The U.S. Supreme Court has declined to get in the middle of a long-running battle between two corporations that posed a major threat to First Amendment commercial speech doctrine.  The Court on Oct. 1, 2001 declined to review the feud between Amway and Procter & Gamble, in which the Court was asked to decide whether economically motivated defamatory speech deserves any First Amendment protection.  Amway Corp. v. Procter & Gamble Co., 242 F.3d 539 (5th Cir.), cert. denied, 122 S. Ct. 329 (2001).

     Procter & Gamble has been victimized for more than two decades by a rumor that it has links to Satanism, and that some of its profits are turned over to the Church of Satan.  The company’s “man in the moon” trademark, no longer in use, was said to be a satanic symbol.  The company has combated the rumor in court, suing those who allegedly have spread the false information.  Among the targets of those lawsuits have been distributors for Amway, which markets soaps and other products that compete with P&G brands.  Procter & Gamble calculated that the rumor cost it nearly $50 million in sales from 1995 to 1997.

     Amway, in turn, claims that it has helped knock down the Satanism rumor, though it acknowledges that some of its demonstrators briefly circulated the rumor in the mistaken belief that it was true.  Amway alleges that Procter & Gamble filed the lawsuits to break Amway as a competitor by forcing it to pay millions of dollars in legal fees to defend itself.  Officials of Amway say the litigation in Texas and Utah has cost the company $30 million in legal bills.  Amway has also sued Procter & Gamble for spreading damaging information about Amway.

     The case that went to the Supreme Court had First Amendment implications that worried media lawyers.  It was filed in Texas by Procter & Gamble while its Utah lawsuit was pending.  The suit alleged that Randy Haugen, one of Amway’s key distributors, broadcast the rumor to other distributors in 1995 through a telephone messaging system.  Mr. Haugen retracted the rumor a few days later, but by then, some of the distributors had sent fliers to potential customers recounting the rumor and concluding: “We offer you an alternative.”

     In its lawsuit, Procter & Gamble accused Amway of committing common law fraud and violating the Lanham Act and the Racketeer Influenced and Corrupt Organizations Act.  After Procter & Gamble’s lawsuit was dismissed in Utah, Amway sought to have the Utah ruling apply to the Texas case.  The district court judge agreed in part, and ruled against Procter & Gamble on other issues.

     Procter & Gamble fared better before the U.S. Court of Appeals for the Fifth Circuit, though the company did not win completely.  The appeals panel determined that the Satanism rumor, because it dealt with religion and corporate behavior, “touched on the type of issues that are at the heart of First Amendment protections.”  It also found that Procter & Gamble was a “limited purpose public figure.”  While those findings would have ordinarily given Amway greater First Amendment protection for what its distributors said about Procter & Gamble, the appeals court went on to say, in essence, that the First Amendment did not apply.

     The appeals court, using the test embodied in the 1983 Supreme Court case Bolger v. Youngs Drug Products Corp., 463 U.S. 60 (1983), determined that Amway’s dissemination of the rumor was commercial speech because “the speaker acted substantially out of economic motivation.”  And since the speech was commercial -- and false -- the court concluded the speech was entitled to “no protection” under the First Amendment according to the familiar Central Hudson test.  Central Hudson Gas & Electric Corp. v. Public Service Commission, 447 U.S. 557 (1980).  Because the First Amendment did not protect Amway’s speech, the court said Procter & Gamble did not need to prove that Amway acted with “actual malice” to prove its Lanham Act claim.    

     With the support of several media organizations, Amway appealed to the Supreme Court, arguing that the Fifth Circuit’s formulation would strip First Amendment protection from all kinds of communication that might be legitimately critical of a business.

     “The motivation behind such speech has no bearing on its importance,” wrote Amway’s lawyer Kenneth Starr of Kirkland & Ellis in the petition before the High Court.  “If a defense contractor thinks that another contractor is selling weapons to the enemy, people ought to know.  If a company thinks that another company is supporting the Ku Klux Klan or the Communist Party or a terrorist organization or the Church of Satan, people ought to know.”

     If a jury could diminish First Amendment protection by finding that a speaker’s motives were economic, Starr said, “the result is an open invitation to eviscerate First Amendment protections precisely when they are most needed -- when the speech is unpopular.”  He said the Fifth Circuit’s ruling departed substantially from the Supreme Court’s more recent decisions defining commercial speech.

     In a reply brief, Procter & Gamble lawyer Arthur Miller defended the Fifth Circuit’s determination.  Amway’s spreading of the Satan rumor, he said, was “nothing more than a blatant commercial pitch vilifying a competitor and urging recipients to buy Amway products only....  Its false and venomous content bears no resemblance to a statement of religious conviction or any other form of protected speech.”