Blog Post Series: Products and the First Amendment

For the last two years, I have been researching and writing about information law in the service of product health and safety regulations. This includes advertising restrictions, mandated disclosure rules, and research regulations. I have not had the chance to pull my various projects together until now. Over the next five days, I will summarize my work and thoughts about the following:

Product-Defining Speech

Free Speech in the Fog of Scientific Uncertainty

Free Speech and Anti-Knowledge

Promoting Good Science Without Censorship

Assessing the Value of Mandated Informational Disclosures

The Unscientific First Amendment

(Links will become available as the posts are published.)

For those who want to skip straight to the law review articles (and God bless you if you actually exist), here are some links:

Snake Oil

A Bad Education

Are Privacy Policies Informational or Ideological?

The Empirical First Amendment

Modern Free Speech Is More Originalist Than You Think

This is a guest post by Tyler Broker, affiliate Privacy & Free Expression research fellow. Tyler’s new article, Free Speech Originalism, will be published in the Albany Law Review and is currently available in draft form on SSRN.

During my time in law school, the biggest disagreements I witnessed among my peers were over the basic premises of originalism. Whether the Constitution was meant to have a static meaning or whether historical inquiry provided the best methodology for understanding Constitutional provisions, were hotly contested and I often couldn’t help getting myself dragged into the debate. I remember thinking the reason the debate kept raging on was that each side could point out flaws that the other side could never sufficiently overcome.

Legal scholars and theorists have many good reasons to refrain from straying too far from originalism when interpreting the Constitution. But when it comes to free speech law, the conventional wisdom about original intent is an embarrassment.

When applying a strict originalist view towards the First Amendment’s free speech clause, the lack of a First Amendment strike down of the Sedition Acts and other categorical restrictions made during the pre-modern era appear as convincing evidence that the original intent for the Amendment accommodated expansive and heavy-handed government restraints on speech. Accordingly, many originalists view the modern-era of free speech jurisprudence, beginning with Justice Oliver Wendell Holmes’ dissent in Abrams, as a “decisive break” with original intent because of the era’s expansive view of protection. However, this view of a decisive break from history became more puzzling the more I examined Holmes’ position. Holmes’ dissent in Abrams did not reject history, in fact his position and his eventual Clear and Present Danger standard relied primarily on historical interpretation.

What, then, could explain why Holmes found such a different standard of protection than what had been the norm for over a century? The answer it turns out was modest and largely consistent with the Founders’ intent: Holmes had simply followed the evidence.

My Article draws on a common variable between the pre-modern and modern era periods of free speech jurisprudence: an evidence-based test of the effects of speech. The test since the founding requires the government to prove, using the best available evidence of the time, that the speech in question will cause genuine harm. If viewed through the lens of this test, first established by the Founders, the highly deferential jurisprudence of the eighteenth and nineteenth centuries and the more robust protections of the modern era become a progression compatible, and without significant deviation, from original constitutional intent. The difference is explained not by extraordinary shifts in the law, but in the greater access to reliable evidence about the true risks of speech and censorship. Moreover, this Article will demonstrate that if the evidence-based test was applied today in accordance with its original intent as a limiting principle on government authority, the protection of speech would not only be broader than it currently exists, but significantly deeper as well.



Identifying and Countering Fake News: New Study Published

Fake news has become a controversial topic, with media organizations, scholars, and even the President of the United States debating the issue. However, it’s not clear what counts as “fake news.” This makes it difficult to diagnose the social harms from fake news, or to create solutions to them. A new report, “Identifying and Countering Fake News,” brings much-needed rigor and clarity to the problem. It is authored by three media and Internet scholars at the University of Arizona: Mark Verstraete, Derek E. Bambauer, and Jane R. Bambauer. The report identifies several distinct types of fake news, including hoaxes, propaganda, trolling, and satire. The study also proposes a set of model solutions to reduce the production and dissemination of fake news.

In the public discourse, “fake news” is often used to refer to several different phenomena. The lack of clarity around what exactly fake news is makes understanding the social harms that it creates and crafting solutions to these harms difficult. This report adds clarity to these discussions by identifying several distinct types of fake news: hoax, propaganda, trolling, and satire. In classifying these different types of fake news, it identifies distinct features of each type of fake news that can be targeted by regulation to shift their production and dissemination.

This report introduces a visual matrix to organize different types of fake news and show the ways in which they are related and distinct. The two defining features of different types of fake news are 1) whether the author intends to deceive readers and 2) whether the motivation for creating fake news is financial. These distinctions are a useful first step towards crafting solutions that can target the pernicious forms of fake news (hoaxes and propaganda) without chilling the production of socially valuable satire.

The report emphasizes that rigid distinctions between types of fake news may be unworkable. Many authors produce fake news stories while holding different intentions and motivations simultaneously. This creates definitional grey areas. For instance, a fake news author can create a story as a response to both financial and political motives. Given this, an instance of fake news may exist somewhere between hoax and propaganda, embodying characteristics of both.

The report identifies several possible solutions based on changes to law, markets, code, and norms. Each has advantages and disadvantages. Legal solutions to fake news are likely to conflict with strong constitutional (First Amendment) and statutory (section 230 of the Communications Decency Act) protections for speech.  Market-based solutions are likely to only reach a subset of fake news. Code solutions may be limited by the difficult judgments required to distinguish satire from other types of fake news. Norms and other community solutions hold promise but are difficult to create through political will.

Some types of fake news are more responsive to regulation than others. Hoaxes are produced primarily in response to financial motivations, so solutions that remove (or decrease) the profit from fake news stories are likely to reduce the number of hoaxes created. By contrast, propaganda is produced primarily for non-financial motivations, so changes in its profitability are unlikely to significantly reduce its output.

The report introduces several solutions that can serve as starting points for discussion about the practical management of fake news, and networked public discourse more generally. These starting points include: expanding legal protections for Internet platforms to encourage them to pursue editorial functions; creating new platforms that do not rely on online advertising; encouraging existing platforms to experiment with technical solutions to identify and flag fake news; and encouraging platforms to use their own powerful voices to criticize inaccurate information.

For more information, contact lead author Mark Verstraete at markverstraete AT

The Slants Visit Arizona Law

The Slants – the first and only Asian-American dance rock band in the world, and Supreme Court litigants in Lee v. Tam – are coming to Tucson! Founder and bassist Simon Tam will give a public talk at 12:00PM on Thursday, April 6, and the band will perform a concert at 7:30PM. Both events are at the University of Arizona James E. Rogers College of Law, 1201 E. Speedway, Tucson. Please come watch and listen!

The Slants at Arizona Law

The Arizona Board of Regents Get an F in FOIA Law

My home institution is undergoing a presidential search right now. Today, I heard a puzzling story during the local segment of my NPR station:

The 27-person presidential search committee has interviewed prospective candidates for president of the University of Arizona, and it has sent the Arizona Board of Regents a short list of names for consideration.

The names and number on the list are not being made public, said regent Bill Ridenour, who chairs the search committee.

“We certainly don’t want to put out the names because they are only prospects,” Ridenour said. “They may choose not to go in with the process.”

What’s puzzling about this is that Arizona Supreme Court precedent has defined what it means to be a confidential “prospect” for a university presidential search, and Bill Ridenour’s use of that term is clearly wrong. Here are the words of the 1991 Arizona Supreme Court decision in Board of Regents v. Phoenix Newspapers:

A prospect is a person in the initial large group that the Committee and HSI considers. A candidate is one who is seriously being considered, and is interviewed, for the position. The prospect may not know that he or she has been nominated, may not wish to be, and may find it embarrassing and harmful to his or her career. A candidate, on the other hand, may actively seek the office. Finalists are those persons actually submitted to the Board for selection.

The opinion goes on to reiterate that prospects who are interviewed for the job are candidates, and that the names of all candidates must be released to the public.

Candidates are prospects who are seriously considered, and who are interviewed for the job. As is the case in many hiring efforts, be it university president, football coach, or chief executive officer of a large business, those interested will already know who is being considered for the job. This, and the fact that the final candidates have an express desire for the job, should militate against maintaining confidentiality. Candidates who actively seek a job run the risk of their desire becoming public knowledge. Because they are candidates, they must expect that the public will, and should, know they are being considered. The public’s legitimate interest in knowing which candidates are being considered for the job therefore outweighs the ‘countervailing interests of confidentiality, privacy [and] the best interests of the state….’

The court went on to conclude that all 17 of the prospects who were interviewed for the position of ASU’s president were “candidates” whose name had to be made public.

I understand the drawbacks of making the names of candidates public, but at the same time, the public’s interest in knowing the pool of serious contenders is great. In addition to the general curiosity about whether the search committee is cultivating a strong pool and using the right factors for its decision-making, Arizona residents also have an interest in making sure that the search committee is complying with anti-discrimination restrictions. A glimpse at the candidate pool allows the public to assess whether the pool is being winnowed in a way consistent with state and federal law.

Bill Ridenour carefully describes the short list of candidates that was sent to the Board of Regents as “prospects.” I suspect he is relying on this language at the very end of the 1991 case about Board-adopted rules:

We note that it might be helpful to the court, the Board, and candidates, if the Board adopted rules of procedure for nominating university presidents. The adoption of rules could avoid a recurrence of future litigation. These rules could indicate when a prospect becomes a candidate and when confidentiality ends.

But I have serious doubts that this language at the end of the opinion was left as an invitation for the Board of Regents to re-define the meaning of a presidential search “candidate” in a way that contradicts the language and the reasoning of the case.

Reasonable minds may disagree about the wisdom of the Arizona public records laws, but I would hope we do not disagree about the importance of following established law, even when we disagree with it. Particularly on this day, when the U.S. president’s press corps has blocked the New York Times, CNN, and other major news groups from its press briefings, I am disappointed that my home institution is taking a cavalier attitude toward transparency obligations and choosing to err on the side of secrecy.

Artificial Intelligence, the Internet of Things, and Social Values

Please join the AALS Internet and Computer Law section for tomorrow’s session on “Artificial Intelligence, the Internet of Things, and Social Values” at the AALS annual meeting in San Francisco.

Date / Time: Thursday, 5 January 2017, 1:30 – 3:15PM

Location: Hilton San Francisco Union Square Hotel, San Francisco, CA

Summary: The Internet of Things will create a vast surge in the amount of data that we – and our devices – generate. To make sense of this trove of information will require the use of algorithms and artificial intelligence by researchers, firms, and government. Digital sifting creates both promise and peril, and is certain to clash with important social norms.

Paper / Project Titles

Josh Fairfield – Digital and Smart Property

Argyro Karanasiou (with Dimitris Pinotsis) – Intelligence and Will Embedded in Deep Learning Algorithms

Dave Levine – Confidentiality Creep, Opportunistic Privacy and Dual-Use Secrecy

Emily Schlesinger – Legal Challenges of Disruptive Technologies 


Joshua Fairfield is an internationally recognized law and technology scholar, specializing in digital property, electronic contract, big data privacy, and virtual communities. He has written on the law and regulation of e-commerce and online contracts and on the application of standard economic models to virtual environments. Professor Fairfield’s current research focuses on big data privacy models and the next generation of legal applications for cryptocurrencies. His articles on protecting consumer interests in an age of mass-market consumer contracting regularly appear in top law and law-and-technology journals, and policy pieces on consumer protection and technology have appeared in the New York Times, Forbes, and the Financial Times, among other outlets. Before entering the law, Professor Fairfield was a technology entrepreneur, serving as the director of research and development for language-learning software company Rosetta Stone.

Dr. Argyro Karanasiou is an Assistant Professor (Senior Lecturer) specializing in IT and Media Law, affiliated with the Centre for Intellectual Property, Policy & Management (CIPPM) and with the Data Science Institute (DSI) at Bournemouth University (United Kingdom). Since August 2016, Argyro is a Visiting Research Fellow at the Internet Society Project (ISP) Center – Yale Law School. Her research discusses techno-legal conceptual frameworks towards a decentralized internet regulation with a particular focus on media ownership and user empowerment. Currently, Argyro is working on Deep Learning and its implications for the agent’s autonomy in automated systems. In the past, she has been involved in media related projects with the Council of Europe (Regional Expert on online media and reconciliation in South Eastern Europe) and with the OSCE Representative on Freedom of the Media. In 2013 (Indonesia) and 2015 (Brazil), Argyro was awarded an Internet Society IGF Ambassadorship and in 2014 she was named a PbD Ambassador by the Information and Privacy Commissioner in Ontario, Canada. In 2016, Argyro joined the EFF’s group of experts on Free Trade Agreements and Digital Services. Recently, Argyro was invited to submit evidence to the Royal Society on automated decision making and deep learning.  Her current projects span a wide range of topics from IoT/wearable tech to big data, bioinformatics and mesh networks. Argyro tweets @ArKaranasiou.

David S. Levine is an Associate Professor of Law at Elon University School of Law and an Affiliate Scholar at the Center for Internet and Society at Stanford Law School (CIS). He is a 2016-2017 Fellow at Princeton University’s Center for Information Technology Policy (CITP). He is also the founder and host of Hearsay Culture on KZSU-FM (Stanford University), an information policy, intellectual property law and technology talk show for which he has recorded over 250 interviews since May 2006. Hearsay Culture was named as a top five podcast in the ABA’s Blawg 100 of 2008 and can be found at His scholarship, which has been published in several law reviews including Florida, North Carolina and Stanford Online, focuses on the operation of intellectual property law at the intersection of technology and public life, specifically information flows in the lawmaking and regulatory process and intellectual property law’s impact on public and private secrecy, transparency and accountability. He has spoken about his work in numerous venues, from the American Political Science Association annual meeting to the Information Society Project at Yale Law School, and internationally.

Dr. Dimitris Pinotsis is a Visiting Research Scientist at the Picower Institute for Learning and Memory and the Department of Brain and Cognitive Sciences at the Massachusetts Institute of Technology (MIT). He is also an Honorary Senior Research Associate at the Wellcome Trust Centre for Neuroimaging at University College London (UCL). Dimitris holds a PhD and an MSc in Mathematics from the Department of Applied Mathematics and Theoretical Physics (DAMTP) of the University of Cambridge, UK. His research has been funded by the US Air Force Office of Scientific Research, UK Research Councils (EPSRC) and the Wellcome Trust. It spans diverse areas including machine learning, the analysis of big data in   neuroimaging, theoretical neurobiology and nonlinear systems in mathematical physics. In recent work, Dimitris exploits deep neural networks and hierarchical Bayesian inference to answer questions in attention, memory and decision-making. Dimitris is an Expert Reviewer for US Air Force Office of Scientific Research, the Austrian Science Fund and the Italian Ministry of Health. He tweets at @dimitrispp and shares his work at

Emily S. Schlesinger is a Senior Attorney in Microsoft’s Regulatory Affairs group where she advises lawyers in the Artificial Intelligence & Research engineering group on global privacy laws. Before joining Microsoft almost three years ago, she worked as a litigation associate at Wilson Sonsini Goodrich & Rosati’s Seattle office and DLA Piper’s Chicago office, and she served as a Deputy Solicitor in the Ohio Attorney General’s Office.  In addition, she clerked for Judge Guy Cole, Jr. of the U.S. Court of Appeals for the Sixth Circuit and Judge Algenon L. Marbley of the U.S. District Court for the Southern District of Ohio.

Hope to see you there!

Graduate Research Fellow in Privacy and Freedom of Speech – Apply!

The University of Arizona James E. Rogers College of Law welcomes applications for a graduate research fellowship beginning in October / November 2016 and ending in summer / fall 2017. The Fellow will work with Professors Derek Bambauer and Jane Bambauer on a series of projects related to privacy, transparency, and free speech, including a major research workshop for scholars in the field scheduled for spring 2017. The Fellow may have the opportunity to teach one or more classes at the law school to JD students or undergraduates. In collaboration with the University’s Center for Digital Society and Data Studies, School of Information, and School of Government and Public Policy, the Fellow will write scholarly research papers, produce opinion pieces for popular media outlets, communicate with stakeholders such as government officials and think tanks, and help the university develop its systems for data privacy and security. The goals of this project are to generate research findings that will inform policy, create new avenues for advocacy, and educate the public about privacy and free speech. The Fellow will also have the option of receiving affiliation as a Center for Democracy and Technology Research Fellow ( The position may involve occasional funded travel to the Center for Democracy and Technology in Washington DC.

About the Application Process

The University of Arizona is committed to meeting the needs of its multi-varied communities by recruiting diverse faculty, staff, and students. The University of Arizona is an EEO/AA-M/W/D/V Employer. As an equal opportunity and affirmative action employer, the University of Arizona recognizes the power of a diverse community and encourages applications from individuals with varied experiences, perspectives, and backgrounds. Applicants should have demonstrated interest and achievement in legal scholarship. A J.D. or equivalent degree from an ABA-accredited law school is required unless waived. The strongest applicants will have a mixture of legal practice experience, scholarly writing, and teaching experience. If you are interested in joining the College of Law’s community of teachers and scholars, please contact Professor Derek Bambauer with the following materials:

  • C.V.
  • Cover letter describing your research goals, scholarly interests, and relevant experience
  • Names and contact information of two references

Finalists for the Fellowship will be required to submit an application through the University of Arizona’s human resources Web site.

We anticipate interviewing candidates beginning in September, and offering the position to commence in October / November 2016. Both starting and ending dates are flexible depending upon the candidate’s needs.

The Fellowship pays a salary of $40,000 – 50,000 for its term and includes full benefits, including health care insurance. (And money goes a lot further in Tucson.)

If you have questions, please contact:

Derek Bambauer

Professor of Law

1201 E. Speedway

Tucson AZ 85718

Internet Troll’s “Political Shenanigans” Are Protected Speech–State v. Hirschman

(Cross-posted at the Technology & Marketing Law Blog.)

Aaron Hirschman, a self-proclaimed “Internet troll,” posted the following message on Craigslist:

Wanna make an easy $20 for voting? (Downtown Bend)

Are you interested in making a quick and easy $20? Meet us in the parking lot downtown near the drop off voting booth this weekend. All you need to do is bring your UNFILLED clean voting ballot and let us fill it out then you sign, and we hand it to the volunteer in the voting booth. Its that simple! Then you get $20. We’ll be there all weekend through tuesday.

Everybody, including state prosecutors, agreed that Hirschman had no intention of actually buying votes or carrying out this plan. His post was what the state called a “political shenanigan,” designed to provoke reactions by taking an absurd or offensive position.


Unfortunately for Hirschman, his trolling was not obvious enough for the government’s liking. Even though nobody replied to Hirschman’s post, the Oregon Secretary of State’s office thought the post would be reasonably interpreted as a genuine proposal to create a contract. He was charged with and convicted of violating ORS 260.715(9), which states that “a person may not [] offer to purchase, for money or other valuable consideration, any official ballot [].”

On appeal, Hirschman made two key arguments: First, the trial court misinterpreted the meaning of the word “offer” in the statute by failing to incorporate an intent element that would require the state to prove he had a subjective intent to form a contract. Second, if the statute did apply to Hirschman’s post, then it violated his constitutional right to free expression under the Oregon Constitution (though the analysis would share many similarities to a First Amendment challenge under the U.S. Constitution.)

The Court of Appeals reversed Hirschman’s conviction. But the analytical path it took to reach its result is a bit surprising.

The court could have avoided a free speech analysis by interpreting the Oregon statute as the defendant suggested—requiring subjective intent by the offeror to actually enter into an illegal contract. This would have allowed the court to dispose the case on statutory rather than constitutional grounds. But the court declined. After consulting Webster’s dictionary and contract-based uses of the term “offer,” the court explained that the Oregon statute must sweep broader than the defendant suggests. The defendant’s version of the statute would be indistinguishable from an attempt to purchase a ballot (which could be charged under a different part of the criminal code).

This seems to me to be a needlessly rote approach to statutory interpretation. Defining the scope of criminal liability is a good time for courts to create legal terms of art that do not match in all respects the way the words are used elsewhere. Crime-facilitating speech is a well-known hazardous area for regulation since it lies at the boundary between protected speech and unprotected conduct. The best way to manage it is to ensure that criminal laws hew closely to transactions, using speech only as evidence of the transaction or preparatory steps. That way, if I make the joke “please, I’ll pay, just somebody please take out the Kardashian family,” the criminal consequences do not teeter on how well or poorly I communicate that I am not serious.

Assessing the defendant’s subjective intent can do some of the work (perhaps not all) to ensure that direct prohibitions of speech are actually targeting a realistic threat. This is why intent is a constitutional requirement in incitement prosecutions. See Dennis v. United States (“The structure and purpose of the statute demand the inclusion of intent as an element of the crime.”) It is worth noting, though, that the Supreme Court still has not clarified whether subjective intent is a constitutional requirement in other similar areas of criminal law like true threats (see Elonis).

But even apart from the wisdom of constitutional avoidance, there is another sensible reason to interpret an “offer” in this criminal context differently from in the contracts context: the goals of the two legal constructions are very different. In contract law, the state has an interest in enforcing accepted offers even if they are made without subjective intent to form a contract–so long as the statement of an offer was objectively believable–in order to encourage transactions. When the putative offeror’s and acceptor’s interests are at odds, the contract system is better off using the objective meaning of the language and context involved so that this and future acceptors are protected from fraud, and so that future offerors can make credible offers that are not discounted as cheap talk. The goal of contract law’s definition of an offer, then, is to enable transactions. When transactions are criminally prohibited, these goals are moot. The only reason to prohibit “offers” is to discourage the transaction from occurring at all, not to enhance their reliability.

Hirschman gave the court an opportunity to define “offer” in the context of a criminal statute as a species of attempt—as a solicitation with the purpose of entering into an agreement that would itself be illegal. But because the court rejected it and accepted the state’s version of the statute, the law wound up in the buzz saw of free speech scrutiny.

Given that the court gave the criminal statute the wide scope that it did, its free speech analysis is strong and, in my view, correct. The Oregon Constitution’s protection of free speech seems to be as protective as the U.S. Constitution when the government creates content-based prohibitions of speech, applying very strong scrutiny to all but the historically excepted categories of speech.  (In fact, the Oregon constitution may offer even stronger protections than the federal right to free speech since the court seems to limit the government to only the historically recognized exceptions).

First, the court found that the law targets expression rather than effects since a person violates the law only through communication, and since that communication can violate the law even if there are no bad effects.

Next, the court rejected the state’s claim that the anti-offer statute in this case was covered by the well-established historical exception for “solicitation or verbal assistance in crime” since solicitation crimes include the very element that the state insisted was not necessary for this particular law: the element of intent that the solicited crime be accomplished.

The court also saw right through the state’s argument that the statute was necessary to promote public trust in the state’s election system. Even if the effects are what the state fear they will be, the diminution of trust alone cannot justify the suppression of political speech. As the court put it, the state “selected a phenomenon and labeled it as a harm.” Derek Bambauer and I call these “tautological harms” in our forthcoming article Information Libertarianism. It’s nice to see a judicial opinion that so clearly identifies the problem; Courts are rarely this attuned to it.

The outcome of this case is doubtlessly correct. Hirschman’s odd mockery is surely part of our constitutional experiment in open political discourse. But given the path taken to reach the result, Oregon legislators may have to revisit and redraft laws criminalizing “offers” to engage in illegal activity lest prosecutors get trolled again.

Case citation: State v. Hirschman, 2016 WL 3675617 (Ore. Ct. App. July 7, 2016)

Call for Papers: Artificial Intelligence, the Internet of Things, and Social Values

Artificial Intelligence, the Internet of Things, and Social Values

Call for Papers – AALS Section on Internet and Computer Law


The Internet of Things will create a vast surge in the amount of data that we – and our devices – generate. To make sense of this trove of information will require the use of algorithms and artificial intelligence by researchers, firms, and government. Digital sifting creates both promise and peril, and is certain to clash with important social norms. For example, it may force us to revisit norms around privacy, ownership, prediction, and the public-private boundary. The Section on Internet and Computer Law welcomes submissions for papers about this clash.


Authors are encouraged to submit papers for this session. Submissions should summarize the paper in roughly 1000 words. To submit, please send the summary by e-mail to Derek Bambauer, <>, by September 15, 2016. The members of the section’s executive committee will review the submissions and select presenters by September 28, 2016. Presenters must submit the final version by December 1, 2016.

The committee will give preference to works in progress and projects; recently accepted or published pieces are also welcomed.

Presenters will share their work at the Section’s meeting at the AALS Annual Meeting on Thursday, 5 January 2017, 1:30 – 3:15PM.


Please contact Derek Bambauer, <>.

Free Speech Challenges to Credit Card Surcharge Laws

I recently helped write and organize an amicus brief urging the Supreme Court to grant cert in Expressions Hair Design v. Schneiderman. The case involves a circuit split on the constitutionality of “no surcharge” laws in New York, Florida, and a few other states. These states allow retailers to give “discounts” to cash and check payers but forbid retailers from adding “surcharges” when customers pay by credit card. Some retailers have challenged these laws under the First Amendment because the laws treat identical conduct differently based on how the sellers represent their prices.

Everybody thinks this is an easy case. The trouble is, everybody is divided about whether the First Amendment applies at all, some saying “obviously yes,” and others saying “obviously no.”

The Second and Fifth Circuits are in the “obviously no” camp. They dismissed the free speech arguments and found that these laws regulate only economic conduct.

A California district court and the Eleventh Circuit are in the “obviously yes” camp. So am I. This camp thinks the laws inarguably regulate speech. Despite appearances, the laws do not constrain pricing. Instead, they constrain how goods are labeled, and how prices are broken down and explained.

In the course of recruiting co-signers, it became clear that law professors are generally reluctant to recognize when commercial speech is being regulated, and also tend to assume that even when it’s clear communications are being suppressed, the suppression operates in consumers’ best interests. These instincts are wrong in the specific case of anti-surcharge laws, and they are likely to be misguided in the larger case of commercial speech as well. I’ll explain here why I think so.

Anti-surcharge laws regulate speech, not conduct.

These anti-surcharge cases are at bottom debating the scope of the First Amendment. The Second Circuit concluded that laws that prohibit a surcharge but allow a discount regulate economic conduct, not speech:

the central flaw in [the merchants’] argument [] is their bewildering persistence in equating the actual imposition of a credit-card surcharge (i.e., a seller’s choice to charge an additional amount above the sticker price to its credit-card customers) with the words that speakers of English have chosen to describe that pricing scheme. . . . But Plaintiffs are simply wrong. What [the law] regulates—all that it regulates—is the difference between a seller’s sticker price and the ultimate price that it charges to credit-card customers.

What’s bewildering to me is that the Second Circuit relies twice on a reference to a “sticker price” without acknowledging the expression involved. Stores are free to charge separately for an item and for the credit card transaction to purchase the item, but a sticker that says “$102, but $2 less for cash,” is legal while a sticker that says “$100, plus $2 for credit cards” can lead to jail time. The difference between criminally liable “surcharges” and perfectly legal “discounts” is, therefore, the way that retailers explain their pricing schemes.

Anti-surcharge laws do not target false and misleading speech

When I first heard about the free speech challenges to anti-surcharge laws, I immediately understood that the laws were regulating communication, but I suspected they might just target fraud. I though that the laws might be enforced out of concern for consumers who reasonably assume that they will be able to purchase an item by credit card for its sticker price and are surprised when their total is rung up. I assumed the laws would operate either as a form of compelled speech (to force retailers to give consumers information they need to know about the fully-loaded price they will pay at the cash register) or as a ban on misleading commercial speech (to make sure merchants don’t give consumers the impression that they will pay less than they actually will). Misleading commercial speech is not constitutionally protected. This potential for consumer deception is what the dissenting 11th Circuit judge had on his mind, and what Rebecca Tushnet is thinking about, I suspect, when she explains that “even if there’s a small-print disclosure—what a reasonable consumer would take away is the measure” of a misleading price.”

By the way, the theory that anti-surcharge laws target deception implicitly concedes that the laws regulate communication. Once we’re going down this road, we’re operating in a space where price communications are presumptively protected unless the regulation bans unprotected false or misleading speech. The First Amendment coverage question will therefore float or sink on the question of deception.

The fact is, anti-surcharge laws are not especially concerned about consumer deception. The anti-surcharge laws sweep broader than deception by banning clear statements, provided in advance of purchase, about additional credit card fees. Any explanation of prices that identifies credit cards as the source of additional costs rather than rolling them into the price of the item is illegal.

The surcharge bans are similar to a law the Kentucky legislature passed in 2005 restricting how telecommunications providers could label their customer’s bills. The state imposed a new tax and allowed telecom providers to pass the costs onto their customers, but the providers were forbidden from labeling the extra cost as a tax on customers’ bills. That ham-fisted attempt to avoid accountability for raising taxes was seen for what it was: an unconstitutional restriction on truthful commercial speech.

If New York is concerned about deception, it could cure the flaws in its anti-surcharge laws by replacing it with a compelled speech rule like this one used in Minnesota. It could mandate a disclaimer when sticker prices report cash prices to make sure customers understand that a credit card fee will apply. As co-signer Jonathan Adler has explained:

Where commercial speech is potentially misleading or even unclear, a requirement of curative counterspeech will typically be preferable to a limitation on speech. As the Court has noted, where possible, the remedy for potentially misleading speech should be more speech. Thus, requirements that producers or vendors qualify claims about products in advertisements and labels are more permissible than limitations or prohibitions on label or ad claims.

But a law requiring a clear disclaimer would be redundant. As long as consumers expect to be able to pay the same price for cash and credit cards, I suspect existing false advertising and unfair business practices laws will already push retailers to make clear disclaimers.

Anti-surcharge laws manipulate speech to nudge consumers into credit card transactions

The next way one might try to rationalize the anti-surcharge laws is to suppose that consumers are well-served by seeing one sticker price that reflects the most they will have to pay at the cash register. Perhaps New York and the other states with surcharge bans are regulating the way costs are framed for consumers.

This explanation, whatever its merit, would have to undergo constitutional scrutiny under the commercial speech doctrine. Under this theory, the state is regulating commercial speech, but it is doing so for an important consumer-protective purpose.

This theory cracks with just a little probing. The anti-surcharge laws wind up censoring not just truthful information, but valuable information: specifically, information that disaggregates the costs of the good or service from the costs of the credit card transaction. This information tends to benefit consumers by making them more likely to avoid transaction costs than they would be if the higher price were normalized and the consumer were offered a discount. The behavioral economics literature shows that the anti-surcharge laws have it backwards: they make consumers more likely to use a card, and thus to pay the higher price, in a dual pricing system. As an amicus brief filed by behavioral economists explains, lab experiments confirm that consumers are more likely to avoid a surcharge than to seek a discount. (This is entirely consistent with Kahneman and Tversky’s loss aversion work.)

The law also discourages retailers from engaging in dual pricing, meaning that cash buyers will continue to subsidize the credit card industry and its customers who pay their bills every month—a regressive transfer of wealth if I ever saw one. The California district court that struck down the anti-surcharge law cited Elizabeth Warren, who points out the detrimental effects of discouraging dual prices.

The negative effects from framing and cross-subsidies surely outweigh any benefits to consumers for seeing a single, higher sticker price (if there are any.) So if New York is attempting to use anti-surcharge laws to protect consumers, it seems to be doing it exactly wrong.

Courts can handle the judicial review of commercial speech regulations

One last form of resistance that I encountered while recruiting signatories was that the topic of prices, surcharges, and discounts is too complicated for the judiciary to understand and is best left to democratically accountable legislatures and agencies.

This is an argument that can be (and has been) trotted out every time the courts engage in constitutional scrutiny of any statutory or regulatory rule. The balancing of interests related to abortion, gay marriage, guns, and discrimination is also complicated, yet few legal scholars would accept judicial disengagement in these areas.

In any case, the premise is wrong. The consequences of anti-surcharge laws are not difficult to predict. State anti-surcharge laws are not the product of reasoned debate or the calculated tinkering by policy wonks. The laws were born from pure pork. They were pushed through by concerted lobbying efforts of credit card companies seeking refuge when a federal law of the same sort was allowed to expire. It requires no special training in economics or public policy to see that in this case, the credit card companies got a law that served their private interests.

If it seems strange that many law professors are prepared to defend the anti-surcharge law as presumptively protecting the public interest, (warning: shameless plug is imminent) I suggest looking at Derek’s and my new draft titled “Information Libertarianism.” We show that laws like the anti-surcharge bans that work against the public interest while appearing to work for it are much more common when the government regulates speech rather than directly regulating whatever it is they mean to achieve. In this case, a statute that bluntly bans retailers from engaging in dual pricing based on method of payment would clearly be an economic regulation rather than a speech regulation. But it would also be an unpopular regulation—one that reveals the state’s blatant pandering to the credit card industry. That type of law would not be confused for a consumer protection law.

By the way, I love credit cards.

This post has, up to this point, demonized the credit card industry. But my criticism of credit card companies applies only to their role in this particular episode of commercial speech bans. In fact, I suspect merchants are exaggerating the true costs of credit card swipe fees since handling cash, protecting it, and depositing it is costly to merchants. Keeping cash on hand is costly to consumers, too. Credit card users who are annoyed by swipe fees probably do not fully appreciate what they get in return. I for one will gladly pay a small swipe fee if the alternative means having to rely more heavily on ATMs and the inherent risks of carrying cash. For the most creditworthy consumers, swipe fees are more than balanced out by plum credit card rewards like miles and cash reimbursements. But this preference of mine does not change the essential point that disaggregating various sources of costs gives consumers more control to decide which services to take on and which to avoid.

I hope the Supreme Court takes up the case. States have a history of regulating speech under the guise of something that sounds like conduct, be it incitement or harassment. It would be a shame if “sticker prices” became an open avenue for banning truthful commercial speech.