Social Media Transparency Rules, Zauderer Standard Head to Supreme Court

In 2021, Florida passed SB 7072, a pathbreaking (in a bad way) social media speech law. This May, the U.S. Court of Appeals for the Eleventh Circuit issued a significant opinion, NetChoice v. Moody, on that law’s constitutionality. One side (Florida) has sought Supreme Court review, and the other (trade groups representing the major social media platforms) is expected to do so as well. If the Court takes the case—as it probably will, especially given that the Fifth Circuit recently rejected Moody while reviewing HB 20, a Texas law similar to SB 7072—it will likely issue a landmark ruling on whether and how states can regulate social media content moderation. Largely unnoticed, so far, is the possibility that the Court will also revisit a notoriously mysterious precedent, Zauderer v. Office of Disciplinary Counsel (1985), and reshape the law of compelled commercial speech.

“Put simply, with minor exceptions, the government can’t tell a private person or entity what to say or how to say it.” That’s the main takeaway from the Eleventh Circuit’s decision. SB 7072 orders social media platforms, among other things, to host certain users, carry certain posts, and moderate content “in a consistent manner.” Upholding most of a preliminary injunction blocking the law, the Eleventh Circuit concluded that these provisions, which infringe platforms’ editorial control over their services, likely violate the First Amendment. (The Fifth Circuit reached a very different conclusion regarding HB 20, as we’ll see.)

SB 7072 contains “content moderation” rules, like the ones just mentioned; but it also contains “transparency” rules. These require platforms:

• to “publish the standards, including detailed definitions,” that they use to moderate content; 
• to announce in advance any changes to their terms of service;
• to supply users the view counts of their posts;
• to disclose any free advertising given to a political candidate; and
• to provide a “thorough rationale” when they remove or downrank content.

Although the Eleventh Circuit shut down SB 7072’s content moderation rules, it upheld (for now) all but the last of these transparency rules. The content moderation ruling drew headlines—but the transparency ruling, too, is immensely important.

The court upheld (most) of the transparency rules because it determined that those rules are subject not to strict or even intermediate scrutiny—as speech regulations typically are—but to the relaxed “undue burden” standard found in Zauderer. An Ohio attorney was disciplined for failing to divulge, in advertisements offering contingent-fee legal representation, that a client would have to pay some costs even if her suit failed. The issue, Zauderer noted, was whether the state could require that “commercial advertising” include certain “purely factual and uncontroversial information.” Given this context, the Court subjected the pertinent disciplinary rule to minimal First Amendment scrutiny, requiring merely that it not be “unjustified or unduly burdensome.”

The Eleventh Circuit acknowledged that Zauderer “is typically applied in the context of advertising and to the government’s interest in preventing consumer deception.” Nonetheless, the court declared, Zauderer “is broad enough to cover S.B. 7072’s disclosure requirements.” This is all the court said in defense of applying Zauderer. It is an assertion that glosses over much. 

Puzzling Over Zauderer

The Zauderer test is a source of deep puzzlement. The courts disagree over both its scope (which compelled commercial speech laws it governs) and its substance (what makes a compelled commercial speech law unduly burdensome). Some judges have questioned whether Zauderer was meant to create a distinct test to begin with. Some—including Justice Clarence Thomas—have called for it to be reexamined.

There are many riddles about the Zauderer test; but the Eleventh Circuit’s Moody decision highlights three in particular. First, can the test be applied to a law—like SB 7072—that compels speech outside the context of advertising? Second, what does it mean for a law to compel “uncontroversial” speech? And third, does the test govern when a compelled commercial speech law seeks to promote consumer welfare in general, or only when such a law seeks to correct a commercial entity’s false or deceptive statements? 

Disclosures in Advertising

“The Supreme Court’s opinion in Zauderer,” Judge A. Raymond Randolph, writing for the D.C. Circuit in National Association of Manufacturers. v. SEC (NAM) (2015), observed, “is confined to advertising, emphatically and, one may infer, intentionally.” Zauderer, he noticed, “explicitly identified advertising as the reach of its holding no less than thirteen times.” Moreover, he added, the Court later confirmed, in Hurley v. Irish-American Gay, Lesbian and Bisexual Group of Boston (1995), that Zauderer applies only in the “context” of “commercial advertising.”

It is a testament to the confusion over Zauderer’s scope that, these clear statements in NAM notwithstanding, the D.C. Circuit recently applied Zauderer outside the realm of advertising. Because there is a “conflict in the circuits regarding the reach of Zauderer,” NAM contains “an alternative ground for [its] decision.” American Hospital Association v. Azar (D.C. Cir. 2020) ignores NAM’s primary holding, cites NAM’s alternative holding, and then insists that “our court has not … limited the [Zauderer] standard” to “advertising and point-of-sale labeling.” (Azar also cites a murky tobacco precedent that seems in tension with NAM’s primary holding, but it makes no attempt to reconcile the two decisions.)

The Ninth Circuit, too, has muddied the waters. True enough, American Beverage Association v. San Francisco (2019) addressed a law that regulated advertising. But the court went out of its way to remove the advertising element from the Zauderer test. “The majority errs,” Judge Sandra Ikuta protested in a separate opinion, “by skipping over the threshold question regarding Zauderer’s applicability, namely whether the notice requirement applies to commercial advertising.”

In Moody, to repeat, the Eleventh Circuit claimed that, although Zauderer is “typically applied in the context of advertising,” it is “broad enough”—the court “think[s]”—to cover more.

And now comes the Fifth Circuit’s ruling in NetChoice v. Paxton. Like SB 7072, HB 20 contains both content moderation rules and transparency rules. The Fifth Circuit upheld the content moderation rules, framing the platforms’ editorial control over their own products not as a First Amendment right but, rather, as a revocable “privilege to eliminate speech that offends the Platforms’ censors.” (If this sounds like a bizarre conclusion, that’s because it is.) 

The Fifth Circuit also upheld HB 20’s transparency rules. Those rules resemble SB 7072’s. For instance, HB 20 compels platforms to publish “specific information” on how they use algorithms and moderate content. The Fifth Circuit found that HB 20’s transparency rules are not “unduly burdensome” under Zauderer. It never acknowledged that Zauderer might not apply outside the context of advertising.  

Oddly enough, the D.C. Circuit, the Fifth Circuit, the Ninth Circuit, and the Eleventh Circuit are removing an element from the Zauderer test that the Supreme Court seems to have retained. NIFLA v. Becerra (2018) reiterated that “the disclosure requirement” in Zauderer “governed only ‘commercial advertising’” and that Zauderer “emphasized” that the speech before it “would have been ‘fully protected’ if … made in a context other than advertising.”

One would think, given the Court’s recent statements in NIFLA, not to mention the Court’s observation in Hurley, and not to mention the Court’s 13 clarifications in Zauderer itself, that everyone would understand that the Zauderer test does not apply outside of advertising. Yet in the short time since NIFLA was decided, three circuits have rejected, and a fourth has noticeably chafed at, that conclusion. Perplexity reigns.

“Uncontroversial” Disclosures

For Zauderer to apply, a required disclosure must be “uncontroversial.” But what is an “uncontroversial” disclosure? No one seems to know. As then-Judge Brett Kavanaugh put it: “It is unclear how we should assess and what we should examine to determine whether a mandatory disclosure is controversial.”

For a time the Ninth Circuit maintained that “uncontroversial” refers merely “to the factual accuracy of the compelled disclosure” rather than “to its subjective impact on an audience.” The D.C. Circuit, meanwhile, disagreed, concluding that “uncontroversial” must refer to whether “a message … is controversial for some reason other than a dispute about simple factual accuracy.” (After all, Zauderer requires that a disclosure be both “factual” and “uncontroversial.”)

NIFLA seemed to nix the Ninth Circuit’s position. The law at issue there required pregnancy clinics “to disclose information about … abortion [services], anything but an ‘uncontroversial’ topic.” “Accordingly,” the Supreme Court said, “Zauderer has no application here.” But NIFLA did not define “uncontroversial,” and the Ninth Circuit has construed the decision as narrowly as possible. “We do not read the [NIFLA] Court,” the Ninth Circuit declares, “as saying broadly that any purely factual statement that can be tied in some way to a controversial issue is, for that reason alone, controversial.” This position places the Ninth Circuit in conflict not only with NIFLA itself, but also with the Second Circuit, which places outside Zauderer laws that require “discussion of controversial political topics.”

The Eleventh Circuit simply announced that SB 7072’s transparency rules require disclosure of “uncontroversial” information. The Fifth Circuit did the same as to HB 20. But if social media is fundamentally expressive—and, elsewhere in its opinion, the Eleventh Circuit found that it is—then what SB 7072 and HB 20 really require is that platforms divulge (“specific[ally]” and “thorough[ly]” and “in detail”) their editorial processes. Those processes are hardly an “uncontroversial” topic. Just ask Florida Gov. Ron DeSantis (R), who, when he signed SB 7072 into law, proclaimed that the transparency rules “hold Big Tech accountable” for “discriminat[ing] in favor of the dominant Silicon Valley ideology.” 

NIFLA says that a disclosure law regarding a controversial topic falls outside the Zauderer test. The Fifth, Ninth, and Eleventh Circuits apparently disagree. Here, then, is another area where multiple circuits’ post-NIFLA reading of Zauderer conflicts with NIFLA’s reading of Zauderer.

Correction of Deception

Does the Zauderer test apply only when the government mandates a disclosure to correct a commercial entity’s false or deceptive statements? Or does it apply also when the government mandates a disclosure to promote consumer welfare more generally?

Zauderer appeared to limit its holding to speech that is “false or deceptive.” And in Milavetz, Gallop & Milavetz, P.A. v. United States (2010), the Court confirmed that Zauderer is “directed at misleading commercial speech.” In restating the Zauderer test, however, NIFLA never mentions a “correction of deception” requirement—and this has generated uncertainty.

In American Beverage Association, Judge Jacqueline Nguyen objected to the Ninth Circuit’s “expansion” of the Zauderer test “to commercial speech that is not false, deceptive, or misleading.” In her view, the Zauderer test is not triggered whenever a law is, broadly speaking, a consumer protection measure. It applies, she explained, when the issue is a “commercial message’s accuracy”—“not its completeness.” Yet Judge Ikuta, in her separate opinion, seemed to accept that after NIFLA, Zauderer no longer contains a correction-of-deception element.

Moody followed Ikuta’s route, rather than Nguyen’s. SB 7072’s transparency rules would ensure that users are “fully informed,” and not “misled,” about platforms’ terms of service, the Eleventh Circuit said. Likewise, the Fifth Circuit in Paxton accepted Texas’s claim that HB 20 would help users “make an informed choice” about “whether to use the Platforms.” To put it in Nguyen’s terms, these are “completeness” rationales, not “accuracy” ones. They do not identify false or deceptive statements that the states aim to correct.

Zauderer Revisited

Florida has asked the Supreme Court to review the validity of SB 7072’s “thorough rationale” requirement. The trade groups that brought the Moody suit will likely ask the Court to review the law’s other transparency rules. The case offers the Court a chance to clarify whether the Zauderer test applies outside of advertising, what “uncontroversial,” as used in the Zauderer test, means, and whether the Zauderer test applies in the absence of false or deceptive commercial speech. A ruling on any, let alone all, of these questions would be noteworthy.

If the Court grants review, and if it indeed revisits Zauderer, what will happen? There are some crosscurrents at play, to put it mildly. The conservative justices in control of the Court have led the way in bolstering the speech rights of corporations. Further, conservative justices tend to be interested in returning the law to first principles. They are likely to question not only whether Zauderer was ever meant to be a standalone test, but also whether the Zauderer test, such as it is, has any grounding in an originalist understanding of the Bill of Rights. These factors point to a narrow Zauderer test, if any.

On the other hand, some of those conservative justices appear to view social media platforms with a skeptical eye. Justice Thomas has wondered aloud whether those platforms might be designated common carriers and thereby made to host speech against their will (a position adopted by the author of the Fifth Circuit’s HB 20 opinion). Justices Samuel Alito, Thomas, and Neil Gorsuch have expressed concern about “the power of dominant social media corporations to shape public discussion of the important issues of the day.” The liberal justices, for their part, have long been more hesitant about boosting corporate speech rights. They tend to worry about letting First Amendment rights grow to “threaten the workings of ordinary regulatory programs.” Here lie the makings of an awkward alliance to uphold some or all of SB 7072’s transparency rules.

Thomas embodies this indeterminacy. He questions the speech rights of social media platforms. He also questions the legitimacy of Zauderer. Do with these facts what you will.

A high court ruling on the constitutionality of social media transparency rules could, Alito suggested, have “widespread implications with regard to other disclosures required by federal and state law.” The discussion to this point has assumed that that’s right. But maybe it’s not. SB 7072 might present a special case. Consider again the possibility that its transparency rules aren’t just any transparency rules. Are those rules about uncovering the true cost, as it were, of the platforms’ service? Or are they about exposing to the world, for scrutiny, challenge, and debate, how the platforms exercise their editorial judgment? If they’re an effort, by the government, to swim back upstream and question platforms’ content moderation decisions, they’re not really “transparency” rules at all; they’re a speech regulation in disguise.

DeSantis, other Florida politicians, and even Florida’s lawyers have openly stated that SB 7072’s transparency rules take aim at platforms’ editorial practices. But even without such admissions, it is easy to see how such rules might improperly entangle the state in matters of free expression. A state that demands “detailed” content moderation standards, along with “thorough” explanations for content moderation decisions, will need to know whether those standards and explanations are complete and accurate. This will require auditing discrete content moderation decisions. But a defining trait of editorial decisions generally, and content moderation decisions specifically, is the elusiveness of objective metrics. (The disclosed standard claims to bar “excessive violence”; are these removed posts “excessively violent”?) So the state will find itself second-guessing a platform’s subjective value judgments—or, if you will, its expressive judgments. There is potentially a big difference, in short, between disclosure transparency (government: “here, put this label on your billboard”) and editorial transparency (government: “how do you decide what to say? tell us all about it”).

As SB 7072 heads toward the Supreme Court, the law’s content moderation rules will be front and center. That makes sense, because those rules strike at the heart of platforms’ right to editorial control over their services. Indeed, the Fifth Circuit has raised the stakes by denying that platforms have such a right to begin with. But don’t forget about the transparency rules. They, too, could prompt a major ruling on free speech and the internet. And they could spur the Court to redefine the all-important Zauderer test to boot.