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Federal appeals court stomps on mandatory grape ads

By The Associated Press


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FRESNO, Calif. — A mandatory advertising campaign for California's table grape industry violates the First Amendment guarantee of free speech, the 9th U.S. Circuit Court of Appeals ruled yesterday.

The ruling was a victory for Delano Farms, the Susan Neill Fresh Fruit and Lucas Brothers companies in Visalia, Calif., which sell grapes under brand names.

The companies argued the California Table Grape Commission violated their right to free speech because it required fees for generic advertising.

The companies sell their fruit under the brand names of Delano Farms, Silver King and Grape Royale, with Neill and the Lucas Brothers selling their fruit at higher prices to stores that would pay for them as opposed to selling them to chain grocery stores, according to court documents.

"This is a huge victory that will lead producers and handlers to have the right — absent government intervention — to decide how to market their own fruit and their own agriculture products," said Brian C. Leighton, the groups' attorney.

Officials with the California Table Grape Commission in Fresno say they plan to file an appeal to yesterday's ruling.

"We will take action to give the courts an opportunity to look again at the facts and make a decision based on an accurate understanding of the facts — that's what missing here," said Kathleen Nave, grape commission president.

Nave said the appeals court in San Francisco incorrectly made its decision by stating the commission did not have antitrust exemption status. The justices also misunderstood grape industry labels, mistaking them for consumer brands.

In 1996, the opposing groups stopped paying annual fees of 11.5 cents per 19 pound box of grapes to the commission. The fees are used for adverting and research and are paid by all table grape growers in California. The opposing groups' fees are now held in escrow while the case is in litigation.

Gerawan Farming Inc. in Sanger also contested the fees. The case was put on hold, pending the outcome of the Delano Farm decision, Leighton said.

In 1997, a U.S. District Court judge in Fresno ruled the grape commission's program did not violate free-speech rights, based on a U.S. Supreme Court decision that same year that upheld mandatory advertising and promotion assessments by the California Tree Fruit Agreement. The high court said in Glickman v. Wileman Bros. & Elliott, Inc. that joint advertisements are constitutional in heavily regulated industries such as California fruit production.

However, the Supreme Court ruled in 2001 that a similar mandatory advertising campaign for the mushroom industry violated free speech. Justices said in U.S. v. United Foods that the mushroom case was different, because the mushroom market was less regulated and mushroom producers do not cooperate the way the tree fruit producers do.

United Foods Inc. argued a mandatory mushroom promotional campaign forced the company to pay for ads that benefited its competitors.

The 9th Circuit said the Table Grape Commission challenge was similar to the mushroom case.

"The business practices by the instant growers are governed by a statute similar to the one at issue in United Foods," Justice Andrew Kleinfeld wrote in the decision, "so they are entitled to First Amendment protection against state compulsion to fund generic advertising."

The case is Delano Farms v. Table Grape, 00-16778.


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