Corporate speech & the First Amendment: history, data, and implications.

• Author: Coates, John C., IV
• Position: Introduction into II. Empirical Evidence on the Corporate Takeover of the First Amendment, p. 223-249 - Symposium: Money, Politics, Corporations and the Constitution

This Article draws on empirical analysis of court decisions, history, and economic theory (a) to show that corporations have begun to displace individuals as the direct beneficiaries of the First Amendment, a shift from individual to business First Amendment cases is recent but accelerating, and (b) to outline an argument that such cases typically reflect a form of socially wasteful rent seeking--not only bad law and bad politics, but also increasingly bad for business and society. Basic facts about corporations in history are reviewed, regulation of commercial speech in U.S. history is summarized, and the emergence of the First Amendment in case law is retold, with an emphasis on the role of constitutional entrepreneur Justice Lewis Powell prompting the Supreme Court to invent corporate speech rights. The chronology shows that First Amendment doctrine long postdated pervasive regulation of commercial speech, which long predated the rise of the U.S. as the world's leading economic power--a chronology with implications for originalists, and for policy analysis of the value of commercial speech rights. The Article then analyzes Supreme Court and Courts of Appeals decisions to quantify what others (1) have noted qualitatively: corporations have increasingly displaced individuals as direct beneficiaries of First Amendment rights, they have done so recently, but with growing speed since Virginia Pharmacy (1976), (2) Bellotti (1978), (3) and Central Hudson (1980). (4) Nearly half of First Amendment legal challenges now benefit business corporations and trade groups, rather than other kinds of organizations or individuals. Such cases represent examples of a particular kind of corruption, defined here as a form of rent seeking: the use of legal tools by business managers in specific cases to entrench reregulation in their personal interests at the expense of shareholders, consumers, and employees, and in aggregate to degrade the rule of law by rendering law less predictable, general and clear. This corruption not only risks the loss of a republican form of government emphasized by most critics of Citizens United, but also risks economic harms--a package of risks one could call (with some but only some exaggeration) "the risk of Russia."

1. SOME HISTORY

   In this Part, I review basic historical facts at the intersection of constitutional, business, and corporate law. Nothing in this section is news--except that business and corporate scholars may not be aware of the details of the constitutional history, and constitutional scholars may not be aware of the details of the business and corporate legal history. This Part of the Article thus represents an effort at improving dialogue across the sub-disciplinary divide between corporate, business and constitutional scholars. Knowledge about each sub-discipline is increasingly necessary to understand the background for, and context and implications of, recent, controversial decisions such as Citizens United (5) and Hobby Lobby. (6)

   The key points of the three sections are (a) from the inception of the U.S., corporations were crucial to economic growth and were not merely constituted but heavily regulated by law, prominently through structural laws constraining their activities, (b) commercial speech has been regulated throughout U.S. legal history, both at common law and over time through statutes and regulations that largely reflect the purposes of the common law, and (c) the First Amendment has only recently been used by courts to strike down laws, and even more recently to strike down laws constraining commercial speech. In combination, these points should (1) lead committed originalists to reject First Amendment rights for corporate speech, (2) make courts (whatever their interpretive approach) reluctant to find such rights unless tightly linked to rights of specific individuals that cannot otherwise be protected and whose expressive (not financial) interests are represented by a legal entity, and (3) reduce the policy appeal of such rights, because they were not necessary to create the massive economic growth that turned a marginal set of colonies into the world's leading economic power by 1900.

   1. A CAPSULE HISTORY OF THE ROLE OF CORPORATIONS IN BUSINESS HISTORY

      I begin by reviewing the role of corporations in U.S. business history. This review is broad in scope and summary in form, meant to put in context more focused (but useful) historical accounts by others, such as (for example) research on the question of how the "Founding Fathers" might have thought about whether business corporations should have First Amendment rights distinct from those held by the individuals acting through or on behalf of the corporations, or how the authors of the Fourteenth Amendment might have thought about the problem given the historical events of the second half of the nineteenth century. (7) The main take-away is that businesses have long and pervasively been creatures of law and regulation, both in the United Kingdom leading up to the founding era, and in the U.S. corporations--in their creation, governance and activities--have from the outset of modern history been structured and regulated by law. This enmeshment of businesses in law was so intrusive and intense that--had it carried over to individuals--it would have been viewed as intolerable. Yet it was not merely tolerated, but taken for granted, even celebrated, for more than two centuries of Anglo-American history.

      As recounted in detail by Mary Bilder, among others, corporations from their inception in English (and hence, American) history were extensions of government--a "particular type of delegated jurisdiction within the 'King's exclusive prerogative.'" (8) Typically, the sovereign granted what would then have been understood as royal franchises, powers or property to a subset of citizens, and the "corporation" of those citizens held authority from the sovereign over the domain specified in the corporate charter or equivalent documents. In English law, the term "corporate" used in a modern sense to refer to a legal entity can be traced to 1410, (9) and commentary on corporations' legal powers dates to the late-sixteenth and early-seventeenth centuries, a time when incorporations were increasing. (10)

      Among these early corporations (11) were the overseas trading companies, such as the East India Company. (12) These trading companies functioned as recognizably (early) modern for-profit business enterprises--with dispersed private ownership, internal and external struggles for corporate and market control, and even hostile takeovers and mergers. (13) However, they also functioned as extensions of the military and political power of the English government, comprising part of the emerging English naval power and extending English control to India, the East Indies and North America. England's trading companies "did not pursue 'peaceful trading' because they believed that neither Portuguese [the rivals of the English] nor Asian rulers would allow them to do so without arms," such that the "use of force remained an integral part of the commercial presence in Asia" of business corporations throughout the early modern period. (14)

      The East India Company also played an important role in public finance, lending money to the Stuarts (with James II becoming a shareholder), before managing to survive the Glorious Revolution to compete with the newly formed Bank of England and the ill-fated South Sea Company in providing fiscal support to the new Orange monarchy, recruited from the Netherlands to provide England's new line of (if you will) chief executive officers. (15) Nascent political parties formed on the shareholder bases of rival trading firms, and law, politics and business were intertwined in numerous detailed ways. (16) Over time, the Bank of England came to play the dominant role in British public finance, and was structurally barred from engaging in non-financial activities, such as trade, or, as the industrial revolution progressed, manufacturing.

      Throughout this period, charters were granted for temporary durations, insuring the ability of the sovereign to renegotiate their terms and impose new conditions (and extract money) as the terms approached. The Bubble Act of 1720 statutorily monopolized the creation of liquid business companies, by forbidding the sale of stock without a charter. Joint stock companies played a significant role in manufacturing as early as the mid-eighteenth century, as public stock markets began to build on the basis of what were effectively sovereign bond markets used by the English to facilitate the finance of their wars with France, undergirded by what John Brewer famously called its "sinews of power"--the successful British switch from privately managed tax farming (essentially a form of highly inefficient privatized tax collection) to much more effective and efficient publicly administered consumption taxes (equivalent to modern state and local sales taxes). (17) That the American Revolution was fueled by resentment over taxes levied on and through "corporate" colonies, (18) that the Declaration of Independence includes as one of King George's acts of tyranny the fact of mercantilist trade regulation, much of it designed to protect the English trading companies, (19) and...