BOSE CORPORATION V.CONSUMERS UNION OF THE UNITED STATES: PRODUCT CRITIQUES AND THE FIRST AMENDMENT

Vincent Brannigan, 1 , Bruce Ensor , 2 University of Maryland

~~~~~~~~~--'ABSTRACT._.,~~~~...,-----,~~~-I n Bose Corp v . Consumers Union of United States Inc. , the Supreme Court extended broad First Amendment protection to statements made by the defendant Consumers Union Inc. concerning speaker systems manufactured by the corporate plaintiff Bose. In a landmark decision , the procedural protection afforded by the First Amendment was broadened to i nclude comprehensive appel l ate review of all c ritical issues. While the Court did not address all issues in the case , logic from its past decisions argues that consumer-oriented criticism should be judged under the liberal standards granted to political speech under the First Amendme nt.

INI'ROOOCTION

Many consumer organizations engage in the critici sm of products or services by various vendors. One response by the vendor may be to threaten or begin a l awsuit, hoping to stifle the criticism. These cases often do not get to the higher courts because consumers can rarely afford the legal fees to defend themselves. Other cases are disposed of on the grounds that the critique was essentially opinion, rather than a statement of fact. The BOSE case was unusual in that all courts involved treated the critique as a factual statement , and both sides were willing to bring the case t hrough the entire court system.

FACTS OF THE CASE

In a May 1970 issue of Consumer Reports, the defendant's wide ly circulated magazine , the defendant made the following statements concerning the Bose loudspeaker system:

Worse , individual instruments heard through the Bose system seemed to grow to gigantic proportions and tended to wander about the room. For instance , a violin appeared to be 10 feet wide and a piano stretched from wall to wal 1. With orchestral music , such effects seemed inconsequential. But we think they might become a nnoying when listening to soloists[3 ,p. 1253 ] .

Bose Corporation i nstituted a product disparagement action against Consumers Union claiming three distinct fa l sehoods about instruments heard through the Bose system: (1) that their size seemed grossly enlarged; (2) that

1 Associate Professor ,Consumer I.aw, Department of Textiles and Consumer Econcmi cs.

2 Ph.D Candidate, Dept. of Textiles and Consumer Economics , J .D. Candidate, U. of Bal timore.

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they seemed to move ; ( 3) that their movement was "about the room".

THE LAW OF LIBEL AND PRODUCT DISPARAGE:MENI'

Product disparagement is a tort action where the plaintiff must prove that a false statement concerning the nature and quality of the product was made by the defendant.[2, sec 623 ] Product disparagement is ana logous to defamation, however the two actions differ in several respects. Defamation includes the general areas of libel and slander.[22] Corporations can be defamed [ 8, 15, 16, 17,21 ] However, corporate defamation relates to the character of the corportion, its morality or ability. Product di sparagement is more analogous to the law of unfair trade practices and relates to false or misleading criticism of a product. [18] The damages which can be awarded in a product disparagement action are considerable.

$)SE is the first product disparagement case in the long line of Supreme Court decisions balancing private rights against the First Amendment.

The leading Supreme Court opinion regarding First Amendment libel law is the case of New York Times v. Sullivan [19 ]. In N.Y.TIMES the Court made two key distinctions. The first was between public figures and private persons. Under N.Y.TIMES, public figures are expected to bear a certain level of harsh, even inaccurate criticism, in order to vindicate the right of the public to robust and open debate. Second, the court defined the level of criticism by setting a standard of "actual malice". Under this standard , if the p laintiff is a public figure , the plaintiff must prove not only that the statement is defamatory and false, but that the author knew it was false, or acted with reckless disregard of the truth.

OOSE:THE LOWER COURT DEX::ISIONS

In an extensi ve trial at the district court level Bose prevailed. The district court applied the t\\0- tiered N.Y.TIMES test to find Consumers Union liabl e . First it found that Bose was a "public figure". Bose did not contest t his finding , but it is crucial to the decision.

The court then turned to the issue of "actua l malice". The court listened to e xtensive testimony from the engineers who conducted t he test. '!he court, sitting as a factfinder without a jury , did not believe the chief engineer accurately reported what he heard. On that basis the court determi ned that the arti c l e was fal se, and t hat the engineer (and , by l aw, Cons umers

Unioo) knew it was false. To the trial court, this was sufficient to prove liability.[3]

Consume rs Union appealed, and t h e federal appellate court r eversed. (4) The court he ld that it could conduct an independent review of both facts am l aw, t o determine whether the district court had made an e rror. This is a n extreme l y unusual proceeding, since normally the conclusion of a lowe r court on a factual issue , such as knowledge of fal sity, would not be reexamined by an appellate court. The appellate court focused on Consumers Uni on 's good faith and editorial review process. It noted that the standard for such articles i s not very high:

Althoug h we would refrain from describing cu's loudspeaker arti cle as exempli fying the very highest order of responsible journalism, CU does not have to meet such high standards to prevail. [4, p. 196)

The appellate court was clearly concerned that courts could stifle criticism by i nsisting on literal truth in what i s an inexact science, or that the fear of liability could l ead to self­censorship.

SUPREME COURT OPINION

Bose appealed the case to the United States Supreme Court. ( 5 ) The Supreme Court in BOSE extended the N.Y.TIMES actual malice standard to product disparagement actions that involve a public figure. The court held that the author's t estimony at trial concerning the Consumer Reports articl e did not consti tute clear and convincing evidence of actual malice , i.e . , that Consumers Union published the article "with knowledge that it contained a false statement or with reckless disregard of the truth."

The Court a l so held that appellate judge s acting under N.Y.TIMES must exercise independent judgment and determine whether the record establishes actual malice with convincing clari ty

Finally, the Court decided that the statement made by Consumers Union fell well within the robust debate P!=I1llitted by the First Amendment, and, as a matter of law , could not have been made with t he "actual malice " required by N.Y.TIMES.

The statement i n this case represents the sort of inaccuracy that is commonplace in the forum of robust debate to which the NEW YORK TIMES rule applies .... Realistically , ... (sic)some error is inevitabl e ; and the difficulty of separating fact from fiction convinced the Court . . . to limit liability to i nstances where some degree of culpability is present in order to e l iminate the risk of undue self censorship and the suppression of truthful material. (5, p.1966)

the difference between hearing violin

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soums move around the room and hearing them wander back and forth fits easily within the breathing space that gives life to the First Amendment. (5, p.1966-67)

COMMERCIAL SPEOCH AND THE LAW OF LIBEL

'!he most important conclusion of the Court in OCSE was t hat First Amendment issues require a very c l ose scrutiny by the appe l late courts to make sure that values of the First Amendment are not bypassed. In the past this was clear l y true in "politica l " s peech. BOSE stands f or t he propos ition that product critiques may deserve ful 1 First Amendme nt protecti on as if they were politica l speech . The equation of product critiques to political debates represents a significant development in the doctrine of "commercial si:;eech".

The doctrine of commercial speech deals with the First Amendment rights of si:;eakers i n the economic marketplace, as opposed to pol itical debates. Traditionally, political si:;eech was unregulated by the government, but could be controlled by courts through the libel laws. Commercial speech was regulated by the government. Libel law was brought in line with the First Amendment i n NEW YORK TIMES. Commercial speech was granted partial First Amendment protection in Virginia State Board of Pharmacy v. Virginia Citizens Consumer Council , Inc.(VIRSINIA PHARMACY) (25) BC6E is the first substantive First Amendment libel case to arise after the extension of First Amendment protection to commercial si:;eech.

The most important question involves defining product critiques under the First Amendment. Are they commercial si:;eech, or political speech? '!he remainder of this article will compare the N.Y.TIMES-BOSE line of d efamation cases with the VIRGINIA PHARMACY concept of the rol e of commercial speech in the First Amendment. The purpose i s to create a logical structure for defining the role of product critiques under the First Amendment.

Historically, commercial speech was not considered protected under the First Amendment. (24 ) Therefore it could be regulated by the government without affecting the First Amendment. However , in VIRGINIA PHARMACY the Court extended First Amendment protection to some tyi:es of commercial si:;eech, citing the strong interests of consumers and soc i ety as a whole in the free flo w of accurat e commercial information.

So long as we preserve a predominantly free enterprise economy, the allocation of our resources in large measure wil 1 be made through numerous private economic decisions. It is a matter of public interest that those decisions , in the aggregate, be intelligent and wel 1 informed. To this end, the free flow of commercial information is indisi:;ensable.(cites ommitted) And if i t is indispensable to the prope r

allocation of resources in a free enterprise system it is also indispensable to the formation of intelligent opinions as to how that system ought to be regulated or altered. Therefore , even if the First Amendment were thought to be primarily an instrument to enlighten public decisionmaking in a democracy, we could not say that the free flow of information does not serve that goal . (footnotes omitted) [ 25 ,p. 765]

No problem arises when the product critique is clearly accurate. Several Supreme Court decisions protect accurate commercial spee'ch. Likewise, libel law requires proof that the statement is not only defamatory, but false. The question is what liability can be imposed for critiques proven to be false .

This f irst requires analysis of the different role of truth in debates involving public as opposed to private persons. In a well known libel case , the Supreme Court in Gertz v. Welch said that "there is no constitutional value in false statements of fact. "(10,p. 340)

Since the plaintiff in GERTZ was a private person, he had a right to be protected against false defamatory statements, with the press bearing the risk that a statement made in good faith might be incorrect. However, when dealing with a public figure, the Court in N.Y.TIMES noted that:

factual errors are inevitabl e in free debate, and the imposition of liability for erroneous factual assertions can 'dampen the vigor and limit the variety of public debate' by inducing self­censorship.[ 19, p.279 )

The press is therefore allowed to make errors when dealing with public figures , if not made with actual malice. The same rule does not apply to advertisers . Justice Stewart in VIRGINIA PHARMACY differentiated between the press and the advertiser stating that:

in contrast to the press, which must often attempt to assemble the true facts from sketchy and sometimes conflicting sources under the pressure of publication deadlines, the commercial advertiser generally knows the product or service he seeks to sell and is in a position to verify the accuracy of his factual representat i ons before he disseminates them. [25,p.777(Stewart J. , concurr) )

This statement al l owed the court to continue programs such as government control of fal se advertising. In later commercial speech cases the Court has continue d to ins i st on truth in commercial speech. In later cases the court has expanded on the rights and limits of commercial speech under the First Amendment. The Court has recognized the critcal role of commercial speech in the marketplace of ideas. The Court has

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defined commercial speech as"expression related solely to the economic interests of the speaker and its audience". [7 ,p.562) The court went on to state:

Commercial expression not only serves the economic interest of the speaker , but also assists consumers and furthers the societal interest in the fullest possible dissemination of information. [ 7 p. 562-63 )

The Court emphasized the role of truth by saying:

"there can be no cons ti tutiona 1 objection t o the suppression of commercial messages that do not accurately inform the public about lawful activity."[7 p. 563)

It i s important to note the purpose of the discussion of commercial speech. The doctrine of commercial speech defines what speech can be restrained by the government prior to publication. In a libel case no speech has been restrained. The application of the First Amendment is designed to prevent self-restraint under fear or threat of a libel action. If a type of speech could be restrained by the government anyway, there is no special reason to protect it from the fear of libel. On the other hand, if the type of speech could not be constrained by the government, there is an excellent case for applying the mcst liberal standards to such speech. Since commercial speech defines the limits of the government 's ability to restrain speech, it provides an important dividing line between the areas where robust debate is the goal of the law, and where other values take precedence.

The issue created by BOSE is whether First Amendment privileges and immunities of organizations working in the f i e ld of product testing, comparison, and evaluation should be in the class of commercial speech, which can be controlled if fa lse, or ne wspaper commentary, which is given the widest scope of freedom even if false? In other words, since a false statement in an advertisement is clearly restrainable by the government (9), is a fa lse statement in a product critique equally unprotected u nder the Constitution? Or do product critiques have a special status under the First Amendment? Does it make a difference whether a competitor or a third party is criticizing the product? If there is to be one rule for the advertiser and another for the critic, how is it to be justified?

From the point o f view of the producer , it is conceptually difficu l t to separate a product critique from a statement designed to sell a product. A False statement cc:ncerning a product is the natural target of a government ban on fa lse advertising. Consumer Reports was not attempting to market or sel 1 a product. However, CONSUMERS UNION sells product critiques. The article purported to be an unbiased professional critique on loudspeaker systems readily avai lable to the public. A false statement in the product critique has the same capacity to mislead the public as a

false statement in an advertisement. It is clear that if the statements in the Consumer Reports Article had been made by a competitor, rather than by Consumer Reports, there would be no question that it was commercial speech. Therefore , the speech may be deemed to be "commercial" in the sense that Consumer Reports obtains revenue, although not profits, from the distribution and sale of its periodical. There was no suggestion in any of the BOSE decisions that Consumers Union's non-profit status had any effect on the case.

On the other hand, the speech in Consumer Reports may be classified as political in the sense t hat product critiques, whether biased or unbiased, correct or incorrect, are really an exposition of ideas and opinions concerning consumer choice in the marketplace. Under this reasoning such statements should be protected by the full force of the First Amerx'lment.

It is the role of the First Amendment to protect speech related to political action. Since in our free economy we rely on the private sector to provide most goods and services , criticism of those providers is a component not only of commercial speech, but arguably political speech.

It may be argued that the criticism of products is the type of robust debate that N.Y.TIMES was designed to protect. Just as citizens s hould be free to criticize politicians who promote dangerous or wasteful policies with the maximum freedom , so should consumers and their organizations be able to criticize producers.

It should be noted that even in a political debate a libel case can be won if the plaintiff proves that the defendant knew the statement was false, or acted in reckless disregard of the truth. This may be an appropriate standard for consumers and organizations. The issue can be further develoi:ed by asking whether the standard should differ for various vendors, large or small. Unfortunately , the law currently applies that standard only to "public figures". This requires analysis of the status of public figures.

PUBLIC FIGURES

The Supreme Court in BOSE did not examine the issue of whether a vendor is a utomatical l y a public figure. The Court noted that the lower court found that Bose was a public f i gure , and Bose did not object to that c haracterization. However, Bose had submitted its radical speaker design to stereo critics and others, in the hope that favorable reviews would stimulate sal es. The de sign itself sparked considerable technical debate . This probably would have been enough to make Bose a public figure , even unde r the most restrictive analysis. More importantly, what is the status of a vendor who doesn't advertise, doesn't invite criticism, and whose name is hardly a household word? The issue is of vital importance , since a vendor who is not a public figure could win a defamation action based on a mere negligent false statement in a product

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critique .

In Hutchinson v. Proxmire, the Supreme Court dealt with a senator's criticism of a scientist's research. The Court rejected the suggestion that the scienti st was a limited public figure for the purpose of comment on his receipt of federal funds for research purposes. The senator's golden fleece award clearly carried the implication that public funds were being expended on pointless and wasteful research. The Court noted that the scientist was addressing a s mall, presumably expert group of readers: "His published w+itings reach a relatively smal l category of professional s concerned witn research in human behavior". (14, p. 135 ]

This decision would seem to support the suggestion that some scientists are public figures and some are not. Few would argue that the Nobel prize winning scientists who pioneered the polio vaccines are not public figures. How can we draw a line? The opinion in PROXMIRE is difficult to interpret , but the conclusion may t ur n on the highly personal nature of scientific work. Criticism of a scientist's work as pointless and wasteful is almost identical to a personal claim of fraudulent activity. In contrast, product critiques are normally related to the product. They may carry little of the moral overtone of a libel action.

One solution would be that the product critique shoul d be viewed, not from the point of view of the producer, but from the point of view of the consumer. To a consumer , al 1 vendors are i n the same pos ition, no matter what their size , ownership, or scope of operation.

Suppose there were two apartment complexes in a city. Both are constructed and operated in exactly the same way, one by the city and the other by a private developer. The city is clearly a public figure. Is there any rational basis for treating the other vendor differently? As far as the consumer is concerned they are engaged in the same activity. Logic would indicate that both are public figures . In both cases the public is invited to consume the product. The same could be said for the vendor of any product. Is there any basis for concluding that some restaurants are public figures , a nd others are private persons , when it comes to restaurant reviews? Placing a product in the marketplace is a public act. Criticizing products serves the same purpose of robust public debate as any political argument. To many people it is even more important.

As to the particul ar coosumer's interest in the free flow of commercial information, that inte rest may be as keen, if not keener by far , than his interest in the days most urgent political debate. (25 , p.748 )

A possible conclusion is that any vendor who places a product on the market, is a public figure for the purpose of critique of the product. This plainly would fall under the definition of public figures in GERTZ as including those who "engage

the publ ic's attent ion in an at terrpt to infl~ence its outcane" . [10, p. 352) Advertisers clearl y engage the public's att ention and attempt to influence them to buy their product. Nothing about the Supreme Court's ruling requires that the public issue be overtly political.

The alternative is that sane vendors are public figures, and others are not. The problem with this approach can be seen in a case called GOIDEN BF.AR. [ ll )

sold were machines. of these could be

In GOIDEN BF.AR the products being franchises t o handle various soft drink A magazine oriented towards buyers franchises published an article which considered negl igentl y defamatory. litigation the court considered Golden a private party as a matter of l aw:

In the Bear to be

Here Golden Bear of Texas did not "thrust itself" into a public controver­sy by rrerel y advertising its services. Were we to agree with Entrepreneur's hypothesis , the mere fact of advertising would render all business public f i gures.[11, p. 952)

In GOIDEN BEAR a consumer oriented magazine was held l iable for defamation because it did not adequately differentiate between two corporations of similar name , engaged in the same line of business. The article was literally true , but the court held the implication of bad conduct by one corporation to the other to be defamatory.

Most importantly, the court imposed on the defendant magazine the burden of proof that the statements were true , rather than the plaintiff corporation having t o prove that the statements were false. This was the result of the finding, as a matter of law, that Golden Bear was not a "public figure" . See also [ 6, l 7) •

In a simi lar case, HALT.MARK BUIIDERS, [ 12) a homebuilder sued a TV station for defamation regarding statements concerning the defendant's homes. The court declared the builder to be a private person, and held the television station to a s tandard of proving the t rut h of the broadcast.

This does not seem to canport with the free and robust debate of N. Y. TIMES, or the acceptance in VIRGINIA PHARMACY t hat carrnercial speech represents a key First Arrendment concern. A better rul e is that all vendors are public figures with regard to products they offer for sale.

CXMPEI'ITOR V. NON CXMPEI'ITOR CRITICS

Based on the above analysis, vendors in a free enterprise econany, whatever their size , product, or method of doing business , would be publ ic figures protected by a standard of actual malice. This proposal does not mean that canpetitors woul d have the same privilege. Clearly, a misrepresentation concerning a canpetitor's product i s precisely the type of conduct the Cpurt i..QUld allow to be regulated. It may be pcssible

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to fashion one r ule for vendors , another rule for critics , such as CONSUMERS UNION.

This occurred i n the related cases of PERMA-MAID [ 20) and SCIENI'IFIC MANUFAC'IURIN3 [ 23 ) . In SCIENTIFIC MANUFACTURING an author was selling a book which contained his own opinion that aluminum pots caused cancer. In PERMA-MAID a corporation selling cast iron pots made the same c laims. The Federal Trade Carmissi on brought actions against both parties. The FIC prevailed against the manufacturer on a claim of fa l se advertising but lost against the author on First Amendment grounds suggest strongly that a non-canpetitor critic is entitl ed to greater protection un:ler the First Amendment.

CONCLUSION

The BOSE case represents a clear step forward f or consumer oriented criticism of product vendors. Under Bose vendors who are public figures must show actual malice, and the evidence of actual malice must be examined in detail at the appellate l evel. BOSE left open the question of who is a public figure. Analyzing this issue in light of the social concerns raised in N.Y.TIMES and its progeny woul d result in a rule where any vendor i s a public f igure with regard to consumer criticism of his product.

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