one incident only and requested further feedback from the readers as to whether the event described constituted general business practice by Cosmetic Club International. The German court denied the freedom of expression protection for Markt Intern’s statements on the ground that they were made for the purposes of competition. The Commission (finding that there was a breach of Art. 10 ECHR) stated that the society is based on the articulation of economic interests.34
The main analysis in cases concerning speech in commercial context focuses on the third prerequisite for interference mentioned above: necessary in a democratic society to achieve the aims pursued. This question has been analysed by the European Court of Human Rights on several occasions already. On this basis, generally applicable criteria to determine the level of protection of the contested speech can be established:

  1. the court identifies the interests at stake (e.g. the right to speak freely on one hand and the interests of persons who may be injured by speech on the other),

  2. the contested speech is analysed – commercial and non-commercial elements of speech,

  3. the weighing of commercial and non-commercial elements takes place within the framework of “public debate” test; the question, which has to be answered in this regard: can the contested speech contribute to a public debate on a particular issue?

  4. if the non-commercial element overweighs the commercial, a higher level of protection will be accorded to the contested speech,

  5. conflicting interests at stake (see point 1 above) are once again balanced.

The key question in establishing its level of protection is therefore the distinction and weighting between commercial and non-commercial elements of speech. As some commentators put it, the level of protection accorded by the Court will partly depend on the extent of the commercial involvement.35 Consequently, the problem how to define commercial speech becomes highly relevant. Due to its many variables, commercial speech cannot be defined with reference to one characteristic only. Below, the approach to speech in commercial context adopted by the European Court of Human Rights is presented. It has to be noted, however, that in Markt Intern36 and Jakubowski37 cases the Court did not place an emphasis on distinguishing between commercial and non-commercial elements of the speech. By stating that the German authorities did not overstep the margin of appreciation it upheld the reasoning of the German courts.

Balancing - what interest does the speech serve?
Freedom of expression serves the interest on the part of the general public in a free flow of information. In the Markt Intern case the European Court of Human Rights referred to the well-established line of the German case-law that statements “intended to promote, in the context of commercial competition, certain economic interests to the detriment of others disqualifies the ability of the speech to contribute a public debate38. According to this line of reasoning, as soon as the commercial purpose is identified the speaker’s interests are accorded lower level of protection. Other purposes by which the speaker has been driven when making the statement are usually overshadowed by the commercial objective. The position of the German jurisprudence has been presented in the Jakubowski case:

In the first place, the motives of the person concerned and, linked to them, the aim and purpose of the comment are crucial. If the comment is motivated not by personal interests of an economic nature, but by concern for the political, economic, social or cultural interests of the community, if it serves to influence public opinion, the appeal will probably qualify for the protection of Article 5 para. 1 of the Basic Law (German Constitution), even if private and, more particularly, economic interests are adversely affected as a result. Conversely, the importance of protecting the latter interests is the greater, the less the comment is a contribution to public debate on a major issue of public concern and the more it is immediately directed against those interests in the course of business and in pursuit of a self-serving goal (see Constitutional Court Decisions [vol.] 66, 116 at 139) such as improving one's own competitive position…”39

According to some opinions, the judgement of the European Court of Human Rights in the Markt intern case is unacceptable, because the “[s]uppression of dissemination of true statements is clearly in violation of Art. 10 ECHR”.40

Distinguishing between commercial and non-commercial elements of speech - a “public debate” test

The European Court of Human Rights dealt with the question of distinction between commercial and non-commercial elements of speech. In this regard the Hertel41 case provides for the most clear and helpful hints. The case involved an injunction against Mr. Hertel, who published results of his research, which proved that preparing food in microwave oven had some serious negative effects on human’s health. The Swiss Association of Manufactures and Suppliers of Household Electrical Appliances instituted proceedings under the Swiss Unfair Competition Act. The Court held that in this case the margin of appreciation was reduced as the applicant had not made purely commercial statements but had participated in a debate on an issue of public concern.

In determining the scope of margin of appreciation afforded to national authorities the Court tried to establish whether Mr. Hertel could contribute to a debate on issues of public concern:

[A] margin of appreciation is particularly essential in commercial matters, especially in an area as complex and fluctuating as that of unfair competition. (…) It is however necessary to reduce the extent of margin of appreciation when what is at stake is not a given individual’s purely “commercial” statements, but his participation in a debate affecting the general interest, for example, over public health; in the instant case, it cannot be denied that such a debate existed.”42

According to the Court’s reasoning, a decisive argument in determining the extent of the margin of appreciation afforded to national authorities is the existence of a public debate to which the statement in question may significantly contribute. The criteria applied by the Court in Hertel can definitely find a general application in distinguishing between commercial and non-commercial elements of the speech.43 The first criterion is therefore the existence of a public debate on a particular issue, which is also the subject matter of a contested speech. The second criterion is whether or not the contested speech has got the potential of contributing significantly to the above-mentioned debate.44 The criteria applied in Hertel were also applied in Barthold45 case.
Demuth v. Switzerland

In the case of Demuth v. Switzerland46 the Court clearly departed from its previous approach. The case concerned state grants , or - refusing to grant a broadcasting licence to a private enterprise – Car TV AG. Car TV intended to broadcast a television programme primarily on cars, which would also deal with energy policies, traffic security, environmental issues (all of these being without any doubt issues of public concern). Consequently, the Court established it had to deal with mixed speech, including both – commercial and non-commercial elements. Having done so, the Court did not apply the “Hertel/Barthold- public debate” test. It did not consider whether there was a public debate to which the applicant could contribute. Instead, it referred to the enterprise’s objectives.

The character of the speech determined through reference to the enterprise’s objectives
In the light of the previous case-law an emphasis on the objectives of the enterprise comes somewhat surprisingly. The Court stated that “the purpose of Car TV AG was primarily commercial in that it intended to promote cars and, hence, further car sales”.47 Then the Court concludes that “where commercial speech is at stake, the standards of scrutiny may be less severe”.48 It seems that the commercial character of the speech was established merely on the basis of the commercial objectives of the enterprise. Consequently the question arises whether the objectives of an enterprise are decisive in determining the character of the speech. When a commercial actor speaks is it always commercial speech?
The judgement in the Demuth case has to be criticised. In his dissenting opinion, Judge Jörundsson, pointed out the importance of taking into account the contents of the programme, which “went well beyond the commercial framework49, as it intended to deal with issues of great public concern like traffic safety, energy policies, environmental issues. As Judge Jörundsson stated:

“These matters were indubitably of general and public interest and would have contributed to the ongoing, general debate on the various aspects of a motorised society. It is, therefore, necessary to reduce the margin of appreciation pertaining to the authorities, since what was at stake was not merely a given individual’s purely “commercial” interests, but his participation in an ongoing debate affecting the general interest.”50

The analysed case brings into question the approach applied by the Court so far. In as much as the speaker element of the speech has to be taken into account, the objective of the speaker’s activity definitely plays a role. It cannot, however, be a decisive factor in deciding what is the scope of protection of a particular statement. The content of the speech and the context in which it has been spoken are much more important and have to be taken into account adequately.

To sum up the arguments in this part of the paper it has to be noted that commercial speech clearly falls within the realm of protection of Art. 10 ECHR. The key question in defining its level of protection is the scrutiny of the justification for restriction in accordance with Art. 10 (2) ECHR. In assessing the extent of the necessity of an interference, the state enjoys a certain margin of appreciation, which is wider in commercial matters. It follows that where commercial speech is at stake, the standards of scrutiny may be less severe.51 The ECtHR held that a wider margin of appreciation is essential in particular in an area as complex and fluctuating as that of unfair competition.52 The scope of the margin is however subjected to European supervision. In exercising this supervision, the ECtHR applied a “public debate” test, in that it determined whether there exists a public debate to which the contested statement may significantly contribute. Clearly, the non-commercial element of the speech touching upon the issues of public concern plays an essential role in determining the level of protection of speech in commercial context.

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