Fruit Growers Sour on Ads, Go to Court

Dan Gerawan grows tons of peaches, plums and nectarines on his family’s orchards here, and he insists they are California’s finest.

His Prima brand fruit is riper because the trees are picked more often, he explains. To avoid bruising, the sweet fruit is boxed at the orchards rather than trucked from the fields. And it is stored at colder-than-typical temperatures to keep it fresher.

And that, Gerawan says, is why he despises paying more than $600,000 a year to a government-mandated fund to advertise and promote generic California tree fruit.

“We’re doing everything we can to differentiate ourselves,” gripes Gerawan, 34, a third-generation Central Valley farmer. “Yet we have to pay into a fund that advertises that all peaches and plums are the same. A generic message, we feel, definitely hurts us.”

Gerawan has gone to the federal courts to challenge the system for marketing his fruit, not as a restraint of trade but as a violation of his 1st Amendment right to free speech. It is an argument that the U.S. Court of Appeals with jurisdiction over California has endorsed, and the case will come before the Supreme Court on Monday.

If the Supreme Court agrees, Gerawan’s case could reshape the marketing of farm products nationwide, and nowhere more so than in California.

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Alone among American industries, agriculture promotes many of its products through government-controlled advertising campaigns. Some recite simple slogans such as “It’s the Cheese,” “Got Milk?” and “Beef: It’s What’s for Dinner.” Some rely on cute jingles such as “Heard It Through the Grapevine” by the California Dancing Raisins.

The California Tree Fruit Agreement, the federally sponsored board that Gerawan is obliged to fund, has sponsored broadcast ads that say “California nectarines are the juiciest” and newspaper ads advising “how to make a peach pie with California peaches.” It also sponsors in-store ads encouraging consumers to ripen fruit in paper bags.

It is one of 34 marketing campaigns controlled by the U.S. Department of Agriculture. Together, they collect more than $750 million a year from growers and shippers.

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Among the states, California has the most extensive effort of its own. Some 47 state-authorized marketing commissions promote commodities ranging from apples and apricots to walnuts and wheat. They collect an additional $137 million a year from growers.

These programs grew out of the Depression-era collapse of the farm economy and the New Deal laws that followed. In hopes of stabilizing farm prices, Congress in 1937 gave the USDA broad powers to regulate agriculture, including marketing.

For example, the government can set quality-control standards to ensure that small or squishy plums are not shipped to market. In the 1960s, Congress went further and authorized the USDA to set up paid advertising campaigns for selected commodities.

These marketing campaigns are not foisted upon dairy farmers or grape growers. They are created by majority vote of the producers themselves. However, once approved, the commissions or commodity boards set mandatory assessments that must be paid by all.

A purely voluntary system would be unfair and unworkable, state officials say, because some growers would make themselves “free riders.”

“If you don’t have a mandatory assessment, you will have people who get the benefit without bearing any of the burden,” said Ann M. Veneman, secretary of the California Department of Food and Agriculture.

In California, 38% of the assessments pay for advertising and 10% goes for trade promotion, according to the Agricultural Issues Forum. The rest is spent for research, quality control, export promotion and consumer education, the group says.

Federal and state officials say the collective approach has proved effective in expanding demand for farm products.

“This increases the size of the pie. It creates more for everyone,” said the USDA’s administrator for agricultural marketing, Lon Hatamiya, who hails from an almond-growing family in Marysville. “A single grower can’t advertise and say, ‘Buy nectarines.’ ”

Many farmers agree. “Marketing orders allow us to promote our products all over the world,” said John Tos, owner of Tos Farms in Hanford, which grows peaches, nectarines and other produce. “I have good friends who are [tree fruit] growers in Georgia and South Carolina who envy California growers for their marketing orders.”

Those two Southern states were once the leaders in peach production, but California has topped them both, Tos says, thanks in part to the state’s marketing campaign.

But the promotional efforts have come under sharp legal attack recently from dissident growers who say the collectivist approach is more suited to the old Soviet Union than to the United States.

“I want the same freedom as any other American to advertise my product as I see fit,” Gerawan said.

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When he and his lawyers mention “the Politburo,” they are referring to the California Tree Fruit Agreement, the Reedley-based federal commission that collects assessments from the growers of peaches and nectarines. The same office also oversees a state marketing program for plums.

“No other industry in the United States is required to pay for generic advertising,” said Brian Leighton, a Clovis attorney who represented Gerawan and other growers in challenging the orders. “Can you imagine Ford, Chrysler and GM being told they have to advertise generic American cars? Or Bill Gates being told he must fund a generic advertising program for computers? He wouldn’t stand for it.”

Growers such as Gerawan and Wileman Brothers & Elliot, another Central Valley producer of nectarines and plums, say they will not stand for it any longer. And they are likely to get a favorable hearing in the Supreme Court.

In the past, the justices drew a clear distinction between government regulations affecting business and those affecting individual rights, such as freedom of speech. Business regulations were nearly always upheld, while regulations affecting personal liberties were often struck down.

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In recent years, however, that distinction has been abandoned, and the court has been increasingly willing to strike down business regulations that infringe free speech.

Last year, for example, the court struck down as a free-speech violation a 1935 federal law that barred brewers from advertising the alcohol content of their beer. The court in June struck down state laws barring retailers from advertising the prices of beer and liquor.

During an oral argument in October, the justices strongly hinted that they will strike down a recent law requiring cable TV operators to carry the signals of local broadcasters. This too is being challenged as a violation of the free-speech rights of cable companies.

Noting those precedents, the U.S. 9th Circuit Court of Appeals in San Francisco last year struck down the forced generic advertising program for peach and plum growers.

“The 1st Amendment right to freedom of speech includes a right not to be compelled to render financial support for others’ speech,” wrote Judge Diarmuid O’Scannlain. Growers who oppose the government-mandated advertising are entitled to a refund of that part of their assessments, he said.

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Clinton administration lawyers appealed, saying the 9th Circuit’s ruling threatens to unravel all of the federal and state promotional campaigns.

The high court will hear oral arguments Monday in the case now known as Glickman vs. Wileman Bros., 95-1879.

In his brief on behalf of the USDA, Solicitor General Walter Dellinger argued that “generic advertising involves purely commercial speech” and therefore should be seen more as a business matter than a free-speech issue.

The evidence collected in the case shows that “collective-funded generic advertising” has succeeded in “expanding the total market for these fruits,” he added.

The dissident growers, not surprisingly, disagree. They suggest that many of the advertising programs have been expensive flops. The California Dancing Raisins, for example, won awards as an advertising pitch but did not increase raisin sales, Leighton says.

“They sold lots of T-shirts, coffee mugs and toys, but they didn’t sell more raisins. That’s why they terminated it,” Leighton said. Raisin growers were being charged $32 per ton to pay for the advertising and they concluded it was ineffective, he says.

Growers who belong to voluntary cooperatives have a different gripe. For example, the 1,200 raisin growers who belong to Sun-Maid complain that they have to pay twice, once for the cooperative’s ad campaigns and a second time for federally mandated campaigns.

The cooperatives that promote Sunkist oranges or Ocean Spray cranberries show that government-mandated promotions are not needed, they argue in a brief to the court.

“If you can form a voluntary cooperative to advertise,” asked Los Angeles lawyer Vincent Waldman, who represents Sun-Maid, “why should the government set up a mandatory program and require all the growers to chip in?”

Savage reported from Washington and Groves from the Central Valley.