International Dairy Foods Ass'n v. Boggs

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206

File Name: 10a0322p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

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INTERNATIONAL DAIRY FOODS ASSOCIATION X

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(09-3515); ORGANIC TRADE ASSOCIATION

(09-3526), -

Plaintiffs-Appellants, -

Nos. 09-3515/3526

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v.

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ROBERT J. BOGGS, in his official capacity as

Ohio Director of Agriculture, -

Defendant-Appellee. -

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Appeal from the United States District Court

for the Southern District of Ohio at Columbus.

Nos. 08-00628; 08-00629—James L. Graham, District Judge.

Argued: June 10, 2010

Decided and Filed: September 30, 2010

Before: GILMAN and WHITE, Circuit Judges; THAPAR, District Judge.*

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COUNSEL

ARGUED: Charles M. English, Jr., OBER, KALER, GRIMES & SHRIVER,

Washington, D.C., Randall J. Sunshine, LINER GRODE STEIN YANKELEVITZ

SUNSHINE REGENSTREIF & TAYLOR LLP, Los Angeles, California, for Appellants.

David M. Lieberman, OFFICE OF THE OHIO ATTORNEY GENERAL, Columbus,

Ohio, for Appellee. ON BRIEF: Charles M. English, Jr., Wendy Yoviene, OBER,

KALER, GRIMES & SHRIVER, Washington, D.C., Randall J. Sunshine, LINER

GRODE STEIN YANKELEVITZ SUNSHINE REGENSTREIF & TAYLOR LLP, Los

Angeles, California, for Appellants. David M. Lieberman, Benjamin C. Mizer, Stephen

P. Carney, William J. Cole, James Patterson, OFFICE OF THE OHIO ATTORNEY

GENERAL, Columbus, Ohio, for Appellee. Gregory R. Flax, BAKER & HOSTETLER

*

The Honorable Amul R. Thapar, United States District Judge for the Eastern District of

Kentucky, sitting by designation.

1

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LLP, Columbus, Ohio, Paige Tomaselli, THE CENTER FOR FOOD SAFETY, San

Francisco, California, for Amici Curiae.

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OPINION

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RONALD LEE GILMAN, Circuit Judge. In response to a number of dairy

processors advertising their nonuse of artificial hormones in the production of milk, the

Ohio Department of Agriculture (ODA) adopted a regulation designed to curb the

allegedly misleading labeling of dairy products. The regulation prohibits dairy

processors from making claims about the absence of artificial hormones in their milk

products (composition claims), and it also requires them to include a disclaimer when

making such claims about their production processes. Two separate dairy-processor

trade organizations filed suit, asserting that the regulation violates their First Amendment

rights and the dormant Commerce Clause.

The district court granted summary judgment in favor of the state of Ohio on all

but one of these claims. Based on this ruling, the court also denied the dairy processors’

motion for a preliminary injunction. The processors then filed an interlocutory appeal

with regard to both orders. For the following reasons, we REVERSE the judgment of

the district court to the extent that it upheld the regulation’s prophylactic ban on

composition claims and its prohibition on the use of an asterisk for required disclosures

to accompany production claims, AFFIRM the remainder of the judgment, and

REMAND the case to the district court for further proceedings consistent with this

opinion.

I. BACKGROUND

A. Factual history

This case concerns the labeling of milk products to reflect the nonuse of artificial

hormones by members of two dairy-processor trade organizations, the International

Dairy Foods Association (IDFA) and the Organic Trade Association (OTA). The IDFA

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is a trade organization whose collective membership consists of an estimated 85 percent

of the milk, cultured-products, cheese, and frozen-desserts producers in the United

States. In contrast, OTA’s members span the entire organic industry, including dairy

production. Several OTA members are certified organic dairy processors that must

comply with the Organic Foods Production Act (OFPA), 7 U.S.C. § 6501 et seq., which

forbids the use of antibiotics, artificial hormones, and pesticides in food production.

(The IDFA and the OTA are hereinafter collectively referred to as “the Processors.”)

At issue in this case is a genetically engineered hormone called recombinant

bovine somatotropin (rbST), also known as recombinant bovine growth hormone

(rbGH). The substance is given to lactating cows to increase their milk production. As

used, rbST combines with the naturally occurring bovine somatotropin (bST) to increase

dairy cows’ milk production by up to 10 percent over cows not given the artificial

hormone.

In 1993, the Food and Drug Administration (FDA) approved the use of rbST in

cows, concluding that the artificial hormone “is safe and effective for dairy cows, that

milk from rbST-treated cows is safe for human consumption, and that production and

use of the product do not have a significant impact on the environment.” Interim

Guidance on the Voluntary Labeling of Milk and Milk Products from Cows that Have

Not Been Treated with Recombinant Bovine Somatotropin, 59 Fed. Reg. 6279, 6279-80

(Feb. 10, 1994); see also 58 Fed. Reg. 59946 (Nov. 12, 1993) (approving the use of

rbST). The agency further “found that there was no significant difference between milk

from treated and untreated cows.” Id. at 6280. Recognizing that some food companies

might wish to inform consumers that they do not use milk from cows receiving rbST, the

FDA determined that such companies could voluntarily label their products as such,

provided that “any statements made are truthful and not misleading.” Id.

In response to requests from several states for further guidance on this issue, the

FDA in 1994 published an Interim Guidance regarding the labeling of milk and milk

products from cows not treated with rbST. The Guidance addressed two types of claims:

(1) “composition claims,” which refer to the final composition of the milk or milk

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product (e.g., “rbST free”), and (2) “production claims,” which refer to the manner in

which the product is produced (e.g., “from cows not treated with rbST”). With regard

to composition claims, the FDA strongly discouraged their use. It concluded that the

term “bST-free” would be false under any circumstances, given that bST is naturally

present in milk. 59 Fed. Reg. at 6280. The FDA next addressed the claim “rbST free,”

noting that it was “concerned that the term . . . may imply a compositional difference

between milk from treated and untreated cows rather than a difference in the way the

milk is produced.” Id.

Instead, the agency encouraged dairy processors to use production claims such

as “from cows not treated with rbST.” But it cautioned that even these claims have “the

potential to be misunderstood by consumers” because they “may imply that milk from

untreated cows is safer or of higher quality than milk from treated cows,” an implication

that would be “false and misleading.” Id. The FDA therefore suggested that processors

place production claims “in a proper context,” such as by pairing a production claim

with the statement that “[n]o significant difference has been shown between milk derived

from rbST-treated and non-rbST-treated cows,” or “by conveying the firm’s reasons

(other than safety or quality) for choosing not to use milk from cows treated with rbST.”

Id.

Bowing to “the traditional role of the States in overseeing milk production,” the

FDA clarified that its Guidance was a nonbinding document intended to give states

assistance in formulating their own labeling laws. Id. The FDA also recommended that

states require food companies to maintain records substantiating their claims and to

make those records available for inspection. Id.

In the 14 years since the FDA issued its Guidance, consumer demand for dairy

products made with milk from non-rbST-treated cows has increased. Many dairy

processors, including those belonging to both the IDFA and the OTA, no longer accept

milk from dairy farmers that comes from cows treated with rbST. Some IDFA

processors, for example, have entered into agreements with milk suppliers to ensure that

the milk received is from untreated cows, and the processors label their products to

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reflect this fact. And OTA members who label their products as “organic” are

specifically precluded by the OFPA from using milk from cows treated with rbST or any

other artificial hormone.

Several of these Processors advertised their nonuse of rbST on dairy products

that they sold in Ohio. In response, Ohio Governor Ted Strickland issued an executive

order in February 2008 that directed the ODA to “define what constitutes false and

misleading labels on milk and milk products.” Ohio Governor Executive Order 2008-

03S (Feb. 7, 2008). He further ordered the agency to require dairy producers claiming

that they do not use rbST to submit supporting documentation and to create labels

containing representations consistent with the FDA’s rbST findings.

The ODA then issued a proposed Rule restricting the types of claims that dairy

processors could make about milk and milk products. To gauge public support for these

labeling restrictions, the ODA solicited comments about the proposed Rule and held two

public hearings. Less than 70 of the 2,700 emails and letters sent to the ODA during this

time period were in favor of the proposed Rule, according to estimates made by the

Processors.

ODA Director Robert Boggs nevertheless adopted the Rule in May 2008. In

relevant part, the final Rule states that

(A) Pursuant to sections 917.05 and 3715.60 of the Revised Code, dairy

products will be deemed to be misbranded if they contain a statement

which is false or misleading.

(B) A dairy label which contains a production claim that “this milk is

from cows not supplemented with rbST” (or a substantially equivalent

claim) may be considered misleading on the basis of such language,

unless:

(1) The labeling entity has verified that the claim is

accurate, and proper documents, including, but not

limited to, producer signed affidavits, farm weight tickets

and plant audit trails, to support the claim, are made

readily available to ODA for inspection; and

(2) The label contains, in the same label panel, in exactly

the same font, style, case, and color and at least half the

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size (but no smaller than seven point font) as the

foregoing representation, the following contiguous

additional statement (or a substantially equivalent

statement): “The FDA has determined that no significant

difference has been shown between milk derived from

rbST-supplemented and non-rbST-supplemented cows.”

(C) Making claims regarding the composition of milk with respect to

hormones, such as “No Hormones”, “Hormone Free”, “rbST Free”,

“rbGH Free”, “No Artificial Hormones” and “bST Free”, is false and

misleading. ODA will not permit such statements on any dairy product

labels.

(D) Statements may be considered to be false or misleading if they

indicate the absence of a compound not permitted by the United States

[F]ood and [D]rug [A]dministration to be present in any dairy product,

including, but not limited to antibiotics or pesticides. Except as otherwise

provided in this rule, accurate production claims will not be deemed false

or misleading.

Ohio Admin. Code § 901:11-8-01.

B. Procedural history

Shortly after the final adoption of the Rule, the IDFA and the OTA filed separate

lawsuits in the district court, challenging the Rule as unconstitutional. The two cases

were later consolidated by the district court. According to the Processors, Ohio’s

labeling Rule infringes on their First Amendment rights, violates the dormant Commerce

Clause, is unconstitutionally vague, and is preempted by the OFPA. The IDFA also

asserted an equal protection claim in its complaint.

The Processors sought a preliminary injunction, after which both sides moved

for summary judgment on all issues except the IDFA’s equal protection claim.

Addressing all three motions in one order, the district court granted summary judgment

in favor of the State on the Processors’ Commerce Clause, void-for-vagueness, and

preemption claims. Regarding the Processors’ First Amendment claim, the court granted

summary judgment in favor of the State on the issue of the Rule’s prohibition of

composition claims. But it granted the State only partial summary judgment as to the

Rule’s restrictions on production claims in light of an undeveloped factual record on the

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issue of whether the Rule’s requirements were unduly burdensome as applied to small

containers. The court found that, in light of these rulings, the Processors had not shown

that they were likely to prevail on the merits of their claims and therefore denied their

motion for a preliminary injunction. This interlocutory appeal of the district court’s

preliminary injunction and summary judgment orders followed. The Processors contest

the district court’s ruling only as it pertains to their First Amendment and Commerce

Clause claims.

II. ANALYSIS

A. Standards of review

We review de novo a district court’s grant of summary judgment. ACLU of Ky.

v. Grayson County, 591 F.3d 837, 843 (6th Cir. 2010). Summary judgment is proper

where no genuine issue of material fact exists and the moving party is entitled to

judgment as a matter of law. Fed. R. Civ. P. 56(c)(2). In considering a motion for

summary judgment, the district court must draw all reasonable inferences in favor of the

nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587

(1986). The central issue is “whether the evidence presents a sufficient disagreement to

require submission to a jury or whether it is so one-sided that one party must prevail as

a matter of law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986).

By contrast, the decision of whether to grant a motion for a preliminary

injunction is “left to the sound discretion of the district court.” Deja Vu of Cincinnati,

L.L.C. v. Union Twp. Bd. of Trs., 411 F.3d 777, 782 (6th Cir. 2005). “A district court,

in deciding whether to grant an injunction, abuses its discretion when it applies the

incorrect legal standard, misapplies the correct legal standard, or relies upon clearly

erroneous findings of fact.” Id. (citation and internal quotation marks omitted). The

following factors are to be considered by a district court in deciding whether to grant a

preliminary injunction:

(1) whether the plaintiff has established a substantial likelihood or

probability of success on the merits; (2) whether there is a threat of

irreparable harm to the plaintiff; (3) whether issuance of the injunction

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would cause substantial harm to others; and (4) whether the public

interest would be served by granting injunctive relief.

Nightclubs, Inc. v. City of Paducah, 202 F.3d 884, 888 (6th Cir. 2000), overruled on

other grounds by 729, Inc. v. Kenton County Fiscal Court, 515 F.3d 485 (6th Cir. 2008).

Like the parties, the district court focused exclusively on the first of these four

factors—whether the Processors are likely to succeed on the merits of their claims—and

relied on its summary judgment ruling to conclude that the Processors were not entitled

to injunctive relief. The key issue on appeal is thus whether the district court erred in

its adverse rulings on the Processors’ (1) First Amendment challenge to the Rule’s

prophylactic ban on composition claims, (2) First Amendment challenge to the Rule’s

disclosure requirement for production claims, and (3) dormant Commerce Clause

challenge to the Rule. We address each claim in turn below.

B. First Amendment challenge to the ban on composition claims

The Processors contend that the Ohio rule violates the First Amendment by

placing a prophylactic ban on composition claims such as “rbST free,” “antibiotic-free,”

and “pesticide-free.” Both sides agree that the composition claims at issue constitute

commercial speech and are thus afforded less extensive protection under the First

Amendment than noncommercial speech. See Zauderer v. Office of Disciplinary

Counsel of the Supreme Court of Ohio, 471 U.S. 626, 637 (1985) (making the

commercial-noncommercial distinction in the context of restrictions on attorney

advertising). Under the commercial-speech framework, “[t]ruthful advertising related

to lawful activities is entitled to the protections of the First Amendment,” In re R.M.J.,

455 U.S. 191, 203 (1982), but the government is “free to prevent the dissemination of

commercial speech that is false, deceptive, or misleading,” Zauderer, 471 U.S. at 638.

Prophylactic bans on commercial speech are evaluated under a four-part analysis

first set forth in Central Hudson Gas & Electric Corp. v. Public Service Commission,

447 U.S. 557 (1980). Pursuant to that analysis, a court first determines whether the

speech concerns unlawful activity or is misleading. Id. at 566. If a court finds in the

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affirmative on either prong, the speech is not entitled to First Amendment protection, and

the analysis ends. Id. But if the court finds that the speech is entitled to First

Amendment protection, it then makes three additional inquiries: (1) whether the asserted

governmental interest is substantial, (2) whether the regulation directly advances that

interest, and (3) whether the regulation is more extensive than necessary to serve the

asserted interest. Id.

1. Whether the Processors’ composition claims are inherently misleading

The district court in the present case concluded that the composition claims were

misleading and therefore not entitled to any First Amendment protection. “Misleading

advertising may be prohibited entirely,” including where the speech is “inherently likely

to deceive or where the record indicates that a particular form or method of advertising

has in fact been deceptive.” In re R.M.J., 455 U.S. at 202-03. Where speech is only

potentially misleading, however, the Central Hudson framework applies. Id. at 203.

Under these circumstances, “the preferred remedy is more disclosure, rather than less.”

Bates v. State Bar of Ariz., 433 U.S. 350, 374-75 (1977) (striking down a ban on price

advertising for “routine” legal services in part because “it seems peculiar to deny the

consumer, on the ground that the information is incomplete, at least some of the relevant

information needed to reach an informed decision”).

The district court held that the composition claims were inherently misleading

because “they imply a compositional difference between those products that are

produced with rb[ST] and those that are not,” in contravention of the FDA’s finding that

there is no measurable compositional difference between the two. This conclusion is

belied by the record, however, which shows that, contrary to the district court’s

assertion, a compositional difference does exist between milk from untreated cows and

conventional milk (“conventional milk,” as used throughout this opinion, refers to milk

from cows treated with rbST). As detailed by the amici parties seeking to strike down

the Rule, the use of rbST in milk production has been shown to elevate the levels of

insulin-like growth factor 1 (IGF-1), a naturally-occurring hormone that in high levels

is linked to several types of cancers, among other things. The amici also point to certain

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studies indicating that rbST use induces an unnatural period of milk production during

a cow’s “negative energy phase.” According to these studies, milk produced during this

stage is considered to be low quality due to its increased fat content and its decreased

level of proteins. The amici further note that milk from treated cows contains higher

somatic cell counts, which makes the milk turn sour more quickly and is another

indicator of poor milk quality. This evidence precludes us from agreeing with the

district court’s conclusion that there is no compositional difference between the two

types of milk.

In addition, and more salient to the regulation of composition claims like “rbST

free,” the failure to discover rbST in conventional milk is not necessarily because the

artificial hormone is absent in such milk, but rather because scientists have been unable

to perfect a test to detect it. As recognized by the State’s brief in the district court,

“given existing technology, it is currently impossible to test milk to determine whether

the hormones present are natural hormones or recombinant hormones (such as rbST).”

The State further conceded this point at oral argument, acknowledging that conventional

milk “could” contain rbST, but that no test has been able to verify if this is in fact the

case. This uncertainty is also implicit in the FDA’s 1994 Guidance. There, the agency

stated that “there [i]s no significant difference between milk from treated and untreated

cows” because “[t]here is currently no way to differentiate analytically between naturally

occurring bST and [r]bST in milk.” 59 Fed. Reg. 6279, 6280 (emphasis added). The

FDA thus appears to have left room for the fact that some compositional difference

between the two types of milk may exist, leaving open the possibility that one day a

method might exist to detect whether rbST is in fact present in conventional milk.

Taken collectively, this evidence points to two distinct types of milk. On the one

hand is milk from cows never given rbST, which in turn cannot produce milk that has

rbST as a matter of fact. The composition claim “rbST free” is therefore demonstrably

true as applied to this milk. On the other hand, milk from cows treated with rbST might

contain the artificial hormone, although there is currently no way to determine whether

that is the case. But even if rbST is not present in conventional milk, there is still

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evidence that it contains increased levels of IGF-1 and might be compositionally of a

lesser quality.

A compositional difference thus exists between the two types of milk, although

the extent of this difference—namely whether conventional milk does in fact contain

rbST—is still very much an open question. As such, the composition claim “rbST free”

at best informs consumers of a meaningful distinction between conventional and other

types of milk and at worst potentially misleads them into believing that a

compositionally distinct milk adversely affects their health. Under these circumstances,

we conclude that composition claims like “rbST free” are not inherently misleading. We

must therefore apply the remaining three Central Hudson factors to assess the

constitutionality of the Rule’s prophylactic ban on the composition claims “rbST free”

and “artificial hormone free.”

As a separate matter, the Processors challenge on appeal the Rule’s ban of

composition claims related to antibiotics and pesticides. The State responds that

antibiotics and pesticides are “largely detectable in milk” and that “all milk is routinely

tested for antibiotics, and the presence of any antibiotic in any amount renders the milk

unacceptable for consumption.” It added that cost considerations prevent the routine

testing of every batch of milk. The State, however, did not present any evidence with

regard to testing procedures used to detect antibiotics and pesticides.

Evidence of this testing might well influence our determination as to whether the

claims “antibiotic free” and “pesticide free” are inherently misleading. If the State’s

testing can detect these substances and prevent any amount of them from being present

in conventional milk, then such claims would be inherently misleading because they

falsely imply that conventional milk contains antibiotics and pesticides when in fact the

State tests to ensure that it does not. But there is no evidence in the record to verify the

State’s contention. In light of this insufficiently developed factual record, the State has

not shown that it is entitled to summary judgment on this challenge. We therefore

remand the issue for further proceedings.

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2. The remaining Central Hudson factors

Having determined that the composition claim “rbST free” is not inherently

misleading, we must review the State’s ban on such claims under the final three Central

Hudson factors: (1) whether the State’s asserted interest is substantial, (2) whether the

regulation directly advances that interest, and (3) whether the regulation is no more

extensive than necessary to serve the asserted interest. See Central Hudson, 447 U.S.

at 566. All three of these factors must be met in order for the Rule to be upheld. See id.

Turning to the first factor, we note that the Rule’s purported purpose is to prevent

the use of “false or misleading” labeling. See Ohio Admin. Code § 901:11-8-01(A).

The Processors concede that this interest is substantial. But because the Rule is aimed

at preventing consumer deception, the State bears the burden to “demonstrate that the

harms it recites are real and that its restriction will in fact alleviate them to a material

degree.” Ibanez v. Fla. Dep’t of Bus. & Prof’l Regulation, Bd. of Accountancy, 512 U.S.

136, 146 (1994) (citation omitted). In Ibanez, the Supreme Court declared

unconstitutional the Florida Board of Accountancy’s censuring of an attorney for

referring to her designation as a Certified Public Accountant and as a Certified Financial

Planner in her advertising materials and other communications with the public. The

Court’s ruling stemmed from “the failure of the Board to point to any harm that is

potentially real, not purely hypothetical” and the “complete absence of any evidence of

deception.” Id. at 145-46 (citation omitted).

In the present case, the record of deception is weak at best. The only evidence

that the State points to is the FDA’s Interim Guidance and consumer comments that it

received in response to the proposed Rule. But the Guidance provides little support in

this regard. The FDA suggests in the Guidance that the claim “rbST free” “may imply

a compositional difference” between the two types of milk, 59 Fed. Reg. 6279, 6280

(emphasis added), but this statement does not establish that such a claim is necessarily

misleading in every context. Furthermore, the FDA cited no evidence or studies in the

Guidance to support its concerns regarding consumer confusion. The Guidance

therefore does not constitute “evidence of deception” as required under Ibanez.

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Also unhelpful are the consumer comments that the ODA received after issuing

the proposed Rule. The State received approximately 2,700 comments, of which the

Processors estimate that only 70 were in support of the Rule. We agree with the State

that some of these comments demonstrate consumer confusion regarding the use of rbST

in milk production. One commenter, for example, asserted that she needed “to know that

the milk I drink has no added hormones,” thereby indicating that she believed rbST to

be present in conventional milk. But few if any of these commenters indicated that their

confusion stemmed from the product labels. The commenter quoted above, for instance,

was informed about rbST and milk production from conversations with her oncologist,

not from reading the labels. Although there is not a “complete absence of deception” as

there was in Ibanez, the proof falls far short of establishing that Ohio consumers have

been misled by dairy-product labeling.

We need not address this issue further, however, because we conclude that the

Rule does not directly advance the State’s interest and is more extensive than necessary

to serve that interest. These last two steps of the Central Hudson test are

complementary. They involve “asking whether the speech restriction is not more

extensive than necessary to serve the interests that support it.” Lorillard Tobacco Co.

v. Reilly, 533 U.S. 525, 556 (2001) (citation omitted). Accordingly, there must be a

“reasonable fit between the legislature’s ends and the means chosen to accomplish those

ends, a means narrowly tailored to achieve the desired objective.” Id. (citation, ellipsis,

and internal quotation marks omitted). “[I]f there are numerous and obvious less-

burdensome alternatives to the restriction on commercial speech, that is certainly a

relevant consideration in determining whether the ‘fit’ between ends and means is

reasonable.” City of Cincinnati v. Discovery Network, Inc., 507 U.S. 410, 417 n.13

(1993).

We agree with the Processors that the potential consumer confusion created by

the composition claim “rbST free” could be alleviated by accompanying the claim with

a disclaimer informing consumers that rbST has yet to be detected in conventional milk.

Examples of possible disclaimers include a statement regarding the lack of evidence that

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conventional milk contains rbST, or even the disclaimer already required by the Rule to

accompany production claims: “The FDA has determined that no significant difference

has been shown between milk derived from rbST-supplemented and non-rbST-

supplemented cows.”

The district court rejected the use of a disclaimer to cure any confusion caused

by the claim “rbST free,” reasoning that “such a statement would only serve to confuse

a consumer.” In the district court’s view, “the label would contain contradictory

information—it would say a product is ‘free’ of rbST, but at the same time state that

there is no rbST in other products, which defeats the purpose of making the claim in the

first place.” But this conclusion rests on the assumption that conventional milk has

conclusively been shown to be free of rbST, when in fact that possibility remains an

open question. The claim “rbST free,” when used in conjunction with an appropriate

disclaimer, could assure consumers that the substance is definitively not in milk so

labeled while also advising them that it has yet to be detected in conventional milk.

There thus exists a method by which the potential difference between the two types of

milk can be presented without also being deceptive. See In re R.M.J., 455 U.S. 191, 203

(1982) (“[T]he States may not place an absolute prohibition on certain types of

potentially misleading information . . . if the information also may be presented in a way

that is not deceptive.”).

For these reasons, we conclude that the Rule’s prophylactic ban of composition

claims such as “rbST free” is more extensive than necessary to serve the State’s interest

in preventing consumer deception. This provision of the Rule therefore cannot withstand

scrutiny under Central Hudson.

C. First Amendment challenge to the disclosure requirement for production

claims

In addition to composition claims, the Ohio Rule regulates the use of production

claims such as “this milk is from cows not supplemented with rbST.” When using these

claims, processors must include a disclosure on the label stating that “[t]he FDA has

determined that no significant difference has been shown between milk derived from

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rbST-supplemented and non-rbST-supplemented cows.” Ohio Admin. Code § 901:11-8-

01(B)(2). This disclosure must be on the same label panel, “in exactly the same font,

style, case, and color and at least half the size (but no smaller than seven point font)” as

the production claim. Id.

The district court granted the State partial summary judgment on this issue. First,

the court held that the disclosure requirement is subject to a reasonableness standard

rather than intermediate scrutiny under the Central Hudson test. The court then found

that the claim “this milk is from cows not supplemented with rbST” implies that

processors using rbST have an inferior or unsafe product, and that the State has an

interest in preventing the dissemination of this potentially misleading information.

Although the court rejected the Processors’ argument that the cost of ensuring that their

labels comply with the Rule makes the Rule unduly burdensome, it found that there was

a factual dispute as to whether the Rule’s formatting requirements were unduly

burdensome to the extent that the Processors might not be able to include the required

disclosure on small containers. The court therefore denied the State summary judgment

on this latter issue.

1. Proper standard for evaluating disclosure requirements

As an initial matter, the Processors argue that the district court failed to employ

the appropriate standard of review for evaluating disclosure requirements. The court

relied on Zauderer v. Office of Disciplinary Counsel of the Supreme Court of Ohio,

471 U.S. 626 (1985), where the Supreme Court articulated a more lenient standard than

the Central Hudson test to use when disclosure requirements, as opposed to outright

prohibitions on speech, are at issue. In Zauderer, the Supreme Court explained that,

“because disclosure requirements trench much more narrowly on an advertiser’s interests

than do flat prohibitions on speech, warnings or disclaimers might be appropriately

required in order to dissipate the possibility of consumer confusion or deception.” Id.

at 651 (alterations, citation, and ellipsis omitted). It therefore held that disclosure

requirements do not violate an advertiser’s First Amendment rights where the

requirements “are reasonably related to the State’s interest in preventing deception of

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consumers.” Id. Such requirements, however, cannot be “unjustified or unduly

burdensome.” Id.

The Supreme Court recently clarified the standard of review to apply to

disclosure requirements in Milavetz, Gallop & Milavetz, P.A. v. United States, 130 S. Ct.

1324 (2010). That case involved challenges to recent revisions of the Bankruptcy Code,

including provisions that require certain professionals providing debt-relief assistance

to disclose in their advertisements that their help was related to bankruptcy relief and to

identify themselves as debt-relief agencies. Id. at 1330. The Court observed that the

relevant provisions targeted marketing claims that were inherently deceptive because

they promised “debt relief without any reference to the possibility of filing for

bankruptcy, which has inherent costs.” Id. at 1340. Given this, and the fact that the

regulation required a disclosure rather than imposing a prohibition on speech, the Court

upheld the constitutionality of the provisions under Zauderer. Id.

Milavetz thus established that Zauderer applies where a disclosure requirement

targets speech that is inherently misleading. We conclude that Zauderer also controls

our analysis where, as here, the speech at issue is potentially misleading. Several

reasons support this conclusion. First, in Milavetz, the Court did not explicitly limit its

application of Zauderer to inherently misleading speech, instead stating that a relaxed

standard of review applies to disclosure requirements regulating “misleading commercial

speech.” Id. at 1339 (emphasis in original). But see id. (Thomas, J., concurring) (“[A]

disclosure requirement passes constitutional muster only to the extent that it is aimed at

advertisements that, by their nature, [are inherently likely to deceive or have in fact been

deceptive].”).

In addition, as the Court recognized in Milavetz, the impetus behind the

formation of the Zauderer standard was the fact that “First Amendment protection for

commercial speech is justified in large part by the information’s value to consumers.”

Id. The speech rights of advertisers, in contrast, are of less value; specifically, their

“constitutionally protected interest in not providing the required factual information is

‘minimal.’” Id. (citing Zauderer, 471 U.S. at 651). This justification for the

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Zauderer standard thus fits regulations that require a disclosure, regardless of whether

the speech being targeted is inherently or potentially misleading. Because the Ohio Rule

regulates production claims by requiring them to be accompanied by a disclosure,

Zauderer controls our review.

Our sister circuits have similarly recognized this rationale for employing the

Zauderer standard. The Court of Appeals for the Second Circuit, for example, has held

that “there are material differences between purely factual and uncontroversial disclosure

requirements and outright prohibitions on speech.” Nat’l Elec. Mfrs. Ass’n v. Sorrell,

272 F.3d 104, 113 (2d Cir. 2001) (citing Zauderer) (brackets and internal quotation

marks omitted). Such differential treatment is due to the fact that the “mandated

disclosure of accurate, factual, commercial information does not offend the core First

Amendment values of promoting efficient exchange of information or protecting

individual liberty interests.” Id. at 114; see also United States v. Wenger, 427 F.3d 840,

849 (10th Cir. 2005) (observing that advertisers’ “constitutionally protected interest in

not providing any particular factual information in [their] advertising is minimal”

(quoting Zauderer)).

In arguing to the contrary, the Processors rely on two decisions from the Eleventh

Circuit Court of Appeals in which that court applied the Central Hudson factors to

disclosure requirements. One of these is Borgner v. Brooks, 284 F.3d 1204, 1210-13

(11th Cir. 2002), which applied the Central Hudson test to a statute requiring dentists

to include disclaimers when advertising a specialty practice not recognized by the

Florida Board of Dentistry and/or membership in an organization affiliated with such a

specialty. The other is Mason v. Florida Bar, 208 F.3d 952, 954-55 (11th Cir. 2000),

where the court analyzed a Florida Bar disclosure requirement for “self laudatory”

statements under the Central Hudson framework. But in neither case did the Eleventh

Circuit explain its decision to employ the Central Hudson test instead of Zauderer.

Moreover, the Borgner decision acknowledged that “[c]ourts have been more tolerant

of regulations mandating disclosure requirements than they have been of regulations that

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impose a total ban on commercial speech.” Borgner, 284 F.3d at 1214. We therefore

find these two cases unpersuasive in determining the proper standard of review.

In sum, we conclude that the Rule’s disclosure requirement is reasonably related

to the State’s interest in preventing consumers from being deceived by production

claims. Like composition claims, production claims such as “this milk is from cows not

supplemented with rbST” are potentially misleading because they imply that

conventional milk is inferior or unsafe in some way. But neither the FDA nor any study

has conclusively shown that to be the case. Furthermore, unlike its regulation of

composition claims, the Rule does not prohibit the use of production claims. It instead

requires only the disclosure of accompanying information. We therefore conclude that

the less-burdensome analytical framework from Zauderer should apply.

2. Evaluation of the disclosure requirement under Zauderer

Under Zauderer, the Rule’s disclosure requirement for production claims must

be “reasonably related to the State’s interest in preventing deception of consumers” and

cannot be “unjustified or unduly burdensome.” Zauderer, 471 U.S. at 651. The district

court concluded that the Rule was in compliance with the Zauderer standard because the

production claim that “this milk is from cows not supplemented with rbST,” despite its

accuracy, nevertheless “implies that those processors that do use rbST have an inferior

or unsafe product or that it is compositionally different.” Ohio’s Rule, the court

continued, “strikes the right balance between preventing misleading information and

providing enough information for consumers to make an informed choice.”

The Processors first contend that the State failed to show that their production

claims are misleading. But the State’s burden of providing such evidence is more

relaxed where disclosure requirements are at issue (as opposed to a ban on commercial

speech) and “the possibility of deception is . . . self-evident.” See Zauderer, 471 U.S.

at 652 (holding that, to justify the state’s imposition of a disclosure requirement for

attorney advertising, the state need not “conduct a survey of the public before it may

determine that the advertisement had a tendency to mislead” (alterations, citation, and

ellipsis omitted)).

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The Supreme Court rejected a similar argument made by those challenging the

revised Bankruptcy Code in Milavetz, noting Zauderer’s holding that a survey of the

public was unnecessary. Milavetz, 130 S. Ct. at 1340. It instead determined that

“[e]vidence in the congressional record demonstrating a pattern of [misleading]

advertisements . . . is adequate to establish that the likelihood of deception in this case

is hardly a speculative one.” Id. (citation and internal quotation marks omitted).

Although the FDA’s Interim Guidance and the consumer comments relied on by the

State constitute weak evidence of deception, they at least demonstrate that the risk of

deception in this case is not speculative. At a minimum, the Guidance supports the

conclusion that production claims can be misleading and the comments show that there

is general confusion among some Ohio consumers regarding what substances are (or are

not) in the milk they purchase. The district court accordingly did not err in concluding

that the Rule’s disclosure requirement is reasonably related to thwarting that risk.

Notwithstanding our conclusion that the Rule’s disclosure requirement is

reasonably related to the State’s interest in preventing consumer deception, we find there

to be no rational basis between this concern and the “contiguous” requirement of such

a disclosure. The Rule stipulates that disclosures must be “in the same label panel, in

exactly the same font, style, case, and color and at least half the size (but no smaller than

seven point font)” as the production claim. Ohio Admin. Code § 901:11-8-01(B)(2). A

disclosure also must be contiguous to the production claim. The font, style, case, and

color requirements for the disclosure’s text have a self-evident rational basis. As

Director Boggs testified in his deposition, these provisions are in place to prevent

marketers from rendering the disclosure “unreadable” by using a miniscule font or

“washing the color out.” These provisions thus prevent label designers from hiding the

disclosure by manipulating the text.

In contrast, we find no rational basis in the record for the Rule’s contiguity

requirement. The Processors specifically take issue with this provision, noting that it

prevents them from linking the production claim to the disclosure through the use of an

asterisk. Director Boggs testified in his deposition that the ODA decided against the use

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of an asterisk based on his “anecdotal experience” of talking to consumers in grocery

stores. According to Director Boggs, these consumers informed him that “oftentimes

it’s hard to understand labels, especially when the print is so small.” But these

observations reveal nothing about whether the use of an asterisk to link information was

effective in conveying a disclosure to consumers. Nor did Director Boggs point to any

other basis for his belief. He instead asserted, without any supporting evidence, that he

had “been aware of [asterisks being a problem in conveying information] for a long

time.”

In light of the paucity of evidence supporting the Rule’s contiguity requirement,

we conclude that it has no demonstrable connection to ensuring that consumers are not

misled. We therefore hold that it lacks a rational basis. See Nat’l Elec. Mfrs. Ass’n v.

Sorrell, 272 F.3d 104, 115 (2d Cir. 2001) (“The [First] Amendment is satisfied . . . by

a rational connection between the purpose of a commercial disclosure requirement and

the means employed to realize that purpose.”).

Finally, the Processors challenge the Rule’s disclosure requirement as being

unduly burdensome. They contend that it hinders their ability to convey their message

regarding rbST as well as their ability to operate in interstate commerce. But the

Processors’ concerns regarding the ability to convey their message stem largely from the

Rule’s prohibition on asterisks, a concern that we have dealt with above. And they have

not pointed to any evidence that the Rule’s font, size, and color requirements impair their

ability to communicate effectively.

Any alleged burden that the Rule imposes on the Processors’ ability to participate

in interstate commerce has similarly been alleviated. The Processors argue that the

Rule’s requirements are sufficiently distinct from those of other states so as to

necessitate Ohio-specific labels and to cause disruption of the nationwide distribution

of dairy products. Without the prophylactic ban on composition claims and the

prohibition on asterisk use, however, the Rule will be largely indistinguishable from

similar regulations in other states. See, e.g., Alaska Stat. § 17.20.013(a) (requiring

production claims to be accompanied by the disclaimer “No significant difference has

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been shown between milk derived from rBST treated and non-rBST treated cows”); Vt.

Stat. Ann. tit. 6, § 2762(3) (requiring production claims to be followed by a disclaimer

such as “[T]he U.S. Food and Drug Administration has not found a significant difference

to exist between milk derived from rbST-treated and non-rbST-treated cows”). The

Processors’ concerns regarding the allegedly more demanding scope of Ohio’s

regulation, including the extra costs of compliance, have thus been effectively addressed

by our rulings above.

D. Dormant Commerce Clause

As a final challenge to the Rule, the Processors claim that it violates the dormant

Commerce Clause. The Constitution grants Congress power “[t]o regulate Commerce

with foreign Nations, and among the several States.” U.S. Const. art. I, § 8, cl. 3.

“Although the Commerce Clause is by its text an affirmative grant of power to Congress

to regulate interstate and foreign commerce, the Clause has long been recognized as a

self-executing limitation on the power of the States to enact laws imposing substantial

burdens on such commerce.” S.-Cent. Timber Dev., Inc. v. Wunnicke, 467 U.S. 82, 87

(1984). In this “dormant” form, the Commerce Clause limits the power of states “to

erect barriers against interstate trade.” Lewis v. BT Inv. Managers, Inc., 447 U.S. 27, 35

(1980).

1. Standard for evaluating dormant Commerce Clause challenges

The parties initially dispute whether the district court used the proper standard

to evaluate the Processors’ Commerce Clause claims. Such claims are traditionally

evaluated using a two-tiered analysis. The first inquiry requires a court to determine

whether “a state statute directly regulates or discriminates against interstate commerce,

or [whether] its effect is to favor in-state economic interests over out-of-state interests.”

Brown-Forman Distillers Corp. v. N.Y. State Liquor Auth., 476 U.S. 573, 579 (1986).

If a state statute does either, it is “generally struck down . . . without further inquiry.”

Id.; see also Dep’t of Revenue of Ky. v. Davis, 553 U.S. 328, 338 (2008) (holding that

a discriminatory state law is “virtually per se invalid” and “will survive only if it

advances a legitimate local purpose that cannot be adequately served by reasonable

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nondiscriminatory alternatives” (citation and internal quotation marks omitted)). But if

the “statute has only indirect effects on interstate commerce and regulates

evenhandedly,” Brown-Forman, 476 U.S. at 579, a court then moves on to the second

inquiry, which requires the application of the balancing test set forth in Pike v. Bruce

Church, Inc., 397 U.S. 137 (1970). That test upholds a state regulation unless the burden

it imposes upon interstate commerce is “clearly excessive in relation to the putative local

benefits.” Id. at 142.

The first inquiry under Brown-Forman focuses on whether a regulation has a

direct effect or only an incidental effect on interstate commerce. But “[w]hat counts as

a ‘direct’ burden on interstate commerce has long been a matter of difficulty for courts,

and, presumably due to its questionable value as an analytical device, the

‘direct/incidental’ distinction has fallen out of use in dormant commerce clause

analysis.” Tenn. Scrap Recyclers Ass’n v. Bredesen, 556 F.3d 442, 448-49 (6th Cir.

2009). This court in Tennessee Scrap thus reformulated the dormant Commerce Clause

analysis as follows:

The first prong targets the core concern of the dormant commerce clause,

protectionism—that is, differential treatment of in-state and out-of-state

economic interests that benefits the former and burdens the latter.

Protectionist laws are generally struck down without further inquiry,

because absent an extraordinary showing the burden they impose on

interstate commerce will always outweigh their local benefits. However,

if the Court determines that the law is not protectionist, it goes on to

analyze the law under the deferential Pike balancing test.

Id. at 449 (citations and internal quotation marks omitted).

In addition to regulations that are protectionist, the Supreme Court has

recognized a second category of regulation that is also virtually per se invalid under the

dormant Commerce Clause: a regulation that has the practical effect of controlling

commerce that occurs entirely outside of the state in question. The Commerce Clause

“precludes the application of a state statute to commerce that takes place wholly outside

of the State’s borders, whether or not the commerce has effects within the State.” Healy

v. Beer Inst., 491 U.S. 324, 336 (1989) (citation omitted) (striking down as

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unconstitutional a New York liquor price-affirmation statute that caused distillers to

adjust their pricing in other states). A state, in other words, cannot “project its

legislation” into another state, Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511, 521 (1935),

such as by forcing “an out-of-state merchant to seek regulatory approval in one State

before undertaking a transaction in another,” Healy, 491 U.S. at 337. Most critical to

this inquiry is the issue of “whether the practical effect of the regulation is to control

conduct beyond the boundaries of the State.” Id. at 336. Like a regulation that favors

in-state economic interests at the expense of out-of-state interests, a state’s regulation

that controls extraterritorial conduct is per se invalid. See KT & G Corp. v. Att’y Gen.

of Okla., 535 F.3d 1114, 1143 (10th Cir. 2008) (“[A] statute will be invalid per se if it

has the practical effect of extraterritorial control of commerce occurring entirely outside

the boundaries of the state in question.” (citation omitted)).

The district court in the present case addressed the Processors’ extraterritorial

arguments in the latter half of its analysis under Tennessee Scrap, where it employed the

Pike test. According to the Processors, the court erred by failing to recognize that the

Rule is per se invalid if it has the practical effect of controlling commerce outside of

Ohio. In response, the State defends the court’s analysis as correct in light of Tennessee

Scrap.

But the plaintiffs in Tennessee Scrap did not argue that the regulation at issue in

that case had any extraterritorial effects. Tenn. Scrap, 556 F.3d at 448. Moreover,

recent cases from other circuits have expressly held that a state regulation that governs

extraterritorially is a per se violation of the Commerce Clause. The Eighth Circuit Court

of Appeals, for example, has held that

[a] statute may violate the dormant Commerce Clause in one of three

ways: (1) the statute clearly discriminates against interstate commerce in

favor of in-state commerce; (2) it imposes a burden on interstate

commerce that outweighs any benefits received; or (3) it has the practical

effect of extraterritorial control of interstate commerce.

Grand River Enters. Six Nations, Ltd. v. Beebe, 574 F.3d 929, 942 (8th Cir. 2009)

(citations omitted).

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At least three other circuits have expressed their Commerce Clause jurisprudence

in a similar three-part fashion. See Selevan v. N.Y. Thruway Auth., 584 F.3d 82, 90 (2d

Cir. 2009); KT & G Corp., 535 F.3d at 1143; Cloverland-Green Spring Dairies, Inc. v.

Pa. Milk Mktg. Bd., 462 F.3d 249, 261-63 (3d Cir. 2006). And five more circuits

recognize the extraterritorial-effects inquiry as being distinct from the Pike balancing

test. See Midwest Title Loans, Inc. v. Mills, 593 F.3d 660, 665 (7th Cir. 2010) (“But

another class of nondiscriminatory local regulations is invalidated without a balancing

of local benefit against out-of-state burden, and that is where states actually attempt to

regulate activities in other states.”); Carolina Trucks & Equip., Inc. v. Volvo Trucks of

N. Am., Inc., 492 F.3d 484, 489 (4th Cir. 2007) (“The principle that state laws may not

generally operate extraterritorially is one of constitutional magnitude.”); Alliance of

Auto. Mfrs. v. Gwadosky, 430 F.3d 30, 35 (1st Cir. 2005) (“A state statute that purports

to regulate commerce occurring wholly beyond the boundaries of the enacting state

outstrips the limits of the enacting state’s constitutional authority and, therefore, is per

se invalid.”); Bainbridge v. Turner, 311 F.3d 1104, 1112 (11th Cir. 2002) (holding that

“laws that directly regulate commerce occurring in other states are invalid”); Gerling

Global Reinsurance Corp. of Am. v. Low, 240 F.3d 739, 746 (9th Cir. 2001) (“The

Commerce Clause seeks to prevent extraterritorial economic ‘effects’ . . . .”).

To be sure, “the critical consideration” in any dormant Commerce Clause

analysis “is the overall effect of the statute on both local and interstate activity.” Brown-

Forman Distillers Corp. v. N.Y. State Liquor Auth., 476 U.S. 573, 579 (1986) (remarking

that “there is no clear line separating the category of state regulation that is virtually per

se invalid under the Commerce Clause, and the category subject to the Pike v. Bruce

Church balancing approach”). Nevertheless, a state regulation is “virtually per se

invalid” if it is either extraterritorial or discriminatory in effect. When it is neither, then

the Pike balancing test controls. Id.

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2. Whether the Rule governs extraterritorially

Our first consideration is therefore whether the Ohio Rule has any extraterritorial

effect. As discussed above, “a statute that directly controls commerce occurring wholly

outside the boundaries of a State exceeds the inherent limits of the enacting State’s

authority.” Healy, 491 U.S. at 336.

The Supreme Court has struck down state regulations due to their extraterritorial

effects in the context of price-affirmation statutes. In Brown-Forman, for example, the

Court analyzed a New York law that required liquor distillers selling to wholesalers in

the state to affirm that the prices charged were not higher than the lowest price at which

the same product was sold in any other state during the month covered by the

affirmation. Certain distillers offered “promotional allowances” to wholesalers

purchasing their products, but were not allowed to do so in New York. The state further

determined that promotional allowances offered to wholesalers in other states effectively

lowered the prices charged in those states, a view that was not shared by other states

with affirmation laws. These distillers were therefore faced with the choice of either

reducing their New York prices, in violation of the affirmation laws in other states, or

discontinuing their promotional programs in the other states. Brown-Forman, 476 U.S.

at 576, 579-82.

The Supreme Court struck down New York’s affirmation law. As a result of the

statute, the Court observed, distillers who had posted prices in New York were unable

to change their prices elsewhere during the relevant month. The statute therefore had

the effect of “[f]orcing a merchant to seek regulatory approval in one State before

undertaking a transaction in another.” Id. at 582. Although New York was free to

regulate the price of liquor within its own borders, it could not “project its legislation

into other States by regulating the price to be paid for liquor in those States.” Id. at 582-

83 (brackets, citation, and internal quotation marks omitted).

The Supreme Court struck down a somewhat different affirmation law in Healy.

There, a Connecticut statute required out-of-state beer shippers to affirm that their posted

prices for products sold to in-state wholesalers were no higher, at the moment of posting,

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than prices charged in all neighboring states. The Court reasoned that the statute

effectively required “out-of-state shippers to forgo the implementation of competitive-

pricing schemes in out-of-state markets because those pricing decisions are imported by

statute into the Connecticut market regardless of local competitive conditions.” Healy,

491 U.S. at 339. By having “the undeniable effect of controlling commercial activity

occurring wholly outside the boundary of the State,” the Court concluded that the statute

violated the Commerce Clause. Id. at 337.

Ohio’s Rule, by contrast, does not affect interstate commerce in the same manner

as the statutes at issue in Brown-Forman and Healy. The Processors argue that, due to

the complex national distribution channels through which milk products are delivered

and the costs associated with changing their labels, the Rule in effect forces them to

create a nationwide label in accordance with Ohio’s requirements. But unlike the price-

affirmation statutes, which directly tied their pricing requirements to the prices charged

by the distillers in other states, the Ohio Rule’s labeling requirements have no direct

effect on the Processors’ out-of-state labeling conduct. That is to say, how the

Processors label their products in Ohio has no bearing on how they are required to label

their products in other states (or vice versa). Nor does compliance with the Ohio Rule

raise the possibility that the Processors would be in violation of the regulations of

another state—the key problem with the New York statute in Brown-Forman. The Rule

accordingly does not purport to “regulate conduct occurring wholly outside the state.”

See Brown-Forman, 476 U.S. at 582 (alteration and citation omitted).

In addition to Brown-Forman and Healy, the Processors rely on Southern Pacific

Co. v. Arizona, 325 U.S. 761 (1945), in support of their extraterritorial argument. The

Supreme Court in that case struck down an Arizona statute that restricted the maximum

number of railroad cars comprising a train in that state to 14 for passenger trains and 70

for freight trains. Id. at 763. Because most trains in the country exceeded those number

of cars, train operators were forced to break up their trains prior to entering Arizona and

reassemble them upon leaving the state. Observing that the Arizona statute essentially

governed the flow of train traffic from Los Angeles, California to El Paso, Texas, the

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Court held that “[t]he practical effect of such regulation is to control train operations

beyond the boundaries of the state exacting it.” Id. at 775. National uniformity in the

regulation of railroads, the Court pointed out, was “practically indispensable to the

operation of an efficient and economical national railway system.” Id. at 771.

Unlike the Arizona statute, the Ohio Rule in the present case does not impede or

control the flow of milk products across the country. The Rule therefore does not create

a “serious impediment to the free flow of commerce.” See id. at 775. Moreover, the

need for regulation “prescribed by a single body having a nation-wide authority [was]

apparent” in Southern Pacific, id., whereas in the present case the FDA explicitly

acknowledged the power of the states to regulate the labeling of products from cows not

treated with rbST. See Interim Guidance, 59 Fed. Reg. 6279, 6280 (“Given the

traditional role of the States in overseeing milk production, the agency intends to rely

primarily on the enforcement activities of the interested States . . . .”). Southern Pacific

is therefore distinguishable on this basis. We accordingly reject the Processors’

argument that the Rule governs extraterritorially and is per se invalid as a result.

3. Whether the Rule is protectionist

In addition to a consideration of the Rule’s alleged extraterritorial effects, we

must assess whether it is protectionist; that is, whether the Rule results in “differential

treatment of in-state and out-of-state economic interests that benefits the former and

burdens the latter.” Tenn. Scrap Recyclers Ass’n v. Bredesen, 556 F.3d 442, 449 (6th

Cir. 2009) (citation omitted). “A [state regulation] can discriminate against out-of-state

interests in three different ways: (a) facially, (b) purposefully, or (c) in practical effect.”

E. Ky. Res. v. Fiscal Court of Magoffin County, 127 F.3d 532, 540 (6th Cir. 1997). The

Processors have not alleged that the Rule is facially discriminatory, so we need address

only the latter two types of discrimination.

In general, the purpose of a regulation can be ascertained from its language. Id.

at 542. Here, the Rule’s purpose is to prevent the “false or misleading” labeling of dairy

products. Ohio Admin. Code § 901:11-8-01(A). Nothing about this purpose indicates

Nos. 09-3515/3526 Int’l Dairy Foods Ass’n et al. v. Boggs Page 28

that Ohio is attempting to protect its local economic interests or burden out-of-state

actors.

The Processors argue, however, that other evidence indicates the presence of a

discriminatory purpose. They allege that traditional Ohio dairy farmers and Monsanto,

which is headquartered in Missouri, “were the driving force behind the proposals.”

According to the Processors, traditional Ohio dairy farmers and Monsanto pushed

through the enactment of the Rule in order to derail other Ohio dairy processors in their

effort to use milk only from cows not given rbST. A number of out-of-state processors,

who had already committed to not using milk from cows treated with rbST, were also

stripped of any competitive advantage they had developed from advertising their nonuse

of such milk in Ohio.

But the Processors’ discriminatory-purpose argument is undermined by their own

evidence. They assert that traditional Ohio dairy farmers and Monsanto lobbied for the

Rule in an effort to prevent other Ohio dairy processors from converting to products

made with milk from cows not treated with rbST. Their argument therefore does not

support the conclusion that the Rule is aimed at favoring Ohio economic actors at the

expense of out-of-state interests.

The Processors next contend that the Rule has a discriminatory effect. “[T]here

are two complementary components to a claim that a statute has a discriminatory effect

on interstate commerce: the claimant must show both how local economic actors are

favored by the legislation, and how out-of-state actors are burdened by the legislation.”

E. Ky. Res., 127 F.3d at 543.

The case of Hunt v. Washington State Apple Advertising Commission, 432 U.S.

333 (1977), is illustrative of this point. In Hunt, a North Carolina regulation prohibited

the importation into the state of closed containers of apples bearing another state’s

grading or classification system. Washington state apple growers, who were subject to

strict grading requirements under their own state’s law, were therefore unable to sell

apples in North Carolina using their labels. Although the regulation was not facially

discriminatory and did not have a discriminatory purpose, the Supreme Court held that

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it nevertheless burdened Washington growers by preventing them from advertising their

grading system and by essentially requiring them to downgrade their product. Id. at 352.

This in turn benefitted North Carolina growers, whose apples were not of as high a

quality as those from Washington. Id.

In the present case, the Processors argue that the Rule favors those Ohio dairy

farmers who wish to continue treating their cows with rbST, and harms out-of-state

farmers and processors who have committed to discontinuing the use of the hormone.

But the Rule burdens Ohio dairy farmers and processors who do not use rbST in their

production of milk products to the same extent as it burdens out-of-state farmers and

processors not using rbST. Conversely, the Rule favors out-of-state farmers and

processors who do use rbST in the same way that it favors Ohio farmers and processors

who use rbST. The point is made all the more clear by the fact that an out-of-state

processor whose production includes the use of rbST benefits from the Rule more than

an Ohio processor who uses milk from cows not treated with rbST.

As the district court noted, the Processors’ “argument is more akin to stating that

the law discriminates against dairy producers that do not use rbST as opposed to dairy

producers that do use rbST.” The problem with the Processors’ argument is that it is of

no help in meeting their burden of demonstrating how Ohio economic actors are favored

by the Rule at the expense of out-of-state actors. Both Ohio and out-of-state processors

are in effect either benefitted or burdened equally. Accordingly, we conclude that the

Processors’ claim that the Rule is protectionist and thus per se invalid is without merit.

4. Weighing the Rule’s burdens and benefits

Because the Rule does not have an impermissible extraterritorial effect and is not

protectionist, we must weigh its burdens and benefits in accordance with the Pike test.

See Tenn. Scrap Recyclers Ass’n v. Bredesen, 556 F.3d 442, 449 (6th Cir. 2009). That

test requires us to uphold the Rule “unless the burden imposed on [interstate] commerce

is clearly excessive in relation to the putative local benefits.” Pike v. Bruce Church, Inc.,

397 U.S. 137, 142 (1970).

Nos. 09-3515/3526 Int’l Dairy Foods Ass’n et al. v. Boggs Page 30

Applying Pike to the present case results in our finding that the alleged burdens

on interstate commerce are not excessive in relation to the putative local benefits. The

Processors’ primary complaint is that Ohio’s absolute prohibitions, formatting

restrictions, and cumbersome requirements are different from those in other states, and

the economic realities will require them to either stop selling in Ohio or conform their

national labels to Ohio’s requirements. But these burdens have largely been alleviated

by our conclusion that the more restrictive provisions of the Rule are invalid under the

First Amendment.

Moreover, Ohio has a reasonable basis to believe that the Rule’s intended

benefit—consumer protection—is significant. “[T]he supervision of the readying of

foodstuffs for market has always been deemed a matter of peculiarly local concern,” and

states “have always possessed a legitimate interest in the protection of their people

against fraud and deception in the sale of food products.” Fla. Lime & Avocado

Growers, Inc. v. Paul, 373 U.S. 132, 144 (1963) (brackets, citation, and internal

quotation marks omitted). Because there is a rational basis to believe that the Rule’s

benefit outweighs any burden that it imposes, the Rule is constitutional under Pike.

III. CONCLUSION

For all of the reasons set forth above, we REVERSE the judgment of the district

court to the extent that it upheld the Ohio Rule’s prophylactic ban on composition claims

and its prohibition on the use of an asterisk for required disclosures to accompany

production claims, AFFIRM the remainder of the judgment, and REMAND the case to

the district court for further proceedings consistent with this opinion.