First Amendment Advertising Is a Critical Component

First Amendment

Advertising is a critical component of any business. Many forms of advertising are protected by the First Amendment, yet "the Supreme Court for many years took the view that commercial speech -- speech that proposes an economic transaction -- was not protected by the First Amendment" (Linder 2012). However, in Virginia State Board of Pharmacy (1976), the Court ruled against a law prohibiting advertising the prices of prescription drugs. But this decision was based not upon the rights of the corporation to free speech, but the rights of consumers to "receive information" to enable them to make decisions (Linder 2012).

However, the Court has also found in favor of attempts to limit the constitutional freedoms of businesses to engage in unfettered speech, such as in the case of bans upon cigarette advertisements directed towards minors or on television to the general public. In 1971, all television advertisements directed towards minors were banned and in 2001 the U.S. Supreme Court, in Lorillard Tobacco Company v. Reilly found in favor of states' rights to limit all cigarette advertising directed towards minors. In the majority decision it noted "the First Amendment also constrains state efforts to limit advertising of tobacco products, because so long as the sale and use of tobacco is lawful for adults, the tobacco industry has a protected interest in communicating information about its products and adult customers have an interest in receiving that information" although "to the extent that federal law and the First Amendment do not prohibit state action, States and localities remain free to combat the problem of underage tobacco use by appropriate means" (Lorillard Tobacco Company v. Reilly, 2012, Exploring Constitutional Conflicts). Recently, there has been a great deal of agitation to promote similar laws banning junk food advertising to children.

Businesses are also constrained in terms of the product claims they can make. For example, the Dietary Supplement Health and Education Act (DSHEA) (1994) prohibit businesses from making unsubstantiated claims about the ability of a supplement to treat disease. Also, "the FDA has issued cease-and-desist warnings about foods that bear structure-function claims. In recent years, it has simply stated that manufacturers are responsible for ensuring that the claims are 'truthful and not misleading'" regarding foods (Nestle 2010). All of this is important for a business to remember given that the underlying principle of consumers to receive accurate information is resonant in all of these examples. Even though businesses can take a certain amount of 'poetic license' when advertising their products (there would be no way to challenge every restaurant that advertised itself as selling 'the world's best pizza' for example) limits have been placed upon free speech in many instances, particularly when the safety of children is at stake.

However, businesses have protections due to limitations placed upon free speech. Customers cannot libel the businesses they patronize, for example, despite their right to criticize the establishments they patronize. "A woman is facing a $750,000 defamation lawsuit and has been ordered to alter a negative Yelp review of a home contractor after police found that her claims didn't add up" as the contractor alleges that her negative and unsubstantiated review on the popular review website has had an unfairly deleterious effect upon his business (Feinstein 2012).

Q2. Ethics

Traditional theories of firm morality suggested that a business only has an ethical obligation to enrich its shareholders, not pursue a moral course. However, recently more and more businesses have begun touting their ethical and sustainability initiatives. A utilitarian perspective on this might suggest that simply put, this is 'good for business' and the net consequences are 'the greatest good for the greatest number of people.' Ignoring the public's demand for businesses to behave in an ethical fashion can result in lost sales. This is a lose-lose for all concerned -- the shareholders of the business lose profits as well as damage being done to the larger environment, as a result of unethical corporate behaviors.