44 Liquormart, Inc. v. Rhode Island

Brief Fact Summary.

The Petitioners, 44 Liquormart, Inc. and Peoples Super Liquor Stores, Inc. (Petitioners) in 1991 placed an ad in a Rhode Island newspaper advertising low prices on its non-alcoholic products. In this same advertisement, it showed pictures of alcoholic beverages, and the word “WOW” next to them. The Rhode Island Liquor Control Administrator (Administrator) found this violated the Rhode Island prohibition on alcoholic beverage prices in advertisements within the state, causing the Petitioners to file suit in Federal District Court seeking a judgment declaring the statute unconstitutional.

Synopsis of Rule of Law.

When a State entirely prohibits the dissemination of truthful, non-misleading 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 of the United State Constitution (Constitution) generally demands.

Facts.

Competitors of the Petitioner filed a complaint to the State of Rhode Island concerning the Petitioner’s 1991 advertisement in a Rhode Island newspaper. This advertisement did not state the price of any alcoholic beverages and in fact mentioned that State law prohibits the use of alcoholic beverage prices in advertising. The advertisement did state the low prices of peanuts, potato chips and mixers offered at the store, identified various brands of liquor sold in the store and included the word “WOW” in large letters next to the vodka and rum bottles in the ad. The competitors complained that the implied reference to bargain prices for liquor violated the statutory ban on price advertising. The Administrator investigated, and assessed a $400 fine. After paying the fine, the Petitioner filed this action in Federal District Court seeking a declaratory judgment that the two statutes restricting alcohol advertising and implementing regulations violate the First Amendment of the Co
nstitution. The District Court concluded that the ban on price advertising of alcoholic beverages was unconstitutional, but the Court of Appeals reversed this decision causing the Petitioners to appeal to the Supreme Court of the United States (Supreme Court).

Issue.

Is Rhode Island’s complete ban on price advertising of alcoholic beverages justified?

Held.

No, Rhode Island’s ban on price advertising is in violation of the First and Fourteenth Amendment of the Constitution. There is no question that the regulation in this case involves 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. Therefore this regulation does not undergo a purely Central Hudson analysis. The Supreme Court informs governmental entities to be mindful that prohibitions of this type rarely survive constitutional review. This type of analysis is to be made with “special care.” In fact the Supreme Court declares that when a State entirely prohibits the dissemination of truthful, nomisleading 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 of the Constitution generally demands. It is important to note that the mere fac
t that messages propose commercial transactions does not dictate the constitutional analysis that applies in decisions to repress them. The purpose of the regulation must be consistent with the reason for the regulation in order to undergo a less than strict analysis under the First Amendment of the Constitution. Rhode Island is unable to prove this consistency with the reason for their blanket ban on alcohol price advertising in this case. The State’s interest can be shown in the prevention of misleading, untruthful information. But the information the Petitioner wishes to disseminate is truthful and therefore the state interest in this blanket ban is not furthered by this policy. The Supreme Court feels 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 in a completely free market. The state a
lso argues that the limit on advertising will promote temperance, but there is simply not enough evidence, as reasonable as this argument is, that this interest is promoted by the regulation. Nor is the state’s argument that restrictions of advertising a vice activity is a legitimate state interest furthered by the legislation. The Supreme Court concludes that there is no special “vice” restrictions to commercial speech under the First Amendment of the Constitution, as long as the “vice” is a legal activity. Concluding there is no legitimate state interest to the prohibition in question, the Supreme Court declares the regulation of alcohol prices in advertisements unconstitutional.
Concurrence.
One of the concurring judges expresses his discomfort with the Central Hudson test for commercial speech, but since the Supreme Court has decided not to overturn the decision in Central Hudson and as this case is in line with this precedent, the concurring Justice concludes that the Supreme Court reached the correct decision.
Another concurring judge does not believe that Central Hudson should be applied in this case. But, instead feels that an interest to keep legal users of a product ignorant in order to manipulate their choices in the marketplace, as is the case with this regulation, cannot be justified whether it is commercial or noncommercial speech.
A further concurring judge, agrees with the decision of the Supreme Court, but feels that this case should have been resolved more narrowly by strictly applying the Central Hudson test to determine whether this commercial speech regulation survives First Amendment constitutional scrutiny. The judge feels that since this regulation fails even under the less stringent test postulated in Central Hudson, that this case did not necessitate a new analysis of commercial speech. Therefore the judge believes that the Supreme Court’s conclusion is correct, but that the test used was wrong.

Discussion.

This case establishes yet another test for determining whether commercial speech is valid, although the analysis made in this case is very similar to the Central Hudson analysis. This case establishes a heavy governmental burden for showing that a blanket ban is necessary to promote the State’s interests. This test contains a less stringent burden than the test used for ordinary speech, but the state has a heavier burden with a blanket ban such as is at issue in this case than it does with regular commercial speech as postulated in Central Hudson. The concurrences in this case debate the method used to determine the constitutionality of this regulation and provide potential uncertainty in future cases as to what methodology will be used and will likely depend on the jurisprudence of the combined Justices during a case.