Thursday 19 October 2017

New U.S.D.A. Meat Label Rule Survives Meat Packers Challenge; Lessons on Labeling Claims and Free Speech

A U.S. district judge in Washington D.C. refused on Wednesday to stop the government from requiring labels on packages of beef, pork, poultry and lamb sold in U.S. stores to include more specific information about the meat’s country of origin. U.S. meat packers said the latest country-of-origin labeling (COOL) rule will drive up their costs and complicate record-keeping. But in a victory for the U.S. Department of Agriculture, District Judge Ketanji Brown Jackson denied their request for a preliminary injunction.

Canada and Mexico are challenging COOL before the World Trade Organization as a U.S. trade barrier. They prevailed in an earlier WTO case against COOL, which led to the revised regulation issued in May and now under dispute. The current WTO challenge will not be resolved until 2015. The meat packers’ lawsuit against COOL remains alive although Jackson rejected the request for a preliminary injunction. The judge said the industry failed to show it would suffer irreparable harm if COOL was in effect while the case being decided.

The primary argument advanced by the American Meat Institute, the trade group for meat packing companies and the lead plaintiff in the lawsuit, was a violation of their right to free speech. Freedom of speech is a common claim across the food industry to labeling changes or enforcement challenges. For example, dietary supplement companies, often respond to warning letters which cite structure function claims as new drug or disease claims, with freedom of speech arguments. The case law in this type of constitutional challenge is well established, even as it relates to FDA and USDA labeling. The COOL rule provides an excellent opportunity to review that framework.

The case law begins by distinguishing compelled speech from compelled commercial speech. Compelled speech refers to a principal of freedom of speech which prohibits the government from telling people what they must say. Compelled speech, like restrictions on speech, is subject to strict scrutiny in most circumstances. How compelled speech is reviewed by courts depends on who is being compelled to speak – an individual or a company. Nearly all FDA/USDA labeling requirements will be classified as compelled commercial speech because it is a labeling requirement mandated to a company. In the case of the COOL rule the Court made clear it is reviewing the compelled disclosure of a production step made by a company.

Compelled commercial speech is subject to one of two review standards. A labeling mandate will either be subject to intermediate scrutiny under a case known as Central Hudson or subject to a reasonableness standards under Zauderer. Compelled commercial speech is generally evaluated under the intermediate scrutiny test that the Supreme Court first articulated in Central Hudson Gas & Electric Corporation v. Public Service Commission of New York, 447 U.S. 557 (1980). Most courts interpreting Central Hudson and the cases to follow as upholding compelled commercial speech only when: the governmental interest is substantial; the regulation directly advances the governmental interest asserted; and the regulation is not more extensive than is necessary to serve that interest. There is an exception to Central Hudson provided by the Supreme Court in Zauderer v. Office of Disciplinary Counsel of Supreme Court of Ohio. In Zauderer the court held a law compels disclosure of “purely factual and uncontroversial information,” the law need only be “reasonably related to the [government’s] interest in preventing deception of consumers” to pass muster under the First Amendment. That is the general hub to any challenge of a FDA/USDA labeling mandate or enforcement action – does the compelled commercial speech relate to purely factual information needed to prevent consumer confusion or to another purpose?

In the case of the COOL rule Judge Jackson relied on two D.C. Circuit Court of Appeals cases interpreting when Zauder and Central Hudson applied. The parties agreed the COOL rule is purely factual and noncontroversial, but looked to the court to answer whether the final rule targeted deceptive speech. If the rule looked to prevent consumer confusion the easier Zauder standard applied otherwise the more onerous Central Hudson would be used. Judge Jackson found the legislative history pointed to a legislative intent aimed at preventing consumer confusion and applied Zauder to strike down the preliminary injunction. The decision to apply the reasonableness standard may ultimately point to how the court will dismiss the lawsuit.

As a member of the food industry remember labeling mandates and enforcement are unique from individual challenges to freedom of speech. There is a rich case history as the discussion above points to. Before raising a freedom of speech argument use the above framework as starting point to guide your conversation with QA and legal counsel. Given the case history and complexity of the issue freedom of speech arguments are best raised in court and not in response to 483s, Warning Letters, or Recalls.

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