How a handful of liquor stores used the First Amendment to invalidate blanket state restrictions on advertising alcoholic beverage pricing in print and media.

As part of our ongoing series regarding the First Amendment and alcoholic beverage advertising (labelling, marketing, etc.), last week we brought you Rubin v. Coors Brewing Co., the case that ruled the Federal Alcohol Administration Act’s ban on alcohol content labeling in beer was unconstitutional under the FIrst Amendment. Kicking off this week, we wanted to start with the other seminal liquor advertising case from the 90s that basically helped establish that the 21st Amendment doesn’t grant any special protections to State or Federal statutes banning alcohol advertising because they relate to “vice” or “sin” products.

This case is 44 Liquormart Inc. v. Rhode Island (1995) (link to Oyez.org for Oral Argument and opinion).

Here’s what happened: Rhode Island had two different statutes banning the advertisement of retail liquor prices outside liquor stores. One statute banned retailers license in Rhode Island as well as out-of-state manufacturers, wholesalers, and shippers, from “advertising in any manner whatsoever the price of any alcoholic beverage offered for sale in the state” (the only exception was for advertising inside stores which was not visible from the street). The other statute applied to the news media in Rhode Island and prohibited them from publishing or broadcasting any advertisements – even those referring to sales another state – that make reference to the price of any alcoholic beverages. In prior decisions, the State Supreme Court of Rhode Island had upheld these statutes finding in two decisions that the 21st Amendment gave the statute an “added presumption of validity” and that it was reasonable for the State to believe that price advertising would result in increased sales of alcoholic beverages, generally.

Two licensed retailers, 44 Liquormart, Inc., and Peoples Super Liquor Stores, Inc., brought suit against Rhode Island challenging enforcement of the statutes claiming they violated the businesses First Amendment Rights (44 LIquormart had run an advertisement highlighting its low prices and been fined $400 by the Rhode Island Liquor Control Administration.

The District Court found, after hearing expert testimony on the matter, that the advertising ban had no significant impact on the levels of alcohol consumption in Rhode Island and concluded as a matter of law that the ban was unconstitutional because it because it did not directly advance the State’s interest in reducing alcohol consumption and was more extensive than necessary to serve that interest. The Court found that the burden was on the State to establish the propriety of a speech restriction regardless of its subject matter and that such a burden wasn’t affected by the 21st Amendment. The Court of Appeals reversed finding inherent merit in the State’s argument that competitive price advertising would lower prices and that lower prices would increase sales. And also found that the 21st Amendment gave the statutes and added presumption of validity.

In a plurality opinion with as much divergence as convergence, the United States Supreme Court reversed the Court of Appeals finding it appropriate to invalidate the statute and holding that the First Amendment’s protection of commercial speech was no lessened or abrogated by the Twent-first Amendment.

Some notable points from the opinion:

Stating a general observation that drives an understanding of commercial speech’s place in First Amendment Jurisprudence, the Court noted:

“Advertising, however tasteless and excessive it sometimes may seem, is nonetheless dissemination of information as to who is producing and selling what product, for what reason, and at what price. So long as we preserve a predominantly free enterprise economy, the allocation of our resources in large measure will be made through numerous private economic decisions. It is a matter of public interest that those decisions, in the aggregate, be intelligent and well informed. To this end, the free flow of commercial information is indispensable.”

Noting that blanket bans generally amounted to thoughtless legislating, the Court espoused:

“When a State regulates commercial messages to protect consumers from misleading, deceptive, or aggressive sales practices, or requires the disclosure of beneficial consumer information, the purpose of its regulation is consistent with the reasons for according constitutional protection to commercial speech and therefore justifies less than strict review. However, when a State entirely prohibits the dissemination of truthful, nonmisleading commercial messages for reasons unrelated to the preservation of a fair bargaining process, there is far less reason to depart from the rigorous review that the First Amendment generally demands.”

Explaining the relation between commercial speech and other forms of free expression:

The special dangers that attend complete bans on truthful, nonmisleading commercial speech cannot be explained away by appeals to the “commonsense distinctions” that exist between commercial and noncommercial speech. Virginia Bd. of Pharmacy, 425 U.S., at 771, Regulations that suppress the truth are no less troubling because they target objectively verifiable information, nor are they less effective because they aim at durable messages. As a result, neither the “greater objectivity” nor the “greater hardiness” of truthful, nonmisleading commercial speech justifies reviewing its complete suppression with added deference. Ibid.

Detailing why, sometimes, States have a greater leeway in regulating commercial speech:

It is the State’s interest in protecting consumers from “commercial harms” that provides “the typical reason why commercial speech can be subject to greater governmental regulation than noncommercial speech.” Cincinnati v. Discovery Network, Inc., 507 U.S. 410, . Yet bans that target truthful, nonmisleading commercial messages rarely protect consumers from such harms. Instead, such bans often serve only to obscure an “underlying governmental policy” that could be implemented without regulating speech. Central Hudson, 447 U.S., at 566. In this way, these commercial speech bans not only hinder consumer choice, but also impede debate over central issues of public policy.

Offering a word of caution about blanket bans:

The First Amendment directs us to be especially skeptical of regulations that seek to keep people in the dark for what the government perceives to be their own good. That teaching applies equally to state attempts to deprive consumers of accurate information about their chosen products:

“The commercial marketplace, like other spheres of our social and cultural life, provides a forum where ideas and information flourish. Some of the ideas and information are vital, some of slight worth. But the general rule is that the speaker and the audience, not the government, assess the value of the information presented. Thus, even a communication that does no more than propose a commercial transaction is entitled to the coverage of the First Amendment.

Getting to the heart of assessing Rhode Island’s arguments about temperance:

The State argues that the price advertising prohibition should nevertheless be upheld because it directly advances the State’s substantial interest in promoting temperance, and because it is no more extensive than necessary. … Although there is some confusion as to what Rhode Island means by temperance, we assume that the State asserts an interest in reducing alcohol consumption.

In evaluating the ban’s effectiveness in advancing the State’s interest, we note that a commercial speech regulation “may not be sustained if it provides only ineffective or remote support for the government’s purpose.” …  For that reason, the State bears the burden of showing not merely that its regulation will advance its interest, but also that it will do so “to a material degree.” … The need for the State to make such a showing is particularly great given the drastic nature of its chosen means—the wholesale suppression of truthful, nonmisleading information.

The State lacked empirical proof for its assertions that the advertising ban significantly reduces drinking:

Although the record suggests that the price advertising ban may have some impact on the purchasing patterns of temperate drinkers of modest means, …, the State has presented no evidence to suggest that its speech prohibition will significantly reduce marketwide consumption. Indeed, the District Court’s considered and uncontradicted finding on this point is directly to the contrary. … Moreover, the evidence suggests that the abusive drinker will probably not be deterred by a marginal price increase, and that the true alcoholic may simply reduce his purchases of other necessities.

In addition, as the District Court noted, the State has not identified what price level would lead to a significant reduction in alcohol consumption, nor has it identified the amount that it believes prices would decrease without the ban. Ibid. Thus, the State’s own showing reveals that any connection between the ban and a significant change in alcohol consumption would be purely fortuitous.

As is evident, any conclusion that elimination of the ban would significantly increase alcohol consumption would require us to engage in the sort of “speculation or conjecture” that is an unacceptable means of demonstrating that a restriction on commercial speech directly advances the State’s asserted interest. … Such speculation certainly does not suffice when the State takes aim at accurate commercial information for paternalistic ends.

The Court also found the ban on advertising alcohol price wasn’t narrowly tailored holding that at least four other methods would produce the results of reduced consumption that State was looking to achieve without limiting speech:

  • As the State’s own expert conceded, higher prices can be maintained either by direct regulation
  • or by increased taxation.
  • Per capita purchases could be limited as is the case with prescription drugs.
  • Even educational campaigns focused on the problems of excessive, or even moderate, drinking might prove to be more effective.

In summing up a rejection of Rhode Island’s arguments that the State’s power under the 21st Amendment to ban liquor sales meant it could also ban speech about liquor, the Court pronounced:

These basic First Amendment principles clearly apply to commercial speech; … Thus, it is no answer that commercial speech concerns products and services that the government may freely regulate. Our decisions from Virginia Bd. of Pharmacy have made plain that a State’s regulation of the sale of goods differs in kind from a State’s regulation of accurate information about those goods. The distinction that our cases have consistently drawn between these two types of governmental action is fundamentally incompatible with the absolutist view that the State may ban commercial speech simply because it may constitutionally prohibit the underlying conduct.

Thus, just as it is perfectly clear that Rhode Island could not ban all obscene liquor ads except those that advocated temperance, we think it equally clear that its power to ban the sale of liquor entirely does not include a power to censor all advertisements that contain accurate and nonmisleading information about the price of the product.

NOTE: If you’ll remember our review of Rubin v. Coors Brewing, you’ll remember the note we made that Justice Stevens had a particularly insightful critique of that decision and the Central Hudson test was improperly drawing a distinction about commercial speech that the Court should reconsider. Here, Justice Thomas advanced a compelling critique of this proclivity for treating commercial speech differently than other speech. Justice Thomas penned a concurrence in which holds a biting critique of State efforts to suppress true information:

I do not see a philosophical or historical basis for asserting that “commercial” speech is of “lower value” than “noncommercial” speech. Indeed, some historical materials suggest to the contrary. See, (Franklin’s Apology for Printers); … Nor do I believe that the only explanations that the Court has ever advanced for treating “commercial” speech differently from other speech can justify restricting “commercial” speech in order to keep information from legal purchasers so as to thwart what would otherwise be their choices in the marketplace.

… Although the Court took a sudden turn away from Virginia Bd. of Pharmacy in Central Hudson, it has never explained why manipulating the choices of consumers by keeping them ignorant is more legitimate when the ignorance is maintained through suppression of “commercial” speech than when the same ignorance is maintained through suppression of “noncommercial” speech. The courts, including this Court, have found the Central Hudson “test” to be, as a general matter, very difficult to apply with any uniformity. This may result in part from the inherently nondeterminative nature of a case-by-case balancing “test” unaccompanied by any categorical rules, and the consequent likelihood that individual judicial preferences will govern application of the test. Moreover, the second prong of Central Hudson, as applied to the facts of that case and to those here, apparently requires judges to delineate those situations in which citizens cannot be trusted with information, and invites judges to decide whether they themselves think that consumption of a product is harmful enough that it should be discouraged. In my view, the Central Hudson test asks the courts to weigh incommensurables—the value of knowledge versus the value of ignorance—and to apply contradictory premises—that informed adults are the best judges of their own interests, and that they are not. Rather than continuing to apply a test that makes no sense to me when the asserted state interest is of the type involved here, I would return to the reasoning and holding of Virginia Bd. of Pharmacy. Under that decision, these restrictions fall.

Importantly, as in Rubin, here  you have the Court finding not only that the just-so-story advanced by the State (that restricting advertising reduced consumption) was the State’s burden to prove, you had the Court looking to evidence which rejected these contentions and also, once again looking to narrower and less speech-abridging measures that could be implemented to promote temperance, like raising prices and restricting the times or amount of sales, or even promoting educational efforts to further the goals of temperance, rather than banning speech. Practitioners and drinkers alike should look to these measures as well as these types of rebuttals in continually pressing against free-speech restrictions on advertising or other alcohol related speech where authorities advance “temperance” or reducing “drinking” as the goal promoted by the measures they’ve emplaced to prohibit people from access to, or speech about, truthful information concerning liquor.

Ashley Brandt

Hi there! I’m happy you’re here. My name is Ashley Brandt and I’m an attorney in Chicago representing clients in the Food and Beverage, Advertising, Media, and Real Estate industries. A while back I kept getting calls and questions from industry professionals and attorneys looking for advice and information on a fun and unique area of law that I’m lucky enough to practice in. These calls represented a serious lack of, and need for, some answers, news, and information on the legal aspects of marketing and media. I've got this deep seeded belief that information should be readily available and that the greatest benefit from the information age is open access to knowledge... so ... this blog seemed like the best way to accomplish that. I enjoy being an attorney and it’s given me some amazing opportunities, wonderful experiences, and an appreciation and love for this work. I live in Chicago and work at an exceptional law firm, Goldstein & McClintock, with some truly brilliant people. Feel free to contact me at any time with any issues, comments, concerns… frankly, after reading this far, I hope you take the time to at least let me know what you think about the blog and how I can make it a better resource.

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