44 Liquormart, Inc. v. Rhode Island

JUSTICE STEVENS announced the judgment of the Court. . .

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.

In 1956, the Rhode Island Legislature enacted two separate prohibitions against advertising the retail price of alcoholic beverages. The first applies to vendors licensed in Rhode Island as well as to out-of-state manufacturers, wholesalers, and shippers. It prohibits them from "advertising in any manner whatsoever" the price of any alcoholic beverage offered for sale in the State; the only exception is for price tags or signs displayed with the merchandise within licensed premises and not visible from the street. The second statute applies to the Rhode Island news media. It contains a categorical prohibition against the publication or broadcast of any advertisements -- even those referring to sales in other States -- that "make reference to the price of any alcoholic beverages." . . .

Complaints from competitors about an advertisement placed by 44 Liquormart in a Rhode Island newspaper in 1991 generated enforcement proceedings that in turn led to the initiation of this litigation. The advertisement did not state the price of any alcoholic beverages. Indeed, it noted that "State law prohibits advertising liquor prices." The ad did, however, state the low prices at which peanuts, potato chips, and Schweppes mixers were being offered, identify various brands of packaged liquor, and include the word "WOW" in large letters next to pictures of vodka and rum bottles. Based on the conclusion that the implied reference to bargain prices for liquor violated the statutory ban on price advertising, the Rhode Island Liquor Control Administrator assessed a $ 400 fine.

After paying the fine, 44 Liquormart . . . filed this action. . . . [T]he District Judge first noted that there was a pronounced lack of unanimity among researchers who have studied the impact of advertising on the level of consumption of alcoholic beverages. . . .

As a matter of law, he concluded that the price advertising ban was unconstitutional because it did not "directly advance" the State's interest in reducing alcohol consumption and was "more extensive than necessary to serve that interest." He reasoned that the party seeking to uphold a restriction on commercial speech carries the burden of justifying it and that the Twenty-first Amendment did not shift or diminish that burden. Acknowledging that it might have been reasonable for the state legislature to "assume a correlation between the price advertising ban and reduced consumption," he held that more than a rational basis was required to justify the speech restriction, and that the State had failed to demonstrate a reasonable "'fit'" between its policy objectives and its chosen means. . . .

As our review of the case law reveals, Rhode Island errs in concluding that all commercial speech regulations are subject to a similar form of constitutional review simply because they target a similar category of expression. The mere fact that messages propose commercial transactions does not in and of itself dictate the constitutional analysis that should apply to decisions to suppress them.

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.

It is the State's interest in protecting consumers from "commercial harms" that provides "the typical reason why commercial speech can be subject to greater governmental regulation than noncommercial speech." Yet bans that target truthful, nonmisleading commercial messages rarely protect consumers from such harms. Instead, such bans often serve only to obscure an "underlying governmental policy" that could be implemented without regulating speech. In this way, these commercial speech bans not only hinder consumer choice, but also impede debate over central issues of public policy.

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. That teaching applies equally to state attempts to deprive consumers of accurate information about their chosen products:

"The commercial marketplace, like other spheres of our social and cultural life, provides a forum where ideas and information flourish. Some of the ideas and information are vital, some of slight worth. But the general rule is that the speaker and the audience, not the government, assess the value of the information presented. Thus, even a communication that does no more than propose a commercial transaction is entitled to the coverage of the First Amendment.

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," 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.

In evaluating the ban's effectiveness in advancing the State's interest, we note that a commercial speech regulation "may not be sustained if it provides only ineffective or remote support for the government's purpose." For that reason, the State bears the burden of showing not merely that its regulation will advance its interest, but also that it will do so "to a material degree." The need for the State to make such a showing is particularly great given the drastic nature of its chosen means -- the wholesale suppression of truthful, non-misleading information. Accordingly, we must determine whether the State has shown that the price advertising ban will significantly reduce 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.

Although the record suggests that the price advertising ban may have some impact on the purchasing patterns of temperate drinkers of modest means, the State has presented no evidence to suggest that its speech prohibition will significantly reduce marketwide consumption. Indeed, the District Court's considered and uncontradicted finding on this point is directly to the contrary. . . .

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. . . .

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. . . .

Because Rhode Island has failed to carry its heavy burden of justifying its complete ban on price advertising, we conclude that [the laws and regulations in question] 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 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.


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." . . . 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. . . .

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. Indeed, Rhode Island's own expert conceded that "'the objective of lowering consumption of alcohol by banning price advertising could be accomplished by establishing minimum prices and/or by increasing sales taxes on alcoholic beverages.'" A tax, for example, is not normally very difficult to administer and would have a far more certain and direct effect on prices, without any restriction on speech. The principal opinion suggests further alternatives, such as limiting per capita purchases or conducting an educational campaign about the dangers of alcohol consumption. The ready availability of such alternatives -- at least some of which would far more effectively achieve Rhode Island's only professed goal, at comparatively small additional administrative cost -- demonstrates that the fit between ends and means is not narrowly tailored. Too, this regulation prevents sellers of alcohol from communicating price information anywhere but at the point of purchase. No channels exist at all to permit them to publicize the price of their products. . .

Respondents argue that an additional factor, the Twenty-first Amendment, tips the First
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.