The Supreme Court's Tobacco Ruling May Foretell Future Of Beverage Alcohol Advertising Restrictions
 
October 22, 2001
 

On June 28, 2001, the United States Supreme Court decided Lorillard Tobacco Co. v. Reilly, a case involving a constitutional challenge to comprehensive regulations promulgated by the Attorney General of Massachusetts to regulate the advertising and sale of cigarettes, smokeless tobacco and cigars.

The regulations' aim was to protect minors from the ill effects of tobacco. Core components of the regulations included advertising and marketing restrictions that prohibited billboards and outdoor advertising within 1,000 feet of schools, playgrounds and similar youth-oriented locations. This "outdoor" advertising included not only signage and other depictions located outside an establishment, but also inside advertising if it was visible from the outside. Additionally, the regulations required that all on-premises, point-of-sale tobacco advertising be placed no lower than five feet from the floor, on the theory that such advertising would be elevated above the eyes of many children. Theÿregulations also contained other requirements and restrictions relating specifically to cigars, smokeless tobacco and other tobacco products.

For the most part, the regulations were upheld at the federal trial court and appellate court levels. On appeal by the tobacco companies to the U.S. Supreme Court, however, a majority led by Justice Sandra O'Connor reversed the lower courts' findings, holding that the regulations were pre-empted by federal law and violative of the tobacco industry's First Amendment rights to free commercial speech.

The Supreme Court's decision regarding federal preemption has little relevance to the alcohol industry, as there is no beverage corollary to the Federal Cigarette Labeling and Advertising Act (FCLAA). In the context of First Amendment law, however, the Supreme Court's decision in Lorillard Tobacco Co. could have significant ramifications for state and municipal regulations that seek to restrict how the alcohol industry advertises its products to consumers.

The Supreme Court issued a very divided opinion in the Lorillard Tobacco Co. case. Although some portions of the opinion were unanimous, others, including the relevant decision regarding the First Amendment rights of the industry relative to the Attorney General's regulations, were supported by a bare majority of five justices.

Justice Sandra Day O'Connor authored the Lorillard Tobacco Co. decision. Part III-B-2 of the opinion sets forth the Court's conclusion that Massachusetts' advertising restrictions unduly infringe on the tobacco industry's First Amendment rights to commercial free speech. Chief Justice Rehnquist, as well as Justices Scalia, Kennedy and Thomas joined that part of the opinion. Applying the four-pronged test for commercial free speech originally defined by the U.S. Supreme Court in Central Hudson Gas & Elec. Corp. v. Public Serv. Comm'n of New York¹, the Court did not challenge the regulations' justification. Earlier in the text of its decision, the Court found that Massachusetts had good reason to promulgate safeguards that protected children from the marketing of tobacco products. However, Central Hudson's fourth prong requires that the government's actions be carefully tailored so as not to unduly burden the free speech rights of the regulated parties. Therefore, in this case, the Court found that the Massachusetts regulations were unduly broad in their sweep, and that the attorney general did not "carefully calculat[e] the costs and benefits associated with the burden on speech imposed."

Writing for the 5-4 majority, Justice O'Connor found that the regulations prohibited advertising in a substantial portion of Massachusetts' major metropolitan areas. In some instances, the 1,000-foot buffer would constitute nearly a complete ban on the communication of truthful information regarding tobacco products.² According to the court, the regulations' substantial geographic reach was exacerbated by other aspects of the regulation, such as the fact that "outdoor" advertising included advertising inside a premises if visible from the outside. The Court also criticized the regulations for restricting advertisements of any size, arguing that they reached too far when they defined "advertisement" to include oral statements, as well as printed or displayed messages. These examples of the regulations' breadth and scope demonstrated the government's lack of tailoring, as required by the fourth prong of Central Hudson. The court expressly noted that the sale and use of tobacco products by adults is a legal activity. Consequently, the Court emphasized that governmental regulations on commercial speech cannot unduly impinge on the speaker's ability to propose a commercial transaction and the adult listener's opportunity to obtain information about the products.

These conclusions are relevant to the alcohol industry and further develop a pattern that started with Rubin v. Coors Brewing Co.,³ and continued with 44 LiquorMart v. Rhode Island⁴. Just as adults may lawfully consume tobacco, so may they lawfully consume alcohol beverages. Time and again, the Supreme Court and other federal courts have reminded alcohol regulatory officials that an express balancing of interest must take place: the government's interest in preventing underage consumption is substantial and even compelling, but it cannot run roughshod over the fact that the sale and use of regulated products like alcohol and tobacco by adults are legal activities. Commercial free speech under the First Amendment protects consumers as well as industry members, by assuring that the latter have the freedom to propose a commercial transaction and that the former have the opportunity to obtain truthful information about the products in question.

As a result of the Lorillard Tobacco Co. decision, regulatory agencies engaged in drafting advertising restrictions should think carefully about the impact of common mechanisms such as "1,000-foot buffer zones." If a buffer zone is so broadly defined that it results in a de facto elimination of opportunities for lawful industries to disseminate truthful information about their products to lawful consumers, it is probably an unconstitutional infringement of the industry member's commercial free speech rights.

Likewise, the opinion appears to warn regulatory officials that the impacts of their regulations must be assessed on a case-by-case basis. The Court noted that Massachusetts' 1000-foot buffer was especially burdensome to free speech rights in major metropolitan areas. As the majority expressly noted:

The degree to which speech is suppressed - or alternative avenues for speech remain available - under a particular regulatory scheme tends to be case specific. . . And a case specific analysis makes sense, for although a State or locality may have common interests and concerns about underage smoking and the effects of tobacco advertisements, the impact of a restriction on speech will undoubtedly vary from place to place. The FDA's regulations would have had widely disparate effects nationwide. Even in Massachusetts, the effect of the Attorney General's speech regulations will vary based on whether a locale is rural, suburban, or urban. Theÿuniformly broad sweep of the geographical limitation demonstrates a lack of tailoring.

This language suggests that state and local regulators seeking to impose advertising restrictions on outdoor advertisements for regulated products like alcohol must make the restrictions flexible enough to accommodate differences between urban, suburban and rural markets. Although the Court set no bright-line test for balancing these interests, the decision in Lorillard Tobacco Co. suggests that a single standard regulation that results in the elimination of approximately 90% of outdoor advertising opportunities violates the First Amendment. Several municipalities around the United States currently have, or are planning to promulgate, outdoor advertising regulations that restrict the promotion of regulated products like alcohol beverages. Regulators in those areas would be well advised to re-examine the degree to which their advertising restrictions utilize blanket measures such as 1000-foot buffers between such advertising and recognized youth-oriented locations.

While this might be welcomed as good news by some elements of the alcohol industry, the decision may have other less-welcome implications. The Court found that the Attorney General's regulations were unduly restrictive and violative of the tobacco industry's First Amendment advertising rights. Nevertheless, the Court unanimously found acceptable the regulations requiring retailers to place tobacco products behind counters and requiring customers to have contact with the salesperson before handling such products. According to the Supreme Court, there is a distinction between communication and product placement. Massachusetts demonstrated a substantial interest in preventing access to tobacco products by minors, and adopted an appropriately narrow means of advancing that interest. The "behind-the-counter" sales restrictions properly fit the state's objective of assuring that transactions are made only to lawful consumers, while leaving open ample communication channels. The Court's ruling in this regard begs the question of whether alcohol regulatory officials could require off-premises licensed retail vendors to display alcohol beverage products only on a behind-the-counter basis. Unlike tobacco products packaging, the alcohol beverage labeling and related package content often constitute the primary basis by which consumers make judgements regarding the selection of a particular alcohol beverage product. Relegating these products to a behind-the-counter status, beyond the regular and reasonable reach of consumers for personal inspection, could itself constitute an undue burden on communication channels between the industry and the lawful consumer.⁵

Much of the Lorillard Tobacco Co. case deals with federal preemption based on a statute relevant only to tobacco. But a significant part of the decision, supported by the Court's current conservative majority, is significant in its extension of commercial speech rights under the First Amendment. The Court's holding, especially with regard to requiring a "case-by-case" balancing of how a uniform advertising restriction can affect different locations differently, is one that merits careful consideration. This is true not only for the regulations at issue, but also for alcohol industry regulations that potentially infringe on First Amendment rights.

For more information, contact Richard Blau at 1-888-688-8500 or via e-mail at rblau@hklaw.com.

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¹447 U.S. 557 (1980) return to article

²The Court cited evidence that the regulations would prevent tobacco advertising in 87% to 91% of Boston, Worchester, and Springfield, Massachusetts. return to article

³514 U.S. 476 (1995) return to article

⁴517 U.S. 484 (1996) return to article

⁵Interestingly, and perhaps in anticipation of such an argument, the Court in Lorillard Tobacco Co. noted that retail vendors "have other means of exercising any cognizable speech interest in the presentation of their products. We presume the vendors may place empty tobacco packaging on open display, and display actual tobacco products so long as that display is only accessible to sales personnel." return to article