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Are Marketing Orders and Checkoffs in Legal Trouble Again? John M

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Are Marketing Orders and Checkoffs in Legal Trouble Again? John M Agricultural and Resource Economics ARE UPDATE Giannini Foundation of Agricultural Economics, University of California Vol. 21, No. 6 Jul/Aug 2018 ALSO IN THIS ISSUE Retail Food Prices and Retailer Market Power: Evidence from the Greater Los Angeles Area Meilin Ma, Tina L. Saitone, Richard J. Volpe, Richard J. Sexton, and Michelle Saksena ......................5 The Economic Impacts of Agricultural Groundwater Markets Ellen M. Bruno ................................................................................9 Are Marketing Orders and Checkoffs in Legal Trouble Again? John M. Crespi A recent Supreme Court ruling 209 (1977)], the Court had held that flawed, and negated it in their Janus against fees collected by public- because collective bargaining by the decision. Non-union public employees employee unions from non-union teachers’ union benefited non-union may no longer be compelled to sup- members may lead to litigation members and because Congress and port the union’s activities even if those of commodity checkoff program the state of Michigan had determined activities benefit them. assessments. Marketing boards that collective bargaining was import- that considered this issue settled ant for labor relations, public unions The Court cited the First Amendment long ago should look closely at could compel non-union members to of the U.S. Constitution, which has the similarities between this case support the part of the union’s activ- long been held not only to protect a and decades-old cases involving ities related to collective bargaining. citizen’s freedoms of speech and asso- generic advertising. Hence, non-union public employees ciation, but freedom from compelled find part of their paycheck going to speech and compelled association. support union activities. Since a union was using the non-union employees’ fees to promote collective On June 27, 2018, the U.S. Supreme Agricultural boards and bargaining, the Court ruled that they Court handed down a decision on commissions representing were compelling those employees the constitutionality of compelled farmers in dozens of industries to send a message with which the union dues. In a 5-4 opinion in Janus spend nearly $1 billion per year employee might not agree and the v. AFSCME [585 U.S. ____ (2018)] (see on generic advertising. First Amendment strictly forbids this. reference on page 4), the Court found that public employee unions could not The Janus case was very similar to the Marketing Boards compel non-union members to pay Abood case (both were brought by non- Should Take Heed assessments called “agency fees” to union public employees who objected Generic advertising and promotion support the union; something public to the compelled support of union is marketing that does not promote a employee unions across the country activities with which they disagreed); particular brand of a good, but instead have regularly been doing for nearly in fact, so similar that a lower court promotes the entire industry. “Got half a century. ruled against the plaintiffs citing the Milk?” is likely the most famous of the The controversy is not new, and in Abood ruling. Nevertheless, the plain- generic campaigns. The collection of 1977, a very similar case against tiffs in Janus appealed and, on June dues to pay for generic marketing has these compelled dues also made it 27, 2018, the Court overturned this always been controversial and became to the Supreme Court. In Abood v. long-standing Abood ruling. The Court especially litigious in the farming Detroit Board of Education [431 U.S. held that the 1977 Abood decision was community in the 1990s and early Figure 1. Timeline: United States Supreme Court Decisions nearly half a century, and agency fees had existed prior to 1977. Thus, the 1977 – ● Abood. Held that compelled assessments from non-union members was legal if the policy upheld in Abood has been part assessments supported a greater regulatory need. of American labor law for a very long 1997 – ● Glickman. Used Abood as basis for compelled assessments in agricultural marketing time. orders. Agricultural checkoffs have likewise 2001 – ● United Foods. Limited Glickman to cases where regulatory need was broader than been around for a very long time. The promotion alone. point here is that just because a ruling 2005 – ● Johanns. Turned promotion from checkoff into government speech thus shielding has been around for a long time does checkoffs from free-speech attacks. Johanns would seem to make United Foods moot. not make it safe. In the case of Janus, 2005- the Court is saying very clearly not to 2018 – ● Generic promotion supported in courts by either applying Glickman, Johanns, or both. tinker with the First Amendment, and 2018 – ● Janus. Throws out Abood and by implication Glickman. Uses United Foods as support a very strong governmental reason in ways that call into question whether Johanns is now implicated. is needed for putting constraints on the Constitution. That argument has 2000s. In an earlier ARE Update (2015), The 2018 Janus decision raises five been raised by plaintiffs in all of the I, along with co-authors Saitone and important legal questions pertaining commodity promotion cases to date Sexton, summarized the three most to the agricultural checkoff programs. as well. recent court cases concerning generic The starting point for these five advertising or “checkoff” assessments questions is understanding that to Question 2. Can programs and concluded that future litigation date, the roughly two-dozen federal stand on one leg? on the constitutionality of generic agricultural marketing orders that can The Glickman case that made the advertising is not likely or, at least, not undertake advertising and promotion, generic promotion of peaches, plums, imminent. Today, I am not so sure. along with the various state orders and nectarines legal is now most and stand-alone checkoff programs likely gone because Abood provided Agricultural boards and commissions (like those for beef and pork), have the basis for Glickman. The 2018 representing farmers in dozens of been justified either on the basis of the Supreme Court did not casually industries spend nearly $1 billion 1997 Glickman v. Wileman Brothers & reverse Abood in the Janus decision; per year on generic advertising. In Elliott, Inc. [521 US 457] decision, the they very forcibly reversed that earlier 2005, the U.S. Supreme Court ruled 2005 Johanns decision, or both. opinion. This Court took great care in Johanns v. Livestock Marketing to say explicitly the earlier Court was Association [544 U.S. 550] that generic The 2018 Supreme Court did greatly in error. advertising was different from other not casually reverse Abood in forms of advertising and not com- the Janus decision; they very Abood made compelled speech and pelled speech. Its assessments were forcibly reversed that earlier assessments legal if a state had an more like taxes collected by the opinion. This Court took great important regulatory need like good government to put forward a gov- care to explicitly say the earlier labor relations. Abood figured heavily ernment-backed message. Thus, as Court was greatly in error. in the Glickman decision that said tree- government speech, it was not the fruit assessments to pay for generic same as other types of compelled Question 1. Does legal promotion and advertising were advertising. longevity mean anything constitutional because the market- ing order was, likewise, satisfying a Since that 2005 Johanns decision, I for the programs? larger regulatory need of Congress for have believed and often stated that The biggest question that Janus raises orderly commodity markets. litigating over the First Amendment for me when considering its impact issues of marketing orders was moot. on agricultural marketing orders and The majority in the Janus opinion It was a settled issue in my opinion. checkoffs is why the Court took up never mentions Glickman. However, Checkoffs for advertising and pro- the Janus case at all. The Abood deci- they most certainly knew about it, motion are government speech, and sion in 1977 made agency fees the as Justice Kagan’s dissent mentions hence not part of a First Amendment law of the land … until it didn’t. Few Glickman twice while arguing Abood is issue. I am not a lawyer, but this expected Abood to be overturned, and a well-established law that has been recent Janus decision has me reconsid- it has been used regularly in lower used to back several other cases and ering the conclusiveness of Johanns. court decisions in similar cases for that now all of those cases are going 2 Giannini Foundation of Agricultural Economics, University of California to be tossed because of the Janus deci- many cases). Decades ago, farm prod- assessments to support generic mar- sion. If Justice Kagan is correct, then ucts were more easily considered com- keting of mushrooms violated the First Glickman is now out. Many marketing modities than today when more and Amendment. programs had two legs to stand on; more farms and cooperatives brand What happened next is that from 2001 Glickman is used along with Johanns their products or seek other means to to 2005, marketing boards scrambled to justify the universal assessments. differentiate them from rivals’ produc- to present themselves as being part Now, one of those supporting legs is tion. These brands may not wish to of a broader regulatory scheme to gone. pay into a generic program that also shelter under the Abood/Glickman helps their non-branded competitors. Question 3. Generic market- umbrella. The majority in Janus never Product differentiation was a key cited Glickman, but did cite United ing is predicated in part on theme in both Glickman and four years the fear of free ridership; is Foods. What is interesting about United later in another generic advertising Foods is how they cited it. United Foods the current Court open to that case: United States v.
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