Promotional fees challenged in court Lobster, berry markets could be affected

AUGUSTA – What do blueberries, potatoes and lobster have to do with beef, pork and mushrooms?

All have promotional groups supported by a mandatory tax on producers, and those fees are being challenged in a case headed for a decision by the U.S. Supreme Court.

Like many other states, Maine over the years has established boards and commissions to promote products that help drive the state’s economy.

All of the groups devote at least some of their revenue, derived from state-mandated taxes and fees, to promote a product.

Last week, the U.S. Supreme Court accepted a case involving a challenge to a beef promotion program funded by a mandatory $1 a head fee on cattle. The more than $80 million a year it generates goes to various beef councils and to the Cattlemen’s Beef Promotion and Research Board.

“We have to be concerned,” said state Agriculture Commissioner Robert Spear. “We don’t have any money to promote Maine products. It’s all done by the boards and commissions.”

The beef groups developed an advertising campaign based on the theme, “Beef: It’s What’s for Dinner.” Some ranchers sued in federal court, arguing that their First Amendment rights under the Constitution were violated by being forced to pay for an advertising campaign they disagreed with.

They won in U.S. District Court, and that decision was upheld by the 8th U.S. Circuit Court of Appeals in St. Louis.

It is the latest in a series of cases that have seen the Supreme Court vacillate on how to interpret the First Amendment when applied to advertising funded by a mandatory government-imposed tax.

For example, in 2001 the Supreme Court ruled that a program to support mushroom sales was unconstitutional. But in 1997, a similar case from California saw the justices uphold a tax on fruit and nut producers used to fund an advertising campaign in support of those products.

“We are carefully watching this case,” said Mark Randlett, an assistant attorney general in Maine. “It could have a major impact in Maine or the court may decide the case on narrow grounds. But we have to be concerned.”

Randlett is not alone. Millions of dollars change hands in Maine for use by promotion councils.

The Wild Blueberry Commission receives about $1 million a year from a tax on blueberries, said David Bell, executive director of the commission. About two-thirds of that $1 million goes toward promotional efforts. Bell believes recent increased sales of wild blueberries have been a result of efforts to promote blueberries for their health value.

“We got the research on the antioxidant value of blueberries, but it was promotion efforts that made consumers aware of that benefit,” Bell said. “That was a major promotional effort.

“Like everyone else, we are watching what the court does,” Bell said. “If the ruling is we can’t use the tax money for promotion, we have a big problem.”

For decades, milk producers in Maine have paid a mandatory tax on milk to fund the Maine Dairy Promotion Board and the Maine Dairy and Nutrition Council and their predecessor organizations. Dairy Board Executive Director Cheryl Baylor said the first such tax was imposed in 1949.

“We think a good argument can be made that promotional efforts like ours are not a problem,” she said. “But that does not mean we are not worried.”

Baylor said most of the approximately $800,000 a year generated by the milk tax is used for promotional efforts.

But Donald Flannery, executive director of the Maine Potato Board, is concerned the $700,000 a year his agency gets from the tax on potato growers could be jeopardized – even though only about $150,000 a year is used for advertising and promotion.

“We would have to figure out a way to pay for the promotion without the tax money,” he said. “We do mostly research and help farmers with problems and that is what most of the tax is used for.”

He has good reason to be concerned.

The judges in the St. Louis appeals court decision rejected an argument that would have allowed a portion of the beef tax to be collected because it was used for education and research, not advertising.

It is not just agricultural groups that could be affected.

Kristen Millar, executive director of the Maine Lobster Promotion Council, said the agency has a budget of about $430,000 a year and spends about 70 percent on promotion. She said elimination of the promotion funds would be “devastating” to the industry.

Commissioner Spear hopes the high court allows the taxes and fees to continue to be collected for advertising programs. But, he said, the programs have been so valuable in Maine that he believes most farmers and growers would support a voluntary fee to support the efforts.

“I really think they have shown how important they are to agriculture,” Spear said.” I really think you would see most voluntarily going with a fee.”