44 Liquormart, Inc. v. Rhode Island

517 U.S. 484

Case Year: 1996

Case Ruling: 9-0, Reversed

Opinion Justice: Stevens

FACTS

In 1956, the Rhode Island legislature passed two laws prohibiting the advertising of the retail prices of alcoholic beverages. The first law banned advertising--in any manner, and whatsoever the price--of any alcoholic beverage offered for sale in the state. The only exception applied to price tags displayed within the store that could not be seen from the street. The second law broadly outlawed the advertising of liquor prices in the news media. Both were challenged in two 1985 cases, but were upheld by the Rhode Island Supreme Court based on Central Hudson Gas and Electric Corp v. Public Service Commission of New York (1980). Peoples Super Liquor Stores, Inc., and the Rhode Island Liquor Stores Association joined 44 Liquormart, Inc., a Rhode Island retailer that had had enforcement actions taken against it for violating the laws, to challenge the laws once again. Peoples operated several Massachusetts liquor stores and had been barred from advertising the prices of its products in Rhode Island newspapers.

A federal district court struck down the laws, finding that the state had not met its obligation under Central Hudson. The judge found a lack of evidence establishing the link between banning the advertising and the state's interest in promoting temperance. A court of appeals reversed, concluding that the regulation was reasonable and that the Twenty-first Amendment, which gives the states regulatory power over alcohol, added a presumption of validity.

 

JUSTICE STEVENS ANNOUNCED THE JUDGMENT OF THE COURT AND DELIVERED THE OPINION OF THE COURT WITH RESPECT TO PARTS I, II, VII, AND VIII, AN OPINION WITH RESPECT TO PARTS III AND V, IN WHICH JUSTICE KENNEDY, JUSTICE SOUTER, AND JUSTICE GINSBURG JOIN, AN OPINION WITH RESPECT TO PART VI, IN WHICH JUSTICE KENNEDY, JUSTICE THOMAS, AND JUSTICE GINSBURG JOIN, AND AN OPINION WITH RESPECT TO PART IV, IN WHICH JUSTICE KENNEDY AND JUSTICE GINSBURG JOIN..

Last Term we held that a federal law abridging a brewer's right to provide the public with accurate information about the alcoholic content of malt beverages is unconstitutional. Rubin v. Coors Brewing Co. (1995). We now hold that Rhode Island's statutory prohibition against advertisements that provide the public with accurate information about retail prices of alcoholic beverages is also invalid. Our holding rests on the conclusion that such an advertising ban is an abridgment of speech protected by the First Amendment and that it is not shielded from constitutional scrutiny by the Twenty-first Amendment.

Parts I and II (Case facts, omitted)

III

... In accord with the role that commercial messages have long played, the law has developed to ensure that advertising provides consumers with accurate information about the availability of goods and services. In the early years, the common law, and later, statutes, served the consumers' interest in the receipt of accurate information in the commercial market by prohibiting fraudulent and misleading advertising. It was not until the 1970's, however, that this Court held that the First Amendment protected the dissemination of truthful and nonmisleading commercial messages about lawful products and services....

In Bigelow v. Virginia (1975), we held that it was error to assume that commercial speech was entitled to no First Amendment protection or that it was without value in the marketplace of ideas. The following Term in Virginia Bd. of Pharmacy v. Virginia Citizens Consumer Council, Inc. (1976), we expanded on our holding in Bigelow and held that the State's blanket ban on advertising the price of prescription drugs violated the First Amendment.

Virginia Pharmacy Bd. reflected the conclusion that the same interest that supports regulation of potentially misleading advertising, namely the public's interest in receiving accurate commercial information, also supports an interpretation of the First Amendment that provides constitutional protection for the dissemination of accurate and nonmisleading commercial messages....

The opinion further explained that a State's paternalistic assumption that the public will use truthful, nonmisleading commercial information unwisely cannot justify a decision to suppress it.... On the basis of these principles, our early cases uniformly struck down several broadly based bans on truthful, nonmisleading commercial speech, each of which served ends unrelated to consumer protection.... At the same time, our early cases recognized that the State may regulate some types of commercial advertising more freely than other forms of protected speech. Specifically, we explained that the State may require commercial messages to "appear in such a form, or include such additional information, warnings, and disclaimers, as are necessary to prevent its being deceptive," Virginia Pharmacy Bd., and that it may restrict some forms of aggressive sales practices that have the potential to exert "undue influence" over consumers. See Bates v. State Bar of Ariz. (1977).

Virginia Pharmacy Bd. attributed the State's authority to impose these regulations in part to certain "commonsense differences" that exist between commercial messages and other types of protected expression.... In Central Hudson Gas & Elec. Corp. v. Public Serv. Comm'n of N. Y. (1980), we took stock of our developing commercial speech jurisprudence. In that case, we considered a regulation "completely" banning all promotional advertising by electric utilities. Our decision acknowledged the special features of commercial speech but identified the serious First Amendment concerns that attend blanket advertising prohibitions that do not protect consumers from commercial harms.

Five Members of the Court recognized that the state interest in the conservation of energy was substantial, and that there was "an immediate connection between advertising and demand for electricity." Nevertheless, they concluded that the regulation was invalid because the Commission had failed to make a showing that a more limited speech regulation would not have adequately served the State's interest. ...[T]he Court concluded that "special care" should attend the review of such blanket bans, and it pointedly remarked that "in recent years this Court has not approved a blanket ban on commercial speech unless the speech itself was flawed in some way, either because it was deceptive or related to unlawful activity."

IV

... 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.... Precisely because bans against truthful, nonmisleading commercial speech rarely seek to protect consumers from either deception or overreaching, they usually rest solely on the offensive assumption that the public will respond "irrationally" to the truth. 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....

V

In this case, there is no question that Rhode Island's price advertising ban constitutes a blanket prohibition against truthful, nonmisleading speech about a lawful product. There is also no question that the ban serves an end unrelated to consumer protection. Accordingly, we must review the price advertising ban with "special care," Central Hudson, mindful that speech prohibitions of this type rarely survive constitutional review.

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....

We can agree that common sense supports the conclusion that a prohibition against price advertising, like a collusive agreement among competitors to refrain from such advertising, will tend to mitigate competition and maintain prices at a higher level than would prevail in a completely free market. Despite the absence of proof on the point, we can even agree with the State's contention that it is reasonable to assume that demand, and hence consumption throughout the market, is somewhat lower whenever a higher, noncompetitive price level prevails. However, without any findings of fact, or indeed any evidentiary support whatsoever, we cannot agree with the assertion that the price advertising ban will significantly advance the State's interest in promoting temperance.

.... [T]he State has presented no evidence to suggest that its speech prohibition will significantly reduce market-wide consumption....

The State also cannot satisfy the requirement that its restriction on speech be no more extensive than necessary. It is perfectly obvious that alternative forms of regulation that would not involve any restriction on speech would be more likely to achieve the State's goal of promoting temperance. 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.

As a result, even under the less than strict standard that generally applies in commercial speech cases, the State has failed to establish a "reasonable fit" between its abridgment of speech and its temperance goal....It necessarily follows that the price advertising ban cannot survive the more stringent constitutional review that Central Hudson itself concluded was appropriate for the complete suppression of truthful, nonmisleading commercial speech.

VI

The State responds by arguing that it merely exercised appropriate "legislative judgment" in determining that a price advertising ban would best promote temperance. Relying on the Central Hudson analysis set forth in Posadas de Puerto Rico Associates v. Tourism Co. of P.R. (1986), and United States v. Edge Broadcasting Co. (1993), Rhode Island first argues that, because expert opinions as to the effectiveness of the price advertising ban "go both ways," the Court of Appeals correctly concluded that the ban constituted a "reasonable choice" by the legislature. The State next contends that precedent requires us to give particular deference to that legislative choice because the State could, if it chose, ban the sale of alcoholic beverages outright. Finally, the State argues that deference is appropriate because alcoholic beverages are so-called "vice" products. We consider each of these contentions in turn....

Given our longstanding hostility to commercial speech regulation of this type, Posadas clearly erred in concluding that it was "up to the legislature" to choose suppression over a less speech-restrictive policy. The Posadas majority's conclusion on that point cannot be reconciled with the unbroken line of prior cases striking down similarly broad regulations on truthful, nonmisleading advertising when non-speech-related alternatives were available....

Because the 5-to-4 decision in Posadas marked such a sharp break from our prior precedent, and because it concerned a constitutional question about which this Court is the final arbiter, we decline to give force to its highly deferential approach. Instead, in keeping with our prior holdings, we conclude that a state legislature does not have the broad discretion to suppress truthful, nonmisleading information for paternalistic purposes that the Posadas majority was willing to tolerate....

We also cannot accept the State's second contention.... ... The text of the First Amendment makes clear that the Constitution presumes that attempts to regulate speech are more dangerous than attempts to regulate conduct. That presumption accords with the essential role that the free flow of information plays in a democratic society. As a result, the First Amendment directs that government may not suppress speech as easily as it may suppress conduct, and that speech restrictions cannot be treated as simply another means that the government may use to achieve its ends.... Finally, we find unpersuasive the State's contention that, under Posadas and Edge, the price advertising ban should be upheld because it targets commercial speech that pertains to a "vice" activity.... The respondents misread our precedent. Our decision last Term striking down an alcohol-related advertising restriction effectively rejected the very contention respondents now make. See Rubin v. Coors Brewing Co. (1995)....

VII

From 1919 until 1933, the Eighteenth Amendment to the Constitution totally prohibited "the manufacture, sale, or transportation of intoxicating liquors" in the United States and its territories. Section 1 of the Twenty-first Amendment repealed that prohibition, and 2 delegated to the several States the power to prohibit commerce in, or the use of, alcoholic beverages....

As is clear, the text of the Twenty-first Amendment supports the view that, while it grants the States authority over commerce that might otherwise be reserved to the Federal Government, it places no limit whatsoever on other constitutional provisions. Nevertheless, Rhode Island argues, and the Court of Appeals agreed, that in this case the Twenty-first Amendment tilts the First Amendment analysis in the State's favor.... ... [A]lthough the Twenty-first Amendment limits the effect of the dormant Commerce Clause on a State's regulatory power over the delivery or use of intoxicating beverages within its borders, "the Amendment does not license the States to ignore their obligations under other provisions of the Constitution." Capital Cities Cable, Inc. v. Crisp, (1984). That general conclusion reflects our specific holdings that the Twenty-first Amendment does not in any way diminish the force of the Supremacy Clause, California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc. (1980), the Establishment Clause, Larkin v. Grendel's Den, Inc. (1982), or the Equal Protection Clause, Craig v. Boren, (1976). We see no reason why the First Amendment should not also be included in that list. Accordingly, we now hold that the Twenty-first Amendment does not qualify the constitutional prohibition against laws abridging the freedom of speech embodied in the First Amendment. The Twenty-first Amendment, therefore, cannot save Rhode Island's ban on liquor price advertising.

VIII

Because Rhode Island has failed to carry its heavy burden of justifying its complete ban on price advertising, we conclude that R. I. Gen. Laws 3-8-7 and 3-8-8.1, as well as Regulation 32 of the Rhode Island Liquor Control Administration, abridge speech in violation of the First Amendment as made applicable to the States by the Due Process Clause of the Fourteenth Amendment. The judgment of the Court of Appeals is therefore reversed.

It is so ordered.

JUSTICE THOMAS, CONCURRING IN PARTS I, II, VI, AND VII, AND CONCURRING IN THE JUDGMENT. .

In cases such as this, in which the government's asserted interest is to keep legal users of a product or service ignorant in order to manipulate their choices in the marketplace, the balancing test adopted in Central Hudson Gas & Elec. Corp. v. Public Serv. Comm'n of N.Y. (1980), should not be applied, in my view. Rather, such an "interest" is per se illegitimate and can no more justify regulation of "commercial" speech than it can justify regulation of "noncommercial" speech....

...I do not join the principal opinion's application of the Central Hudson balancing test because I do not believe that such a test should be applied to a restriction of "commercial" speech, at least when, as here, the asserted interest is one that is to be achieved through keeping would-be recipients of the speech in the dark. Application of the advancement-of-state-interest prong of Central Hudson makes little sense to me in such circumstances. Faulting the State for failing to show that its price advertising ban decreases alcohol consumption "significantly," as JUSTICE STEVENS does, seems to imply that if the State had been more successful at keeping consumers ignorant and thereby decreasing their consumption, then the restriction might have been upheld. This contradicts Virginia Pharmacy Bd.'s rationale for protecting "commercial" speech in the first instance....

Although the Court took a sudden turn away from Virginia Pharmacy Bd. 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 inpart from the inherently non-determinative 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 Pharmacy Bd. Under that decision, these restrictions fall.

JUSTICE O'CONNOR, WITH WHOM THE CHIEF JUSTICE, JUSTICE SOUTER, AND JUSTICE BREYER JOIN, CONCURRING IN THE JUDGMENT.

Rhode Island prohibits advertisement of the retail price of alcoholic beverages, except at the place of sale. The State's only asserted justification for this ban is that it promotes temperance by increasing the cost of alcoholic beverages. I agree with the Court that Rhode Island's price-advertising ban is invalid. I would resolve this case more narrowly, however, by applying our established Central Hudson test to determine whether this commercial-speech regulation survives First Amendment scrutiny.

Under that test, we first determine whether the speech at issue concerns lawful activity and is not misleading, and whether the asserted governmental interest is substantial. If both these conditions are met, we must decide whether the regulation "directly advances the governmental interest asserted, and whether it is not more extensive than is necessary to serve that interest."

Given the means by which this regulation purportedly serves the State's interest, our conclusion is plain: Rhode Island's regulation fails First Amendment scrutiny.

Both parties agree that the first two prongs of the Central Hudson test are met. Even if we assume arguendo that Rhode Island's regulation also satisfies the requirement that it directly advance the governmental interest, Rhode Island's regulation fails the final prong; that is, its ban is more extensive than necessary to serve the State's interest.

As we have explained, in order for a speech restriction to pass muster under the final prong, there must be a fit between the legislature's goal and method, "a fit that is not necessarily perfect, but reasonable; that represents not necessarily the single best disposition but one whose scope is in proportion to the interest served." Board of Trustees of State Univ. of N.Y. v. Fox (1989). While the State need not employ the least restrictive means to accomplish its goal, the fit between means and ends must be "narrowly tailored." The scope of the restriction on speech must be reasonably, though it need not be perfectly, targeted to address the harm intended to be regulated. The State's regulation must indicate a "carefu[l] calculat[ion of] the costs and benefits associated with the burden on speech imposed by its prohibition." Cincinnati v. Discovery Network, Inc. (1993). The availability of less burdensome alternatives to reach the stated goal signals that the fit between the legislature's ends and the means chosen to accomplish those ends may be too imprecise to withstand First Amendment scrutiny....If alternative channels permit communication of the restricted speech, the regulation is more likely to be considered reasonable.

Rhode Island offers one, and only one, justification for its ban on price advertising. Rhode Island says that the ban is intended to keep alcohol prices high as a way to keep consumption low. By preventing sellers from informing customers of prices, the regulation prevents competition from driving prices down and requires consumers to spend more time to find the best price for alcohol. The higher cost of obtaining alcohol, Rhode Island argues, will lead to reduced consumption.

The fit between Rhode Island's method and this particular goal is not reasonable. If the target is simply higher prices generally to discourage consumption, the regulation imposes too great, and unnecessary, a prohibition on speech in order to achieve it. The State has other methods at its disposal -- methods that would more directly accomplish this stated goal without intruding on sellers' ability to provide truthful, nonmisleading information to customers....

Rhode Island's prohibition on alcohol-price advertising, as a means to keep alcohol prices high and consumption low, cannot survive First Amendment scrutiny. The Twenty-first Amendment cannot save this otherwise invalid regulation. While I agree with the Court's finding that the regulation is invalid, I would decide that issue on narrower grounds. I therefore concur in the judgment.