By Courtney Dean, a 2018 Judge K.K. Legett Fellow at Washington Legal Foundation who will be entering her third year at Texas Tech University School of Law in the fall.
Restrictions on the speech of “disfavored” products merit all the more judicial scrutiny because they are easy targets for creating precedents. Earlier this summer, a federal court in the Western District of Missouri rightfully struck down three state restrictions on alcoholic beverage advertising. The court in Missouri Broadcasters Association v. Taylor reinforced the principle that states cannot arbitrarily stifle truthful, non-misleading commercial speech.
The case involved two regulations and a statute that sought to limit how alcohol producers, distributors, and retailers could promote their goods. The state asserted that the restrictions were enacted to discourage overconsumption, combat underage drinking, and maintain the independence of retailers in the marketplace. The plaintiffs—the Missouri broadcasting industry, a winery, and a sports bar—argued that the restrictions unconstitutionally violated the First Amendment.
The U.S. Supreme Court outlined the framework for analyzing a First Amendment claim involving commercial speech in Central Hudson Gas & Electric Corp. v. Public Service Commission, 447 U.S. 557 (1980). There, the Court devised a four-part analysis. First, to qualify for protection, commercial speech must be a non-misleading promotion of lawful conduct. If the threshold for protection is met, the speech restriction will be struck down unless the government proves (1) it is justified by a substantial government interest, (2) it “directly advances” that interest, and (3) it is no more extensive than necessary to achieve that interest.
The regulations
The first challenged regulation, 11 C.S.R 70-2.240(5)(G), banned retailers from advertising sale prices outside of their stores and prohibited them from offering coupons or discounts on beer and wine. The second regulation, 11 C.S.R. 0-2.240(5)(I), prohibited advertising sale prices below the retailers’ cost (though the rule did not prevent retailers from actually selling alcohol at below-cost).
Applying Central Hudson, the Missouri court first determined that the speech at issue promoted lawful products, and that the regulations were justified by substantial state interests. However, the regulations failed the third and fourth prongs of the Central Hudson test for two particularly noteworthy reasons. First, the court observed that while the regulations prohibited discount advertising outside of a retailer, it was entirely lawful to advertise and sell alcohol at discount prices inside those establishments.
Because anyone who wishes to consume alcohol must enter a retailer to buy it, the regulation did not prevent those purportedly most at risk for overconsumption from knowing about or taking advantage of discount prices. Instead, the only persons denied knowledge of the sales were those with no propensity to drink in the first place. Finding the regulations to be under-inclusive, the court held the restrictions did not directly advance the state’s goal of deterring overconsumption or underage drinking.
Second, the court noted the plaintiffs proactively made the case that the state could not meet its evidentiary burden. Under Central Hudson, the state has the burden to establish the fit between commercial speech restrictions and state policy interests. Yet, the plaintiffs in this case took the initiative to present what the court described as credible, substantial, and convincing evidence that the state could not meet its requirement. The plaintiffs presented expert testimony discrediting the relationship between the regulations and policy goals, demonstrating that advertisements affect brand loyalty more than consumption levels.
Further, the plaintiffs’ evidence established that alternatives like government-funded educational programs and alcohol taxes more effectively combat overconsumption and underage drinking without compromising commercial speech. The state, on the other hand, “simply argue[d] that the statute and regulations directly advance the State’s interest and do not violate the First Amendment.” Accordingly, the court praised the plaintiffs’ proactive approach and agreed the regulations did not fit the state policy goals.
The statute
The challenged statute, Mo. Ann. Stat. § 311.070.1, barred distillers, brewers, winemakers, and wholesalers from exclusively associating their products with single retailers in brand advertisements. Under the statute, brands were required to list two or more unrelated retailers on any advertisement identifying where their products were sold. The statute also prohibited the advertisement of price-point information.
Applying Central Hudson, the court first determined that the speech at issue promoted lawful conduct, and that the statute was justified by substantial state interests in maintaining a three-tier marketplace and promoting retailer independence. However, the state presented no evidence to show how the statute actually advanced that interest. The court agreed with the plaintiffs’ contention that the statute was arbitrarily under-inclusive because it allowed producers and distributors to support retailers in other ways, like providing branded barware, mirrors, and other tangible goods.
The court also scrutinized the necessity of the speech intrusion, finding that less restrictive means—like policing the marketplace or limiting what producers and distributors may spend advertising their retail affiliation—would equally serve the state interest. Accordingly, the statute failed the Central Hudson test and was declared an unconstitutional invasion of the right to commercial speech. Further, because the statute required producers and distributors to affiliate with more than one retailer, the statute unconstitutionally compelled association. The statute was struck down.
Conclusion
The court in this case was rightfully critical of Missouri’s advertisement restrictions. When judging government action under the First Amendment, the Supreme Court has explained that courts must be particularly skeptical of any speech restriction imposed for what the government perceives to be the public’s own good. Whether personal or commercial, the point remains: if any speech is to be protected from arbitrary suppression, then all speech must be protected from arbitrary suppression. Allowing the government to regulate commercial expression just because it considers an industry or the promotion of its lawful products or services to be objectionable is no different from allowing the government to regulate personal expression just because it doesn’t agree with the message.
Allowing a speech restriction to masquerade as an economic regulation to avoid the government’s lofty burden of proof under Central Hudson would chip away at the protections accorded by the First Amendment and pave the way for more intrusive speech restrictions in the future. Thus, even in a time when industry is so heavily regulated, it’s important that courts are willing to scrutinize commercial speech restrictions and hold governments accountable.