Amicus Curiae Brief — Johanns v. Livestock Marketing Assn.

Supreme Court US.

(») FILED

JQ

A

Nos. 03-1164 & 03-1165 G26 2004

IN THE

Supreme Cont of the United States

ANN M. VENEMAN, SECRETARY OF AGRICULTURE, et a/.,

Petitioners,

LIVESTOCK MARKETING ASSOCIATION, et a/.,

Respondents.

NEBRASKA CATTLEMEN, INC., ef a/.,

Petitioners,

LIVESTOCK MARKETING ASSOCIATION, ef a/.,

Respondents.

ON WRITS OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

BRIEF FOR AMICUS CURIAE

THE CALIFORNIA AGRICULTURAL ISSUES FORUM

SUPPORTING PETITIONERS

SETH P. WAXMAN

Counsel of Record

RANDOLPH D. Moss

; TODD ZUBLER

BRIAN M. BOYNTON

WILMER CUTLER PICKERING

HALE AND DORR LLP

2445 M Street, N.W.

Washington, D.C. 20037

(202) 663-6000

QUESTION PRESENTED.

TABLE OF AUTHORITIES

STATEMENT OF INTEREST

SUMMARY OF ARGUMENT

ARGUMENT

TABLE OF CONTENTS

MANDATORY CONTRIBUTIONS FOR COMMOD-

ITY PROMOTION PROGRAMS Do Not IMPLI-

CATE PRODUCERS’ FIRST AMENDMENT

RIGHTS BECAUSE THE SPEECH FUNDED IS

THAT OF THE GOVERNMENT.

SSSR RHEE HEHEHE eee

SSSR HSER HEHEHE eH Ee

sa liliadiacliadiadatieeeiaiede dati tadaieieieal

A MANDATORY COMMODITY PROMOTION PRO-

GRAM IS CONSTITUTIONAL IF IT SATISFIES

INTERMEDIATE SCRUTINY. .....c.cccscececscocosesessssersserereseeees

MOST MANDATORY COMMODITY PROMOTION

PROGRAMS WILL SURVIVE INTERMEDIATE

SCRUTINY. aaa eeenerneeee

A. Mandatory Commodity Promotion Pro-

grams Further Substantial Governmental

Interests in Supporting Agricultural In-

dustries and Remedying Market Failures. ...........

1. Commodity Promotion Programs

Maintain and Expand Agricultural In-

CC

2. Ccummodity Promotion Programs Cor-

rect the Market Failure Caused by

“Free Riding.”

B. Mandatory Commodity Promotion Pro-

grams Directly Advance an Important

Governmental Purpose and Are Narrowly

Tailored.

(iii)

11

13

14

. 18

iv

TABLE OF CONTENTS—Continued

1V. COMMODITY PROGRAMS THAT REQUIRE PRO-

DUCERS TO ASSOCIATE FOR IMPORTANT REA-

SONS APART FROM CONDUCTING GENERIC

ADVERTISING SATISFY THE “GERMANENESS”

TEST OF ABOOD. ..

CONCLUSION........... .

2 &

— sew ST nn

TABLE OF AUTHORITIES

CASES

Page(s)

44 Liquormart, Inc. v. Rhode Island, 517 U.S. 484

(1996) i)

Abood v. Detroit Board of Education, 431 U.S. 209

(1977) 3, 11, 27, 30

Adarand Constructors, Inc. v. Pena, 515 U.S. 200

(1995) 1l

Board of Regents of the University of Wisconsin

System v. Southworth, 529 U.S. 217 (2000) 4,6

Board of Trustees of State University of New York

v. Fox, 492 U.S. 469 (1989) 12, 25

Burson v. Freeman, 504 U.S. 191 (1992) 7

Central Hudson Gas & Electric Corp. v. Public

Service Commission, 447 U.S. 557 (1980) x

Charter v. USDA, 230 F. Supp. 2d 1121 (D. Mont.

2002) 6

FEC v. Beaumont, 539 U.S. 146 (2003) 10

Gerawan Farming, Inc. v. Kawamura, 90 P.3d 1179

(Cal. 2004) 12, 13, 14, 25, 26

Glickman v. Wileman Bros. & Elliott, Inc., 521

U.S. 457 (1997) passim

Keller v. State Bar of California, 496 US. 1

(1990) 4, 5, 18, 27

Lathrop v. Donohue, 367 U.S. 820 (1961) 11

Lebron v. National Railroad Passenger Corp.,

513 U.S. 374 (1995) 4, 5,6

Lehnert v. Ferris Faculty Ass'n, 500 US. 507

(1991) 11,18

Livestock Marketing Ass’n v. USDA, 207 F. Supp.

2d 992 (D.S.D. 2002) 6

McConnell v. FEC, 124 8S. Ct. 619 (2003) 10

Near v. Minnesota, 283 U.S. 697 (1931) . 7

Pelts & Skins, LLC v. Landreneau, 365 F.3d 423

(5th Cir. 2004) 26

Railway Employees’ Department v. Hanson, 351

US. 225 (1956) ll

vi

TABLE OF AUTHORITIES—Continued

Page(s)

Turner Broadcasting System, Inc. v. FCC, 512 US.

622 (1994) 11, 12

United States v. Frame, 885 F.2d 1119 (3d Cir.

1989) 12

United States v. O’Brien, 391 U.S. 367 (1968) 7

United States v. United Foods, 533 U.S. 405 (2001) .....passim

Waters v. Churchill, 511 U.S. 661 (1994) 3]

Webster v. Fall, 266 U.S. 507 (1925) 9

Zauderer v. Office of Disciplinary Counsel,

471 U.S. 626 (1985) 9, 10, 25

STATUTES

Beef Promotion and Research Act of 1985, 7 U.S.C.

§§ 2901 et seq. passim

Agricultural Adjustment Act, ch. 25, 48 Stat. 31

(1933) 15

Federal Agriculture Improvement and Reform Act

of 1996, Pub. L. No. 104-127, 110 Stat. 888......... 15, 16, 23

Cal. Food & Agric. Code § 63901 16, 23

Cal. Food & Agric. Code § 63901.4 16

Cal. Food & Agric. Code § 65500 et seq. 29, 30

OTHER AUTHORITIES

2002 Census of Agriculture, available at

http://www.nass.usda.gov/census/ (last visited

Aug. 20, 2004) . 2, 13, 20

Alston, Julian M., et al., The California Prune

Board’s Promotion program: An Evaluation

(Giannini Foundation Research Report No.

344, Mar. 1998) 17

vii

TABLE OF AUTHORITIES—Continued

Julian M. Alston et al., The California Table Grape

Commission's Promotion Program: An

Evaluation (Giannini Found. Research Report

No. 43, Nov. 1997) (finding substantial returns

to table grape advertising and promotion over

the period 1968-1993), available at http://

giannini.ucop.edu/Monographs/43-grapes.

(last visited Aug. 20, 2004) =

Page(s)

17, 18

California Department of Food and Agriculture

List of Marketing Programs, available at

http://www.cdfa.ca.gov/mkt/mkt/mktbrds.html

. (last visited Aug. 20, 2004)

wo BY

California Table Grape Commission, Brand Survey,

available at http://www. freshcaliforni

-com/consumer_research.pdf (last visited Aug.

20, 2004)

21

California Table Grape Commission website, avail-

able at http//www.freshcaliforniagrapes.com

(last visited Aug. 20, 2004)

Carman, Hoy F. & R. Kim Craft, An Economic

Evaluation of California Avocado Industry

Marketing Programs 1961-1995 (Giannini

— Research Report No. 345, July

17

Commodity Advertising and Promotion (Henry W.

Kinnucan et al. eds. 1992)

Crespi, John M., Promotion Checkoffs, Why So

Controversial? The Evolution of Generic Ad-

vertising Battles (National Institute for Com-

modity Promotion Research & Evaluation

2001), available at http://www. aem.cornell.edu

/special_programs/commodity/nicpre/bulletins/

rb0104.pdf (last visited Aug. 20, 2004)

15, 21

viii

TABLE OF AUTHORITIES—Continued

Page(s)

Economic Research Service, USDA, State Fact

Sheets, available at http://www.ers.usda.gov

/StateFacts/US.HTM (last visited Aug. 20,

2004)... 13, 17

Forker, Olan D. & Ronald Ww. Ward, Commodity

Advertising: The Economics and Measurement

of Generic Programs (199B).....rererereneneees 15, 16, 19, 23

Kinnucan, Henry W., A Critique of the Promotion

Evaluations Submitted in Fulfillment of the

$906 PP AIDR AGP cccccecsccececcecsssscessssesssnsscsscssossnsososscssessssssesseee 17

Kinnucan, Henry W. & @ystein Myrland, Free-

Rider Effects of Generic Advertising: The Case

of Salmon, 19 Agribusiness 315 (2003) ...........-0-0e0e0 21, 22

Lauck, Jon, After Deregulation: Constructing Agri-

cultural Policy in the Age of “Freedom To

Farm,” 5 Drake J. Agric. L. 3 (2000)...... 1, 14. 15

Lee, Hyunok, et al., Mandated Marketing Pro-

grams for California Commodities (Berkeley:

University of California Agricultural Experi-

ment Station, Giannini Foundation Information

Series No. 96-1 (1996)) —_ 17

Looney, J.W., The Changing Focus of Government

Regulation of Agriculture in the United States,

44 Mercer L. Rev. 763 (1993) .. 20

Market Share Reporter (Robert S. Lazich ed. 2003) ............ 20

Olson, Mancur, The Logic of Collective Action

(1971). : 19

Samuelson, Robert J., A Sad Primer i in Hypocrisy,

Newsweek (Feb. il, 2002) 15

The Laureates of the Univ. of Cal., Riverside, Cali-

fornia Avocado Commission, available at

http://www.development.ucr.edw/perpet-

ual/perplaureatescac.html (last visited Aug. 20,

2004) 20

ix

TABLE OF AUTHORITIES—Continued

Page(s)

USDA, Agricultural Mktg. Programs, available at

http://www.ams.usda.gov/repromo.htm (last vi-

Sited Aug. 20, 2004)........cccceccssssesssesssessessssessessseseses 16

USDA, Agricultural Mktg. Servs. List of Fed.

Mktg. Orders, available at

http://www.ams.usda.gov/fv/moabmotab.htm

(last visited Aug. 20, 2004) .......c..cccccccsecsssesssssssssseesseeessss., 17

Vande Kamp, Phillip R. & Harry M. Kaiser, Com-

modity Promotion rinencenwsn in the U

itt 1800 ee sae 16

STATEMENT OF INTEREST'

The California Agricultural Issues Forum (“the Fo-

rum”) is a nonprofit mutual benefit corporation whose mem-

bers are entities established under state or federal laws to

collect mandatory assessments and to use those assessments

to engage in research and promotional activities relating to

particular agricultural commodities. The Forum is thus in-

timately familiar with the workings of programs like that at

issue in this case and has a substantial interest in the contin-

ued operation and success of those programs.

SUMMARY OF ARGUMENT

Few issues of public policy have plagued national and

state government as profoundly or as consistently as low

farm prices.’ Since at least the 1930s, Congress and the

States have attempted innumerable remedies, from produc-

tion restrictions, to antitrust exemptions, to price supports.

Fields that were already planted have been “plowed up” and

millions of newborn pigs and hundreds of thousands of sows

killed to drive up prices; taxpayers have shouldered the cost

of hundreds of billions of dollars of farm subsidies; and the

Government has taken the extraordinary step of paying

farmers not to farm.

As discussed more fully below, the problem of low farm

prices has persisted in part because most agricultural com-

modities, unlike many other goods, come from a very large

number of relatively small producers and are undifferenti-

ated between producers. In 2002, for example, there were

more than two million farms in the United States, each with

' The parties in this case have consented to the filing of this brief.

No counsel for a party authored this brief in whole or in part, and no per-

son or entity, other than the Forum, its members, or its counsel, made a

monetary contribution to the preparation or submission of this brief.

? See, e.g., Jon Lauck, After Deregulation: Constructing Agricultural

Policy in the Age of “Freedom To Farm,” 5 Drake J. Agric. L. 3, 15 (2000)

(In the 1960 presidential election, Senator John Kennedy declared that

low farm prices were “our no. 1 . . . domestic problem.”).

2

average sales of less than $100,000.’ As a result—unlike the

IBMs or GMs of the world—the average avocado, cherry, or

grape farmer cannot possibly engage in the costly —

and promotien necessary to increase overall consumer de-

mand (and thus price) for his or her product. Experience

and economic theory show, moreover, that voluntary efforts

to band together to do so are destined to fail. The average

avocado farmer, for example, has no incentive to advertise

individually, or to join with other farmers to do 80, when the

benefit of his or her expenditure or contribution will be

shared over the thousands of other growers—many of whom

may have themselves opted not to contribute.

Mandatory agricultural research and promotion pro-

grams, like that at issue in this case, represent a singular

success in addressing this “collective action problem” and

the plight of small farms throughout the country. There are

more than one hundred existing federal and state mandatory

commodity research and promotion programs, which a

take, among other things, health and agriculture wongenr

foreign market access initiatives, consumer education, an

generic advertising—all designed to increase demand or to

improve production for particular agricultural negra

And they have had extraordinary success in doing so. In-

deed, in some cases, the return on investment to each par-

ticipant is as high as $26 for every dollar paid. No other

farm policy has come close to achieving this level of success.

The Eighth Circuit’s decision jeopardizes these pro-

grams and the countless farm-related jobs that depend on

the market demand they generate. Perhaps most disturb-

ingly, the approach adopted by the Eighth Circuit would im-

pose on Congress (and, presumably, state legislatures) sage

gle, judicially defined recipe for agricultural promotion:

Congress wants to expand demand for an agricultural com-

modity by imposing mandatory assessments on growers that

* See : : , vol. 1, ch. 1, tbl. 1, available at

See 2002 Census of Agriculture, vol. 1, ‘

http://www.nass.usda.gov/census/census02/volume 1/us/st99_1_002_002.pdf

(last visited Aug. 20, 2004).

3

are then used for advertising (along with other demand-

increasing activities), it must first implement a “broader col-

lective enterprise” in which growers’ “freedom to act inde-

pendently” is “constrained by [a] regulatory scheme,” as in

Glickman v. Wileman Bros, & Elliott, Inc., 521 U.S. 457

(1997). See United States v. United Foods, 533 U.S. 405, 412

(2001) (quoting Wileman, 521 U.S. at 469). Under the rea-

soning of the Court of Appeals, any other program of this

sort is per se unconstitutional. Nothing in the First

Amendment or this Court’s precedents compels this re-

markable conclusion.

First, contrary to the Court of Appeals’ conclusion, the

First Amendment does not even apply to the mandatory

funding of speech by a government-established entity that

delivers a message defined by the government.

Second, even if the First Amendment applies, it does

not impose any such per se rule. Rather, because mandatory

commodity promotion programs bar no speech, but simply

provide additional information to consumers; do not compel

any speech, but only the payment of money; and do not con-

vey an ideological message, but only commercial advertise-

ments, the most stringent level of scrutiny that can possibly

apply is intermediate scrutiny. Given the opportunity, the

vast majority of federal and state commodity research and

promotion programs will be able to show that they effec-

tively further an important government interest in support-

ing agricultural industries and helping to overcome tne col-

lective action problem, and that they do so in a narrowly tai-

lored manner.

Finally, many mandatory commodity programs are also

constitutional under the “germaneness” test articulated in

Abood v. Detroit P-«rd of Education, 431 U.S. 209 (1977),

because unlike the s.and-alone advertising program at issue

in United Foods, they use advertising as part of a broader

effort to expand demand—including through health and ag-

ricultural research and foreign market access efforts.

Regardless of how any particular program might fare if

subjected to the proper constitutional scrutiny, the Court of

4

i i i important federal

Appeals plainly erred in setting aside an impo

mi hove because it concluded that the program was not

accompanied by a collectivization of the industry.

ARGUMENT

NTRIBUTIONS FOR COMMODITY PROMO-

Te PROGHAMS DO NOT IMPLICATE PRODUCERS’ FIRST

AMENDMENT RIGHTS BECAUSE THE SPEECH FUNDED IS

THAT OF THE GOVERNMENT.

A. The Eighth Circuit’s determination that the gov-

ernment-speech doctrine does not apply in a case peat

compelled funding of speech (see Pet. App. 17a-18a) S| e

be rejected. This Court has recognized that it is “inevi :

that funds raised by the government will be spent for =

and other expression” and that the government may pay for

that speech with “taxes or other exactions binding - pro-

testing parties.” Board of Regents of Univ. of Wis. et v.

Southworth, 529 U.S. 217, 229 (2000). Thus, the Court wo

made clear that citizens compelled to fund ngage ie

speech have no right under the First Amendment to : ~

to funding that speech. See Keller v. State Bar of Ca 2 “

U.S. 1, 12-13 (1990). The advertising of most comm vd

promotion programs is government speech because the

boards that run the ads are instrumentalities of the sap

ment under this Court’s precedent and the messages they

deliver are defined by Congress and the state legislatures.

This Court’s decision in Lebron v. National erin

Passenger Corp. makes clear that where “the nascar

creates a corporation by special law, for the furtherance :

governmental objectives, and retains for itself permanen

+ The Court of Appeals relied on Southworth in holding that the gov-

ernment-speech doctrine does not apply to a case involving the =

funding of speech. See Pet. App. 17a-18a. But aero — a

i i hworth, too, involv e ma

actly the opposite conclusion. Sout . henge oped

i f speech, and although the government-speec

po the Court said it did not only because “{t)he University ha{d]

disclaimed that the speech is its own.” 529 U.S. at 229.

5

authority to appoint a majority of the directors of that cor-

poration, the corporation is part of the Government for pur-

poses of the First Amendment.” 513 U.S. 374, 400 (1995).

Here, the Court of Appeals concluded that Lebron was inap-

plicable because Amtrak, which was resisting a holding that

its billboards were public fora, “argued that it was not part

of the government,” whereas “in a government speech case

the defendant typically argues that it is part of the govern-

ment and therefore immune from content-related First

Amendment scrutiny.” Pet. App. 18a n.5. The court did not

explain, however, why this difference matters, unless the

governing rule is that an entity’s governmental status must

always be resolved against the entity in favor of a First

Amendment challenge. But that cannot be the law. To the

contrary, if an entity is a part of the government that cannot

make content-based distinctions when it creates a public fo-

rum for private speech, then surely that same entity remains

part of the government when it is itself the speaker.”

In the present context, moreover, not only is the

speaker a government-created entity, with government-

appointed members, but the message that it conveys is also

defined by the government. The Beef Act, for example, like

most commodity promotion programs, defines the speech at

issue: it must be about beef—speech about politics, social

issues, and anything else is not authorized—and it must con-

vey a specific message about beef, namely, that consumers

should buy more beef. See 7 U.S.C. §§ 2902(13), 2904(10). A

commodity promotion board’s speech, in other words, is fun-

damentally different from the political and ideological speech

of the State Bar in Keller, which was not specified by the

government and which this Court held lawyers could not be

compelled to subsidize. See 496 U.S. at 13-16. For these

* The fact that members of the Beef Board are nominated by state

cattle associations before being appointed by the Secretary of Agriculture

does not change this conclusion. Indeed, the same was true in Lebron,

where the President was required to make most of his appointments from

lists submitted by various groups. See 513 U.S. at 385.

6

reasons, here, unlike in Keller, there is little doubt that the

government is “accountable to the electorate and the politi-

cal process for its advocacy.” Southworth, 529 U.S. at 235.

As with all other government speech, those who disagree

with the message can blame Congress.

B. Day-to-day oversight of a commodity program by

another government agency is not required for the govern-

ment-speech doctrine to apply. The lower courts have dis-

agreed about whether the Secretary of Agriculture per-

forms any meaningful oversight of the Beef Program and

have given this question significant weight in their determi-

nations whether the Beef Program constitutes government

speech. Compare Livestock Mktg. Ass'n v. USDA, 207 F.

Supp. 2d 992, 1005-1006 (D.S.D. 2002), with Charter v.

USDA, 230 F. Supp. 2d 1121, 1187-1138 (D. Mont. 2002).

That inquiry, however, is wholly beside the point.

If an entity like the Beef Board is itself a governmental

entity that is required to deliver a government-defined mes-

sage, then its speech is necessarily government speech, and

oversight by a different government agency is irrelevant.

This Court did not ask in Lebron, for example, whether the

government-appointed directors were subject to day-to-day

oversight by some other government official. Any other

approach would force courts to make difficult, arbitrary de-

terminations regarding precisely how much government

oversight is sufficient for a particular program. For exam-

ple, is attendance by a government representative at most

but not all board meetings sufficient? If the government

representative attends but plays no active role, is the de-

fense still viable? This Court should avoid opening the door

for further litigation wrestling with minutiae of this nature

by holding that the advertising conducted by commodity

promotion boards pursuant to a specific mandate by Con-

° To the contrary, the Court recognized that “the directors of Am-

trak, unlike commissioners of independent regulatory agencies, are not, by

the explicit terms of the statute, removeable by the President for cause,

and are not impeachable by Congress.” Lebron, 513 US. at 398.

Poti

7

gress or a State is government speech that does not impli

i t impli-

cate producers’ First Amendment rights.

Il. A MANDATORY COMMODITY PROMOTION PROGRAM IS

CONSTITUTIONAL IF IT SATISFIES I

pena . NTERMEDIATE SCRU-

A. It is long settled that a law is not unconstitutional

merely because it implicates First Amendment rights. See

eg., United States v. O'Brien, 391 U.S. 367, 376 (1968)

Rather, before a court may declare a law unconstitutional. it

must consider whether the law serves a sufficiently impor-

tant governmental interest and does so with sufficient preci-

sion. Even content-based restrictions on core political

speech and prior restraints on speech can survive constitu-

tional scrutiny in some circumstances. See Burson v. Free-

man, 504 U.S. 191, 211 (1992); Near v. Minnesota, 283 U.S.

697, 716 (1931). Thus, even if a particular commodity promo-

tion program implicates the First Amendment—because it

does not involve government speech and is not mere “eco-

nomic regulation” under the Court’s decision in Glickman v

Wileman Bros. & Elliott, Inc., 521 U.S. 457, 474-475 (1997) —

the program must be upheld if it survives th

stitutional scrutiny. e applicable con-

Rather than apply this well-established framework to

the Beef Program, the Court of Appeals held that it was not

required “to engage in such a line-drawing exercise” because

this Court had already decided in United Foods that any

mandatory commodity promotion program that is not part of

a broader regulatory scheme is per se unconstitutional. See

Pet. App. 26a. United Foods, of course, holds no such thing.

To the contrary, the Court was unmistakably clear in stating

“we ...do not consider whether the Government's interest

could be considered substantial for purposes of the Central

Hudson test.” 533 U.S. at 410. The notion that the Court

nonetheless went on to decide this issue, not only with re-

spect to the mushroom program, but also with respect to

every other commodity promotion program—and did so in

the context of reviewing whether the district court had

8

properly granted summary judgment in the Government’s

favor—is unfounded.

B. A law requiring producers of a commodity to fund

generic advertising for that commodity is subject to, at

most, intermediate scrutiny because such a law only mini-

mally impinges on the First Amendment rights of produc-

ers—if it does so at all. Six members of this Court have al-

ready indicated that a mandatory commodity promotion

program is constitutional if it passes the intermediate scru-

tiny test established under Central Hudson Gas & Electric

Corp. v. Public Service Commission, 447 U.S. 557 (1980). In

Wileman, Justice Souter, Chief Justice Rehnquist, and Jus-

tice Scalia said (in dissent) that they would have applied in-

termediate scrutiny to commodity promotion programs. See

521 U.S. at 492-493 (Souter, J., dissenting). And in United

Foods, Justices Breyer, O’Connor, and Ginsburg indicated

that if the mushroom program were subject to First

Amendment scrutiny at all, they would apply only interme-

diate scrutiny and uphold the program. See 533 U.S. at 429

(Breyer, J., dissenting).

To be sure, in neither Wileman nor United Foods did a

majority apply intermediate scrutiny, but in neither case

was it necessary for the Court to do so. In Wileman, the

Court held that the tree-fruit marketing program did not

even implicate the First Amendment. The Court questioned

in a footnote why the Court of Appeals in that case had

started its analysis with Central Hudson rather than “apply

Abood’s ‘germaneness’ test,” Wileman, 521 U.S. at 474 n.18,

but the Court never stated that a program that passed the

higher Central Hudson standard would nonetheless be un-

constitutional. Similarly, the Court in United Foods had no

reason to address whether intermediate scrutiny was appli-

cable. United Foods principally addressed and rejected the

Government’s contention that the mushroom program was

constitutional as economic regulation under the Court’s deci-

sion in Wileman. See 533 U.S. at 411-413. The Court ex-

pressly noted that the Government did “not rely upon Cen-

tral Hudson to challenge the Court of Appeals’ decision,”

9

533 U.S. at 410, and the Court therefore never addressed

whether a commodity promotion program could be constitu-

tional based on the fact that it serves important governmen-

tal purposes, independent of any connection to a broader

regulatory scheme. Neither case, therefore, forecloses the

application of intermediate scrutiny. See Waters v. Chur-

chill, 511 U.S. 661, 678 (1994) (plurality opinion of O’Connor

J.); Webster v. Fall, 266 U.S. 507, 510 (1925). )

In any event, because mandatory commodity promotion

programs are particularly unikely to impose significant

burdens on free speech, no standard more demanding than

intermediate scrutiny should apply.

First, commodity promotion programs involve -

pelled funding of only amare nonideological, ce.

cial speech. Whatever the level of scrutiny applicable to a

restriction on commercial speech that deprives consumers of

truthful, nonmisleading information, see 44 Liquormart, Inc

v. Rhode Island, 517 U.S. 484, 501-504 (1996) (plurality opin.

ion of Stevens, Kennedy, and Ginsburg, JJ.); id. at 517

(Scalia, J. concurring in part and concurring in judgment); id.

at 518 (Thomas, J., concurring in part and concurring in

judgment), this Court’s precedents are clear that a regula-

tion of commercial speech that results in more, rather than

less, speech implicates First Amendment rights to only a

limited degree. As a plurality of the Court noted in 44 Li-

quormart, the principal reason commercial speech even war-

rants First Amendment protection is because consumers

have an interest in receiving product information. See id. at

496 (plurality opinion of Stevens, Kennedy, Souter, Gins-

burg, JJ.). A law that provides consumers with more infor-

mation therefore should be analyzed differently than a law

that limits the flow of information.

In Zauderer v. Office of Disciplinary Counsel, 471 U.S

626 (1985), for example, the Court applied highly deferential

review in upholding a requirement that an attorney’s adver-

tisement disclose that clients must pay costs in contingent

fee cases because it was “reasonably related to the State’s

interest in preventing deception of consumers.” Jd. at 651.

10

Although the State’s interest in that case focused on pre-

venting consumer deception, see United Foods, 533 U.S. at

416, the Court made clear that “[bJecause the extension of

First Amendment protection to commercial speech is justi-

fied principally by the value to consumers of the information

such speech provides, . . . [a person’s] constitutionally pro-

tected interest in not providing any particular factual infor-

mation in his advertising is minimal.” 471 U.S. at 651.

Second, laws that regulate the payment of money, even

if used for speech, tread less heavily on free-speech rights

than laws that regulate speech directly. The payment of

money simply is not the equivalent of speech. As the Court

recently explained in upholding a ban on corporate campaign

contributions, “restrictions on political contributions have

been treated as merely marginal speech restrictions subject

to relatively complaisant review under the First Amend-

ment, because contributions lie closer to the edges than to

the core of political expression.” FEC v. Beaumont, 539

U.S. 146, 162 (2003) (internal quotation omitted). For this

reason, the Court has held that campaign contribution limits

are not subject to the “strong presumption against constitu-

tionality of the sort often thought to accompany the words

‘strict scrutiny.”” McConnell v. FEC, 124 S. Ct. 619, 656

(2003).

By the same token, laws that compel (rather than limit)

the funding of speech implicate First Amendment rights to a

lesser degree than laws that actually compel speech itself.

Indeed, this Court’s cases make clear that laws compelling

funding of speech do not trigger exacting scrutiny. In

Abood, for example, before even reaching the germaneness

inquiry, the Court invoked a relaxed form of scrutiny—

citing “the legislative assessment of the important contribu-

tion of the union shop to the system of labor relations estab-

lished by Congress”—in reaffirming that an employee may

be compelled to pay fees to a union even if the employee has

ideological objections to the union’s collective bargaining ac-

11

tivities. 431 U.S. at 222;’ see also Lathrop v. Donohue, 367

U.S. 820, 843 (1961) (Wisconsin “might reasonably believe”

that compelled payment of bar dues by all lawyers in the

State served “legitimate interests in raising the quality of

professional services”). If an employee can be compelled to

pay for ideological speech relating to collective bargaining in

order serve the important governmental interest in labor

policy, then surely a farmer can be compelled to pay for

commercial speech in order to serve the equally important

governmental interest in agricultural policy.

C, The Court of Appeals erred in concludin

U nited Foods prevented it from undertaking an ee te

determination whether the Beef Act can be sustained under

intermediate scrutiny. Because the Eighth Circuit has not

considered the application of intermediate scrutiny, this

Court, rather than address the issue in the first instance

should reverse the decision of the Court of Appeals and re-

mand the case for application of that test. See Adarand

Constructors, Inc. v. Pena, 515 U.S. 200, 237 (1995) (remand-

ing for application of the proper level of scrutiny).

Ill. MOST MANDATORY COMMODITY PROMOTION

WILL SURVIVE INTERMEDIATE SCRUTINY. —

Under intermediate scrutiny, a law will be upheld

against constitutional challenge if “it furthers an important

or substantial governmental interest,” “the governmental

interest is unrelated to the suppression of free expression,”

and if the restriction “is no greater than is essential to the

furtherance of that interest.” Turner Broad. Sys., Inc. v.

FCC, 512 U.S. 622, 662 (1994) (internal quotation omitted).

.

The “germaneness” inquiry of Abood and its i

nes progeny is used to de-

termine whether activities outside of core collective bargaining activities

~ be funded with mandatory dues. See, e.g., Lehnert v. Ferris Faculty

ss'n, 500 U.S. 507, 519 (1991). The separate determination, initially

pre by the Court in Railway Employees’ Department v. Hanson

351 U.S. 225 (1956), and acknowledged in Abood, that compelled funding of

ive bargaining is constitutionally justified, entailed an application of

a relaxed form of intermediate scrutiny. See Abood, 431 U.S. at 222.

12

“To satisfy this standard, a regulation need not be the least

speech-restrictive means of advancing the Government’s

interests.” Jd.; see also Board of Trs. of State Univ. of N.Y.

v. Fox, 492 U.S. 469, 480 (1989).

Whether a particular commodity promotion program

survives First Amendment scrutiny is a fact-intensive in-

quiry that must be made on a case-by-case basis. See Turner

Broad., 512 U.S. at 664-665. But most, if not all, mandatory

commodity promotion programs—even if they involve only

or primarily generic advertising—should pass this test.

Such programs further an important governmental interest

in helping to sustain important agricultural industries and

overcoming the structural impediments that prevent farm-

ers from engaging in significant demand-expanding activ-

ity—either individually or through voluntary collective ac-

tion. Indeed, in United States v. Frame, 885 F.2d 1119 (3d

Cir. 1989), the Court of Appeals for the Third Circuit con-

cluded that the Beef Program survived even strict scrutiny

precisely because supporting the beef industry is a compel-

ling governmental purpose, the Program is ideologically

neutral, and the mandatory nature of the Program is neces-

sary to combat the free-rider problem. See id. at 1133-1137.

More recently, in a thorough and well-reasoned opinion,

the California Supreme Court held that, under the State

Constitution (which is generally more protective of free-

speech rights than the United States Constitution), commod-

ity promotion programs are subject to only intermediate

scrutiny. See Gerawan Farming, Inc. v. Kawamura, 90 P.3d

1179, 1192 (Cal. 2004). In considering the application of in-

termediate scrutiny, the court (1) held that “the objective of

maintaining and expanding markets for agricultural prod-

ucts, thereby ensuring the viability of California agriculture,

is a substantial objective,” id. at 1193; (2) rejected the argu-

ment that “the government’s interest is not substantial sim-

ply because the [California Marketing Act] has delegated the

decision whether to create a marketing program in a given

sector of the agricultural economy to the agricultural pro-

ducers themselves,” id.; (3) accepted the State’s position that

13

if the generic advertising at issue is “an efficacious means of

significantly improving the sale of agricultural products in

this state,” then the challenged program directly advances

the government’s interests, id.; and (4) rejected the plain-

tiffs argument that a program funded from producer as-

sessments is always unconstitutional because it could be

funded from general tax revenues, see id. at 1194. This

Court, if it rejects the government-speech defense and ad-

dresses the application of intermediate scrutiny, should ap-

ply a similar analysis under the federal Constitution.

A. Mandatory Commodity Promotion Programs Fur-

ther = ae yc ern Interests in Sup-

Market Failures. an ee

. Agriculture is of fundamental importance

mies of the United States and satiate oe aoe

over two million farms in the United States produced $200

billion worth of goods, and farm-related employment ac-

counted for approximately 26 million jobs—over 15% of the

total jobs in the United States.’ For California, which has

the largest agricultural production of any State in the Na-

tion, the total amount of sales of agricultural products was

well over $25 billion in 2002, there were almost 100 million

acres of farmland that year, and in 2000, farm-related em-

~~ accounted for 15.1% of the State’s over 19 million

obs.

8

See 2002 Census of Agriculture, vol. 1, ch

. , Vol. 1, ch. 1, tbl. 1, available at

http://ww.nass.usda.gov/census/census02/volume l/us/st99_1 002 002.pdf

(last visited Aug. 20, 2004); Economic Research Service, USDA, State

Fact Sheets, available at http://www .

-vkdien ie, ae

” See 2002 Census of Agri

griculture, vol. 1, ch. 2, tbl. 2, available a

http://www.nass.usda.gov/census/census02/volume 1/us/st99 2_002_002 at

(last visited Aug. 20, 2004); Economic Research Service, USDA State

Fact Sheets, available at http://www.ers.usda.gov/StateFacts/CA htm

(last visited Aug. 20, 2004) (jobs total for 2001). )

14

It is clear that given the importance of agriculture to

the economy of the United States and various individual

States, the governmental interest in supporting the agricul-

tural industry is substantial. The California Supreme Court

so concluded in Gerawan Farming, see 90 P.3d at 1193, and

even the Justices in dissent in Wileman agreed that main-

taining and expanding markets for covered commodities are

“substantial government interests,” 521 U.S. at 492 (Souter,

J., dissenting). Mandatory commodity promotion programs

directly advance this governmental interest in two ways:

(1) increasing demand for agricultural commodities, and (2)

addressing market failures that result in suboptimal spend-

ing on agricultural research and promotion.

1. Commodity Promotion Programs Maintain

and Expand Agricultural Industries.

Maintaining a vibrant and stable agricultural industry is

of utmost importance both to the United States and to indi-

vidual States. That task, however, is not an easy one.

Weather, disease, and pests—uncontrollable and unpredict-

able—can drastically affect crop output. Moreover, agricul-

tural markets respond poorly to gluts in the market that de-

press prices. See Jon Lauck, After Deregulation: Construct-

ing Agricultural Policy in the Age of “Freedom To Farm,” 5

Drake J. Agric. L. 3, 5 (2000). “Instead of adjusting supply

when prices sink to unsustainable levels, farmers often

maintain production levels—believing that they need to op-

erate at full-capacity in order to make up for lower prices—

or increase their production.” Jd. Indeed, many farmers

have turned to new technologies to increase production in an

attempt to make up for lower prices. But this effort has

been likened to running on a treadmill: “(G)reater produc-

tion through more technology . . . compound[s] the low price

problem, creating the need for even more productivity 1m-

provements.” Jd. at 5-6. Furthermore, the sheer number of

farmers, their small relative size, and the perishability of

—~<ena «oe

15

crops weaken farmers’ bargaining positions.'’ The bargain-

ing power disparity between farmers and large-scale food

proce » rs is especially pronounced. See id. at 8. Together,

the various economic problems that plague agricultural

markets and make farming a highly volatile enterprise have

been called “the farm problem.”

Since the 1930s, the federal and state governments have

responded to these market problems in a number of ways.

One early legislative response was the Agricultural Adjust-

ment Act, ch. 25, 48 Stat. 31 (1933), which “created the au-

thority for the regulation of production.” Lauck, supra, at

12. The flaws of production controls, however, were imme-

diately seen when “{s]ix million little pigs and two-hundred

thousand sows were killed to boost hog prices, leaving the

country horrified by the mass matricide and infanticide.” Jd.

(internal quotation omitted). An alternative to production

controls are government price support mechanisms such as

nonrecourse loans and subsidies. See id. at 13-19. But of

course, “direct government payments to farmers . . . cost the

federal government more money” than other forms of regu-

lation. /d. at 17. Indeed, between 1978 and 2002, the federal

government spent in excess of $300 billion—or about 10% of

the national debt in 2002—on farm subsidies."”

A complement (and, at times, an alternative) to gov-

ernment regulation of supply and government subsidization

has been legislation that allows producers of a commodity to

band together and fund generic advertising to stimulate de-

mand. See, e.g., Federal Agriculture Improvement and Re-

° Olan D. Forker & Ronald W. Ward, Commodity Advertising: The

Economics and Measurement of Generic Programs 7 (1993).

'' See John M. Crespi, Promotion Checkoffs, Why So Controversial?

The Evolution of Generic Advertising Battles, National Inst. for Commod-

ity Promotion Research & Evaluation 3 (2001), available at http://www.

aem.cornell.edu/special_programs/commodity/nicpre/bulletins/rb0104. pdf

(last visited Aug. 20, 2004).

'? Robert J. Samuelson, A Sad Primer in Hypocrisy, Newsweek,

Feb. 11, 2002, at 49.

16

form Act of 1996 (“FAIR Act”), Pub. L. No. 104-127,

§ 501(b)(1), 110 Stat. 888 (1996). The Beef Program, for

example, is expressly “designed . . . to maintain and expand

domestic and foreign markets and uses for beef and beef

products.” 7 U.S.C. § 2901(b). Similarly, California's com-

modity research and promotion programs are intended to

“increase overall demand for [the] commodities” covered and

to “avoid economic waste and maintain stable agricultural

markets.” Cal. Food & Agric. Code §§ 63901(e), 63901.4.

Such programs play a substantial role in today’s agricul-

tural a” A se conducted in the late 1990s re-

vealed that there were at least 102 commodity programs in

operation with combined budgets of nearly $700 million.” At

present, there are 17 national federal programs that cover

blueberries, beef, cotton, dairy, eggs, milk, Hass avocados,

honey, lamb, mangoes, mushrooms, peanuts, popcorn, pork,

potatoes, soybeans, and watermelons." For California alone,

there are 48 mandatory commodity programs established

under state law, including programs for California’s top five

agricultural products (dairy products, greenhouse/nursery

products, grapes, lettuce, and cattle/calves), and 12 federal

'3 See Phillip R. Vande Kamp & Harry M. Kaiser, genes pe

motion Programs in the United States 2, 8 (1999), available a

http://www.aem.cornell.edu/special _programs/commodity/nicpre/bulletins/

rb0104.pdf (last visited Aug. 20, 2004); see also Forker & Ward, supra, at

101.

'4 See USDA, Agricultural Mktg. Programs, available at

http://www.ams.usda.gov/repromo.htm (last visited Aug. 20, 2004).

. Dee tae

17

marketing orders.'’ The total budget for all of the California

commodity programs in 1992 was $112.94 million.'®

Numerous econometric studies confirm that these pro-

grams are highly effective in increasing demand and thus

yield a positive return to the producers who fund them. In-

dependent third-party evaluations of several federal com-

modity promotion programs (required by § 501(c) of the

FAIR Act) show that the Dairy, Beef, Soybeans, Pork, Rai-

sins, Eggs, Walnuts, Florida Tomatoes, and Papaya pro-

grams have all generated average returns of 4:1 or better."’

Apart from these federally mandated studies, numerous

other evaluations have concluded that commodity research

and promotion programs yield substantial positive returns

to producers."* Of particular relevance here, the expert re-

'S See Economic Research Service, USDA, State Fact Sheets, avail-

able at http://www.ers.usda.gov/StateFacts/CA.htm (last visited Aug. 20,

2004); California Dep’t of Food and Agric., List of Marketing Programs,

available at http://www.cdfa.ca.gov/mkt/mkt/mktbrds.html (last visited

Aug. 20, 2004) (two voluntary marketing “agreements” are excluded from

the total of 48); USDA, Agricultural Mktg. Servs., List of Fed. Mktg. Or-

ders, available at http://www.ams.usda.gov/fv/moabmotab.htm (last vis-

ited Aug. 20, 2004).

'© See Hyunok Lee et al., Mandated Marketing Programs for Cali-

fornia Commodities 25 (Berkeley: Univ. of Cal. Agric. Experiment Sta-

tion, Giannini Found. Info. Series No. 96-1, Aug. 1996).

Henry W. Kinnucan, A Critique of the Promotion Evaluations

Submitted in Fulfillment of the 1996 FAIR Act 24 (table 1) (draft paper

presented at the NEC-63 meetings held in Baltimore, Md. on Mar. 26,

2004) (Dairy (4.3:1), Beef (5.7:1), Soybeans (9.3:1), Pork (26.2:1), Raisins

(7.3:1), Eggs (6.6:1), Walnuts (4.0:1), Florida Tomatoes (27.2:1-30.9:1), and

Papaya (10.1:1-31.2:1)).

= See, e.g., Hoy F. Carman & R. Kim Craft, An Economic Evalua-

tion of California Avocado Industry Marketing Programs 1961-1995, at

46 (Giannini Found. Research Report No. 345, July 1998) (average bene-

fit/cost ratio of 1.89); Julian M. Alston et al., The California Prune Board’s

Promotion Program: An Evaluation 48 (Giannini Found. Research Re-

port No. 344, | far. 1998) (From 1992 to 1996, “investments by prune grow-

ers in promotion through the [California Prune Board] yielded them

marginal returns of at least $2.65 for every dollar spent.”); Julian M.

Alston et al., The California Table Grape Comm ssion’s Promotion Pro-

18

port of Professor Ronald Ward, which was entered into evi-

dence, indicates that the Beef Program has increased de-

mand for beef and generated a positive rate of return for

beef producers who fund the program through assessments.

See J.A. 170-173. Professor Ward concluded that on aver-

age, “for each dollar spent on the checkoff assessments,”

producers realized “an additional [$]5.67 net gain.” J.A. 172.

2. Commodity Promotion Programs Correct the

Market Failure Caused by “Free Riding.

Mandatory programs also advance the governmental in-

terest in a strong agricultural economy by correcting a mar-

ket failure—caused by the collective action problem—that,

with rare exceptions, prevents producers, acting on their

own, from spending funds to expand overall demand for

their products. The collective action problem that hampers

voluntary efforts by farmers to promote their homogenous

agricultural products is similar to that accepted by this

Court in other contexts to justify compelled funding of

speech or association. See, e.g., Lehnert, 500 US. at 517

(“{T]he considerations that justify the union shop in the pri-

vate context—the desirability of labor peace and eliminating

‘free riders’—are equally important in the public-sector

workplace.”); Keller, 496 U.S. at 12 (“It is entirely appropri-

ate that all of the lawyers who derive benefit from the

unique status of being among those admitted to practice be-

fore the courts should be called upon to pay a fair share of

the cost of the professional involvement in this effort.”). The

federal and state commodity promotion programs that are

intended to address the collective action problem in agricul-

ture deserve similar deference.

gram: An Evaluation (Giannini Found. Research Report No. 43, Nov.

1997) (finding substantial returns to table grape advertising and promo-

tion over the period 1968-1993), available at

http://giannini.ucop.edu/Monographs/43-grapes.pdf (last visited Aug. 20,

2004).

19

The market failure addressed by mandatory commodity

research and promotion programs is well documented. At-

tempts to increase demand for agricultural products through

promotion are plagued by “free riding”: individuals are

unlikely to contribute voluntarily to the provision of a good

or service that they share collectively with others if they can

“free ride” on the contributions of others with impunity. See

Forker & Ward, supra, at 10 (a “free rider” is an “individual

who shares in the benefits but is not willing to pay the ap-

propriate share of the costs”). Advertising for homogenous

agricultural commodities is such a good, and, thus, farmers

of most commodities (like avocados, cherries, and grapes)

are unlikely to engage in voluntary consumer advertising—

either individually or collectively.

Most farm commodities, which are often distinguishable

only by their packaging (if any), exhibit some characteristics

of “cooperative goods.” Forker & Ward, swpra, at 21. Coop-

erative goods are “[pJroducts that cannot be differentiated”

and for which advertising (brand or generic) “may increase

total demand, but . . . cannot change market shares among

product suppliers.” Jd. For such goods, the free-rider prob-

lem prevents the optimal level of promotion from being un-

dertaken: “There would be little incentive for one brand ad-

vertiser to promote his goods, since all other suppliers would

benefit without paying their share of the advertising cost.”

Id.

The problem of free riding is exacerbated when there

are numerous actors involved, none of which maintains a

dominant market position. As the number of participants in

a collective endeavor grows, each participant receives an

increasingly smaller fraction of the total benefits from every

dollar it individually contributes to the provision of the col-

lective good, making the incentive to shirk and free ride on

the contributions of others increasingly strong. See gener-

ally Mancur Olson, The Logic of Collective Action 33-36, 43-

48 (1971). At the same time, both the costs of making pri-

vate contractual arrangements and the costs of identifying

and punishing free-riders (say, by ostracism) increase.

20

Most agricultural industries are highly fragmented:

“(A lgriculture is made up of a large number of wisely dis-

persed, atomistic producers[.]”"” In 2002, each of the over

two million farms in the United States had, on average, sales

of less than $100,000, and in California there were 79,631

farms, with average total sales of just $323,205.” For exam-

ple, there are 6,000 avocado growers just in California.” In

contrast, 75% of the U.S. soft drink market is concentrated

in two companies (Coca-Cola and PepsiCo), each of which

had annual revenues in 2003 of at least $20 billion; 75% of the

U.S. peanut butter market is controlled by three companies

(J.M. Smucker (Jif), Unilever (Skippy), and ConAgra Foods

(Peter Pan)), each of which had annual revenues in 2003 of at

least $1.3 billion; and 56% of the U.S. breakfast cereal mar-

ket is concentrated in three companies (Kellogg, Kraft

Foods, and Quaker Oats), each of which had annual revenues

in 2003 of at least $8 billion.”

For these reasons, individual brand advertising is

unlikely to occur for many agricultural products. The aver-

age small farmer—unlike Coke, Jif, and Kellogg—cannot af-

ford to run branded consumer advertising, and, even if he or

'° J.W. Looney, The Changing Focus of Government Regulation of

Agriculture in the United States, 44 Mercer L. Rev. 763, 767 (1993).

? See 2002 Census of Agriculture, vol. 1, ch. 1, tbl. 1,

http://www.nass.usda.gov/census/census02/volume 1/us/st99_1_002_002.pdf

(last visited Aug. 20, 2004); id. vol. 1, ch. 2, tbl. 2, available at

http://www.nass.usda.gov/census/census02/volume 1/us/st99_2_002_002.pdf

(last visited Aug. 20, 2004).

2! See The Laureates of the Univ. of Cal., Riverside, California Avo-

cado Commission, available at http://www.development.ucr.edu/perpet-

ual/perplaureatescac.html (last visited Aug. 20, 2004).

22 See Market Share Reporter 273, 395 (Robert S. Lazich ed. 2003);

C.McGlone et al., Smucker (J.M.) Co., The - Initiating Coverage,

Deutsche Bank Securities Inc. (Mar. 2003); Hoover’s, Company Records

for Coca-Cola Co., PepsiCo, Inc., Kellogg Co., Kraft Foods Inc., Quaker

Oats Co., The J.M. Smucker Co., Unilever PLC, and ConAgra Foods, Inc.,

2003 Annual Sales. (Quaker Oats was acquired by PepsiCo, Inc. in 2001.)

21

she could, it would not be economically rational to do so.”

One commentator has described the small farmer’s plight as

follows:

For farmers growing homogenous products, in the

absence of a significant market presence, there is no

incentive for . . . an individual producer . . . to en-

gage in advertising because other producers of the

same commodity may free ride upon this advertis-

ing. An individual producer] [can] either advertise

in the hopes of establishing a distinguishable brand

or refrain from advertising altogether. More often

than not, because agricultural commodities are in-

distinguishable, the latter decision is made. Thus, a

suboptimal level of advertising is expended in the

industry[.]

Crespi, supra, at 11-12. Indeed, the expert report submitted

in this case explains that individual agricultural commodity

advertising is often impossible: “Given both the high entry

cost for developing a meaningful promotion program and the

free rider issue, for many industries the only option is to

fund an industry wide effort ....” J.A. 168.

The free-rider problem is also likely to undermine any

voluntary efforts by producers collectively to generate ge-

neric advertising because “(gjeneric advertising of a ho-

mogenous commodity is a type of public good.” Henry W.

Kinnucan & @Mystein Myrland, Free-Rider Effects of Generic

Advertising: The Case of Salmon, 19 Agribusiness 315, 315

* Thus, it is no surprise that with respect to many commodities, con-

sumers do not recognize brands and do not make purchase decisions based

on brand. A survey of 808 primary grocery shoppers revealed that when

purchasing fresh grapes, the following factors, rather than brand, are the

most important: ripeness/freshness, whether the grapes are seedless,

taste, price, color, size, appearance, and whether the grapes were in sea-

son, organic, domestically grown, and conveniently packaged. See Cali-

fornia Table Grape Comm'n, Brand Survey, available at http://www.

freshcaliforniagrapes.com/consumer_research.pdf (last visited Aug. 20,

2004). By contrast, 40% of peanut butter shoppers said brand was the

most important factor to them. See id.

22

(2003). The “benefits of any price rise caused by the adver-

tising are shared by all of the commodity’s producers re-

gardless of whether they paid into the program.” Id. And

this “ability to ‘free ride’ weakens the producer’s incentives

to contribute to the program.” Jd. “Hence, in the parlance

of public good theory . . . ‘collective’ goods like generic ad-

vertising tend to be under-provided relative to the social op-

timum.” /d.; see also J.A. 168 (without mandatory commod-

ity promotion programs, “it is impractical if not impossible

for producers within some industries to address the informa-

tional needs for the good of the total industry”).

Empirical evidence confirms what theory predicts.

Economic analysis of individual firm advertising patterns,

for example, reveals that firms generally commit the most

resources to consumer advertising where there is strong

product differentiation (such as is created by meaningful

brands) and a highly concentrated industry structure (7.e.,

where there are few sellers).”’ Furthermore, the actual his-

tory of some voluntary commodity promotion programs sup-

ports the theory. For example, the experience of the Ameri-

can Egg Board shows how a voluntary promotion program

can unravel due to the free-rider problem. In the first years

of the Egg Board’s voluntary program, very few producers

requested refunds. But by 1988, almost half of the assess-

ments were being refunded. See Forker & Ward, supra, at

126. The same phenomena occurred in the cotton research

and promotion program, which before 1990 allowed produc-

ers to request a refund of their assessments. Over time the

percentage of producers requesting refunds increased stead-

ily, severely undermining the program’s efficacy and fair-

ness. See id. at 122 (noting that 35% of producers were re-

questing refunds by 1990).

In short, absent the use of mandatory programs, only

commodities with concentrated market structures will

** See Michael S. Willis & Richard T. Rogers, Market Share Disper-

sion Among Leading Firms as a Determinant of Advertising Intensity,

13 Rev. of Indus. Org. 503-506 (1998).

23

achieve even close to optimal levels of product promotion.

In markets where small farmers predominate, commodity

advertising will be nonexistent. And in addition to generat-

ing a suboptimal amount of commodity promotion—and thus

favoring industries with greater market concentration—the

free-rider problem also allows some producers unfairly to

benefit from the consumer advertising, if any, that is actu-

ally produced.

Legislation requiring producers of a commodity to band

together and to fund promotion collectively is a straightfor-

ward response to the collective action problem. See Forker

& Ward, supra, at 10 (the mandatory commodity promotion

programs that replaced earlier voluntary programs “are a

direct outgrowth of the potential free-rider problem.”);

Commodity Advertising and Promotion xiv (Henry W. Kin-

nucan et al. eds., 1992) (forward by Alan D. Forker)

(“([)nherent in the voluntary arrangement is the ‘free rider’

problem. In addition to the inequity involved, the ‘free rider’

issue made it difficult to collect enough money to develop

effective programs.”). Indeed, Congress and the States have

recognized the free-rider problem when enacting commodity

promotion programs. See FAIR Act § 501(b)(7) (such pro-

grams employ “promotion methods and techniques that in-

dividual producers and processors typically are unable, or

have no incentive, to employ.”); Cal. Food & Agric. Code

§ 63901(c) (commodity promotion programs needed for agri-

cultural industries, “which tend to be decentralized with

many small entities operating in diverse locations.”). More-

over, Congress recognized that it is small producers in par-

ticular who need to be able to come together to promote

their products collectively. See FAIR Act § 501(b)(10)

(“[GJeneric commodity promotion programs are of particular

benefit to small producers who often lack the resources or

market power to advertise on their own and who are other-

wise often unable to benefit from the economies of scale

available in promotion and advertising.”).

24

B. Mandatory Commodity Promotion Programs Di-

rectly Advance an Important Governmental Pur-

pose and Are Narrowly Tailored.

1. As the dissenting opinion in Wileman suggests, the

question whether a particular program directly advances the

important governmental purposes of “stabiliz{ing] markets

for covered agricultural products and maintain[ing] the

prices received by farmers” necessarily requires case-by-

case analysis. 521 U.S. at 492 (Souter, J., dissenting). The

vast majority of commodity research and promotion pro-

grams, and the Beef Program in particular, however, should

satisfy this test.

The dissenting Justices in Wileman, for example, noted

that the Government offered nothing more than “specula-

tion” in support of its contention that the treefruit program

“appreciably increase[d] the total amount of advertising for”

mushrooms. /d. at 501. Here, in contrast, the record amply

demonstrates that the Beef Program has substantially in-

creased demand (and thus price) and that, without the pro-

gram, neither individual cattlemen nor voluntary associa-

tions would have the incentive or ability to engage in similar

demand-expanding activity. See J.A. 168-173. Moreover,

there is no reason to believe that the program creates any

disincentives for cattlemen to engage in voluntary advertis-

ing—if they were otherwise so inclined or able—particularly

since they actually have more, rather than less, revenue to

spend given the program’s success. |

Similarly, even under the reasoning of the dissenting

Justices in Wileman—who questioned whether the Agricul-

tural Marketing Agreement Act of 1937 (“AMAA”) was im-

plemented in a manner consistent with the “the Act’s stated

purposes,” see 521 U.S. at 494, 495-499 (Souter, J., dissent-

ing)—the Beef Act and the vast majority of other programs

raise no concerns.” The purpose of the Beef Act, for exam-

°S Whether the adoption of any given federal marketing order is ra-

tional, moreover, is a fact-specifie question that should be analyzed on a

case-by-case basis.

25

ple, is “to maintain and expand domestic and foreign mar-

kets and uses for beef and beef products,” 7 U.S.C. § 2901(b),

and it directly advances this purpose by targeting a single

commodity for promotion throughout the United States. See

521 U.S. at 493 (“(I]f the Government were to attack these

problems across an interstate market for a given agricul-

tural commodity or group of them, the substantiality of the

national interest would not be open to apparent question.”).

Similarly, California’s overall approach to commodity re-

search and promotion, far from being arbitrary, is best de-

scribed as comprehensive. Forty-eight commodities are

covered, including the State’s top five, and the coverage

spans producers statewide.

2. The Beef Act and the vast majority of similar re-

search and promotion programs are, likewise, narrowly tai-

lored. Under intermediate scrutiny, the “fit” between the

legislative purpose and the means used to achieve that end

need not constitute “the single best disposition but one

whose scope is in proportion to the interest served.” Fox,

492 U.S. at 480 (internal quotation omitted). Moreover, it is

well settled that the government may “attack problems

piecemeal, save where their policies implicate rights so fun-

damental that strict scrutiny must be applied.” Zauderer,

471 U.S. at 651 n.14.

By their nature, most commodity research and promo-

tion programs are quite narrowly tailored: (1) they do not

limit in any way a farmer’s ability to speak on any subject he

or she may choose to address; (2) they do not require any

producer “to engage in any actual or symbolic speech”; and

(3) they “do not compel the producers to endorse or to fi-

nance any political or ideological views.” Wileman, 521 U.S.

at 469-470. Moreover, non-mandatory efforts at joint adver-

tising have not succeeded. See supra pp. 21-22.

Some have argued that a law authorizing the mandatory

collection of assessments from producers of a commodity to

be used for promotion is not narrowly tailored because there

exists the supposedly less restrictive alternative of funding a

promotion program with “general [tax] revenue.” Gerawan

26

Farming, 90 P.3d at 1194; Pelts & Skins, LLC v. Landre-

neau, 365 F.3d 423, 434 n. 21 (5th Cir. 2004). That argument,

however, misunderstands the purpose of the laws at issue.

As discussed in more detail above, laws allowing producers

of a commodity to put in place a mandatory commodity pro-

motion program are a direct response to the collective action

problem that prevents those producers from banding to-

gether voluntarily to produce the optimal amount of adver-

tising for that commodity. The remedy for a market failure

that prevents a group from acting together to produce a

good for its collective benefit is not to make someone else

pay for the good. Just as the problem of collective action in

the labor context is not more narrowly redressed by requir-

ing that all taxpayers fund a union’s collective bargaining

activities, Congress was entitled to make the judgment that

only those who most directly benefit from the demand-

expanding activity of the Beef Program should be required

to fund that effort.

Finally, unlike the AMAA, neither the Beef Act nor the

vast majority of similar laws takes an inconsistent stance

with respect to credits for individual brand advertising. Cf.

Wileman, 521 U.S. at 502-503 (Souter, J., dissenting). A

credit program, moreover, is unfair to smaller producers,

who cannot afford to purchase their own advertising; risks

promoting one or two powerful brands instead of the overall

industry; and ignores the fact that effective consumer adver-

tising is very expensive and thus effective only when re-

sources are combined.

IV. COMMODITY PROGRAMS THAT REQUIRE PRODUCERS TO

ASSOCIATE FOR IMPORTANT REASONS APART FROM CON-

DUCTING GENERIC ADVERTISING SATISFY THE “GER-

MANENESS” TEST OF ABOOD.

As discussed above, a mandatory commodity program

that does nothing more than undertake generic advertising

can be sustained under the government-speech doctrine or

under intermediate scrutiny. But as the Court explained in

Wileman and United Foods, a law requiring that producers

jointly fund various commercial activities—just one of which

27

is generic advertising—designed to strengthen the economic

position of their industry, is also constitutional under the

“germaneness” test of Abood and Keller.”

A. In Abood, the Court applied a relaxed form of scru-

tiny and held that nonunion employees could be compelled to

fund, over their ideological objections, activities that were

“germane” to the union’s collective bargaining function. 431

U.S. at 235; see also Keller, 496 U.S. at 13-14 (“The State

Bar may therefore constitutionally fund activities germane

to” the goals of “regulating the legal profession and improv-

ing the quality of legal services” with “the mandatory dues

of all members.”). Compelling employees to associate for

purposes of collective bargaining was justified to “distribute

fairly the cost of these activities among those who benefit

[and] counteract[] the incentive that employees might oth-

erwise have to become ‘free riders’ [who] refuse to contrib-

ute to the union while obtaining the benefits.” Abood, 431

U.S. at 222: see also Keller, 496 U.S. at 12.

The Court applied this germaneness test in both Wile-

man and United Foods. In Wileman, the Court held that to

the extent the tree-fruit marketing program at issue impli-

cated the First Amendment, it was constitutionai under

Abood because the generic advertising was “unquestionably

germane to the purposes of the marketing orders.” Wile-

man, 521 U.S. at 473. In United Foods, the Court declined

to follow Wileman because “almost all” of the mandatory

assessments for the mushroom promotion at issue there

were used for generic advertising and thus the only program

the compelled assessments served was “the very advertising

scheme in question.” 533 U.S. at 412, 415.

In combination, United “ods and Wileman make clear

that compelled funding of generic advertising undertaken by

* Whether the Beef Act is constitutional under this standard is rea-

sonably encompassed within the questions presented. If the Court does

not reach this issue, however, it should make clear that it is not implicitly

foreclosing this independent and previously established defense.

28

a commodity research and promotion program is constitu-

tional under Abood if the advertising is “germane to a pur-

pose related to an association indepencent from the speech

itself.” United Foods, 533 U.S. at 415. Where a program

requires producers to associate in order cooperatively to

market their product, as in Wileman, this requirement is

met. See id. The same is also true where a law requires

preducers of a commodity to associate for other economic

purposes, such as undertaking research and development

that will benefit the entire industry or working to open or

expand export markets for a commodity. Such purposes,

which further the overarching goal of improving the eco-

nomic position of an agricultural industry, are related to

economics, not speech.

Moreover, as in the union context, there is a need to

mandate collective action to pursue these activities. The

free-rider problem that affects small producers of commodi-

ties in fragmented industries (discussed above) prevents

those producers from banding together voluntarily to en-

gage in the optimal amount of research and development and

efforts to expand export markets. For a group of producers,

research and promotion and market access activities, like

generic promotion, are “public goods.” Ifa new seedless va-

riety of grape is developed, a method for dealing with pests

is improved, a compound in grapes that prevents heart dis-

ease better understood, or an export market for grapes

opened, then all grape producers benefit. Such “goods” are

often too expensive for one producer to pursue and often dif-

ficult, if not impossible, to pursue through voluntary collec-

tives, which face the threat of free-riding.

In short, mandatory associations for research and de-

velopment, export market development, and other similar

activities are precisely the sorts of economic arrangements

governed by Abood. Accordingly, to the extent generic ad-

vertising is germane to these programs, the entire program

is constitutional under Abood and its progeny.

B. For many commodity programs, the germaneness

test will be readily met. First, many commodity programs

29

require producers to associate for an economic purpose dis-

tinct from generic advertising. The Ketchum Act, Cal. Food

& Agric. Code §§ 65500 et seq., which establishes the Cali-

fornia Table Grape Commission, for example, states that its

purpose is not merely to support generic advertising, but to

“aid producers of California fresh grapes in preventing eco-

nomic waste in the marketing of their commodity, to develop

more efficient and equitable methods in such marketing, and

to aid such producers in restoring and maintaining their pur-

chasing power at a more adequate, equitable, and reasonable

level.” Cal. Food & Agric. Code § 65500(g). The statute,

therefore, gives the Commission the authority, among other

things, (1) to “conduct . . . scientific research” regarding “the

dietetic value of fresh grapes,” “cultural practices and prod-

uct handling,” and “vie production, storage, refrigeration,

inspection, and transportation of grapes,” and (2) “to present

facts to and negotiate with state, federal, and foreign agen-

cies on matters which affect the marketing and distribution

of fresh grapes.” Id. § 65572(h), (i), (k).

In practice, moreover, many commodity research and

promotion programs engage in significant economic activity

distinct from generic advertising. To use the California Ta-

ble Grape Commission again as an example, it funds re-

search into the phytonutrients in grapes that may prevent

or cure disease; viticulture research related to the develop-

ment of new varieties of grapes, the control of pests, and

other issues of concern to growers; and category manage-

ment research to determine how retailers can most effec-

tively sell grapes to consumers. The Commission also un-

dertakes substantial efforts to open foreign markets to Cali-

fornia grapes. It worked, for example, with the United

States Department of Agriculture and the United States

Trade Representative to open China and Australia to Cali-

fornia grapes, and it continues to work to keep those and

other markets open.”’ These activities and many others fur-

” See generally California Table Grape Commission website, avail-

able at http://www.freshcaliforniagrapes.com (last visited Aug. 20, 2004).

30

ther California’s goal of “aid[ing] producers of California

fresh grapes.” Cal. Food & Agric. Code § 65500(g).

Second, the generic advertising undertaken by commod-

ity research and promotion programs of this sort is unques-

tionably “germane” to the economic purpose of the pro-

grams. See Wileman, 521 U.S. at 473. The advertising itself

increases demand for the commodity. Moreover, the adver-

tising often works in tandem with the program’s non-speech,

economic activities. For example, the statute governing the

California Table Grape Commission authorizes it to “educate

and instruct the public with respect to . . . the healthful

properties and dietetic value of fresh grapes.” Cal. Food &

Agric. Code § 65572(i). And in practice, the Commission’s

advertising campaign, which has described grapes as “The

Natural Snack,” pursues exactly that goal. Programs like

this, that engage in advertising as just one tool among many

to increase demand, and that would not receive adequate

funding if left to voluntary contributions, satisfy the ger-

maneness test of Abooa.

C. The Beef Program itself readily meets this test. Its

purpose—"to strengthen the beef industry’s position in the

marketplace and to maintain and expand domestic and for-

eign markets and uses for beef,” 7 U.S.C. § 2901(b)—is

purely economic and unrelated to speech. And the pro-

gram’s advertising is germane to this purpose. The generic

beef advertising is just one part of a larger program involv-

ing significant research and consumer information activities,

including research and education projects addressing food-

borne pathogens, the proper handling of beef products, nu-

trition and health, and cattle diseases, including mad cow

disease. See, e.g., Brief for Pet’rs Nebraska Cattlemen 13-

16, 49 n.16. Because the Court of Appeals failed even to con-

sider whether the Beef Program could pass muster under

Abood’s germaneness test, a remand with respect to this is-

sue is appropriate.

CONCLUSION

For the reasons stated avove, the judgment of the

Court of Appeals should be reversed.

AUGUST 2004

Respectfully submitted,

SETH P. WAXMAN

Counsel of Record

RANDOLPH D. Moss

TODD C. ZUBLER

BRIAN M. BOYNTON

WILMER CUTLER PICKERING

HALE AND DORR LLP

2445 M Street, N.W.

Washington, D.C. 20037

(202) 663-6000

Counsel for the California

Agricultural Issues Forum