January 30, 2017REGULATING 'FRAUD NEWS'By Ari Melber Melber is the chief legal correspondent at MSNBC. He served on a panel discussion, “Election Politics and More,” presented by the New Jersey Institute for Continuing Legal Education last fall. Barack Obama hates it. So does Donald Trump. The rise of ‘fake news’ has drawn widespread condemnation, though the meaning of the label itself is now a matter of political dispute. Obama has criticized fake news based on its original definition—patently false disinformation masquerading as journalism. A few weeks after the November election, he lamented the impact of "active misinformation" that is "packaged" to deceive, so it "looks the same when you see it on a Facebook page" as a legitimate article. A false item claiming the Pope endorsed Trump, for example, was one of the top election ‘stories’ on Facebook, according to a Buzzfeed analysis. That means millions of Americans wrongly thought they were reading and sharing something that happened (it didn't) from a news source (it wasn't). In his first press conference as president-elect, however, Donald Trump dramatically reappropriated the term. Trump said he would not call on CNN because it reported "fake news." There are virtually no journalism experts who agree with that use of the label. Fake news is an intentional effort to spread false information in the guise of a factual news product. It does not refer to news one merely dislikes, or to false information erroneously published by a legitimate news outlet. (From newspapers to scientific journals, factual institutions do make mistakes. Even in error, their commitment to correction separates them from propagandists.) To use a legal framework, fake news is essentially a scheme to trick the consumer—a fraud. Perhaps ‘fraud news’ is the better label. If this is a fraud, can it be regulated as one? Is there a role for the government in regulating and preventing fraud news, while respecting the robust speech protections in the Constitution? A Blurry Debate The government has an obvious interest in regulating fraudulent content. Frauds and disinformation offer virtually no benefit to society. Instead, they present one-sided risks: The perpetrator benefits by deceiving a victim, who loses money, time or something even more valuable. Buying a fraudulent smoke detector, for example, presents risks far graver than the cost of the item. As a matter of policy, there are few serious defenders of fraud. It is a violation of the social contract, an impediment to commerce and, quite obviously, an attack on any pursuit of truth. The Supreme Court has found "falsehoods have little value in and of themselves." Even the creators of fake news admit it is pernicious. Paul Horner, who led an influential "Facebook fake news empire," told the Washington Post he feels "bad" his work helped Donald Trump, and finds the public embrace of fake news "scary." Meanwhile, the traditional legal remedies for conventional journalistic harm—like individually suing an outlet for libel—are futile against hundreds of fraud news sites, bloggers and trolls. If the U.S. government spends time pursuing counterfeit purses and identity fraud, surely it has an interest in combating fraud news, which can influence elections and impact public safety. The consensus that fraud news is a problem, however, only provides the first legal step for government action—a legitimate rational. The second step is to ensure any government remedy is constitutional, which means leaving ample room for speech protected by the First Amendment. It turns out that is legally difficult, because of the very nature of fraud news. A Right to Lie The Supreme Court has upheld laws banning conventional fraud, and upheld laws that provide penalties for words used to carry out fraudulent acts. But things get trickier when politics are involved. The Court affords special protection to speech about politics, including some false speech - the Court has ruled the First Amendment sometimes protects a right to lie. In 2012, the Court held that a politician had a constitutional right to lie about receiving a Medal of Honor (U.S. v. Alvarez). The Court struck down a federal law, the Stolen Valor Act, which provided up to a year in prison as punishment for lying about a Medal of Honor. The U.S. government defended the law as a way to combat false claims in an area where the government has a strong interest—administering accurate military records and honoring veterans' service. The Court reasoned, however, that even deliberately false claims are an unavoidable part of open discussions in a free society. "Some false statements are inevitable if there is to be an open and vigorous expression of views in public and private conversation," wrote Justice Anthony Kennedy, noting it's the kind of "expression the First Amendment seeks to guarantee." The opinion concedes the Constitution allows punishment of false statements in many contexts, from fraud to libel to perjury. In every such instance, though, the Court emphasizes that the government is punishing something more than a lie itself. There is: 1) a lie, and 2) the lie directly causes damage (or, as the Court explained, "legally cognizable harm associated with a false statement"). Other cases show the context for that damage is critical. Take one of the more absurd free speech cases ever to reach the Supreme Court, Hustler Magazine v. Falwell. Hustler, a pornographic magazine, spoofed a popular liquor ad by showing Jerry Falwell, the conservative minister, discussing his "first time." As Chief Justice William Rehnquist memorably wrote, the ad featured Falwell recounting a "drunken incestuous rendezvous with his mother in an outhouse." At the bottom of the page, a disclaimer stated "ad parody—not to be taken seriously." A jury rejected Falwell's libel suit, finding the parody did not attempt to present real facts, but awarded him damages for "emotional distress" caused by the ad. The Supreme Court overturned the damages, finding the First Amendment protected "breathing space" for speech like Hustler's parody. To win, the Court explained, Falwell would need to prove the material was essentially published to deceive—presented as true, with reckless disregard to whether it was true. (The reckless disregard standard is from the landmark libel case New York Times v. Sullivan.) The Court didn't write a blank check for every parody imaginable, but it drew a line protecting even outrageous satire—which Falwell viewed as false and libelous—so long as it wasn't offered as a claim of truth. That's an important distinction, given the deceit at the core of fraud news. Remedies Any new constitutional regulation of fraud news must work within the Supreme Court's precedents, which offer political speech a lot of ‘room,’ and err on the side of allowing even objectionable falsehoods by individual citizens. There are many precedents, however, upholding routine punishments for false speech in specific circumstances, such as fraud and deceitful content in commercial speech. The Court has ruled that some commercial speech, like advertising or communication concerned solely with business, gets less First Amendment protection than political speech. This area of the law is in flux; the general rationale has been that words used on behalf of a business are less important than words used on behalf of actual people to express ideas or participate in democracy. The distinction could prove pivotal for one comprehensive way to regulate fraud news. Here is one way for the federal government to address the issue: Subject the fraud news industry to the same regulatory oversight that other false commercial speech faces—supervision by the Federal Trade Commission (FTC). Regulatory enforcement actions don't spark many headlines, but the FTC has actually spent years combating fake news schemes. It tracks, regulates, sues and even shuts down fake news sites peddling frauds, deceptive advertising and other misleading material. In 2013, for example, the FTC announced it reached a legal agreement to shut down an operation that was "deceptively using fake news websites to market acai berry supplements and other weight-loss products." The FTC has also won court battles with companies using fake news to sell deceptive products. In December, the Second Circuit upheld a monetary ruling for the FTC against a fleet of fake news websites pushing misinformation to push weight loss products (Federal Trade Commission v. LeadClick Media). The fake sites "had logos styled to look like news sites, and they included pictures of supposed reporters next to their articles," attorney Shari Claire Lewis explains in the New York Law Journal. Fradulent journalism was crucial to the scheme, because the (supposed) journalists cited their (false) reporting to vouch for the products. Since its founding in 1914, the FTC has used civil enforcement to protect consumers from unfair business practices, including patrolling "deceptive acts or practices" under a 1938 law. The FTC could develop a framework for pursuing fraud news about political propaganda, or work with Congress to define a framework consistent with the First Amendment. The FTC's recent actions against fraud news proprietors typically targeted a two-step practice: They posted misinformation about a product, then sold the product. In fraud news, however, the political misinformation is the product. And, it's free. We live in a world where most news consumers never purchase their news directly. They consume it online in exchange for viewing ads, or in exchange for providing their personal information (instead of money). An FTC framework for fraud news would treat these readers as ‘consumers,’ and target the websites for deceptive acts against them. To follow First Amendment precedents, the framework could limit the FTC to only regulating posted articles—not seeking prior restraints against future articles—and to only regulate businesses devoted to fraud news. Legally, a focus on deceptive businesses keeps the FTC in the ballpark of commercial speech, patrolling deceptive practices taken in pursuit of commerce. During the election, the most popular fraud news sites were launched by business people, often abroad, enticed by the market online for political news. They were trying to make money, not express any particular view. “I started the site for a easy way to make money,” a 17-year-old fraud news proprietor in Macedonia told BuzzFeed last year. Some tried posting liberal fraud news stories as well, but found "news about Trump" got more clicks, as the 16-year-old behind BVANews.com explained to BuzzFeed. Since these sites are clearly operating as businesses, it is logical to regulate their commerce and deceptive practices like any other business. A focus on deceptive businesses would also keep the government away from meddling with actual journalists or citizens exercising their right to lie while engaged in politics. There is no ‘ministry of information’ in American government, and the Constitution forbids government efforts to stifle the free press. Fake news may remain a slur against legitimate news organizations, but an FTC framework patrolling businesses devoted to fraudulent and deceptive practices would not ensnare any real news organizations. (Indeed, there is nothing new about government agencies respecting the role of reporters while enforcing laws or rules; the Justice Department has detailed policies for its interactions with the press during criminal inquiries.) As for citizens engaged in politics, the case law is clear. An individual citizen has a right to lie about many things, absent hurting or libeling another person, and there is a wide berth for political hyperbole. The FTC regulates trade, not speech, and patrolling fraud news would not give it any new authority to tackle statements made by individuals about politics. A quick parallel to the FTC's enforcement actions is instructive. The FTC could legally fine, and even shutter, websites peddling the acai berry treatments, since they used deceptive commercial speech. But it could not take any legal action against a person for simply lying about acai berry treatments, absent some deceptive commercial action. That distinction is why even robust FTC regulation of fraud news would not (and could not) aim to ‘end’ all fraud news, let alone address any protected false speech in society. Absent the existence of libel, Supreme Court precedents suggest the First Amendment protects a citizen expressing lies or his or her version of fake news. Political operatives have strong case law to defend deceptive assertions as protected speech, especially if they show the lies are part of some wider expression, be it political, satirical or artistic. If those kind of lies are ‘effective’ in politics, citizens may use them more frequently, regardless of whether the FTC prevents similar falsehoods in commerce. Even that scenario, however, would be an improvement over the current stalemate. It would be a world where the assertions in our society were a product of the people in society, allowing arguments about what people believe and why. Surely that is better than the current situation. We now live in a society where fraudulent businesses live off our democracy as parasites, exploiting the demand for news by serving its opposite—disinformation that undermines trust and, perhaps, our ability to convene a factual debate on public issues. This is a status report provided by the New Jersey State Bar Association on recently passed and pending legislation, regulations, gubernatorial nominations and/or appointments of interest to lawyers, as well as the involvement of the NJSBA as amicus in appellate court matters.