Tuesday, November 29, 2011

Seventh Circuit: Bond for Infomercial Does Not Violate Free Speech

A three-judge panel of the Seventh Circuit ruled today in FTC v. Trudeau that a lower court's requirement that author and infomercialist Kevin Trudeau post a $2 million bond before airing an infomercial does not violate the First Amendment.

The case arose out of Trudeau's violation of a court-approved settlement with the Federal Trade Commission by airing infomercials that misrepresented his book The Weight Loss Cure "They" Don't Want You to Know About.  Here's Trudeau (part 1 of 5; more on YouTube):


The lower court held Trudeau in contempt, ordered him by pay $37.6 million to the FTC (based on consumers' loss as a result of his misrepresentation) and required him to post a $2 million bond before airing any infomercial, misleading or not.

The Seventh Circuit upheld the bond against Trudeau's First Amendment challenge.  (It also upheld the $37.6 million sanction.)  Applying the Central Hudson test for commercial speech, the panel wrote that "the protection of consumers is a substantial interest," and that "the performance bond directly advances that interest" by making it more likely that future consumers would be compensated for misleading infomercials and by making it less likely that Trudeau will produce misleading infomercials.  As to tailoring:

The performance bond meets [the "carefully calibrated" standard in Bd. of Trustees of the State Univ. of New York v. Fox].  First, a bond is required only if Trudeau decides to resume making infomercials.  It does not limit Trudeau as an author; it does not curtail Trudeau's attempt to pitch products in any print medium; it does not even apply if Trudeau makes a TV or radio ad under two minutes.  Its application targets only the commercial conduct that has caused such tremendous consumer harm in the past--infomercials.  Second, the district court set the performance bond at $2 million but took seriously Trudeau's claim that it is beyond what he can afford by allowing him to file an audited financial statement and prove as much in a hearing.  Third, the bond requirement is proportional to the amount of harm Trudeau caused by previous deceptive infomercials.  If anything, the number seems low given that, over the course of nearly a year, Trudeau's Weight Loss Cure infomercial sold thousands of books each day for many months.

Op. at 11-12 (emphasis in original).



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