Apr 7, 2007

Supreme Court Ruling Gives New Life to Checkoffs

While the decision concerned beef, not fruit or vegetables, leaders in the horticulture industry hailed the U.S. Supreme Court beef promotion decision May 23 as a victory.

“It is a great victory for the apple industry – and for all industries in which people want to come together to promote their products,” said Nancy Foster, president and CEO of the U.S. Apple Association.

Produce Marketing Association President Bryan Silbermann said: “This interpretation by the Supreme Court rings true. It affirms that an industry with common goals can come together to improve the marketplace through efforts such as research and promotion.”

Tim O’Connor, president and CEO of the U.S. Potato Board, said the ruling “wipes the First Amendment challenge off the board for every promotion program.”

Foster said the “landmark decision” provided “rules we can operate under with confidence. It defined what is government speech and what is a government entity.”

In its ruling, the court upheld, 6-3, the Beef Promotion and Research Act of 1985. The court overturned lower court decisions by the U.S. Court of Appeals for the 8th Circuit and the U.S. District Court for South Dakota, which had ruled it unconstitutional.

At issue was whether speech – advertising – promoting beef is “government” or “private.” The court ruled that the beef promotion is government speech and not subject to challenge on First Amendment grounds.

The Supreme Court made it clear that among the reasons it ruled that the beef ad campaign represented government speech was that it was overseen by the secretary of agriculture and no evidence suggested consumers viewed the campaign as anything other than government speech.

“I am extremely pleased that the U.S. Supreme Court overturned the lower courts’ decisions and ruled in favor of the beef checkoff program,” said Agriculture Secretary Mike Johanns, whose department was defendant in the case. “This is certainly a win for the many producers who recognize the power of pooled resources. As this administration has always contended, USDA regards such programs, when properly administered, as effective tools for market enhancement.”

A week after the Supreme Court ruling on the, “Beef. It’s what’s for dinner,” advertising campaign, the justices sent three challenges to other commodity ad programs back to lower courts.

The court remanded one case involving advertising for alligator-skin products and two for well-known ad campaigns – that of the pork producers “other white meat” effort and the milk checkoff that funds “got milk?” ads. They were sent back to lower courts to reconsider in light of the previous week’s ruling.

The lower courts will have to resolve whether those same conditions are true regarding the other programs and whether the cases should be pressed or dismissed.

Apple promotion programs are organized by enabling legislation in several states and are government entities, Foster said. States with such programs need to make sure they are operating under laws that are properly structured to meet the tests defined by this Supreme Court ruling, she said.

The U.S. Potato Board’s O’Conner said no legal actions have been brought against the dozen or so state checkoffs or the national potato program, which are structured similarly to apple programs.

The Beef Promotion and Research Act of 1985 establishes a federal policy of promoting and marketing beef and beef products, the high court said. The secretary of agriculture implemented the act and imposed an assessment, a checkoff, on all cattle sales.

While lower courts had ruled that the Beef Act and Order unconstitutionally compel respondents to subsidize speech to which they object, the Supreme Court disagreed. It said the generic advertising at issue is the government’s own speech and exempt from the First Amendment free-speech challenge.

Justice Antonin Scalia said that, under the Beef Act, the message is effectively controlled by the federal government. The agriculture secretary has final approval authority over every word in every promotional campaign, he said.

The Supreme Court ruling marks its third attempt since 1997 to define the limits of marketing programs. That year, the court upheld mandatory fees to promote California peaches, plums and nectarines.

Four years later, the court ruled the government couldn’t force mushroom growers to pay for advertising to promote mushrooms. The ads weren’t part of a broader government effort to regulate that market, as was the case with the California fruits, the court said.

In the beef case, the Justice Department defended the assessments using a legal theory it hadn’t raised in the mushroom case.

It argued that the advertising program was “government speech” because the agriculture secretary controls the national boards of beef producers that carry out the promotion. It contended that the federal government is entitled to control its own speech, even when it’s funded by fees assessed on certain industries.

Litigants opposing the checkoffs contend there are strong arguments that the advertising campaigns aren’t from the government and that the checkoffs force farmers to join associations they don’t want to join, a new issue that may be pursued if lower courts decide to re-hear the cases.