In blow to three-tier restrictions, 8th Circuit rules state alcohol advertising laws violate the First Amendment.
We called this a while back for the broadcasters, producers, and distributors challenging Missouri’s restrictions on alcohol advertising contained in the state’s three-tier “of value” and tied-house laws and regulations.
You’ll note this has been bouncing around for a while now as the state originally won a motion to dismiss the lawsuit challenging certain Missouri liquor advertising restrictions as violative of the First Amendment. The 8th Circuit reversed that decision finding that the broadcasters, alcohol distributors and producers bringing the challenge had stated a cause of action and remanded the case for further proceedings. The district court held a trial and concluded that the challenged laws, that regulate retail alcohol advertising allowed retailers but not producer or distributors to run certain advertisements, violated the First Amendment.
The state of Missouri appealed the decision, much to the joy of First Amendment and alcohol regulatory lawyers everywhere as the District Court’s decision and findings of fact, coupled with the prior 8th Circuit opinion, left little doubt that this case would create good case law for those worried that antiquated liquor control laws are a tail wagging the dog of a modern liquor manufacturing industry and alcohol consuming public.
The 8th Circuit did not disappoint and yesterday delivered a blow to the three-tiered alcohol regulatory regime finding that the state overreached in looking to restrict forms of advertising in the ways it had under the auspices of “temperance” and the ill-defined bogey-man of the “orderly marketplace.”
Briefly, the 8th Circuit held that the statute challenged (Mo. Rev. Stat. Sec. 311.010-.950) violated the First Amendment by restricting speech based on content and speaker identity. The Court also ruled that the Twenty-First Amendment doesn’t override the First Amendment implications and violations and found that the state utterly failed in showing how, as applied, the state alleviates the harms of undue influence. It is riddled with inconsistencies and exemptions that render it, irrational and ineffective and the State completely lacked proof that the statutory restrictions were not more extensive that necessary to serve the asserted interests. The Court also found that the regulations violated the First Amendment and that the state failed to carry its burden and provide any empirical proof that the regulations restricting the sale of alcohol below cost or at a discount reduced over consumption or kept underage drinking down. The Court also found that the regulations were more extensive than necessary to further the state interests.
There are some wonderful points from the opinion that liquor lawyers should familiarize themselves with:
- In rejecting the idea that such restrictions on what wineries, breweries and distilleries can advertise are simply incidental functions of a three-tiered alcohol regulatory system, the Court stated:
Although the Statute on its face does not restrict speech, its practical operation restricts speech based on content and speaker identity. The Statute imposes content-based restrictions by limiting what producers and distributors can say in their advertisements. See id. at 564 (noting that marketing is “speech with a particular content”). Under the Statute, a producer or distributor may not have an advertisement that says, “Drink Coors Light, now available at Joe’s Bar,”because the advertisement mentions a retailer. The Statute also restricts speech based on speaker identity because it allows retailers—but not producers or distributors—to run certain advertisements. That is, Joe’s Bar could run the ad, “Drink Coors Light, now available at Joe’s Bar,”but a producer or distributor could not. Missouri’s economic motivation for the Statute does not insulate it from First Amendment challenges. Cf.id. at 567 (“While the burdened speech results from an economic motive, so too does a great deal of vital expression.”). The Statute “imposes a burden based on the content of speech and the identity of the speaker”and thus implicates the First Amendment. See id.
- In discussing what the state has to show under Central Hudson the Court reiterated a theme consistent with state alcohol regulation and state arguments about the level of proof necessary to provide evidence of effect or intent of state restrictions on liquor advertising:
To satisfy the third Central Hudson prong, Missouri must show that the Statute advances its substantial interest “in a direct and material way.” Rubin v. Coors Brewing Co., 514 U.S. 476, 487, 115 S. Ct. 1585, 131 L. Ed. 2d 532 (1995) (quoting Edenfield v. Fane, 507 U.S. 761, 767, 113 S. Ct. 1792, 123 L. Ed. 2d 543 (1993)). This burden “is not satisfied by mere speculation or conjecture; rather, a governmental body seeking to sustain a restriction on commercial speech must demonstrate that the harms it recites are real and that its restriction will in fact alleviate them to a material degree.” Id. (quoting Edenfield, 705 U.S. at 770-71). The Statute “may not be sustained if it provides only ineffective or remote support for the government’s purpose.” Cent. Hudson, 447 U.S. at 564. Instead, Missouri must show that the Statute “significantly reduces” the alleged harms. See 44 Liquormart, Inc., 517 U.S. at 506. This requirement is “critical; otherwise, ‘a State could with ease restrict commercial speech in the service of other objectives that could not themselves justify a burden on commercial expression.'” Greater New Orleans, 527 U.S. at 188 (quoting Rubin, 514 U.S. at 487).
- The Court also addressed the problems with current arguments in favor of the three-tier system by showing that tired historical claims are not favored and not proof as to the concrete realities and facts of cases:
Missouri fails to show how the Statute, as applied, alleviates to a significant degree the harm of undue influence. Missouri alleges that the Statute—as shown through “consensus and history”—advances its interest because the three-tiered system prevents undue influence of alcohol producers and distributors over retailers. Missouri’s reliance on history is misplaced, because it discusses the history of other states and the purpose behind tied-house laws generally, but fails to include a discussion of Missouri’s own history or of the Statute in particular. Missouri’s reliance on “consensus” is equally unavailing. Missouri notes that nearly every state and the federal government have tied-house laws, so Missouri’s tied-house laws must pass constitutional muster. But the fact that other states and the federal government have tied-house laws does not make Missouri’s version constitutional—particularly when only sections of Missouri’s tied-house law, as applied, are at issue in this case. Consensus and history, at best, speak to an arguable need for a three-tiered system generally; they do not show how the Statute, as applied here, directly and materially advances Missouri’s interest of preventing undue influence. Missouri has not demonstrated that the harm of undue influence is real or that the Statute alleviates this harm to a material degree.
On a side note, in a concurring opinion, at least one judge invited further review and challenge arguing that since the speech compelled of alcohol advertisers involved making brewers, wineries, and distilleries discussing sales or discounts or releases at retailers list other locations, it was arguably compelled speech and that under the recent Janus v. Am. Fed’n of State, Cty., &Mun.Emps., Council 31,138 S. Ct. 2448 (2018) the standard would be “exacting scrutiny” and not Central Hudson.
Thankfully, reason prevailed here and alcohol attorneys and other regulatory attorneys faced with similar statutes and regulations in their states regarding alcohol advertising should analyze those regimes and bring similar challenges where appropriate.